Global Marketing Management

Masaaki Kotabe & Kristiaan Helsen

Third Edition John Wiley & Sons, Inc., 2004
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Chapter 5

Political and Legal Environment

Chapter 5

Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

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
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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 countrys political processes.
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Chapter 5

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
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Chapter 5

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 countrys interests in the international arena for various
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Chapter 5

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
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Chapter 5

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)

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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

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

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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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Chapter 5

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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Chapter 5

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
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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: Japans population of lawyers is low.
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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

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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)
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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
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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
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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.

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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.

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Copyright John Wiley & Sons, Inc. 2004

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