Global Marketing Management Global Political & Legal Environment

1. Global Marketing ManagementGlobal Political & Legal Environment MKTG 3215-001 Spring 2013 Mrs. Tamara L. Cohen Class #6

2. Homework: Foreign Corrupt Practices Act Global Political & Legal Environment

3. Group Project • Project Proposal due on Wednesday, Feb.13 • What do you need to do? • Choose your group 5-6 students in each group • Choose your country 1 group per country • Choose your product / brand - NOT marketed in that country yet - real or imagined • Let me know - your group, country, product / brand / service Countries reserved: • BRAZIL • PHILIPPINES

4. KEY TERMS Political Environment Legal Environment Jurisdiction & dispute resolution personal territorial subject matter Protection of intellectual property rights = legal monopoly Green Marketing laws Antitrust legislation • Sovereign rights of nation • Political risks • confiscation • expropriation • domestication • NGOs • Government agencies that help companies in global marketplace

5. KEY CONCEPTS Political Environment Legal Environment 3 heritages form basis for most legal systems in world: Common law (“English law”) Civil or code law (“Napoleonic Code”) Islamic law (“Shari’ah”) Even though a country’s laws may be based on doctrine of one of these 3 legal systems, individual interpretation may vary significantly. • Sovereign state • independent & free from all external control • equal to other sovereign states • Political risk • Benefits of foreign investment

6. Global Political Environment

7. Global Perspective of Political Environment • Important reality of international business • both host & home governments are integral partners • Government controls & restricts company’s activities • encourages & offers support • discourages & bans or restricts company’s activities • International law recognizes sovereign right of nation • to grant or withhold permission to do business within its political boundaries • to control where its citizens conduct business

8. The Sovereignty of Nations Nations can & do give up specific aspects of their sovereign rights in order to coexist with other nations, e.g. strategic alliances for trade NAFTA – North America Free Trade Agreement NATO – North Atlantic Treaty Organization WTO – World Trade Organization EU – European Union AU – African Union

9. Stability of Government Policies Issues that can affect stability of a government • radical shifts in government philosophy when opposing political party comes to power • pressure from special interest groups • weakened economic conditions • bias against foreign investment • conflicts between governments Main political causes of international market instability • some forms of government are inherently unstable • changes in political parties during elections can affect trade conditions • nationalism • animosity targeted toward specific countries • trade disputes themselves

10. Political Risks of Global Business • Confiscation – company’s assets seized without payment • Expropriation – investment seized by government but there is some reimbursement for assets • Domestication – host countries gradually cause transfer of foreign investments to national control & ownership through series of gov’t decrees

11. Venezuela -recentexpropriations • President Hugo Chávez’s Venezuelan government’s “broad nationalizations & asset seizures have gone far beyond the oil industry to include coffee roasters, cattle ranches and tomato-processing plants”. • dozen oil rigs, > 30 oil terminals, > 300 boats, aluminum, cement, gold, iron, steel, farming, transportation, electricity, food production, banking, paper, media, golf courses • Margarita Hilton Hotel

12. Violence and Terrorism • State Department reported >10,000 terrorist incidents in 70 countries in 2011 • Goals of terrorism against multinationals • embarrass government & its relationship with firms • generate funds by kidnapping executives • use as pawns in political or social disputes • inflict terror within a country as did 9/11 • In past 30 years, 80% terrorist attacks against U.S. have been aimed at American businesses

13. Forecasting Political Risk • Political risk assessment • Government failure is greatest risk to international marketers • Risk assessment of investments “According to a communiqué by the Soro Government, effective Monday, 24 January, 2011, all cocoa and coffee exports from Côte d'Ivoire will be suspended.”

14. Nationalism = intense feeling of national pride & unity • National interest & security > international relations • Countries use nationalism to protect themselves against intrusions • threats from outside forces • declines in domestic economy • Nationalism comes & goes • Marketers should not confuse nationalism with widespread fear or animosity directed at particular country • Toyota in U.S. (1980s) • animosity toward US in France • unhappiness in many other countries re war in Iraq

15. Economic Risks • Exchange controls • stem from shortages of foreign currency held by a country • Local-content laws • Import restrictions • force foreign industry to purchase more supplies within host country, so creating markets for local industry • Tax controls • Price controls • essential products with high public interest • pharmaceuticals / food / gasoline • Labor problems • labor unions have strong government support

16. Political Sanctions • Boycott of nation by one nation or by group of nations • stop all trade between countries • issuing sanctions against trade of specific products e.g. U.S. boycotts of trade with Cuba/Iran • History indicates that sanctions often unsuccessful

17. Political & Social Activists • Not usually government sanctioned • Can interrupt normal flow of trade • Range from those who seek peaceful change to those who resort to violence & terrorism to effect change e.g. worldwide boycott of Nestlé products • Internet an effective tool of activists

18. NGOs • NGOs increasingly affect policy decisions made by governments • protests • lobbying • collaboration with governmental organizations • Many NGOs involved in relieving human misery plaguing parts of the world

19. Mali Syria Pakistan Libya Israel, West Bank & Gaza Iraq Congo, Democratic Republic    Central African Republic Kenya Afghanistan   Nigeria Haiti Somalia Philippines Saudi Arabia Lebanon Algeria Iran Cote d'Ivoire Burundi   Eritrea Niger Chad Yemen Colombia Mexico Sudan Republic of South Sudan Guinea Korea (North) • Americas gAsia • g Middle East • g Africa U.S. State Department Travel Warnings

20. Reducing Political Vulnerability Strategies that MNCs use to minimize political vulnerability & risk • joint ventures • expanding the investment base • licensing • planned domestication • political bargaining • political payoffs

21. Global Legal Environment

22. Legal Systems of the World CIVIL (code) COMMON BILEGAL SHARI’AH LAW LAW (mixture) LAW

23. Marketing Laws • All countries have laws regulating marketing activities: • Promotion (especially censorship of advertising) • Product development (e.g. cheaper to meet EU standards with regular product range than design especially for EU market) • labeling (‘Product’) • Pricing (especially products regarded as ‘in the national interest’) • channels of distribution (‘Place’) • Discrepancies across markets create challenges for trade negotiators (differences in enforcement & interpretation)

24. Food product label in USA Food product label in European Union

25. Conflict Resolution • Conciliation = mediation = non-binding agreement to resolve dispute • Arbitration = parties agree to honor judgment made by mutually selected referee • Litigation = lawsuits in public courts • Jurisdiction? • What recourse?

26. What isINTELLECTUAL PROPERTY? = property resulting from people’s intellectual talent & abilities to produce original work like graphic designs, novels, computer software, machine-tool designs, secret formulas PROPERTY RIGHTS = legal rights to resources + income generated by those resources Intellectual property laws protect property rights of creators/owners of IP

27. Green Marketing Laws - focus on environmentally friendly products - focus on product packaging & effect on solid waste management - rules for recycling, being organic, being eco-friendly Green marketing = marketing products that are environmentally safe.

28. Some U.S. Laws Apply in Host Countries • Foreign Corrupt Practices Act • illegal for companies to pay bribes to foreign officials, candidates, or political parties • National security laws • controlled products • Antitrust laws • protect consumers • protect exports & investments against private restrictions • Anti-boycott law • Extraterritoriality of U.S. laws

29. International Law compliance – not what you’re expecting Governments respect international law only when it suits their national interests. (Don't expect that to change any time soon.)

30. What do we know about the Political Environment? • Sovereignty of nations affects stability of government policies • Different governmental types, political parties, nationalism, targeted fear/animosity, & trade disputes can affect the environment for marketing in foreign countries • Political risks of global business • Importance of political system to international marketing • Impact of political & social activists, violence, & terrorism on international business • How to assess & reduce effect of political vulnerability • How & why governments encourage foreign investment

31. Various legal systems in world affect business Legal questions jurisdiction & legal recourse in disputes protection of intellectual property rights extended U.S. law enforcement enforcement of antitrust legislation by U.S. & foreign governments Internet & its new legal implications Engage competent international lawyers What do we know about the International Legal Environment?

32. What do YOU think about the Foreign Corrupt Practices Act? “ the law is overly broad and too aggressively enforced ” ? ? ? ? STRONGLY AGREE AGREE STRONGLY DISAGREE DISAGREE

33. Next class: Case # 1: Starbucks Preparation: Reading for Starbucks case analysis: Reading #11 in Course Pack + independent reading Visit Starbucks web site www.starbucks.com Prepare for class discussion & hand in.