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Global Marketing Management A European Perspective Warren J. Keegan Bodo B. Schlegelmilch The Political, Legal, And Regulatory Environments in Global Marketing.

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Presentation on theme: "Global Marketing Management A European Perspective Warren J. Keegan Bodo B. Schlegelmilch The Political, Legal, And Regulatory Environments in Global Marketing."— Presentation transcript:

1 Global Marketing Management A European Perspective Warren J. Keegan Bodo B. Schlegelmilch The Political, Legal, And Regulatory Environments in Global Marketing Management

2 Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 2 Overview zThe Political Environment zInternational Law zWays to Avoid Legal Problems zConflict Resolution, Dispute Settlement and Litigation zInternational Institutions and their Political Role zSummary

3 Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 3 Learning Objectives zKnowing the importance of political environments for global marketing activities zUnderstanding the consequences of different legal systems zKnowing the influence of the political and legal framework on global company activities zLearning about opportunities of dispute settlement in international litigations

4 Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 4 The Political Environment zGlobal marketing activities influenced by governmental institutions, political parties, and organisations zEnvironment determines attitude towards ySovereignty yPolitical risk yTaxes yDilution of equity control yExpropriation

5 Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 5 Nation-States and Sovereignty zSovereignty = supreme and independent political authority zImplies that the nation-state yIs decision making authority of last resort in its territory yIs independent from other nation-states zNation-state activities governed by yEconomic development yPolitical and economic system zGlobal market integration erodes economic sovereignty

6 Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 6 Political Risk zThe risk that changes in governmental policy adversely affect a company’s activities zA lower level of political risk tends to attract higher investments zLevel of political risk is inversely proportional to a country’s state of economic development

7 Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 7 Taxes zMany companies make efforts to minimise tax liability by shifting locations of income zExample “earnings stripping” yForeign company reduces earnings by making loans to U.S. affiliates rather than using direct investment to finance U.S. activities yU.S. subsidiary deducts the interest paid on these loans, thereby reducing its tax burden zA variety of international and bilateral treaties apply

8 Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 8 Dilution of Equity Control zIn lower-income countries there is often political pressure for national control of foreign-owned companies zGoal of national governance: protect the right of national sovereignty zPolitical pressure often causes companies to take local partners (strategic alliances, joint-ventures)

9 Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 9 Expropriation zExpropriation = governmental action to dispossess or control a company’s ownership zNationalisation = ownership of property and assets is transferred to the host government zConfiscation = nationalisation without compensation zCreeping expropriation = severe limitations on economic activities. E.g., limitations on repatriation of profits, content requirements, quotas for hiring locals, price controls

10 Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 10 International Law (1) zInternational law = the rules and principles nation- states consider binding upon themselves zTwo categories zPublic law, or law of nations zInternational commercial law zTo reduce legal uncertainty, international organisations attempt to provide guidelines zThe United Nation’s “International Court of Justice”

11 Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 11 International Law (2) zTwo fundamentally different legal systems zCode law zBased on written norms (codices), supplemented by judicial decisions zE.g., trademarks must be registered zCase law zRests on tradition and precedence stemming from past jurisdiction zE.g., trademarks are established by prior use

12 Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 12 Ways to Avoid Legal Problems (1) zScope of legal regulations zKnow about treaties of friendship, commerce, and navigation zJurisdiction zSpecify which nation’s laws apply, when a transaction crosses boundaries zIntellectual Property zEnsure that patents and trademarks are registered in each country business is conducted

13 Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 13 Ways to Avoid Legal Problems (2) zIntellectual Property (cont.) zBeware of counterfeiting: the unauthorized copying and production of a product zBeware of piracy: the unauthorized publication or reproduction of copyrighted work zKnow about international treaties, e.g. zWorld Intellectual Property Organization zThe Patent Cooperation Treaty zEuropean Patent Convention

14 Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 14 Ways to Avoid Legal Problems (3) zAntitrust zAntitrust laws designed to combat restrictive business practices and to encourage competition zEuropean Commission prohibits agreements and practices that prevent, restrict, and distort competition zHowever, in many European countries, individual country laws apply to specific marketing mix elements

15 Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 15 Ways to Avoid Legal Problems (4) zLicensing zContractual agreement in which a licensor allows a licensee to use patents, trademarks, technology or other intangible assets in return for royalty payments zIn many countries, elements of licensing are regulated by governmental agencies, e.g. zDuration of agreement zAmount of royalties a company can receive

16 Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 16 Ways to Avoid Legal Problems (5) zBribery and corruption zLaws and rules that try to regulate international business ethics exist on different levels zNational level (e.g., Foreign Corrupt Practices Act) zLevel of official international organisations (e.g., OECD’s Anti-Bribery Resolution) zLevel of international private institutions (e.g., Transparency International) zCorporate Level

17 Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 17 Conflict Resolution, Dispute Settlement, and Litigation zInternational lawsuits can be very complex, time- and cost-consuming zExtrajudicial, alternative approaches often provide faster, easier, and less expensive ways to resolve commercial disputes zInstitutions such as the International Chamber of Commerce have established Courts of Arbitration that can be employed by global companies

18 Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 18 International Institutions and their Political Role (1) zEuropean Union’s Role zArticles and directives constitute community law zEuropean Court of Justice zHears disputes among the member nations on trade issues (e.g., mergers, monopolies, trade barriers) zResolves conflicts between national law and EU law zNational Laws in Europe should always be consulted (may be more strict than community law)

19 Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 19 International Institutions and their Political Role (2) zWorld Trade Organisation’s (WTO) Role zPrecursor GATT, established in 1948, was based on three principles zNon-discrimination zOpen markets zFair trade zEstablishment of WTO in 1995 as a permanent institution with more decision making power

20 Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 4/ 20 Summary zPolitical environment is influenced by governmental institutions, political parties, and organisations. Risk assessment is crucial. zLegal environment consists of laws, courts, attorneys, and legal customs and practices. Countries follow either common-law system or code-law system. zRegulators environment consists of agencies, governmental and non-governmental, that enforce laws or set guidelines for conducting businesses.


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