1. The Political, Legal, and Regulatory Environments of Global Marketing
Chapter 4
Global Marketing

2. Political Environment
Political cultures provide context
Governing party’s attitude toward
Sovereignty
Political risk
Taxes
Threat of equity dilution
Expropriation
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3. Sovereignty Supreme and independent political authority
“Every sovereign state is bound to
respect the independence of every other
sovereign state, and the courts in one country
will not sit in judgment on the
acts of government of another
done within its territory”
Chief Justice Fuller
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4. Keegan and Green, Chapter 5
Current Trends
Privatization
Moves an economy toward free-market direction
Evidence that governments are changing how they exercise sovereign power
Global Integration
Countries in advanced preferential trade agreements sacrifice many sovereign rights to improve economy
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5. Keegan and Green, Chapter 5
Political Risk
Risk of change in political environment or government policy that would adversely affect a company’s ability to operate effectively and profitably
When perceived political risk is high, a country will have a difficult time attracting foreign direct investment
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6. Keegan and Green, Chapter 5
Taxes
Government taxation policies
High taxation can lead to growth in a black market
Corporate taxation
Companies attempt to limit tax liability by shifting location of income
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7. Keegan and Green, Chapter 5
Seizure of Assets
Expropriation – governmental action to dispossess a foreign company or investor
Compensation should be provided in a “prompt, effective, and adequate manner”
When no compensation is provided, it is called confiscation
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8. Seizure of Assets (cont.)
Nationalization - a government takes control of some or all of the enterprises in an entire industry
Acceptable according to international law if
satisfies public purpose
includes compensation
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9. Keegan and Green, Chapter 5
International Law
The rules and principles that nation-states consider binding among themselves
Disputes between nations are issues of public international law
Judicial arm of the United Nations
World Court or International Court of Justice (ICJ)
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10. Common Law versus Civil Law
Civil Law country
Legal system reflects the structural concepts and principles of the Roman Empire
Companies are formed by contract between two ore more parties who are fully liable for the actions of the company
Common Law country
Disputes are decided by reliance on the authority of past judicial decisions
Companies are legally incorporated by state authority
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11. Keegan and Green, Chapter 5
Islamic Law
Legal system in many Middle Eastern countries
Based on the sharia - a comprehensive code governing Muslim conduct in all areas of life
Koran–- Holy Book
Hadith
Based on life, sayings, and practices of Muhammad
Identifies forbidden practices “haram”
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12. Bribery and Corruption
Top 7 Rankings
1. Nigeria
2. Pakistan
3. Kenya
4. Bangladesh
5. China
6. Cameroon
7. Venezuela
Bottom 7 Rankings
45. Australia
46. Netherlands
47. Switzerland
48. Singapore
49. Norway
50. Canada
51. Finland
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13. Countries Most Likely to Bribe
Home Country of Bribing Company
1. Belgium/ Lux
2. France
3. Italy
4. Netherlands
5. South Korea
6. UK
7. Spain
8. China
Country in which Bribes were Accepted
1. Nigeria
2. Bolivia
3. Colombia
4. Russia
5. Pakistan
6. Mexico
7. Indonesia
8. India
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