global marketing management, 5e chapter 5copyright (c) 2009 john wiley & sons, inc. 1 chapter 5...

Global Marketing Management, 5e

Chapter 5Copyright (c) 2009 John Wiley & Sons, Inc.

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Chapter 5

Political and Legal Environments

Chapter Overview

1. Political Environment--Individual Governments

2. Political Environment--Social Pressures and Political Risk

3. Terrorism and the World Economy4. International Agreements5. International Law and Local Legal

Environment6. Issues Transcending National

Boundaries


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Introduction

International marketers should be aware that the economic interests of their companies can differ widely from those of the countries in which they do business.

International marketers must abide by various international agreements, treaties and laws.

Political and legal climates are inherently related and inseparable because laws are generally a manifestation of a country’s political processes.


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1. Political Environment - Individual Governments

Government affects almost every aspect of business life in a country.

National politics affect business environment directly, through changes in policies, regulations, and laws.

The political stability and mood in a country affect the actions a government will take.

Home Country versus Host Country.


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1. Political Environment - Individual Governments

Structure of Government Ideology Communism Capitalism Socialism Political Parties

Single-party-dominant country Dual-party system Multi-party system

Government Policies and RegulationsIt is the role of government to promote a country’s interests in the international arena for various reasons and objectives such as: national security, developing new industries, and protecting declining industries. Chapter 5Copyright (c) 2009 John Wiley & Sons, Inc.

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1. Political Environment - Individual Governments Incentives and Government Programs Government Procurement Trade Laws Tariff and Nontariff Barriers (Exhibit 5-1) Embargoes and Sanctions Export License Requirements Investment Regulations (ownership and financial

controls) Macroeconomic Policies (governments’ monetary

and fiscal policies such as the cost of capital, level of economic growth, rates of inflation and international exchange rates)


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Exhibit 5-1: Tariff and Nontariff Barriers


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2. Political Environment - Social Pressures and Political Risk

Social Pressures and Special InterestsForeign companies also have to consider social factors as part of the political environment of host countries, e.g., feelings of nationalistic sentiment.

Managing the Political Environment Expropriation Confiscation Nationalization Domestication Policy/Phase-Out Policy Countertrade (See Exhibits 5-2 and 5-3.)


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Exhibit 5-2: Government Policy Areas and Instruments


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Exhibit 5-3: Country Risk Assessment Criteria


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Exhibit 5-4: Examples of Country Risk Ratings

Chapter 5

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Copyright (c) 2007 John Wiley & Sons, Inc.

3. Terrorism and the World Economy

According to an IMF study, the September 11, 2001 terrorist attacks in New York and Washington D.C. resulted in major losses for the U.S. economy.

The short-term lost economic output was estimated as $47 billion.

The stock market lost $1.7 trillion. In addition, 125,000 workers were laid off for 30 days.

Terrorist activities disrupt international movement of supplies and merchandise and financial flows.


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4. International Agreements

G7 (Group of Seven) is an economic policy coordination group made up of political leaders from Canada, England, France, Germany, Italy, Japan, and the United States.

G8 (Group of Eight) consists of G7 and Russia.

COCOM (The Coordinating Committee for Multilateral Controls) was founded in 1949 to stop the flow of Western technology to the former Soviet Union; members countries include Australia, Japan and the NATO countries except Iceland.


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5. International Law and Local Legal Environment

International Law (the law of nations) comes from three main sources: Customs International treaties Court decisions


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5. International Law and Local Legal Environments Local Legal Systems and Laws

Business Practices and the Legal Systems


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5. International Law and Local Legal Environments

Regulations on e-Commerce - privacy issues

Types of Legal SystemsCommon LawCode (written) LawIslamic LawSocialist LawsCivil LawCommercial Law

5. International Law and Local Legal Environment

Cultural Values and Legal Systems Japan’s population of lawyers is low. In the U.S., emphasis is on explicit contracts

and a reliance on the legal system is high. In China, relationships (guanxi) and verbal

contracts are important. In Brazil, Jeitinho is used to find solutions

outside the legal system. Planning Ahead Arbitration and Enforcement


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Exhibit 5-6: The Number of Lawyers per 100,000 Residents

6. Issues Transcending National Boundaries

ISO 9000 certification has become an essential marketing tool for firms.

ISO 14000 is based on the principle of self –regulation, thereby minimizing surveillance and sanctions.

Intellectual Property Protection TRIPs (Trade-Related Aspects of Intellectual

Property Rights) Patent (first-to-file & first-to-invent

principles)Chapter 5Copyright (c) 2009 John Wiley & Sons, Inc.

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Copyright The Digital Millennium Copyright Act

(DMCA) Trademark (prior-use, first-to-use & first-to-

file principles) Trade Secret Paris Convention Patent Cooperation Treaty Patent Law Treaty(See Exhibit 5-7.)


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Exhibit 5-7: Ratings for the Level of Intellectual Property Protection in Various Countries


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European Patent Convention Berne Convention

Antitrust Laws of the United States The Sherman Act The Clayton Act Extraterritorial application of U.S. antitrust

laws Export Trading Company (ETC) Act of 1982


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Antitrust Laws of the European Union Foreign Corrupt Practices Act (FCPA)

of 1977 The FCPA was designed to prohibit the

payment of any money or anything of value to a foreign official, foreign political party, or any candidate for foreign political office for purposes of obtaining, retaining, or directing business.


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The FCPA does not prohibit so-called facilitating or grease payments.

Small payments to lower level officials are allowed to expedite the process.

FCPA does not prohibit bribery payments to nongovernmental personnel.


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