The Political, Legal, and Regulatory Environments of Global Marketing

1
The Political, Legal, and Regulatory Environments
of Global Marketing

• Chapter 4
• Global Marketing

2
Political Environment

• Political cultures provide context
• Governing partys attitude toward
• Sovereignty
• Political risk
• Taxes
• Threat of equity dilution
• Expropriation

3
Sovereignty

• Supreme and independent political authority

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 Chief Justice
Fuller
4
Current Trends

• Privatization
• Moves an economy toward free-market direction
• Evidence that governments are changing how they
  exercise sovereign power

• Global Integration
• Countries in advanced preferential trade
  agreements sacrifice many sovereign rights to
  improve economy

5
Political Risk

• Risk of change in political environment or
  government policy that would adversely affect a
  companys ability to operate effectively and
  profitably
• When perceived political risk is high, a country
  will have a difficult time attracting foreign
  direct investment

6
Taxes

• Government taxation policies
• High taxation can lead to growth in a black
  market
• Corporate taxation
• Companies attempt to limit tax liability by
  shifting location of income

7
Seizure of Assets

• Expropriation governmental action to dispossess
  a foreign company or investor
• Compensation should be provided in a prompt,
  effective, and adequate manner
• When no compensation is provided, it is called
  confiscation

8
Seizure of Assets (cont.)

• Nationalization - a government takes control of
  some or all of the enterprises in an entire
  industry
• Acceptable according to international law if
• satisfies public purpose
• includes compensation

9
International Law

• 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)

10
Common Law versus Civil Law

• 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

• Common Law country
• Disputes are decided by reliance on the
  authority of past judicial decisions
• Companies are legally incorporated by state
  authority

11
Islamic Law

• 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

12
Bribery and Corruption

• Top 7 Rankings
• 1. Nigeria
• 2. Pakistan
• 3. Kenya
• 4. Bangladesh
• 5. China
• 6. Cameroon
• 7. Venezuela

• Bottom 7 Rankings
• 45. Australia
• 46. Netherlands
• 47. Switzerland
• 48. Singapore
• 49. Norway
• 50. Canada
• 51. Finland

13
Countries Most Likely to Bribe

• Home Country of Bribing Company
• 1. Belgium/ Lux
• 2. France
• 3. Italy
• 4. Netherlands
• 5. South Korea
• 6. UK
• 7. Spain
• 8. China

• Country in which Bribes were Accepted
• 1. Nigeria
• 2. Bolivia
• 3. Colombia
• 4. Russia
• 5. Pakistan
• 6. Mexico
• 7. Indonesia
• 8. India