Global Marketing, S2 2016

WEEK 4: CHAPTER 4

The political and legal

environment
Later we welcome our first industry speaker,
Mr Mitchell Neave from 40K Globe.

Objectives
Discuss difference between domestic and intl
legal systems and how they are connected
Appreciate the importance of the debate about
IPP
Analyse the role of sanctions, embargoes,
boycotts, multilateral agreements in restraining
trade
Discuss categories of political risks and ways
to mitigate them
Illustrate the way religion influences legal
requirements
2

Home country political and legal

environment
Home country policies and legalities can
disadvantage firms that compete globally, for
example, environmental issues:
Environmental Superfund
Kyoto Protocol
Copenhagen Summit
Paris agreement
How?
3

Home country political and

legal environment
Ongoing struggles about IP rights due to
competition between nations and companies at
different stages of development and capability
Lack of IP rights in China
Grey markets or parallel importing:
products enter the market in ways not desired
by their manufacturers
uncontrolled distribution channels
4

IP theft and piracy

Global piracy and
counterfeiting thrive.
Large marketplaces
selling pirated and
counterfeit goods.

Harco Glodok, Panthip Plaza, Silk

Street, Garment Wholesale
Center, etc..etc..

Embargoes, sanctions, and

boycotts
Deliberate government distortion of trade for
adversarial and political purposes
They can be enforced by the United Nations
as a punishment:
inflict great economic damage
https://www.youtube.com/watch?v=sP7t_AyeSk4 0.59 Cuba
embargo

GOOGLE CHINA

Click to play video

http://www.youtube.com/watch?v=3-jkKFCxggY
1:27

Embargoes, sanctions, and

boycotts
Australia and New Zealand tend to follow US-led
actions
Consumers vote with their feet
Widespread antipathy towards China
Rise in anti-US feeling especially in the Muslim
world
Dispute between Japan and China led to Chinese
rejecting Japanese products:
Japanese exports to China fell 14.5% in
November 2012

Export controls
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
Conflict can arise due to nations safeguard
their own economic interests
What trigger countries to impose export controls?

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

Why would countries implement import

controls?

Import controls: Problems

Domestic social cost
Downstream change in import composition
Protected firms have less incentive to
become more efficient and competitive
What do all these mean?

Regulation of international
business behaviour
Nations attempt to govern international
marketing activities
Moral and ethical boundaries are set
Intl behavior based on whose standards?
Boycotts used for political reasons, for
example, Arab nations have developed a
blacklist of companies that deal with Israel

SLOW STRANGULATION: 'IRAN

SANCTIONS A WAR ON ORDINARY
CITIZENS'

Click to play video

http://www.youtube.com/watch?v=HO0ljYvV9Ag
3:09

Regulation of international
business behaviour

Antitrust laws
Whats the effect on competition?
Bribery and corruption laws
Australian Competition and Consumer
Commission (ACCC)
Foreign Corrupt Practices Act passed in 1977
in the US
http://www.australiancompetitionlaw.org/overview.html

2012 Corruption Perception Index

http://www.transparency.org/cpi2015

Regulation of international
business behaviour
OECD anti-bribery convention:
overseas bribery is a crime
WTO considers placing bribery rules
Transparency International (TI) publishes the
Corruption Perceptions Index annually
Concerns for international marketers: general
standards of behaviour and ethics, plus social
and environmental costs
https://www.transparency.org/country/

Host country: Political action

and risk
Risk of loss when investing caused by
changes in a countrys political structure or
policies
Changes in tax laws, tariffs, expropriation of
assets or restriction in repatriation of profits
Stability and consistency may be superficial
Political risk is lowest in countries that have a
history of stability and consistency

Types of political risk

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

Approach to managing risk

19

Reducing risk
Accumulate information before making
decisions
A firm needs to demonstrate that it is an
integral part of the host country
Monitor political developments
Take out insurance to cover loss
http://dfat.gov.au/pages/default.aspx

Legal differences and restraints

Theocracy is based on religious faith:
halal certification for exports of commodities,
ranging from meat to cosmetics
Common law is based on tradition
Code law is based on a rigid written statutes

Legal differences and restraints

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
https://www.wto.org/english/tratop_e/tratop_e.htm

Legal differences and restraints

Genetically modified products
http://www.foodstandards.gov.au/consumer/gmfood/gm
overview/Pages/default.aspx

Laws protecting domestic industries and

reducing imports
Laws prohibiting deceptive advertising
Enforcement of laws

Influencing politics and laws

Work with people who understand the
political and legal systems such as who?
Engage in multilateral negotiations
Develop coalitions
Lobby politicians

SWEET & MAXWELL VIDEO BLOG:

INTERNATIONAL CHAMBER OF COMMERCE
AND ARBITRATION IN HONG KONG

Click to play video

http://www.youtube.com/watch?v=KGUbdYOISEw
2:44

International politics
Government-to-government relationships can
affect international marketing
Immense impact on trade when governments
change policy from hostility to cooperation:
change in policy by the Chinese
government
As global marketers, how do you keep track
of relationships and changing policies?

International law
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 PATENTS

Click to play video

http://www.dailymotion.com/video/x5tubd_int
ernational-patents_news#from=embed
0:57

International law
Firms are also affected by bilateral treaties
and conventions
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)

In closing
Your Ind research essay is due in two weeks
time. Turnitin issues, academic honesty
notes!
Next week, our topic is on Cultural
environment
Next week we welcome Mr Julian Moss from
Vodka 0!