Political and Legal Issues-2011

Political and Legal Issues-2011 - The Political Legal and...

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Unformatted text preview: The Political, Legal and Regulatory Enviornments Multinational Marketing MKT 359 National Sovereignty Sovereign States Considered to be free and independent Regulates the movement of goods, people and capital across its boarders Its internal business is its own Political Issues Structure of Governments Capitalistic Socialist Communist Political Parties One-party system Dual-party system Multi-party system Reasons to Restrict Trade National Security Ability to produce goods necessary to remain independent Not exporting goods that will help enemies or unfriendly nations Idea of nurturing nascent industries to strength in a protected market To maintain domestic employment for political stability Developing new industries Protecting declining industries Ways to restrict trade Tariffs Specific Ad valorem duties Non-tariff barriers Quotas Custom and entry procedures Financial control Performance requirements Ownership controls Political Risk In order to manage risk, one needs to be aware of what policy instruments are in place for important policy areas: Monetary Fiscal Trade Foreign Ownership Incomes Sectoral Country Risk Ratings (2010) Country Norway Switzerland Brunei Luxemburg Composite Risk Measure Political Risk Financial Risk Economic Risk 91.0 88.0 87.5 86.3 83.8 83.5 83.3 83.0 82.5 82.5 76.8 75.8 89.0 86.0 82.5 91.5 78.5 87.0 92.0 73.0 84.5 89.0 81.5 64.5 47.0 45.0 46.5 42.0 46.5 40.0 35.0 46.0 44.5 41.5 36.0 48.0 46.0 45.0 46.0 39.0 42.5 40.0 39.5 47.0 36.0 34.5 36.0 39.0 Taiwan Canada Finland Kuwait Singapore Sweden US (30) China (35) Gov't policy areas and Instruments Policy Areas Monetary Fiscal Trade Legal Banking reserve levels Tax rates Subsidies Government import controls Administrative Loan guarantee Credit regulation Tax collection Import quotas, tariffs, exchange rate and controls Profit repatriation controls, investment approvals Direct Market Operations Money creation Government purchases Government imports Government joint ventures Government wages State-owned enterprises Ownership Foreign Investment laws Incomes Sectoral Labor laws Land tenure laws Price controls Wage controls Industry licensing, domestic content Types of Risk Changes in company ownership Expropriation, confiscation and nationalization or domestication Local content requirements Changes in company operations Changes in transfers of goods and money Countertrade Country Risk Assessment Political and Economic Environment Stability of the political system Degree of control of economic system Constitutional guarantees Effectiveness of public administration Labor relations and social peace Country risk assessment Domestic economic conditions Population size Per capita income Economic growth during previous 5 years Inflation during previous 2 years Accessibility of domestic capital market to foreigners Availability of high-quality labor Possibility of giving employment to foreign nationals Legal requirements for environment Traffic system and communication channels Country Risk Assessment External economic relations Restrictions imposed on imports Restrictions imposed on exports Restrictions imposed on foreign investments in the country Legal protection for brands and products Restrictions imposed on monetary transfers Drain on foreign funds through oil or other energy imports Restrictions on the exchange of local money into foreign currencies. Taxes Governments uses taxes to generate revenue High taxes though only encourage the black market Also encourages companies to use countertrade or "off the books" transactions to avoid taxes International Agreements G7 and G8 Economic policy coordination group made up of leaders from Canada, England, France, Germany, Italy, Japan, Russia and the US G20 becoming more important for economic issues GATT and WTO COCOM (Coordinating Committee for Multilateral Controls) Originally was to stop the flow of technology to the former Soviet Union (1949) Has changed to the Wassenaar Arrangement (1995) Only provides recommendations of countries not to send sensitive material too. Issues Transcending National Boundaries ISO 9000 ISO 14000 Concerns with "sustainable development" Environmental concerns International Law Three main sources Customs International treaties International court decisions Still, companies are subject to local laws when doing business Types of Legal Systems Common Law US, Britain France Middle east Cuba, North Korea Code law Islamic Law Socialist Law Number of Lawyers per 100,000 residents United States Britain Germany France Japan 367.6 175.4 158.7 66.7 16.9 Legal Issues Facing the Company Type of decision Pricing decisions Packaging decisions Product decisions Competitive decisions Selling decisions Production decisions Channel decisions Issue Price fixing, deceptive pricing, trade discount Pollution regulations, fair packaging and labeling Patent protection, warranty requirements, product safety Barriers to entry, anticompetitive collusion Bribery, stealing trade secrets Wages and benefits, health and safety requirements Dealer's rights, exclusive territorial distributors International Treaties for Intellectual Property Protection Paris Convention Patent Cooperation Treaty Patent Treaty Law European Patent Convention Berne Convention Levels of Intellectual Property Protection in Various Countries Country Argentina Canada Chile China Germany Israel Patents 3.8 8.1 5.7 2.4 8.6 7.1 Copyrights Trademarks Trade Secrets 5.7 7.7 5.7 2.9 8.6 7.1 8.1 4.8 4.8 8.1 7.1 9.0 7.6 6.2 9.0 8.6 9.5 3.8 6.7 9.0 4.4 7.8 7.8 3.3 10.0 8.9 7.8 3.3 5.6 7.8 New Zealand 7.1 South Korea Thailand 3.3 2.4 United States 9.0 US Laws Sherman Anti-Trust Act (1890) prohibits conspiracy to reduce competition example: price "fixing" agreements among competing firms Extended Sherman Act by outlawing exclusive dealing and price discrimination prohibits unfair methods of competition example: use of deceptive advertising If it is illegal in the US, it is illegal for a US company to do it overseas. Clayton Act (1914) Federal Trade Commission Act (1914) US Foreign Corrupt Practices Act of 1977 Anti-trust in the EU The EU does not apply anti-trust laws extraterritorially However, any company doing business in the EU is subject to those laws. EU blocked mergers of Time Warner and EMI Group as well as GE and Honeywell Suing Microsoft and winning Bribery and Corruption Bribery and Corruption are serious issues in international business. There are countries in the world that require bribes to get anything done. US law limits what US companies can do in those countries. 2010 Corruption Rankings Rank/ Country CPI Rank/Country Score Worst Best 1 Denmark 9.3 178 Somalia 1 New Zealand 9.3 176 Myanmar 1 Singapore 9.3 176 Afghanistan 4 Finland 9.2 175 Iraq 4 Sweden 9.2 172 Uzbekistan 6 Canada 8.9 172 Turkmenistan 7 Netherlands 8 Australia 8 Switzerland 10 Norway 8.8 8.7 8.7 8.6 172 Sudan 171 Chad 170 Burundi 168 Equatorial Guinea CPI Score 1.1 1.4 1.4 1.5 1.6 1.6 1.6 1.7 1.8 1.9 Conflict Resolution Taking a case to court in another country presents a whole host of issues. More companies today are using Alternative Dispute Resolution (ADR) Arbitration Meditation Negotiation ...
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