8/31/2023

The political environment of global marketing

• is the set of governmental institutions, political parties, and
2.4 The Political, Legal and organizations that are the expression of the people in the nations of
the world.
Regulatory Environments • - sovereignty to national governments.
PP. 153-180 • - political risk
• - government’s actions with respect to taxes and seizures of assets
(tịch biên tài sản) – expropriation (sung cong), confiscation (tich thu),
and nationalization (quoc huu hoa).

Sovereignty (/'''´sɔvrənti'‘’/ - chu quyen) Sovereignty & Global Market Integration

▪Sovereignty: Supreme and independent political ▪ Some believe that global market integration is eating into national
economic sovereignty
authority
▪ In the EU, individual countries gave up their rights to a national currency,
“A sovereign state was considered free and independent. It regulated product standards in exchange for better market access
trade, managed the flow of people into and out of its boundaries, and
▪ “The ultimate resource of a government is power, and we’ve seen
exercised undivided jurisdiction over all persons and property within its
repeatedly that the willpower of governments can be overcome by
territory. It had the right, authority, and ability to conduct its domestic
persistent attacks from the marketplace.”
affairs without outside interference and to use its international power
and influence with full discretion.” ~ Neal Soss, Economic Consultant
Richard Stanley
President, Stanley Foundation

Political Risk Political Risk

▪Risk of change in political environment or in • Some examples of political risk include:
–War
government policy that would unfavorably affect a –Social unrest, fractionalized by language, ethnic and/or religious groups
–Orderly political transfer
company’s ability to operate effectively and profitably. –Politically motivated violence
–International disputes
▪When perceived political risk is high, a country will have –Change in government/pro-business orientation
a difficult time attracting foreign direct investment. –Social conditions (population density and wealth distribution)
–Corruption, nepotism
▪ Some governments offer political risk insurance. –Crime
–Labor costs
–Tax discrimination
–Exchange controls, tariff barriers
–Dependence on and/or importance to a major hostile power
–Repatriation restrictions

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Taxes Seizure of Assets

▪ Governments rely on tax revenues to generate funds necessary ▪ ultimate threat a government can pose toward a company
for social services, the military, and other expenditures.
▪Expropriation–governmental action to dispossess a
▪ Government taxation policies on the sale of goods and services foreign company or investor
frequently motivate for companies and individuals to profit by Compensation should be provided in a “prompt, effective, and adequate
not paying taxes manner”
▪ Government taxation policies ▪Confiscation occurs when no compensation is
• High taxation can lead to black market growth and cross-border provided.
shopping
• High taxes in China leads to smuggling of oil, cigarettes, PCs, film International law is generally interpreted as prohibiting
• In Great Britain, cars returning from France bring on average 80 bottles of wine back any act by a government to take foreign property without
▪ Corporate taxation compensation
• Companies attempt to limit tax liability by shifting location of income –
earning stripping

Seizure of Assets Seizure of Assets

▪Creeping expropriation
▪Nationalization–a government takes control of some
limits economic activities of foreign firms
or all of the enterprises in an entire industry
• Acceptable according to international law if: ▪May include:
–Limits on repatriation of profits, dividends, or royalties
• satisfies public purpose –Technical assistance fees
• includes compensation –creased local content laws
–Quotas for hiring local nationals
–Price controls
–Discriminatory tariff and nontariff barriers
–Discriminatory laws on patents and trademarks

International Law International Court of Justice

▪The rules and principles that nation-states consider binding ▪Judicial arm of the United
among themselves Nations founded in 1947
▪Pertains to property, trade, immigration and other areas
▪Settles disputes between
▪Disputes between nations are issues of public international
law
nations
• World Court or International Court of Justice (ICJ); ICJ, The Hague, Netherlands ▪Offers advice on legal
• Judicial arm of the United Nations
• International Law Commission
issues submitted by various
• United Nations Security Council international agencies

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Common Law vs. Civil Law Common Law vs. Civil Law
▪ The Napoleonic Code of 1804
▪ Common Law ▪ Civil Law
• Disputes are decided by reliance on the •Legal system reflects the structural
drew on the Roman legal concepts and principles of the Roman
authority of past judicial decisions
system and is the basis for • Companies are legally incorporated by state Empire
continental European law authority •Companies are formed by contract
today. Code law is also known • Code law is used in only a few areas; the between two or more parties who
as civil law. U.S. Uniform Commercial Code fully
adopted by 49 states, Louisiana still
are fully liable for the actions of the
company
▪ U.S. law is rooted in English influenced by French civil law
common law.

Thông luật (Anh- Mỹ) Hệ thống luật Châu Âu lục địa (Pháp-Đức)

Sidestepping Legal Issues 1. Jurisdiction - Quyền lực pháp lý

▪Refers to a court’s authority to rule on particular types of
▪Get expert legal help issues arising outside of a nation’s borders or to exercise
▪Prevent conflicts power over individuals or entities from different countries.
1. Establish jurisdiction ▪Employees of foreign companies should understand the
2. Protect intellectual property extent to which they are subject to the jurisdiction of host-
3. Protect licenses and trade secrets country courts.
4. Avoid bribery ▪Courts have jurisdiction if it can be demonstrated that the
5. Advertising & promotion company is doing business in the state in which the court
sits.

2. Intellectual Property Infringement of Intellectual Property

▪ Intellectual property must be registered in each
country where business is conducted. ▪Counterfeiting (Làm giả mạo) –unauthorized copying
•Patent – gives an inventor exclusive right to make,
use, and sell an invention for a specified period of and production of a product
time
•Trademark – distinctive mark, motto, device, or
▪Associative Counterfeit/Imitation (Nhái) –product
emblem used to distinguish it from competing name differs slightly from a well-known brand
products
•Copyright – establishes ownership of a written, ▪Piracy (Vi phạm bản quyền) – unauthorized
recorded, performed, or filmed creative work publication or reproduction of copyrighted work

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Intellectual Property Protecting Intellectual Property

▪In the U.S., registration is with the Federal Patent Office
“You may not realize it, but by using the name ▪In Europe, applicants use the European Patent Office or
Kleenex ® as a generic term for tissue, you risk register country-by-country. European patents are
erasing our coveted brand name that we’ve expensive because of the need to translate technical
worked so hard for all these years. Kleenex ® is documents into all of the languages of the EU.
a registered trademark and should always be ▪Soon the Community Patent Convention will cover 27
followed by the ® and the words ‘Brand countries
Tissue’. Just Pretend it’s in permanent ▪Madrid Protocol trademark owners are protected in 74
marker.” countries with 1 application

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Antitrust – Chống độc quyền 3. Licensing and Trade Secrets

▪Laws are designed to combat restrictive business
▪Licensing is a contractual agreement in which a
practices and to encourage competition licensor allows a licensee to use patents, trademarks,
•Enforced by FTC in the U.S., Fair Trade Commission in trade secrets, technology, and other intangible assets
Japan, European Commission in the EU in return for royalty payments or other forms of
•The Sherman Act of 1890 prohibits certain restrictive compensation
business practices including fixing prices, limiting ▪Important considerations
production, allocating markets, or any other scheme •What assets may be licensed
designed to limit or avoid competition. •How to price assets
•Applies to U.S. companies outside U.S. borders and to foreign companies operating in •The rights granted
the U.S.

Licensing and Trade Secrets 4. Bribery and Corruption

▪ Trade secrets are confidential information or knowledge that has ▪Foreign Corrupt Practices Act
commercial value and is not in the public domain and for which steps •Requires publicly held companies to institute internal accounting controls that
have been taken to keep it secret would record all transactions
▪ Trade secrets include manufacturing processes, formulas, designs, and •Makes it a crime for a U.S. corporation to bribe an official of a foreign
government or political party to obtain or retain business
customer lists. •Prohibits payments to third parties when there is reason to believe it may be
▪ To prevent disclosure, use confidentiality contracts channeled to foreign officials
▪ The Uniform Trade Secrets Act has been adopted by most U.S. states ▪Omnibus Trade and Competitiveness Act
•Allows for “grease” payments to cut red tape; i.e., getting shipments through
▪ NAFTA was first international agreement protecting trade secrets customs, getting permits
▪ TRIPS, Trade-Related Aspects of Intellectual Property Rights signed by
members of GATT

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Conflict Resolution (Giải quyết xung đột) The Regulatory Environment

▪Litigation (Sự kiện tụng)
▪A part of the firm's external marketing environment on
▪Formal arbitration (Hòa giải) which legal and political forces act to change regulations
•Settles disputes outside of court which affect the marketing effort;
•Groups agree to abide by panel’s decision ▪Includes agencies, both governmental and non-
governmental, enforce laws or set guidelines for
▪1958 United Nations Convention on the Recognition and conducting business
Enforcement of Foreign Arbitral Awards (New York ▪Marketing activities affected by international and regional
Convention) economic organizations
•Most important treaty regarding international arbitration signed •EU
•WTO

Key takeaways
1. Elements of a country’s political environment: Sovereignty, taxes,
political risk, seizure of assets.
2. Main types of legal systems: Common and Civil laws, Islamic laws…
3. Most important business issues to global marketers: jurisdiction,
intellectual property, antitrust, licensing and trade secrets, bribery
and corruption.
4. Alternatives for conflict resolution and dispute settlement:
litigation, formal arbitration