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Chapter 3: Legal, Technological, and Political Forces

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1 Chapter 3: Legal, Technological, and Political Forces
International Business, 4th Edition Griffin & Pustay ©2004 Prentice Hall

2 Chapter Objectives_1 Describe the major types of legal systems confronting international businesses Explain how domestic laws affect the ability of firms to conduct international business List the ways firms can resolve international business disputes ©2004 Prentice Hall

3 Chapter Objectives_2 Describe the impact of the host country’s technological environment on international business Explain how firms can protect themselves from political risk ©2004 Prentice Hall

4 The Legal Environment Common Law Civil Law Religious Law
Bureaucratic Law ©2004 Prentice Hall

5 Common Law Based on wisdom of judges decisions on individual cases through history Cases create legal precedents ©2004 Prentice Hall

6 Countries Using Common Law
United States Canada Australia India New Zealand Barbados Saint Kitts Nevis Malaysia ©2004 Prentice Hall

7 Civil Law Based on codification of what is and is not permissible
Originated in biblical times with the Romans Reinforced by French Napoleonic code Judge determines scope of evidence collected and presented ©2004 Prentice Hall

8 Egypt’s legal system is a blend of English common law, the French Napoleonic code, and Islamic Law
©2004 Prentice Hall

9 Religious Law Based on the officially established rules governing faith and practice of a particular religion Theocracy: country that applies religious law to civil and criminal conduct ©2004 Prentice Hall

10 Bureaucratic Law Legal system in communist countries and in dictatorships ©2004 Prentice Hall

11 Laws Affecting International Business Transactions
Sanctions Embargo Extraterritoriality Helms-Burton Act ©2004 Prentice Hall

12 Laws Directed Against Foreign Firms
Nationalization Expropriation Confiscation Privatization ©2004 Prentice Hall

13 Impacts of MNCs on Host Countries: Economic/Political
Advantages Greater selection Higher standards Job creation Tax benefits Technology transfers Disadvantages Competition Job loss Dependency on economic health of MNC Political power ©2004 Prentice Hall

14 Dispute Resolution Which country’s law applies?
In which country should the issue be resolved? Which technique should be used to resolve the conflict? How will the settlement be enforced? ©2004 Prentice Hall

15 Conflict Resolution Techniques
Litigation Arbitration Mediation Negotiation ©2004 Prentice Hall

16 Principle of Comity A country will honor and enforce within its own territory the judgments of foreign courts Conditions of the principle: Reciprocity is extended Defendant is given proper notice Judgment does not violate domestic statutes or treaty obligations ©2004 Prentice Hall

17 Joint venture between Volkswagen and the Shanghai Automotive Industry Group
©2004 Prentice Hall

18 Intellectual Property
Patents Copyrights Trademarks Brandnames Intellectual property often forms the basis of a firm’s competitive advantage! ©2004 Prentice Hall

19 International Treaties Protecting Intellectual Property Rights
International Convention for the Protection of Industrial Property Rights (i.e., the Paris Convention) Berne Convention for the Protection of Literary and Artistic Works Universal Copyright Convention Trade-Related Intellectual Property Rights agreement ©2004 Prentice Hall

20 Figure 3.2 Software Revenue Lost to Piracy
©2004 Prentice Hall

21 Political Risk Ownership risk Operating risk Transfer risk
©2004 Prentice Hall

22 Table 3.1 Examples of Political Risks
Expropriation Confiscation Campaigns against foreign goods Mandatory labor benefits legislation Civil wars Inflation Kidnappings, terrorist threats, and other forms of violence Repatriation Currency devaluations Increased taxation ©2004 Prentice Hall

23 Basic Country Knowledge
Is the country a democracy or dictatorship? Does country rely on free market or government controls? Does government view foreign firms as positive influence? Are firm’s customers private or public? Does government act arbitrarily? Is existing government stable? ©2004 Prentice Hall

24 Insurance against Political Risks
Overseas Private Investment Corporation (OPIC) Multilateral Investment Guarantee Agency (MIGA) ©2004 Prentice Hall

25 Map 3.2 Countries’ Relative Political Riskiness, 2002
©2004 Prentice Hall

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