This document summarizes Chapter 5 of a global marketing textbook. It discusses the political and legal environments international marketers must consider, including: individual government policies; social pressures and political risks; terrorism's impact on the world economy; international agreements; international law and local legal systems; and issues that transcend national boundaries like intellectual property protection and antitrust laws.

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Global Marketing Management, 5e
Chapter 5
Political/Legal
Environments

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Chapter Overview
1. Political Environment---Individual
Governments
2. Political Environment---Social Pressures and
Political Risk
3. Terrorism and the World Economy
4. International Agreements
5. International Law and Local Legal
Environment
6. Issues Transcending National Boundaries

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Introduction
 International marketers should be aware that the
economic interests of their companies can differ
widely from those of the countries in which they do
business.
 International marketers must abide by various
international agreements, treaties and laws.
 Political and legal climates are inherently related
and inseparable because laws are generally a
manifestation of a country’s political processes.

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1. Political Environment - Individual
Governments
 Government affects almost every aspect of
business life in a country.
 National politics affect business environment
directly, through changes in policies, regulations,
and laws.
 The political stability and mood in a country affect
the actions a government will take.
 Home Country versus Host Country.

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1. Political Environment - Individual
Governments
 Structure of Government
– Ideology
– Communism
– Capitalism
– Socialism
– Political Parties
 Single-party-dominant country
 Dual-party system
 Multi-party system
 Government Policies and Regulations
It is the role of government to promote a country’s interests
in the international arena for various reasons and
objectives such as: national security, developing new
industries, and protecting declining industries.

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1. Political Environment - Individual
Governments
 Incentives and Government Programs
 Government Procurement
 Trade Laws
 Tariff and Nontariff Barriers (Exhibit 5-1)
 Embargoes and Sanctions
 Export License Requirements
 Investment Regulations (ownership and financial controls)
 Macroeconomic Policies (governments’ monetary and
fiscal policies such as the cost of capital, level of economic
growth, rates of inflation and international exchange rates)

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Exhibit 5-1: Tariff and Nontariff Barriers

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2. Political Environment - Social
Pressures and Political Risk
 Social Pressures and Special Interests
Foreign companies also have to consider social
factors as part of the political environment of host
countries, e.g., feelings of nationalistic sentiment.
 Managing the Political Environment
– Expropriation
– Confiscation
– Nationalization
– Domestication Policy/Phase-Out Policy
– Countertrade (See Exhibits 5-2 and 5-3.)

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Exhibit 5-2: Government Policy Areas
and Instruments

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Exhibit 5-3: Country Risk Assessment
Criteria
Please Insert Exhibit 5-3 Here
“Country Risk Assessment Criteria”

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Exhibit 5-4: Examples of Country Risk
Ratings
Please Insert Exhibit 5-4 Here
“Examples of Country Risk Ratings”

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3. Terrorism and the World Economy
 According to an IMF study, the September 11,
2001 terrorist attacks in New York and
Washington D.C. resulted in major losses for the
U.S. economy.
 The short-term lost economic output was
estimated as $47 billion.
 The stock market lost $1.7 trillion. In addition,
125,000 workers were laid off for 30 days.
 Terrorist activities disrupt international movement
of supplies and merchandise and financial flows.

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4. International Agreements
 G7 (Group of Seven) is an economic policy
coordination group made up of political leaders
from Canada, England, France, Germany, Italy,
Japan, and the United States.
 G8 (Group of Eight) consists of G7 and Russia.
 COCOM (The Coordinating Committee for
Multilateral Controls) was founded in 1949 to
stop the flow of Western technology to the former
Soviet Union; members countries include
Australia, Japan and the NATO countries except
Iceland.

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5. International Law and
Local Legal Environment
 International Law (the law of nations) comes from
three main sources:
– Customs
– International treaties
– Court decisions

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5. International Law and
Local Legal Environments
 Local Legal Systems and Laws
– Business Practices and the Legal Systems
(See Exhibit 5-5.)
Please Insert Exhibit 5-5 Here
“Legal Issues Facing the Company”

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5. International Law and
Local Legal Environments
– Regulations on e-Commerce - privacy issues
– Types of Legal Systems
 Common Law
 Code (written) Law
 Islamic Law
 Socialist Laws
 Civil Law
 Commercial Law

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5. International Law and
Local Legal Environment
 Cultural Values and Legal Systems
– Japan’s population of lawyers is low.
– In the U.S., emphasis is on explicit contracts and a
reliance on the legal system is high.
– In China, relationships (guanxi) and verbal
contracts are important.
– In Brazil, Jeitinho is used to find solutions outside
the legal system.
 Planning Ahead
 Arbitration and Enforcement

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Exhibit 5-6: The Number of Lawyers per
100,000 Residents
Please Insert Exhibit 5-6 Here
“The Number of Lawyers per 100,000 Residents”

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6. Issues Transcending National
Boundaries
 ISO 9000 certification has become an essential
marketing tool for firms.
 ISO 14000 is based on the principle of self –
regulation, thereby minimizing surveillance and
sanctions.
 Intellectual Property Protection
– TRIPs (Trade-Related Aspects of Intellectual
Property Rights)
– Patent (first-to-file & first-to-invent principles)

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6. Issues Transcending National
Boundaries
– Copyright
– The Digital Millennium Copyright Act (DMCA)
– Trademark (prior-use, first-to-use & first-to-file
principles)
– Trade Secret
– Paris Convention
– Patent Cooperation Treaty
– Patent Law Treaty
(See Exhibit 5-7.)

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Exhibit 5-7: Ratings for the Level of Intellectual
Property Protection in Various Countries

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6. Issues Transcending National
Boundaries
– European Patent Convention
– Berne Convention
 Antitrust Laws of the United States
– The Sherman Act
– The Clayton Act
– Extraterritorial application of U.S. antitrust laws
– Export Trading Company (ETC) Act of 1982

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6. Issues Transcending National
Boundaries
 Antitrust Laws of the European Union
 Foreign Corrupt Practices Act (FCPA) of 1977
– The FCPA was designed to prohibit the
payment of any money or anything of value to a
foreign official, foreign political party, or any
candidate for foreign political office for purposes
of obtaining, retaining, or directing business.

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6. Issues Transcending National
Boundaries
– The FCPA does not prohibit so-called facilitating
or grease payments.
– Small payments to lower level officials are
allowed to expedite the process.
– FCPA does not prohibit bribery payments to
nongovernmental personnel.