Managing Political & Legal Risks in Global Business: Sovereignty, Interests & Host Actions, Study notes of Introduction to Business Management

Download Managing Political & Legal Risks in Global Business: Sovereignty, Interests & Host Actions and more Study notes Introduction to Business Management in PDF only on Docsity! Political and Legal Environments Learning Objectives: 1. The political/legal risks of global 2. How to reduce the effect of political/legal vulnerability Global Perspective International law recognizes the sovereign right of a nation to grant or withhold permission to do business within its political boundaries and to control where its citizens conduct business. Assessing Political Environment of the Host Country 1. What is the political structure? 2. What attitudes does the host government have toward foreign investment or companies? 3. What actions are likely to flow from the host government? 4. Are my business activities in conflict with its national interest? A Sampling of Government Types Insert Exhibit 6.1 National Interests and Impacts on Businesses 1. Sovereignty and Self-preservation: Limiting foreign ownership of media 2. National security: Infrastructure and essential resources: Defense and telecommunication 3. Prosperity Import restriction Role of local or regional government 4. Enhancing Prestige: E.g. French’s suspense of sale of Thomson to the Lagardere Group 5. Cultural identity E.g. Europe advocates curbs on foreign television E.g. Forbidding Starbucks 6. Host Country Pressure Groups E.g. McDonald’s raise wages in China Host Government Actions 1. Jawboning the informal intervention of governments in the business process, often without a legal basis 2. “Buy-local” Restrictions Local businesses are preferred over foreign companies 3. Nontariff Barriers 4. Subsidies: one way to support local industries WTO outlaws direct export direct subsidies but do not prohibit indirect subsidies 5. Local-content laws Countries often require a portion of any product sold within the country to have local content. 6. Ownership Conditions 7. Boycotts: barring companies completely from a given markets 8. Takeovers Confiscation – the seizing of a company’s assets without payment. Expropriation – where the government seizes an investment but some reimbursement for the assets is made. Domestication – when host countries gradually cause the transfer of foreign investments to national control and ownership through a series of government decrees by mandating local ownership and greater national involvement in a company’s management. Lessening Political Vulnerability 1. Local partners 2. Invaluable status 3. Local borrowing 4. Minimizing fixed assets 5. Political risk insurance Marketing Laws • All countries have laws regulating marketing activities. - Promotion - Product development - Labeling - Pricing - Channels of distribution - competitions Counterfeiting and Piracy • Possible responses: - Co-opt the distributors through acquisition or licensing - Educate consumers about the value of the original product through advertising - Investigate and bring legal actions - Join coalitions which brings pressures on governments - Use advanced technologies - Continue product improvement Laws Against Bribery and Corrupt Practices • Foreign Corrupt Practices Act - Makes it illegal for companies to pay bribes to foreign officials, candidates, or political parties.