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Chapter 4 Political, Legal &

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1 Chapter 4 Political, Legal &
Regulatory Environment

2 地主國的政治力量 政府的理念 政黨 日本 日本 多黨 美國 政治 美國 北韓 兩黨政治 中國 中國 一黨獨大 古巴
存在於共產主義與資本主義之間的制度 鼓勵私人擁有企業,政府承擔私人企業無法執行的部份 政府擁有與管理所有的企業,不允許私有企業的存在

3 The Political Environment
Global marketing activities influenced by governmental institutions, political parties & organizations Environment determines attitude towards: Sovereignty Political risk Taxes Dilution of equity control Expropriation

4 1.Nation-States & Sovereignty (p.92)
Sovereignty = supreme & 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 Stage of development Political and economic system Global market integration is eroding national economic sovereignty

5 2.Political Risk (p.93) The risk that a governmental policy adversely affects 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

6 3.Taxes (p.94) Many companies minimize tax liability by shifting locations of income “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 Many companies have negotiated bilateral tax treaties to provide tax credits for taxes paid abroad

7 4.Dilution of Equity Control (p.94)
In lower-income countries, often political pressure for national control of foreign-owned companies Goal of national governance: protect the right of national sovereignty In underdeveloped countries, political pressure often causes companies to take local partners (strategic alliances, joint-ventures)

8 5.Expropriation (p.96) Expropriation = governmental action to dispossess a company or investor Nationalization = ownership of property & assets is transferred to the host government Confiscation = nationalization without compensation Creeping expropriation = severe limitations on economic activities. (limitations on repatriation of profits, local content requirements, quotas for hiring local nationals, price controls)

9 Sidestepping Legal Problems (1) (p.98)
Establishment Citizens of one country be treated fairly in another country Jurisdiction Specify which nation’s laws apply, when a transaction crosses boundaries Intellectual Property Ensure that patents & trademarks are registered in each country business is conducted International treaties

10 Sidestepping Legal Problems (cont.)
Antitrust Antitrust laws designed to combat restrictive business practices & to encourage competition The Sherman Act of 1890 prohibits certain restrictive business practices, including fixing prices, limiting production, allocating markets…and so on. European Commission prohibits agreements & practices that prevent, restrict & distort competition

11 Sidestepping Legal Problems (cont.)
Licensing Contractual agreement in which a licensor allows a licensee to use patents, trademarks, trade secrets, technology or other intangible assets in return for royalty payments Trade Secrets Confidential information or knowledge that has commercial value Enforcement is the key issue: risks are always associated with lax enforcement

12 Sidestepping Legal Problems (cont.)
Bribery & Corruption: legal & ethical A crime for US companies to bribe an official of a foreign government to obtain or retain business Laws & rules try to regulate international business ethics on different levels U.S. Foreign Corrupt Practices Act (FCPA) of 1977 Publicly held companies must institute internal accounting controls that record all transactions

13 Conflict Resolution, Dispute Settlement & Litigation (p.107~109)
International lawsuits can be very complex, time & cost-consuming Extrajudicial, alternative approaches often provide faster, easier & less expensive ways to resolve commercial disputes Institutions such as the International Chamber of Commerce (ICC) have established Courts of Arbitration that can be employed by global companies

14 Summary Political environment is the set of governmental institutions, political parties & organizations. The political environment varies from country to country & risk assessment is crucial. Legal environment consists of laws, courts, attorneys, & legal customs & practices. Countries follow either common-law system or code-law system.

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