Political and Legal Environment of International Business - Prof. Linyun W. Yang, Study notes of Marketing Management

Download Political and Legal Environment of International Business - Prof. Linyun W. Yang and more Study notes Marketing Management in PDF only on Docsity! Global Marketing Management Global Political & Legal Environments MKGT 3215-021 Summer 2010 Mrs. Tamara L. Cohen Tuesday July 13, 2010 Progress anyone? Group Project • Project Proposal due on July 20 • What do you need to do? 1. Choose your group 2. Choose your country ….. already taken 3. Choose your product/brand 4. Tell me • Sovereign state is independent & free from all external control; equal to other sovereign states • Political risk • Benefits of foreign investment • 4 heritages form basis for most legal systems in world 1. Common law (“English law”) 2. Civil or code law (“Napoleonic Code”) 3. Islamic law (“Shari’ah”) 4. Marxist-socialist tenets • Even though country’s laws may be based on doctrine of one of these 4 legal systems, individual interpretation may vary significantly Global Perspective of Political Environment • Crucial reality of international business – both host & home gov’ts are integral partners • Gov’t controls & restricts company’s activities – encourages & offers support – discourages & bans or restricts its activities • International law recognizes sovereign right of nation – to grant or withhold permission to do business within its political boundaries – to control where its citizens conduct business Nations can & do abridge specific aspects of their sovereign rights in order to coexist with other nations, e.g. strategic alliances for trade NAFTA – North America Free Trade Agreement NATO – North Atlantic Treaty Organization WTO – World Trade Organization EU – European Union AU – African Union The Sovereignty of Nations Venezuela - expropriations last year • golf courses • President Hugo Chávez’s Venezuelan government’s “broad nationalizations & asset seizures have gone far beyond the oil industry to include coffee roasters, cattle ranches and tomato-processing plants”. • dozen oil rigs, > 30 oil terminals, > 300 boats, some 60 oil service companies • Margarita Hilton Hotel • Ternium steel company (2008) Political Parties • In countries where 2 strong political parties typically succeed one another, important to know direction each party is likely to take – Great Britain: Labour Party vs. Conservative Party • Unpredictable & drastic shifts in gov’t policies deter investments, whatever the cause Current assessment of country’s political philosophy & attitudes important in gauging stability & attractiveness in terms of market potential Violence and Terrorism • State Department reported 3,200 terrorist incidents worldwide in 2004 • Goals of terrorism against multinationals – embarrass gov’t & its relationship with firms – generate funds by kidnapping executives – use as pawns in political or social disputes – inflict terror within a country as did 9/11 • In past 30 years, 80% terrorist attacks against U.S. have been aimed at American businesses Nationalism = intense feeling of national pride & unity • National interest & security more important than int’l relations • Countries use nationalism to protect themselves against intrusions – threats from outside forces – declines in domestic economy • Nationalism comes & goes • Marketers should not confuse nationalism with widespread fear or animosity directed at particular country – Toyota in U.S. (1980s) – animosity toward US in France – unhappiness in many other countries re war in Iraq Economic Risks • Exchange controls – stem from shortages of foreign exchange held by country • Local-content laws • Import restrictions – force foreign industry to purchase more supplies within host country, so creating markets for local industry • Tax controls • Price controls – essential products with high public interest • Pharmaceuticals / Food / Gasoline • Labor problems – labor unions have strong gov’t support Political Sanctions • One or group of nations may boycott another nation – stop all trade between countries – issuing sanctions against trade of specific products e.g. U.S. boycotts of trade with Cuba/Iran • History indicates that sanctions often unsuccessful U.S. State Department Travel Warnings Eritrea Congo, Democratic Republic of Chad Iran Algeria Burundi Cote d'Ivoire Somalia Iraq Timor-Leste Sudan Haiti Central African Republic Israel, the West Bank, and Gaza Colombia Philippines Afghanistan Reducing Political Vulnerability Strategies that MNCs use to minimize political vulnerability & risk – joint ventures – expanding the investment base – licensing – planned domestication – political bargaining – political payoffs Government Encourages Foreign Investment • to accelerate development of an economy • U.S. government motivated for economic + political reasons – encourages US firms to seek business opportunities in countries worldwide, including politically risky • Department of Commerce (DOC) • International Trade Administration (ITA) • Agencies that provide assistance to U.S. companies – Export-Import Bank (Ex-Im Bank) – Foreign Credit Insurance Association (FCIA) – The Agency for International Development (AID) – The Overseas Private Investment Corporation (OPIC) Islamic Law (Shari’ah) • Basis for Islamic law is interpretation of Koran • Among unique aspects of Islamic law is prohibition against payment of interest • Islamic system – emphasis on ethical, moral, social & religious dimensions to enhance equality & fairness for good of society Marxist-Socialist Tenets • Socialist countries now trade with non- Marxist countries • Pattern for development varies among countries • Premise is that law is strictly subordinate to prevailing economic conditions Marketing Laws • All countries have laws regulating marketing activities – Promotion (especially advertising censorship) – Product development (cheaper to meet EU stds with regular product range than design especially for EU market) – Labeling – Pricing – Channels of distribution • Discrepancies across markets create challenges for trade negotiators (differences in enforcement & interpretation) Counterfeiting & Piracy • Lost sales from unauthorized use of U.S. patents, trademarks & copyrights > $100 billion annually • Piracy industry has grown sophisticated – many counterfeit goods indistinguishable from original • Counterfeit pharmaceuticals = 2% of $327 billion drugs sold each year Piracy Rates for Computer Software Highest Piracy Rates Lowest Piracy Rates Armenia 95% Unites States 21% Moldova 94 New Zealand 22 Azerbaijan 94 Japan 25) Zimbabwe 91 Denmark 25 Vietnam 88 Austria 26 Venezuela 86 Switzerland 26 Pakistan 86 Sweden 26 Indonesia 85 Finland 27 Ukraine 84 United Kingdom 27 Cameroon 84 Belgium 27 Algeria 84 Germany 28 Montenegro 82 Netherlands 29 El Salvador 82 Australia 29 Zambia 82 Norway 29 Bolivia 82 Israel 32 lvory Coast 82 Canada 34 China 82 UAE 35 Nigeria 82 South Africa So Paraguay 82 Ireland 36 Guatemala 81 Singapore 39 Protection of Intellectual Property Rights • Companies spend millions of dollars establishing brand names or trademarks • Millions spent on research • Intellectual properties = valuable assets • New technologies developed to prevent piracy • Failing to protect intellectual property rights can lead legal loss of rights • Cases where companies legally lost rights to trademarks; had to buy back these rights or pay royalties for their use e.g. McDonald’s in Japan & South Africa; Bermuda onions U.S. Laws Apply in Host Countries • Foreign Corrupt Practices Act – illegal for companies to pay bribes to foreign officials, candidates, or political parties • National security laws – controlled products • Antitrust laws • protect US consumers • protect US exports & investments against private restrictions • Antiboycott law • Extraterritoriality of U.S. laws • sovereignty of nations affects stability of government policies • different governmental types, political parties, nationalism, targeted fear/animosity, & trade disputes can affect the environment for marketing in foreign countries • political risks of global business • importance of political system to international marketing • impact of political & social activists, violence, & terrorism on international business • how to assess & reduce effect of political vulnerability • how & why governments encourage foreign investment What do we know about the Political Environment? • Various legal systems in world affect business • Legal questions – Jurisdiction & legal recourse in disputes – Protection of intellectual property rights – Extended U.S. law enforcement – Enforcement of antitrust legislation by U.S. & foreign governments • Internet & its new legal implications • Engage competent international lawyers What do we know about the International Legal Environment?