1. The Political, Legal, and Regulatory Environments
Chapter 5
Global Marketing

2. How International Law Affects Marketing:
Examples
Product: ISO standards, different environmental rules and safety related legislation across countries
Price: anti-dumping legislation
Place: country specific distribution systems / rules
Promotion: topics of ads and commercials, limitation on product samples
The Golden Rule: there is always an opportunity for negotiations with governments or their agencies

3. Political Dimensions
The political environment provides a highly influential context for business operations

4. Political Risk
Risk of change in political environment or government policy that would adversely affect a company’s ability to operate effectively and profitably
Businesses seek political stability
When perceived political risk is high, a country will have a difficult time attracting foreign direct investment (FDI)

5. Causes of Political Risk
Tension between aspirations and reality
Primarily occurs in lower and lower-middle income countries
Indonesia:
Malaysia:
Political risk in high income countries: it is generally due to a long-standing conflict
Northern Ireland

6. Taxation Policies Government taxation policies
High taxation can lead to growth in a black market
Corporate taxation
Companies attempt to limit tax liability by shifting location of income
Transfer Pricing is a widely used technique by multinationals to counter high taxes

7. Trade Interventions 1.
Subsidies: Some form of payment to domestic producers: cash grants; low-interest loans; tax breaks; or government equity participation in the company

8. Trade Interventions 2.
Quotas: restrictions on the quantity of a product imported into a country

9. Consequences of Intervention

10. Expropriation - Risk
A governmental action to dispossess a foreign company or investor
Compensation should be provided in a “prompt, effective, and adequate manner”
When no compensation is provided, it is called confiscation
Nationalization - a government takes control of some or all of the enterprises in an entire industry
Acceptable according to international law if it satisfies a public purpose, and includes compensation

11. Legal Systems: Common Law
Disputes are decided by reliance on the authority of past judicial decisions
Companies are legally incorporated by state authority

12. Legal Systems: Civil Law
Legal system reflects the structural concepts and principles of the Roman Empire
Companies are formed by contracts and founders are fully liable for the actions of the company

13. International Law
The rules and principles that nation-states consider binding among themselves
Disputes between nations are issues of public international law
Judicial arm of the United Nations: International Court of Justice (ICJ or World Court) in The Hague, Netherlands
Court applies international conventions, customs, and general principles of law “as recognized by civilized nations”
EU, NAFTA, WTO
Consistency and enforcement are big question marks

14. Jurisdiction
Employees of foreign companies should understand the extent to which they are subject to jurisdiction of host-country courts (training)
Courts have jurisdiction if it can be demonstrated that the company is doing business in the state the court sits
Firms are subject to both home and host-country laws

15. Industrial Espionage
Secretly collecting trade secrets or proprietary information about a competitor
Industrial espionage is most prevalent in high-tech industries: electronics, chemicals, aerospace, and pharmaceuticals
Technical know-how and trade secrets may separate industry leaders from followers
Ex:

16. Intellectual Property Rights:
International Law: Paris Convention
Intellectual property must be registered in each country where its business is conducted

17. Antitrust Legislation
Against restrictive business practices and encourage competition
Enforced by FTC in the USA
Competition Bureau in Canada
European Commission in European Union
Example: The Sherman Act (USA) of 1890 prohibits price fixing, limiting production, allocating markets, or any other scheme designed to limit or avoid competition.
The law applies to foreign companies operating in the US
EU and the USA vs. Microsoft

18. Canada: The Corruption of Foreign Public Officials Act (1999)
Against bribery, money laundering, and illegal possession of foreign properties & assets
Penalties: max. 5-year prison term
Defence negotiations: accused must show that the loan, reward, advantage or benefit was:
a reasonable expense that is directly related to the promotion, demonstration or explanation of the person's products and services