Legal implications of global business expansion


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Legal implications of global business expansion

  1. 1. The legal and regulatory environment: how does it affect global business expansion?<br />Group C:<br />Aimee Churchill<br />Georgiana Murariu<br />Adrian Ruse<br />OksanaZaborska<br />
  2. 2. Globalisation: Concept and Origins<br /><ul><li>movement of capital, goods and people
  3. 3. development of technology
  4. 4. creation of international companies
  5. 5. departure from the nation state with closed borders, migration is necessary for survival
  6. 6. creation of supranational bodies and supranational regulatory organisations</li></li></ul><li>Introduction to the legal and regulatory system <br />Is closely linked and stems from the political and cultural attitude towards business. <br />The importance of the legal system is to give order and stability to the means of doing business<br /> Includes two key aspects:<br />Local Domestic Law- important to understand home laws as well as international as there may be a limit to what can be exported.<br />International Law- there are a number of international laws that will affect a company’s activity abroad. <br />
  7. 7. A brief overview of some legal bodies<br /> The International Court of Justice, situated in The Hague, Holland has been seen as being the key place for international disputes. Other bodies include:<br />
  8. 8. What types of commercial legal systems are there?<br />Common Law<br />Civil/code law<br />Islamic Law<br />
  9. 9. Common Law<br /> Also called Anglo-American law, having originated in England in the Middle Ages.<br />Used in the UK, the United States, New Zealand, and other countries previously part of the British Commonwealth, as well as some Asian countries (Malaysia, Pakistan). (Encyclopaedia Britannica, 2010)<br />Disputes are settled based on past judicial decisions/cases. (Keenan & Green, 2010)<br />
  10. 10. Civil/code law<br />Used by some European and Latin American countries: France, Germany, Italy, Chile, Brazil, as well as some Asian countries – Japan, China, Thailand. (Merryman and Perdomo, 2007)<br />Older and more widely distributed than common law. (Merryman & Perdomo, 2007)<br />This system reflects the concepts and principles of the Roman Empire in the 6th century. (Keegan & Green, 2010)<br />Judge actively participates in examining witnesses and seeking evidence. <br />
  11. 11. Islamic Law/Sharia law<br />A distinct legal environment, with laws that affect both business, and other issues such as divorce and inheritance. <br /><ul><li>(USA International Business Publications, no year)</li></ul>Applies both to Muslims and non-Muslims, thus it is imperative for any marketer doing business in countries like Malaysia to have a basic understanding of this set of laws. - (BBC Religions, 2010)<br />Originates from a combination of sources: The Qur’an (the Muslim holy book), Hadith (sayings of the prophet Muhammad), and fatwas (rulings of Islamic scholars).<br />
  12. 12. Marketing implications<br />A country’s commercial legal system can have an impact on several aspects of marketing. <br />Business Freedom<br />Investment Freedom<br />Property Rights<br />Trade Freedom<br />
  13. 13. BUSINESS FREEDOM<br />“The overall freedom to start, operate, and close a business…” – (The Heritage Foundation, 2010)<br />Average duration of opening a business: 35 days<br />Variables: Time, cost, minimum capital, number of procedures, obtaining a licence, recovery rate when closing a business.<br />-(2010 INDEX OF ECONOMIC FREEDOM)<br />
  14. 14. Business freedom continued: Singapore vs. brazil<br />- 2010 INDEX OF ECONOMIC FREEDOM<br />
  15. 15. INVESTMENT FREEDOM<br /> Questions to be asked:<br />Are foreign investors treated equally?<br />Are investment laws transparent and efficiently implemented?<br />Are foreign purchases of real estate allowed? To what extent?<br />Are foreign exchange controls tightly regulated?<br />
  16. 16. Investment freedom cont.<br />People (human beings) and companies (artificial persons) invest their capital on a multinational level. <br />Democratic states are more the attractive option for investment <br />There is a separation of powers: judiciary (Court), legislative (Parliament) and executive (Minister) and any investment will be more secure. <br />
  17. 17. Investment freedom continued<br />
  18. 18. Intellectual PROPERTY RIGHTS<br />Patents<br />Trademarks<br />Copyrights<br />Counterfeiting<br />
  19. 19. Intellectual Property rights continued<br />It is widely accepted that intellectual property rights should be strengthened. <br />For every $2 worth of software purchased, $1 worth of software is obtained illegally. (Bird & Jain, 2008)<br />The Paris Convention, The Berne Convention and ‘TRIPS’ were put in place to protect intellectual property rights internationally. (Bird & Jain, 2008)<br />Examples:<br />Tom Waits (singer/songwriter)<br />“Champagne only comes from Champagne, France.”<br />
  20. 20. TRADE FREEDOM<br />Terms of access:<br />Refers to all of the conditions that affect the importation of goods. <br />These conditions include the following: <br />Tariff systems: there are two types of systems. These are:<br />Single column tariff - the simplest type of tariff, the rate applies to imports from all countries on the same basis. <br />Two column tariff- duties is supplemented by a second column of "conventional" duties which show reduced rates agreed through tariff negotiations with other countries<br />
  21. 21. Terms of Access continued<br />A custom duty is a tariff or tax on the importation of goods<br />Types of Duty- there are two types:<br />Ad Valorem Duties - This duty is expressed as a percentage of the value of goods. <br />Specific Duties - Expressed as a specific amount of currency per unit of weight, volume, length or number of other units of measurements <br />
  22. 22. ‘Red tape’<br />Origin : In 17th century legal documents were covered in red cloth<br />By 19th century red tape was used as a term for any legal complications<br />The administration of government paperwork and procedures that are time consuming and costly to businesses<br /> Seen as meaningless and unnecessary <br />Average cost of red tape to business is around £3 billion / year.<br />Highest contributors of these costs is Data Protection costing £600 Million.<br />Provides protection against arbitrary, regulates aspects of business activities that citizens do not trust, and ensures fairness and equity in treatment of bureaucratic clients<br />
  23. 23. Import and Export Policies <br />Import Policies include:<br />
  24. 24. Import and Export Policies <br />Export policies include:<br />
  25. 25. Taxation and pricing regulations<br /><ul><li>Corporate Tax Rates
  26. 26. Border Taxes
  27. 27. How tightly are prices regulated?</li></li></ul><li>Taxation on foreign investments<br /><ul><li> a political risk when used as a means of controlling foreign investments.
  28. 28. In order to control foreign investments governments use: corporate tax, income tax, value-added tax, special consumption tax, acquisition tax, registration tax, property tax and aggregate land tax </li></li></ul><li>Brazil and Thailand<br />18th of October this year Brazil's Finance Minister Guido Manteg increased the financial transaction <br /> tax on foreign investments in fixed income to 6%. <br />From 13th of October Thailand imposed a 15 percent withholding tax on interest and capital gains for foreigners holding Thai bond.<br /> A stronger currency makes the country`s exports more expensive in dollar terms, hurting companies that rely on making sales abroad.<br />
  29. 29. Sharia Law (analysis and case study)<br />Adherence varies from region to region<br />Example: Instead of paying interest, banks may share profits with the borrower in an agreed proportion<br />Young Muslims are a desirable market for mainstream brands as they are loyal and becoming more progressive (Marketing Week, 2010) <br />
  30. 30. A brief case study :hsbcamanah<br />Mohammed Ismaeel, Head of Global Marketing - HSBC Amanah<br />- Marketing Week, 2010<br />
  31. 31. NAFTA<br />North American Free Trade Agreement: free trade between the USA, Canada and Mexico, signed in 1992. (<br />Helped eliminate some non-tariff measures affecting agricultural trade between the US and Mexico.<br />Ensures that North American producers receive the primary benefits of recently established tariff preferences. (US Department of Agriculture, 2008)<br />Example: only American/Mexican milk can be used to make dairy products traded under NAFTA preferential rates. (US Department of Agriculture, 2008)<br />
  32. 32. EEA <br />Stands for European Economic Area<br />Members today: the 27 EU countries + 3 EFTA countries (Iceland, Liechtenstein, Norway) (, 2009)<br />4 freedoms: I. freedom of movement of goods<br /> II. Freedom of movement of capital<br />III. Freedom of movement of persons<br />IV. Freedom of movement of services<br />
  33. 33. In conclusion…<br />Legal aspects need to be planned when planning the marketing mix (ahead of time) and legal advice needs to be sought well in advance. <br />Better consumer education is a measure that can benefit businesses, as it teaches consumers why they should not buy fake goods, or download illegally, etc. <br />
  34. 34. 4 Possibilities…<br /><ul><li>Alter: bargain to get the government to alter its policy or actions
  35. 35. Ally: avoid risk of government actions by seeking strategic alliances
  36. 36. Avoid: make strategic moves that bypass the impact of a government’s action
  37. 37. Accede: adjust operations to comply with a government requirement</li></li></ul><li> The end<br />Thank you for listening.<br />We welcome any questions you might have.<br />