Chapter 5 The Political and Legal Environment

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Chapter 5The Political and Legal Environment


Introduction

• While deciding upon a firm’s international marketing activities the manager needs to concentrate on three areas: • • •


Home-Country Political and Legal Environment

• Firms are affected by government policies and the legal system, and this has a major impact on a firm’s opportunities abroad• •

•



• Governments may attempt to aid and protect the international marketing efforts of companies through ____________activities



• Gray market goods are

• Areas of governmental activities which are of major concern to the international marketer are:• • • •



• Embargoes and sanctions:

• Reasons for the impositions are varied, ranging from human rights to nuclear nonproliferation to terrorism



• Unilateral impositions result in shift in trade, and do not produce the desired result

• • Governments often consider sanctions as

being free of cost



• Export control•

•

•



• The U.S. export control system is based on the: • •

• The exporter must obtain an __________, which consists of written authorization to send a product abroad



• Restricts the flow of materials and helps avoid the proliferation of weapons of mass destruction

•

• Imposes financial controls which inhibit funding for terrorist training

•



• Availability of high-technology products•

• • Import controls•



• Tariffs:

• Voluntary restraint agreements:

•

• Quota systems:



• Problems faced while administering import controls:• • •



• They do not to work as intended•

• Regulation of international business behavior• Boycotts:

•



• Antitrust measures –

• Bribery and corruption –


Host-Country Political and Legal Environment

• Political risk:

• Major types of political risk• • •



• Government policies to combat political risks include:• Expropriation:

• Confiscation:



• Domestication: Whereby the government:• •

• Effects of domestication include:• • • •



• Common risks faced by most businesses operating abroad: • • • • •



• Legal differences and restraints• • Two major legal systems popular worldwide

are:•

•



• Antidumping laws –

• Require export and import licensing• Laws may be designed to protect domestic

industries and reduce imports•

•



• Dealing with the intricacies of national politics:•

•



• Develop coalitions or constituencies to motivate legislators and politicians to consider and implement change through:• • •


International Relationships

• International politics•

• If bilateral political relations between countries improve, business can benefit

•


International Relationships

• International law• No enforceable body of international law

exists•

• Firms are restricted by both home- and host-country laws


The International Relationships• In case of a conflict in deciding which

country’s law to follow, firms can choose either arbitration or litigation• •

• International terrorism and marketing•


International Relationships• Terrorists direct their strikes at business more

than any other target•

• Direct effect of terrorism on business activities are the immediate cost levied on individual firms

• Indirect effect of terrorism on business activities –


International Relationships• Chill effect:

• • Physical damage inflicted by terrorism

disrupts power supply, communication, transport and other forms of infrastructure•

•


International Relationships• Key side effect of terrorism

•

•

•


Ethical Issues

• The ethical obligations faced by multinational enterprises include:• • •

• Corporate governance and responsibility• Corporate governance:


Ethical Issues• Its key elements include:

• • •

• Intellectual property:


Ethical Issues

• Bribery and corruption• The _________________________ was passed in

1977 to disallow U.S. firms to bribe foreign officials for business purposes

• Functional lubrication - The “express fee” charged in many countries, which has several characteristics: • • •


Ethical Issues• In the process driven by “individual greed,”

the amount depends on the individual official and is for the official’s own personal use

• In 1995, the __________________________ officially condemned bribery


Ethical Issues• The ________________________________ in 2009

released a Recommendation for Further Combating Bribery of Foreign Public Officials

• The _______________________ was intended to protect investors by improving the accuracy and reliability of corporate

Documents

Chapter 5 The Political and Legal Environment