chapter 5kotabe & helsen's global marketing management, third edition, 2004 1 global...

Chapter 5 Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

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Global Marketing ManagementGlobal Marketing Management

Masaaki Kotabe & Kristiaan HelsenMasaaki Kotabe & Kristiaan Helsen Third EditionThird Edition

John Wiley & Sons, Inc., 2004John Wiley & Sons, Inc., 2004


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Chapter 5Chapter 5

Political and Legal EnvironmentPolitical and Legal Environment


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Chapter OverviewChapter Overview

1. Political Environment---Individual 1. Political Environment---Individual GovernmentsGovernments

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

3. Terrorism and the World Economy3. Terrorism and the World Economy4. International Agreements4. International Agreements5. International Law and Local Legal 5. International Law and Local Legal

EnvironmentEnvironment6. Issues Transcending National 6. Issues Transcending National

BoundariesBoundaries


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IntroductionIntroduction

International marketers should be aware that the International marketers should be aware that the economic interests of their companies can differ economic interests of their companies can differ widely from those of the countries in which they widely from those of the countries in which they do business.do business.

International marketers must abide by various International marketers must abide by various international agreements, treaties and laws.international agreements, treaties and laws.

Political and legal climates are inherently related Political and legal climates are inherently related and inseparable because laws are generally a and inseparable because laws are generally a manifestation of a country’s political processes.manifestation of a country’s political processes.


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1. 1. Political Environment - Individual Political Environment - Individual GovernmentsGovernments

Government affects almost every aspect of Government affects almost every aspect of business life in a country.business life in a country.

National politics affect business environment National politics affect business environment directly, through changes in policies, regulations, directly, through changes in policies, regulations, and laws.and laws.

The political stability and mood in a country affect The political stability and mood in a country affect the actions a government will take.the actions a government will take.

Home Country vs. Host Country.Home Country vs. Host Country. Structure of GovernmentStructure of Government::

– Ideology Ideology


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1. Political Environment - Individual 1. Political Environment - Individual Governments (contd.)Governments (contd.)

– CommunismCommunism– CapitalismCapitalism– SocialismSocialism– Political PartiesPolitical Parties

» Single-party-dominant countrySingle-party-dominant country» Dual-party systemDual-party system» Multi-party systemMulti-party system

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


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

Incentives and Government ProgramsIncentives and Government Programs Government ProcurementGovernment Procurement Trade LawsTrade Laws Tariff and Nontariff Barriers (see Exhibit 5-1)Tariff and Nontariff Barriers (see Exhibit 5-1) Embargoes and SanctionsEmbargoes and Sanctions Export License RequirementsExport License Requirements


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Investment Regulations (ownership & financial Investment Regulations (ownership & financial controls)controls)

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


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

Social Pressures and Special InterestsSocial Pressures and Special Interests Managing the Political EnvironmentManaging the Political Environment::

– ExpropriationExpropriation– ConfiscationConfiscation– NationalizationNationalization– Domestication Policy/Phase-Out PolicyDomestication Policy/Phase-Out Policy– CountertradeCountertrade


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3. Terrorism and the World Economy3. Terrorism and the World Economy

According to an IMF study, the September 11, According to an IMF study, the September 11, 2001 terrorist attacks in New York and 2001 terrorist attacks in New York and Washington D.C. resulted in major losses for the Washington D.C. resulted in major losses for the U.S. economy. U.S. economy.

The short-term lost economic output was The short-term lost economic output was estimated as estimated as $47 billion$47 billion..

The stock market lost The stock market lost $1.7 trillion$1.7 trillion.. In addition, In addition, 125,000 workers125,000 workers were laid off for 30 days. were laid off for 30 days.

Terrorist activities disrupt international movement Terrorist activities disrupt international movement of supplies and merchandise and financial flows.of supplies and merchandise and financial flows.


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4. International Agreements4. International Agreements

G7 (Group of Seven)G7 (Group of Seven) is an economic policy is an economic policy coordination group made up of political leaders coordination group made up of political leaders from Canada, England, France, Germany, Italy, from Canada, England, France, Germany, Italy, Japan, and the United States.Japan, and the United States.

G8 (Group of Eight)G8 (Group of Eight) consists of G7 and Russia. consists of G7 and Russia. COCOMCOCOM (The Coordinating Committee for (The Coordinating Committee for

Multilateral Controls) was founded in 1949 to stop Multilateral Controls) was founded in 1949 to stop the flow of Western technology to the former the flow of Western technology to the former Soviet Union; members countries include Soviet Union; members countries include Australia, Japan and the NATO countries except Australia, Japan and the NATO countries except Iceland.Iceland.


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5. International Law and 5. International Law and Local Legal Environment Local Legal Environment

International Law (the law of nations) comes from International Law (the law of nations) comes from three main sources:three main sources:– CustomsCustoms– International treatiesInternational treaties– Court decisionsCourt decisions

Local Legal Systems and LawsLocal Legal Systems and Laws– Business Practices and the Legal SystemsBusiness Practices and the Legal Systems

» Issues of green marketingIssues of green marketing– Regulations on E-CommerceRegulations on E-Commerce


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

– Types of Legal Systems:Types of Legal Systems:» Common LawCommon Law» Code (written) LawCode (written) Law» Islamic LawIslamic Law» Socialist LawsSocialist Laws» Civil LawCivil Law» Commercial LawCommercial Law

Cultural Values and Legal Systems:Cultural Values and Legal Systems:– Japan’s population of lawyers is low.Japan’s population of lawyers is low.


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

– In the U.S., emphasis is on explicit contracts In the U.S., emphasis is on explicit contracts and a reliance on the legal system is high.and a reliance on the legal system is high.

– In China, relationships In China, relationships ((guanxiguanxi)) and verbal and verbal contracts are important.contracts are important.

– In Brazil, In Brazil, JeitinhoJeitinho is used to find solutions is used to find solutions outside the legal system.outside the legal system.

Planning AheadPlanning Ahead Arbitration and EnforcementArbitration and Enforcement


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6. Issues Transcending National 6. Issues Transcending National BoundariesBoundaries

ISO 9000 certification has become an essential ISO 9000 certification has become an essential marketing tool for firms.marketing tool for firms.

ISO 14000 is based on the principle of self –ISO 14000 is based on the principle of self –regulation, thereby minimizing surveillance and regulation, thereby minimizing surveillance and sanctions.sanctions.

Intellectual Property Protection:Intellectual Property Protection:– TRIPs (Trade-Related Aspects of Intellectual TRIPs (Trade-Related Aspects of Intellectual

Property Rights)Property Rights)– Patent (first-to-file & first-to-invent principles)Patent (first-to-file & first-to-invent principles)


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6. Issues Transcending National 6. Issues Transcending National Boundaries (contd.)Boundaries (contd.)

– Copyright Copyright » The Digital Millennium Copyright Act The Digital Millennium Copyright Act

(DMCA)(DMCA)– Trademark (prior-use, first-to-use & first-to-file Trademark (prior-use, first-to-use & first-to-file

principles)principles)– Trade SecretTrade Secret– Paris ConventionParis Convention– Patent Cooperation TreatyPatent Cooperation Treaty– Patent Law TreatyPatent Law Treaty


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– European Patent ConventionEuropean Patent Convention– Berne ConventionBerne Convention

Antitrust Laws of the United States:Antitrust Laws of the United States:– The Sherman ActThe Sherman Act– The Clayton ActThe Clayton Act– Extraterritorial application of U.S. antitrust Extraterritorial application of U.S. antitrust

lawslaws– Export Trading Company (ETC) Act of 1982Export Trading Company (ETC) Act of 1982


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Antitrust Laws of the European Union:Antitrust Laws of the European Union: Foreign Corrupt Practices Act (FCPA) of 1977Foreign Corrupt Practices Act (FCPA) of 1977::

– The FCPA was designed to prohibit the The FCPA was designed to prohibit the payment of any money or anything of value to a payment of any money or anything of value to a foreign official, foreign political party, or any foreign official, foreign political party, or any candidate for foreign political office for candidate for foreign political office for purposes of obtaining, retaining, or directing purposes of obtaining, retaining, or directing business.business.


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– The FCPA does not prohibit so called The FCPA does not prohibit so called facilitatingfacilitating or or grease paymentsgrease payments..

– Small payments to lower level officials are Small payments to lower level officials are allowed to expedite the process.allowed to expedite the process.

– FCPA does not prohibit bribery payments to FCPA does not prohibit bribery payments to nongovernmental personnel.nongovernmental personnel.

chapter 5kotabe & helsen's global marketing management, third edition, 2004 1 global...

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