keegan05 final

The Political, Legal, and Regulatory Environments of Global MarketingChapter 5

Global Marketing

Keegan and Green, Chapter 5

Keegan and Green, Chapter 5*Political EnvironmentPolitical cultures provide contextGoverning partys attitude toward SovereigntyPolitical riskTaxesThreat of equity dilutionExpropriation


Keegan and Green, Chapter 5*SovereigntySupreme and independent political authorityEvery sovereign state is bound to respect the independence of every other sovereign state, and the courts in one country will not sit in judgment on the acts of government of another done within its territory Chief Justice Fuller


Keegan and Green, Chapter 5*Sovereignty and Economic DevelopmentGovernments of developing countries seek to exercise control over nations economic development by passing protectionist lawsObjective: to encourage economic development by protecting emerging or strategic industriesNations of advanced economic development seek to eliminate constraints on free tradeObjectives: promote fair trade, define and preserve nations social order


Keegan and Green, Chapter 5*Current TrendsPrivatizationMoves an economy toward free-market directionEvidence that governments are changing how they exercise sovereign powerGlobal IntegrationCountries in advanced preferential trade agreements sacrifice many sovereign rights to improve economy


Keegan and Green, Chapter 5*Political RiskRisk of change in political environment or government policy that would adversely affect a companys ability to operate effectively and profitablyWhen perceived political risk is high, a country will have a difficult time attracting foreign direct investment


Keegan and Green, Chapter 5*Causes of Political RiskTension between aspirations and realityPrimarily occurs in lower and lower-middle income countriesIndonesia and economic crisisWhen political risk occurs in high income countries, it is generally due to a long-standing conflictNorthern Ireland


Keegan and Green, Chapter 5*TaxesGovernment taxation policiesHigh taxation can lead to growth in a black marketCorporate taxation Companies attempt to limit tax liability by shifting location of income


Keegan and Green, Chapter 5*Seizure of AssetsExpropriation governmental action to dispossess a foreign company or investorCompensation should be provided in a prompt, effective, and adequate mannerWhen no compensation is provided, it is called confiscation


Keegan and Green, Chapter 5*Seizure of Assets (cont.)Nationalization - a government takes control of some or all of the enterprises in an entire industryAcceptable according to international law if satisfies public purposeincludes compensation


Keegan and Green, Chapter 5*International LawThe rules and principles that nation-states consider binding among themselvesDisputes between nations are issues of public international lawJudicial arm of the United NationsWorld Court or International Court of Justice (ICJ)


Keegan and Green, Chapter 5*World Court FunctionsIn making decisions in accordance with international law, it shall apply International conventionsInternational customsGeneral principles of law as recognized by civilized nationsJudicial decisions and the teachings of the most highly qualified persons of the various nations


Keegan and Green, Chapter 5*Common Law versus Civil LawCommon Law countryDisputes are decided by reliance on the authority of past judicial decisionsCompanies are legally incorporated by state authorityCivil Law countryLegal system reflects the structural concepts and principles of the Roman EmpireCompanies are formed by contract between two ore more parties who are fully liable for the actions of the company


Keegan and Green, Chapter 5*Islamic LawLegal system in many Middle Eastern countriesBased on the sharia - a comprehensive code governing Muslim conduct in all areas of lifeKoran- Holy BookHadithBased on life, sayings, and practices of MuhammadIdentifies forbidden practices haram


Keegan and Green, Chapter 5*JurisdictionEmployees of foreign companies should understand the extent to which they are subject to jurisdiction of host-country courtsCourts have jurisdiction if it can be demonstrated that the company is doing business in the state the court sitsExamples:Revlon versus UOLVolkswagen versus GM


Keegan and Green, Chapter 5*Intellectual Property RightsIntellectual property must be registered in each country where business is conductedPatent gives an inventor exclusive right to make, use, and sell an invention for a specified period of timeTrademark distinctive mark used to distinguish it from competing productsCopyright establishes ownership of a written, recorded, performed, or filmed creative work


Keegan and Green, Chapter 5*Infringement of Intellectual PropertyCounterfeitingAssociative CounterfeitingPiracy


Keegan and Green, Chapter 5*International Agreements & Intellectual PropertyInternational Convention for the Protection of Industrial PropertyParis ConventionHonored by 100 countriesFacilitates multi-country patent registration, ensures that once a company files, it has a right of priority in other countries for 1 year from that datePatent Cooperation TreatyEuropean Patent Convention


Keegan and Green, Chapter 5*Antitrust LawsDesigned to combat restrictive business practices and to encourage competitionEnforced by FTC in the US, Fair Trade Commission in Japan, European Commission in European UnionExample: The Sherman Act of 1890 prohibits certain restrictive business practices including fixing prices, limiting production, allocating markets, or any other scheme designed to limit or avoid competition. Law applies to US companies outside US borders and to foreign companies operating in the US


Keegan and Green, Chapter 5*Licensing and Trade SecretsContractual agreements in which a licensor allows a licensee to use patents, trademarks, trade secrets, technology, and other intangible assets in return for royalty payments or other forms of compensationImportant considerationsWhat assets may be licensedHow to price assetsThe rights granted


Keegan and Green, Chapter 5*Bribery and CorruptionTop 7 Rankings1. Nigeria2. Pakistan3. Kenya4. Bangladesh5. China6. Cameroon7. Venezuela

Bottom 7 Rankings45. Australia46. Netherlands47. Switzerland48. Singapore49. Norway50. Canada51. Finland


Keegan and Green, Chapter 5*Countries Most Likely to BribeHome Country of Bribing Company1. Belgium/ Lux2. France3. Italy4. Netherlands5. South Korea6. UK7. Spain8. ChinaCountry in which Bribes were Accepted1. Nigeria2. Bolivia3. Colombia4. Russia5. Pakistan6. Mexico7. Indonesia8. India


Keegan and Green, Chapter 5*Foreign Corrupt Practices Act (FCPA)Requires publicly held companies to institute internal accounting controls that would record all transactionsMakes it a crime for a US corporation to bribe an official of a foreign government or political party to obtain or retain businessProhibits payments to third parties when there is reason to believe it may be channeled to foreign officials


Keegan and Green, Chapter 5*Conflict ResolutionLitigationFormal arbitrationSettles disputes outside of courtGroups agree to abide by panels decision


Keegan and Green, Chapter 5*Regulatory EnvironmentAgencies, both governmental and non-governmental, that enforce laws or set guidelines for conducting businessMarketing activities affected by international and regional economic organizationsEUWTO


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