© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 5 The Political and Legal Environment

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Introduction While deciding upon a firm’s international marketing activities the manager needs to concentrate on three areas:

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Home-Country Political and Legal Environment Firms are affected by government policies and the legal system, and this has a major impact on a firm’s opportunities abroad

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Home-Country Political and Legal Environment Governments may attempt to aid and protect the international marketing efforts of companies through ____________activities

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Home-Country Political and Legal Environment Gray market goods are Areas of governmental activities which are of major concern to the international marketer are:

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Home-Country Political and Legal Environment Embargoes and sanctions: Reasons for the impositions are varied, ranging from human rights to nuclear nonproliferation to terrorism

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Home-Country Political and Legal Environment Unilateral impositions result in shift in trade, and do not produce the desired result Governments often consider sanctions as being free of cost

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Home-Country Political and Legal Environment Export control

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Home-Country Political and Legal Environment The U.S. export control system is based on the: The exporter must obtain an __________, which consists of written authorization to send a product abroad

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Home-Country Political and Legal Environment Restricts the flow of materials and helps avoid the proliferation of weapons of mass destruction Imposes financial controls which inhibit funding for terrorist training

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Home-Country Political and Legal Environment Availability of high-technology products Import controls

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Home-Country Political and Legal Environment Tariffs: Voluntary restraint agreements: Quota systems:

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Home-Country Political and Legal Environment Problems faced while administering import controls:

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Home-Country Political and Legal Environment They do not to work as intended Regulation of international business behavior Boycotts:

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Home-Country Political and Legal Environment Antitrust measures – Bribery and corruption –

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Host-Country Political and Legal Environment Political risk: Major types of political risk

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Host-Country Political and Legal Environment Government policies to combat political risks include: Expropriation: Confiscation:

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Host-Country Political and Legal Environment Domestication: Whereby the government: Effects of domestication include:

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Host-Country Political and Legal Environment Common risks faced by most businesses operating abroad:

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Host-Country Political and Legal Environment Legal differences and restraints Two major legal systems popular worldwide are:

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Host-Country Political and Legal Environment Antidumping laws – Require export and import licensing Laws may be designed to protect domestic industries and reduce imports

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Host-Country Political and Legal Environment Dealing with the intricacies of national politics:

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Host-Country Political and Legal Environment Develop coalitions or constituencies to motivate legislators and politicians to consider and implement change through:

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Relationships International politics If bilateral political relations between countries improve, business can benefit

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Relationships International law No enforceable body of international law exists Firms are restricted by both home- and host- country laws

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The International Relationships In case of a conflict in deciding which country’s law to follow, firms can choose either arbitration or litigation International terrorism and marketing

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Relationships Terrorists direct their strikes at business more than any other target Direct effect of terrorism on business activities are the immediate cost levied on individual firms Indirect effect of terrorism on business activities –

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Relationships Chill effect: Physical damage inflicted by terrorism disrupts power supply, communication, transport and other forms of infrastructure

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Relationships Key side effect of terrorism

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Ethical Issues The ethical obligations faced by multinational enterprises include: Corporate governance and responsibility Corporate governance:

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Ethical Issues Its key elements include: Intellectual property:

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Ethical Issues Bribery and corruption The _________________________ was passed in 1977 to disallow U.S. firms to bribe foreign officials for business purposes Functional lubrication - The “express fee” charged in many countries, which has several characteristics:

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Ethical Issues In the process driven by “individual greed,” the amount depends on the individual official and is for the official’s own personal use In 1995, the __________________________ officially condemned bribery

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Ethical Issues The ________________________________ in 2009 released a Recommendation for Further Combating Bribery of Foreign Public Officials The _______________________ was intended to protect investors by improving the accuracy and reliability of corporate