Transcript Chapter 4
Global Marketing Management A European Perspective The Political, Legal, And Regulatory Environments in Global Marketing Management Warren J. Keegan Bodo B. Schlegelmilch Overview The Political Environment International Law Ways to Avoid Legal Problems Conflict Resolution, Dispute Settlement and Litigation International Institutions and their Political Role Summary Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 2 Learning Objectives Knowing the importance of political environments for global marketing activities Understanding the consequences of different legal systems Knowing the influence of the political and legal framework on global company activities Learning about opportunities of dispute settlement in international litigations Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 3 The Political Environment Global marketing activities influenced by governmental institutions, political parties, and organisations Environment determines attitude towards Sovereignty Political risk Taxes Dilution of equity control Expropriation Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 4 Nation-States and Sovereignty Sovereignty = supreme and independent political authority Implies that the nation-state Is decision making authority of last resort in its territory Is independent from other nation-states Nation-state activities governed by Economic development Political and economic system Global market integration erodes economic sovereignty Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 5 Political Risk The risk that changes in governmental policy adversely affect a company’s activities A lower level of political risk tends to attract higher investments Level of political risk is inversely proportional to a country’s state of economic development Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 6 Taxes Many companies make efforts to minimise tax liability by shifting locations of income Example “earnings stripping” Foreign company reduces earnings by making loans to U.S. affiliates rather than using direct investment to finance U.S. activities U.S. subsidiary deducts the interest paid on these loans, thereby reducing its tax burden A variety of international and bilateral treaties apply Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 7 Dilution of Equity Control In lower-income countries there is often political pressure for national control of foreign-owned companies Goal of national governance: protect the right of national sovereignty Political pressure often causes companies to take local partners (strategic alliances, joint-ventures) Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 8 Expropriation Expropriation = governmental action to dispossess or control a company’s ownership Nationalisation = ownership of property and assets is transferred to the host government Confiscation = nationalisation without compensation Creeping expropriation = severe limitations on economic activities. E.g., limitations on repatriation of profits, content requirements, quotas for hiring locals, price controls Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 9 International Law (1) International law = the rules and principles nationstates consider binding upon themselves Two categories Public law, or law of nations International commercial law To reduce legal uncertainty, international organisations attempt to provide guidelines The United Nation’s “International Court of Justice” Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 10 International Law (2) Two fundamentally different legal systems Code law Based on written norms (codices), supplemented by judicial decisions E.g., trademarks must be registered Case law Rests on tradition and precedence stemming from past jurisdiction E.g., trademarks are established by prior use Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 11 Ways to Avoid Legal Problems (1) Scope of legal regulations Know about treaties of friendship, commerce, and navigation Jurisdiction Specify which nation’s laws apply, when a transaction crosses boundaries Intellectual Property Ensure that patents and trademarks are registered in each country business is conducted Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 12 Ways to Avoid Legal Problems (2) Intellectual Property (cont.) Beware of counterfeiting: the unauthorized copying and production of a product Beware of piracy: the unauthorized publication or reproduction of copyrighted work Know about international treaties, e.g. World Intellectual Property Organization The Patent Cooperation Treaty European Patent Convention Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 13 Ways to Avoid Legal Problems (3) Antitrust Antitrust laws designed to combat restrictive business practices and to encourage competition European Commission prohibits agreements and practices that prevent, restrict, and distort competition However, in many European countries, individual country laws apply to specific marketing mix elements Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 14 Ways to Avoid Legal Problems (4) Licensing Contractual agreement in which a licensor allows a licensee to use patents, trademarks, technology or other intangible assets in return for royalty payments In many countries, elements of licensing are regulated by governmental agencies, e.g. Duration of agreement Amount of royalties a company can receive Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 15 Ways to Avoid Legal Problems (5) Bribery and corruption Laws and rules that try to regulate international business ethics exist on different levels National level (e.g., Foreign Corrupt Practices Act) Level of official international organisations (e.g., OECD’s Anti-Bribery Resolution) Level of international private institutions (e.g., Transparency International) Corporate Level Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 16 Conflict Resolution, Dispute Settlement, and Litigation International lawsuits can be very complex, time- and cost-consuming Extrajudicial, alternative approaches often provide faster, easier, and less expensive ways to resolve commercial disputes Institutions such as the International Chamber of Commerce have established Courts of Arbitration that can be employed by global companies Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 17 International Institutions and their Political Role (1) European Union’s Role Articles and directives constitute community law European Court of Justice Hears disputes among the member nations on trade issues (e.g., mergers, monopolies, trade barriers) Resolves conflicts between national law and EU law National Laws in Europe should always be consulted (may be more strict than community law) Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 18 International Institutions and their Political Role (2) World Trade Organisation’s (WTO) Role Precursor GATT, established in 1948, was based on three principles Non-discrimination Open markets Fair trade Establishment of WTO in 1995 as a permanent institution with more decision making power Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 19 Summary Political environment is influenced by governmental institutions, political parties, and organisations. Risk assessment is crucial. Legal environment consists of laws, courts, attorneys, and legal customs and practices. Countries follow either common-law system or code-law system. Regulators environment consists of agencies, governmental and non-governmental, that enforce laws or set guidelines for conducting businesses. Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 20