04. political and regulatory climate

THARAKA DIASMBA(USA), BBA(USA), Dip in Mgt, ACIM(UK), FAEA(Dip in AEA-UK),

FinstSMM(UK), CPM(Asia), MSLIM, PM(Sri-Lanka) 1

List and explain the political motivations behind government actions that promote or restrict international marketing. Identify pressure groups that affect international marketing.

Discuss specific government actions salient to international marketing, such as boycotts and takeovers.

List and compare the four basic legal traditions that marketers encounter worldwide.

Cite examples illustrating how national laws can vary and change.

Differentiate between the steps involved in managing political risk and those involved in planning for regulatory change.

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Host country political climate Host government actions Home country political forces Legal environments National regulatory environments Managing political risk Global marketing and terrorism


Self-preservation Security Prosperity Prestige Ideology Cultural identity


© 2005 Prentice Hall 5

“Every 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.” - U.S. Supreme Court Chief Justice Fuller

© 2005 Prentice Hall 6

Stage of Development Protectionist laws

-lesser developed Free trade – advanced

development

Political and economic Cronyism Market vs. Non-market

The ultimate resource of a government is power, and we’ve seen repeatedly that the willpower of governments

can be overcome by persistent attacks from the marketplace.

- Neal Soss

Government subsidies Ownership restrictions Operating conditions

Work permits Local content requirements


Takeovers = Host-government actions that result in a firm’s loss of ownership or direct control

An expropriation ( taking out of an owners hands) is a formal seizure of an operation

A confiscation( Seizure by the government) is an expropriation without compensation


Guided by the same six interests as host countries U.S. embargo of Cuba U.S. anti-Arab boycott legislation

Often home countries seek multilateral actions to increase their bargaining power


Product liability Bankruptcy Regulating cyberspace


Positive HNO – assume people can be trusted to obey the rules

Negative HNO – assume people cannot be trusted to obey the rules


Attitudes toward rules are affected by two criteria:1. Level of power distance2. Type of human nature orientation


AlterBargain to get government to change regulations

AvoidMove to bypass the impact of the regulation

Accede ( agree or express agreement) Comply

Ally ( A friendly nation) Avoid some risks by seeking strategic alliances


Political risk is the possibility that an unexpected and drastic change due to political forces will result in adverse circumstance for business operations


Regulatory Change More moderate and predictable changes in

the business environment Political risk

More unexpected and drastic changes


© 2005 Prentice Hall 5-16

The rules and principles that nation-states consider binding among themselves

Disputes between nations are issues of public international law Judicial arm of the United Nations World Court or International Court of Justice

(ICJ)


Common Law country Disputes are decided

by reliance on the authority of past judicial decisions

Companies are legally incorporated by state authority

Civil Law country Legal system reflects

the structural concepts and principles of the Roman Empire

Companies are formed by contract between two ore more parties who are fully liable for the actions of the company


Legal system in many Middle Eastern countries Based on the sharia - a comprehensive code

governing Muslim conduct in all areas of life Koran–- Holy Book Hadith

▪ Based on life, sayings, and practices of Muhammad

▪ Identifies forbidden practices “haram”


Get expert legal help

Preventing conflicts Establish jurisdiction Protecting intellectual

property Avoid bribery


Refers to a Court’s authority to rule on particular types of controversies arising outside of a nation’s borders or to exercise power over individuals or entities from different countries.

Employees of foreign companies should understand the extent to which they are subject to jurisdiction of host-country courts

Courts have jurisdiction if it can be demonstrated that the company is doing business in the state the court sits


Intellectual property must be registered in each country where business is conducted Patent – gives an inventor exclusive right to

make, use, and sell an invention for a specified period of time

Trademark – distinctive mark used to distinguish it from competing products

Copyright – establishes ownership of a written, recorded, performed, or filmed creative work


Counterfeiting – unauthorized copying and production of a product

Associative Counterfeit/Imitation – product name differs slightly from a well-known brand

Piracy – unauthorized publication or reproduction of copyrighted work

Fighting the battle on two fronts:1. Perfect intelligence systems to avoid being

caught unaware when changes disrupt operations

2. Develop risk-reducing strategies that help limit their exposure, or the losses they would sustain, should a sudden change occur


Starbucks pulled out of Israel because they feared a terrorist attack GE criticized by a senator for taking “blood money” from a state that

supports terrorism (Iran) Global tourism and education are affected

Americans spend more on domestic and nearby tourism; less spent on overseas tourism. Fewer Middle Easterners are visiting America.

Tighter visa controls in America have created an opportunity for non-U.S. countries to increase their share of international students

Governments and companies spend lots of money to protect infrastructure, plant, equipment, and people


04. political and regulatory climate

Marketing

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