Professional Documents
Culture Documents
Nationalism
Sovereignty
Imperialism/domination
Power
Ideologies
National interests
Political risk
A Snapshot of Chapter
The political and legal environment in the home
country, the environment in the host country, and
the laws and agreements governing relationships
among nations are all important to the
international marketer.
Compliance with them is mandatory in order to do
business abroad successfully.
Such laws can control exports and imports both
directly and indirectly and can also regulate the
international business behavior of firms,
particularly in the areas of boycotts, antitrust,
corruption, and ethics.
continue
To avoid the problems that can result from changes in the
political and legal environment, the international marketer
must anticipate changes and develop strategies for coping
with them.
Whenever possible, the manager must avoid being taken by
surprise and thus not let events control business decisions.
On occasion, the international marketer may be caught
between clashing home and host country laws. In such
instances, the firm needs to conduct a dialogue with the
governments in order to seek a compromise solution.
Alternatively, managers can encourage their government to
engage in government-to-government negotiations to settle
the dispute.
continue
Home country government policies and the legal systems have a major
impact on a firms opportunities abroad. Examples:
Minimum wage legislation affects the international competitiveness of a
firm using highly labor intensive production processes.
The cost of domestic environment safety regulations may also
significantly affect the pricing policies of firms in their international
marketing efforts
2- Export Controls
Export controls
Designed to deny or delay the acquisition of strategically
important goods by the adversaries/rivals.
The legal basis for export controls varies across nations.
Dual use items (goods useful for both military and civilian
purposes) are controlled by the Joint List of the European Union.
Restricts the flow of materials and helps avoid the
proliferation/sudden increase of weapons of mass destruction.
Reduces flows of technological knowledge to control the
sophistication of armaments/weapons used by insurgent/dissatisfied
groups.
Imposes financial controls which inhibit funding for terrorist training.
3- Import Controls
In these countries, either all imports or the imports of
particular products are controlled through tariff and
nontariff mechanisms.
Tariffs place a tax on imports and raise prices.
Nontariff barriers like voluntary restraint agreements
are self-imposed restrictions and cutbacks aimed at
avoiding punitive/punishing trade actions from the host.
Quota systems reduce the volume of imports accepted
by a country.
The final effect of all these actions is a quantitative
reduction of imports
3- Import Controls
For the international marketer, such restrictions may
mean that the most efficient sources of supply are not
available because government regulations restrict
importation from those sources.
The result is either second-best products or higher costs
for restricted supplies. This in turn means that the
customer receives inferior service and often has to pay
significantly higher prices, and that the firm is less
competitive when trying to market its products
internationally.
Policymakers are faced with several problems when
trying to administer import controls.
First, most of the time such controls exact a huge price
from domestic consumers.
3- Import Controls
Several major areas in which nations attempt to govern the international marketing activities
of its firms are boycotts, whereby firms refuse to do business with someone, often for
political reasons; antitrust measures, wherein firms are seen as restricting competition; and
corruption, which occurs when firms obtain contracts with bribes rather than through
performance
Arab nations, for example, have developed a blacklist of companies that deal with Israel.
Even though enforcement of the blacklisting has decreased, some Arab customers still
demand from their suppliers assurances that the source of the products purchased is not
Israel and that the company does not do any business with Israel.
Boycott measures put firms in a difficult position. Caught in a web of governmental activity,
they may be forced to either lose business or pay fines. This is particularly the case if a firms
products are competitive yet not unique, so that the supplier can opt to purchase them
elsewhere. Heightening of such conflict can sometimes force companies to withdraw
operations entirely from a country
International Law
No enforceable body of international law exists;
Treaties and agreements respected by a number of
countries influence international business operations.
Firms are restricted by both home and host country laws.
In case of a conflict in deciding which countrys law to follow,
firms can choose either arbitration or litigation.
Litigation/trial often involves extensive delays and is
very costly.
Arbitration procedures should always be included in
the original contract.
International Terrorism
Terrorism is the systematic use (or threat) of
violence aimed at attaining a political goal and
conveying a political message.
Terrorists direct their strikes at business more
than any other target.
Terrorism creates new opportunities for firms
in a few industries like construction, security,
and information technology.
International Terrorism
Direct effect of terrorism: the immediate cost
imposed on individual firms.
Indirect effect on business activities: the real
or perceived decline in per capita income,
purchasing power, and stock market values.
Chill effect - Uncertainty about the state of a
nations economy leads to a sharp reduction
in demand for both consumer and industrial
goods.
International Terrorism
Physical damage disrupts power supply,
communication, transport and other forms of
infrastructure, thereby disturbing the supply of
inputs, resources and services.
Terrorism deteriorates transnational
relationships.
Regulations imposed by the government to
reduce a countrys vulnerability/weakness to
terrorism may delay the supply of inputs,
increase administrative burden and require
firms to invest in new procedures.
Ethical Issues
The ethical obligations faced by
multinational enterprises include:
Corporate governance and responsibility
Intellectual property rights
Bribery and corruption
Class Discussion
Topic
The impact of terrorism in
France and other countries of
Europe on the international
trade with Asian countries
especially with Muslim
countries.
The consequences of
terrorism should be discussed
both in short run and long run
on the international business
as well.