ch03 legal-technological-political-forces
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Chapter 3:Legal, Technological, and Political Forces
International Business, 4th EditionGriffin & Pustay
By Mahsina, SE., MSIBy Mahsina, SE., MSIFB: mahsina seFB: mahsina se
Follow me et: mahsina_seFollow me et: mahsina_seEmail: Email: [email protected][email protected]
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Chapter Objectives_1
Describe the major types of legal systems confronting international businesses
Explain how domestic laws affect the ability of firms to conduct international business
List the ways firms can resolve international business disputes
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Chapter Objectives_2
Describe the impact of the host country’s technological environment on international business
Explain how firms can protect themselves from political risk
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The Legal Environment
Common Law Civil Law Religious Law Bureaucratic Law
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Common Law
Based on wisdom of judges decisions on individual cases through history
Cases create legal precedents
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Countries Using Common Law
United States Canada Australia India New Zealand
Barbados Saint Kitts Nevis Malaysia
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Civil Law
Based on codification of what is and is not permissible
Originated in biblical times with the Romans
Reinforced by French Napoleonic code Judge determines scope of evidence
collected and presented
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Egypt’s legal system is a blend
of English common law, the
French Napoleonic code, and Islamic Law
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Religious Law
Based on the officially established rules governing faith and practice of a particular religion
Theocracy: country that applies religious law to civil and criminal conduct
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Bureaucratic Law
Legal system in communist countries and in dictatorships
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Laws Affecting International Business Transactions
Sanctions Embargo Extraterritoriality
– Helms-Burton Act
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Laws Directed Against Foreign Firms
Nationalization Expropriation Confiscation Privatization
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Impacts of MNCs on Host Countries: Economic/Political
Advantages– Greater selection– Higher standards– Job creation– Tax benefits– Technology
transfers
Disadvantages– Competition– Job loss– Dependency on
economic health of MNC
– Political power
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Dispute Resolution
Which country’s law applies? In which country should the issue be
resolved? Which technique should be used to
resolve the conflict? How will the settlement be enforced?
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Conflict Resolution Techniques
Mediation
Litigation
Arbitration
Negotiation
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Principle of Comity
A country will honor and enforce within its own territory the judgments of foreign courts
Conditions of the principle:– Reciprocity is extended– Defendant is given proper notice– Judgment does not violate domestic statutes or
treaty obligations
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Joint venture between
Volkswagen and the Shanghai Automotive
Industry Group
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Intellectual Property
Patents Copyrights Trademarks Brandnames
Intellectual property often forms the basis of a firm’s competitive advantage!
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International Treaties Protecting Intellectual Property Rights
International Convention for the Protection of Industrial Property Rights (i.e., the Paris Convention)
Berne Convention for the Protection of Literary and Artistic Works
Universal Copyright Convention Trade-Related Intellectual Property Rights
agreement
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Figure 3.2 Software Revenue Lost to Piracy
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Political Risk
Ownership risk Operating risk Transfer risk
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Table 3.1 Examples of Political Risks
Expropriation Confiscation Campaigns against
foreign goods Mandatory labor
benefits legislation Civil wars Inflation
Kidnappings, terrorist threats, and other forms of violence
Repatriation Currency
devaluations Increased taxation
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Basic Country Knowledge
Is the country a democracy or dictatorship? Does country rely on free market or
government controls? Does government view foreign firms as
positive influence? Are firm’s customers private or public? Does government act arbitrarily? Is existing government stable?
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Insurance against Political Risks
Overseas Private Investment Corporation (OPIC)
Multilateral Investment Guarantee Agency (MIGA)
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Map 3.2 Countries’ Relative Political Riskiness, 2002