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INTERNATIONAL MARKETING 6e
The International Political and
Legal Environment
Chapter 6
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The Political and Legal Environment
Home country political and legal environment
The Environmental Superfund
Intellectual property rights
Gray markets
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The Political and Legal Environment
Embargoes and sanctions
,…government actions to distort
the free flow of trade in goods,
services,or ideas for
adversarial and political
purposes”
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Export Controls
U.S,export control systems
Export Administration Act (Commerce Department)
Munitions Control Act (State Department)
Determinants for export controls
– National security,foreign policy,short supply,nuclear
nonproliferation
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Export Controls
Critical commodities list
Sensitive to national security
Controlled for other purposes
No License Required (NLR)
Export license
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Should a Given Product
be Exported?
To a Given Country?
To a Given End User?
Decision Steps in the Export
Licensing Process
U.S,Export Control System
For A Particular End Use?
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Major Changes Altering Export Controls
Collapse of the Iron
Curtain
Export controls have
moved from a,strategic
balance” to a?tactical
balance”
approach
Major focus of export
controls rest on the
Third World
Loosening of mutual
bonds between allied
nations
Increased foreign
availability of high
technology
Increase in the speed
and dissemination of
information and
innovation
Difficulty in monitoring
the transfer of
miniaturized high
technology.
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Export Control Problems and Conflicts
Determining what constitutes military-use,
civilian-use,and dual-use products.
Implementing controls on physical goods and
knowledge and technology transfers.
Monitoring access to deemed exports by
foreign nationals.
Recognizing nationalistic
desires to protect
economic interests.
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Import Controls
Tariffs
Voluntary restraint agreements
Quota systems
Administrative problems
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Import Controls
Administrative problems
Monetary and social costs to consumers while
benefiting protected groups.
Downstream change in the composition of imports
to circumvent narrowly defined protectionist
measures.
The failure of protected firms become more
efficient and competitive.
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International Business Behavior Regulation
Regulating international business behavior
Home countries may implement special laws and
regulations to ensure that the international
business behavior of firms headquartered within
them is conducted within moral and ethical
boundaries considered appropriate.
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International Business Behavior Regulation
Boycotts
Instances where a firm or person
refuses to do business with another
firm or person for social,economic
or political reasons.
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International Business Behavior Regulation
Antitrust Laws
Focus on firms engaged in competitive activities
that restrict or impede competition.
Corruption
Where firms have obtained contracts or other
competitive benefits through bribes and illegal
payments and not through performance.
The Foreign Corrupt Practices Act in 1977
In 1995 the Organization of American States
(OAS) condemned bribery.
The 1998 Trade Act
The WTO put bribery rules on its agenda
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Political Action and Risk
Political risk
A lack of consistency and stability in governmental
and social institutions
Types of political risk
Ownership risk (property and life)
Operating risk (ongoing operations interference)
Transfer Risk (in shifting funds between countries)
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Typical Forms of Host Country Controls
Expropriation
Taking of private property with compensation
Confiscation
Taking of private property without compensation
More subtle forms of control
Domestication
Local-content
Exchange controls
,Overinvestment”
Tax policies
Price controls
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Coping with Political Risk and Controls
Minimizing Risk
Insure against risk
Create a structured operating environment
Develop an,Early Warning” risk-monitoring
system.
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Legal Differences and Restraints
The two major legal systems
Common law
– Based on tradition and less
dependent on statutes and
codes than on precedent
and custom.
Code law
– Based on a comprehensive
set of written statutes that spell
out legal rules explicitly,
Antidumping laws
Laws which prohibit below-cost sales of imported
goods in local markets.
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The Influencing of Politics and Laws
Options for dealing with politics and laws
Ignore prevailing rules and
expect to get away with it.
Provide input and resolve
problem areas through
multilateral negotiations.
Develop linkages and
lobby contacts to get
the laws changed.
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The International Environment
International Politics
Political relations and conflicts between countries
can have a profound impact on firms trying to do
business internationally.
If relations between countries improve,business
can benefit.
International Law
No enforceable body of international law exists,
Firms are subject to home and host-country laws.
Areas of cooperation among nations
– bilateral treaties guaranteeing fair treatment
– patent and trademark protection