Global marketing

Week 3, September 20, 2017

Chapter 5
The Political and Legal Environments

The political and legal Environments

Marketing managers must understand three areas:
1. Political and legal circumstances in the home country
2. Political and legal circumstances in the host country
3. Bilateral and multilateral agreements, treaties, and laws government
relations between host and home countries

Sanctions and Embargoes

- Government actions that distort the free flow of trade in good, services, or
ideas for decidedly adversarial and political, rather than strictly economic
purposes

Export Controls
- Many nations use export control system, designed to deny or at least delay
the acquisition of strategically important goods by adversaries
- Most make controls the exception, rather than the rule
- Other nations consider exports to be an extension of reign policy

Import Controls
In many nations all imports or the imports of particular products are controlled
through mechanisms including
- Tariffs
- Voluntary restraint agreements
- Quota systems

Regulation
Several major areas in which nations attempt to govern the global marketing
activities of firms include:
- Boycotts (whereby firms refuse to do business with someone)
- Antitrust measures (wherein firms are seen as restricting competition)
- Corruption (which occurs when firms obtain contracts with bribes rather
than through competitive bidding and performance)

Behaviour and Ethics

- Increasingly, public concerns are raised about such issues as global warming,
pollution and moral behaviour
- These issues are not the same importance in every country
Assessing Risk
Political risk
- The risk of loss, when in vesting in a given country, that is caused by changes
in a country’s political structure or policies
o Ownership Risk (Exposes property and life)
o Operating Risk (interference with the ongoing operations of the
firm)
o Transfer Risk (Mainly encountered when attempts are made to shift
funds between countries)

Risk
Expropriation
Seizure of foreign assets by a government with payment of compensation to the
owners

Confiscation
Similar to expropriation, but does not involve compensation to the firm

Domestication
Government demands partial transfer of ownership and management responsibility
and may impose regulations regarding share of a product that is locally produced
and share of profit retained

Legal Differences
Theocracy
Has faith and belief as its key focus and is a mix of societal, legal and spiritual
guidelines

Common Law
Based on tradition and depends less on written statutes and codes than on
precedent and custom

Code Law
Based on a comprehensive set of written statutes