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 party’s attitude toward • Sovereignty • Political risk • Taxes • Threat of equity dilution • Expropriation Keegan and Green, Chapter 5

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 Keegan and Green, Chapter 5

4. 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 Current Trends Keegan and Green, Chapter 5

5. Political Risk • Risk of change in political environment or government policy that would adversely affect a company’s ability to operate effectively and profitably • When perceived political risk is high, a country will have a difficult time attracting foreign direct investment Keegan and Green, Chapter 5

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 Keegan and Green, Chapter 5

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 Keegan and Green, Chapter 5

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 Keegan and Green, Chapter 5

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) Keegan and Green, Chapter 5

10. Common Law country Disputes are decided by reliance on the authority of past judicial decisions Companies are legally incorporated by state authority 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 versus Civil Law Keegan and Green, Chapter 5

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” Keegan and Green, Chapter 5

12. 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 Bribery and Corruption Keegan and Green, Chapter 5

13. 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 Countries Most Likely to Bribe Keegan and Green, Chapter 5