Global Marketing Management Masaaki Kotabe & Kristiaan Helsen Third Edition John Wiley & Sons, Inc., 2004

Global Marketing Management

• Masaaki Kotabe & Kristiaan Helsen Third Edition John Wiley & Sons, Inc., 2004

Chapter 5

• Political and Legal Environment

Chapter Overview

• 1. Political Environment---Individual Governments

• 2. Political Environment---Social Pressures and Political Risk

• 3. Terrorism and the World Economy

• 4. International Agreements

• 5. International Law and Local Legal Environment

• 6. Issues Transcending National Boundaries

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.

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 vs. Host Country.

• Structure of Government:

• Ideology

1. Political Environment - Individual Governments (contd.)

• Communism
• Capitalism
• Socialism
• Political Parties
• Single-party-dominant country
• Dual-party system
• Multi-party system

• Government Policies and Regulations: It is the role of government to promote a country’s interests in the international arena for various

1. Political Environment - Individual Governments (contd.)

• reasons and objectives such as: national security, developing new industries, and protecting declining industries.

• Incentives and Government Programs

• Government Procurement

• Trade Laws

• Tariff and Nontariff Barriers (see Exhibit 5-1)

• Embargoes and Sanctions

• Export License Requirements

1. Political Environment - Individual Governments (contd.)

• Investment Regulations (ownership & financial controls)

• Macroeconomic Policies (governments’ monetary & fiscal policies such as the cost of capital, level of economic growth, rates of inflation & international exchange rates)

2. Political Environment - Social Pressures and Political Risk

• Social Pressures and Special Interests

• Managing the Political Environment:

• Expropriation
• Confiscation
• Nationalization
• Domestication Policy/Phase-Out Policy
• Countertrade

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.

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.

5. International Law and Local Legal Environment

• International Law (the law of nations) comes from three main sources:

• Customs
• International treaties
• Court decisions

• Local Legal Systems and Laws

• Business Practices and the Legal Systems
• Issues of green marketing
• Regulations on E-Commerce

5. International Law and Local Legal Environments (contd.)

• Types of Legal Systems:
• Common Law
• Code (written) Law
• Islamic Law
• Socialist Laws
• Civil Law
• Commercial Law

• Cultural Values and Legal Systems:

• Japan’s population of lawyers is low.

5. International Law and Local Legal Environment (contd.)

• 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

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)

6. Issues Transcending National Boundaries (contd.)

• 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

6. Issues Transcending National Boundaries (contd.)

• 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

6. Issues Transcending National Boundaries (contd.)

• 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.

6. Issues Transcending National Boundaries (contd.)

• 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.