Developed by Cool Pictures and MultiMedia Presentations Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

What We Are Striving To Accomplish 1.To understand the importance of the political and legal environments in both domestic and overseas markets. 2.To learn how governments affect business through legislation and regulations. 3.To see how the political actions of countries expose firms to international risks. 4.To examine the differing laws regulating international trade in different countries. 5.To understand how international political relations, agreements, and treaties affect international business.

Home-Country Perspective Maintain or gain international market share Manufacturing location Legal and regulatory measures Political environment Government activity Embargoes and trade sanctions Export controls Regulation of international business behavior

Embargoes and Sanctions Reasons for imposing embargoes and sanctions have varied:

U.S. Export Controls Export-control systems, designed to deny or at least delay the acquisition of strategically important goods by political adversaries. Dual-use item, goods that are useful for both military and civilian purposes. Export licenses, a license obtainable from the U.S. Department of Commerce Bureau of Industry and Security.

Export Controls Determinants of Export Controls National Security Foreign Policy Short Supply Nuclear Nonproliferation Decision Steps in the Export Licensing Process Should a Given Product Be Exported? To a Given Country? For Use by a Given Firm?

Bribery and Corruption Regulating International Business Behavior Boycotts Transparency International Antitrust Laws International Business Ethics

Political Risk Three Major Types of Risk Ownership Operating Transfer Possible outcomes Violence and Conflict Expropriation Confiscation Domestication Weakening of Intellectual Property Rights

Economic Risk Exchange Controls - Controls on the movement of capital in and out of a country, sometimes imposed when the country faces a shortage of foreign currency. Tax Policy - A means by which countries may control foreign investors. Price Controls - Government regulation of prices of goods and services; control of the prices of imported goods or services as a result of domestic political pressures.

Risk Management Corporate: Non-exploitative Monitoring of political development Insurance Lobbyists Basic Systems of Law: Common law Code law

Influencing Politics and Laws A high risk option is to simply ignore prevailing rules. A second approach is to provide input to trade negotiators. A third option involves the development of coalitions and constituencies that can motivate politicians. The international manager has various options:

International Relations and Laws International Politics Bilateral Agreement Multilateral Agreement International Law Body of rules governing sovereign state relationships. Treaties and agreements respected by a number of countries. Jurisdictional disputes are settled using litigation or arbitration.