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Chapter 4

Chapter 4. The political and legal environment. Home country policies and legalities can disadvantage firms that compete globally For example, climate change Environmental Superfund Kyoto Protocol Copenhagen Summit. Home country political and legal environment. 3.

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Chapter 4

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  1. Chapter 4 The political and legal environment

  2. Home country policies and legalities can disadvantage firms that compete globally For example, climate change Environmental Superfund Kyoto Protocol Copenhagen Summit Home country political and legal environment 3

  3. Home country political and legal environment 4

  4. Lack of intellectual property rights in China Grey markets or ‘parallel importing’ products enter the market in ways not desired by their manufacturers uncontrolled distribution channels Home country political and legal environment 5

  5. Google China Home country political and legal environment Click to play video

  6. Deliberate government distortion of trade for adversarial and political purposes Can be enforced by the United Nations as a punishment inflict great economic damage Embargoes and sanctions

  7. Often initiated by the US against small countries, including Cuba Iraq North Korea Rarely achieve the desired effect The US annually loses an estimated US$20 billion in lost exports due to sanctions Embargoes and sanctions

  8. UN set to vote on Iran sanctions Embargoes and sanctions Click to play video

  9. Export control systems impede upon the acquisition of goods by adversaries Primarily used by the US Established in Australia and New Zealand through involvement in the Wassenaar Arrangement Export controls

  10. The US export control system The Export Administration Act and the Munitions Control Act Military use, civilian use or dual use Export controls

  11. Export controls

  12. Determinants for export controls national security foreign policy short supply nuclear non-proliferation Export controls

  13. US exporters must obtain an export license Commodities exported from the US are scrutinised Most international business is under ‘no license required’ (NLR) conditions Export controls

  14. A new environment for export controls • Restricts the availability of high technology products, including weapons • Export controls have moved from a ‘strategic approach’ to a ‘tactical approach’

  15. How much of the latest technology is required for a country to engage in ‘dangerous’ activities? Terrorist attacks highlight the importance of export control A new environment for export controls

  16. Australia has 38 per cent of the world’s uranium earned $573 million in 2005 from exports exports to France stopped in the 1980s in protest against their nuclear testing Increased demand for uranium from India, Russia and China India has not signed the Nuclear Non-Proliferation Treaty (NPT) Export controls

  17. Restrictions placed on international marketers by countries with trade deficits or infrastructure problems Tariffs Voluntary restraint agreements Quota systems Import controls

  18. Domestic social cost The downstream change in import composition Protected firms have less incentive to become more efficient and competitive Import controls: Problems

  19. Nations attempt to govern international marketing activities Moral and ethical boundaries are set Boycotts used for political reasons For example, Arab nations have developed a blacklist of companies that deal with Israel Regulation of international business behaviour

  20. Antitrust laws What’s the effect on competition? The Australian Competition and Consumer Commission (ACCC) Bribery and corruption laws Functional lubrication is permissible; individual greed is not Regulation of international business behaviour

  21. OECD anti-bribery convention Overseas bribery is a crime Australia and New Zealand have never prosecuted any cases Regulation of international business behaviour

  22. Standards of behaviour and ethics Firms in Australia and New Zealand are accountable to the government and public scrutiny Can marketers be trusted? Regulation of international business behaviour

  23. The risk of loss when investing caused by changes in a country’s political structure or policies For example, changes in tax laws Stability and consistency may be superficial Political action and risk

  24. Ownership risk exposes property and life Operating risk involves interference with the ongoing operations of a firm Transfer risk encountered when shifting funds between countries Types of political risk

  25. Exposure to political risk 26

  26. Pressure from anti-Western factions Violent areas are avoided Expropriation is the seizure of foreign assets Confiscation does not involve compensation Domestication is more subtle Political action and risk

  27. Exchange controls reduce import of luxury goods Raise tax rates applied to foreign investors Price controls by government Political action and risk

  28. Accumulate information before making decisions A firm needs to demonstrate that it is an integral part of the host country Monitor political developments Reducing risk

  29. Common law is based on tradition Code law is based on a rigid written statutes Theocracy is based on religious faith Halal certification of exports Legal differences and restraints

  30. Anti-dumping laws a firm cannot export at a lower price than what it charges in its home market Food safety laws sanitary and phytosanitary (SPS) regulations Legal differences and restraints

  31. Genetically modified products Laws prohibiting deceptive advertising Enforcement of laws Legal differences and restraints

  32. International patents Legal differences and restraints Click to play video

  33. Work with people who understand the political and legal systems Engage in multilateral negotiations Develop coalitions Lobby politicians Influencing politics and laws

  34. Government-to-government relationships can affect international marketing Extraterritoriality occurs when the domestic law of one country is applied in a foreign jurisdiction For example, US embargoes placed upon Cuba International politics

  35. No enforceable body of international law exists Some treaties and agreements are respected Some agreements seek to simplify the legal aspects of international business for example, patents and trademarks International law

  36. Firms must concern themselves with jurisdictional disputes International commercial dispute resolution Neutral arbitration rather than litigation for example, the Australian International Legal Services Advisory Council (AILSC) International law

  37. Sweet & Maxwell video blog: International Chamber of Commerce and Arbitration in Hong Kong International law Click to play video

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