Political 05 Final (Global Marketing)

8/13/2019 Political 05 Final (Global Marketing)

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The Political, Legal, andRegulatory Environments of

Global Marketing

Chapter 5

Global Marketing


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Political Environment

Political cultures provide context

Governing partys attitude toward

Sovereignty

Political risk

Taxes

Threat of equity dilution

Expropriation


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Sovereignty

Supreme and independent political authority

Every sovereign state is bound to

respect the independence of every other

sovereign state, and the courts in one country

will not sit in judgment on the

acts of government of anotherdone within its territory

Chief Justice Fuller


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Sovereignty and Economic Development

Governments of developing countries seek

to exercise control over nations economic

development by passing protectionist laws

Objective: to encourage economic developmentby protecting emerging or strategic industries

Nations of advanced economic development

seek to eliminate constraints on free tradeObjectives: promote fair trade, define and

preserve nations social order


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Current Trends

Privatization

Moves an economy

toward free-marketdirection

Evidence that

governments are

changing how they

exercise sovereign

power

Global Integration

Countries in

advancedpreferential trade

agreements

sacrifice many

sovereign rights toimprove economy


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Political Risk

Risk of change in political environment or

government policy that would adversely

affect a companys ability to operate

effectively and profitably

When perceived political risk is high, a

country will have a difficult time attracting

foreign direct investment


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Causes of Political Risk

Tension between aspirations and reality

Primarily occurs in lower and lower-middle

income countries

Indonesia and economic crisis

When political risk occurs in high income

countries, it is generally due to a long-

standing conflict

Northern Ireland


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Taxes

Government taxation policies

High taxation can lead to growth in a black

market

Corporate taxation

Companies attempt to limit tax liability by

shifting location of income


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Seizure of Assets

Expropriationgovernmental action to

dispossess a foreign company or investor

Compensation should be provided in a

prompt, effective, and adequate manner

When no compensation is provided, it is

called confiscation


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Seizure of Assets (cont.)

Nationalization - a government takes

control of some or all of the enterprises in

an entire industry

Acceptable according to international law

if

satisfies public purpose

includes compensation


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International Law

The rules and principles that nation-states

consider binding among themselves

Disputes between nations are issues of

public international law

Judicial arm of the United Nations

World Court or International Court of Justice(ICJ)


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World Court Functions

In making decisions in accordance with

international law, it shall apply

International conventions

International customs

General principles of law as recognized by

civilized nationsJudicial decisions and the teachings of the most

highly qualified persons of the various nations


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Common Law versus Civil Law

Common Law country

Disputes are decided

by reliance on the

authority of pastjudicial decisions

Companies are legally

incorporated by state

authority

Civil Law country

Legal system reflects

the structural concepts

and principles of theRoman Empire

Companies are formed

by contract between

two ore more parties

who are fully liable for

the actions of the

company


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Islamic Law

Legal system in many Middle Eastern countries

Based on thesharia- a comprehensive code

governing Muslim conduct in all areas of lifeKoran- Holy Book

Hadith

Based on life, sayings, and practices ofMuhammad

Identifies forbidden practices haram


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Jurisdiction

Employees of foreign companies shouldunderstand the extent to which they are

subject to jurisdiction of host-country courts

Courts have jurisdiction if it can bedemonstrated that the company is doing

business in the state the court sits

Examples:Revlon versus UOL

Volkswagen versus GM


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Intellectual Property Rights

Intellectual property must be registered in

each country where business is conducted

Patentgives an inventor exclusive right to

make, use, and sell an invention for a specifiedperiod of time

Trademarkdistinctive mark used to

distinguish it from competing products

Copyrightestablishes ownership of a written,

recorded, performed, or filmed creative work


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Infringement of Intellectual Property

Counterfeiting

Associative

Counterfeiting

Piracy


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International Agreements & Intellectual

Property

International Convention for the Protection of

Industrial Property

Paris Convention

Honored by 100 countriesFacilitates multi-country patent registration,

ensures that once a company files, it has a

right of priority in other countries for 1 year

from that date

Patent Cooperation Treaty

European Patent Convention


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Antitrust Laws

Designed to combat restrictive business practicesand to encourage competition

Enforced by FTC in the US, Fair Trade

Commission in Japan, European Commission

in European Union

Example: The Sherman Act of 1890 prohibits certain

restrictive business practices including fixing prices,

limiting production, allocating markets, or any other

scheme designed to limit or avoid competition. Law

applies to US companies outside US borders and to

foreign companies operating in the US


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Licensing and Trade Secrets

Contractual agreements in which a licensor

allows a licensee to use patents, trademarks,

trade secrets, technology, and other

intangible assets in return for royaltypayments or other forms of compensation

Important considerations

What assets may be licensed

How to price assets

The rights granted


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Bribery and Corruption

Top 7 Rankings

1. Nigeria

2. Pakistan

3. Kenya

4. Bangladesh

5. China 6. Cameroon

7. Venezuela

Bottom 7 Rankings

45. Australia

46. Netherlands

47. Switzerland

48. Singapore

49. Norway 50. Canada

51. Finland


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Countries Most Likely to Bribe

Home Country ofBribing Company

1. Belgium/ Lux

2. France

3. Italy

4. Netherlands

5. South Korea

6. UK

7. Spain

8. China

Country in whichBribes were Accepted

1. Nigeria

2. Bolivia

3. Colombia

4. Russia

5. Pakistan

6. Mexico

7. Indonesia

8. India


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Foreign Corrupt Practices Act (FCPA)

Requires publicly held companies toinstitute internal accounting controls that

would record all transactions

Makes it a crime for a US corporation tobribe an official of a foreign government or

political party to obtain or retain business

Prohibits payments to third parties whenthere is reason to believe it may be

channeled to foreign officials


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Conflict Resolution

Litigation

Formal arbitration

Settles disputes outside of court

Groups agree to abide by panels decision


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Regulatory Environment

Agencies, both governmental and non-

governmental, that enforce laws or set

guidelines for conducting business Marketing activities affected by

international and regional economic

organizationsEU

WTO

Documents

Political 05 Final (Global Marketing)