International business 6e griffin chapter 3

legal, technological, and political forces international business, 5th edition chapter Chapter Objectives • 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 3-2 Chapter Objectives • Describe the impact of the host country’s technological environment on international business • Explain how firms can protect themselves from political risk 3-3 The Legal Environment While domestic firms must follow laws and customs of home country, international businesses must obey laws of home country and all host countries 3-4 Legal Systems 3-5 Common Law Civil Law Religious Law Bureaucratic Law Common Law • Based on wisdom of judges’ decisions on individual cases through history • Cases create legal precedents 3-6 Countries Using Common Law • United States • Barbados • Canada • Saint Kitts • Australia • Nevis • India • Malaysia • New Zealand 3-7 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 3-8 Hong Kong follows many traditions of the British Common Law legal system 3-9 Religious Law • Based on the officially established rules governing faith and practice of a particular religion • A country that applies religious law to civil and criminal conduct is called a theocracy 3-10 Laws Directed Against Foreign Firms 3-13 Nationalization Expropriation Confiscation Privatization Economic and Political Impacts of MNCs on Host Countries • Advantages – Greater selection – Competition – Higher standards – Job loss – Job creation – Dependency on economic health of MNC – Tax benefits – Technology transfers 3-14 • Disadvantages – Political power Cultural Impacts of MNCs on Host Countries • Advantages – Improved standard of living – Better health care – Abuse of less developed policies in the areas of safety and environmental concerns – More sanitary food products – Negligent product offerings – Introduction of new products 3-15 • Disadvantages 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? 3-16 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 3-17 Arbitration Arbitration is the process by which both parties to a conflict agree to submit their cases to a private individual or body whose decision they will honor 3-18 The Technological Environment Agricultural land Infrastructure Low-cost labor Resources Skilled labor 3-19 Rich natural resources Intellectual Property • Patents • Copyrights • Trademarks • Brand names 3-20 Intellectual property often forms the basis of a firm’s competitive advantage! 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 3-21 Political Risk Assessment Ownership risk Operating risk 3-22 Transfer risk Table 3.2 Examples of Political Risks • Expropriation • Confiscation • Inflation • Kidnappings, terrorist threats • Campaigns against foreign goods • Repatriation • Mandatory labor • Currency benefits legislation devaluations • Civil wars • Increased taxation 3-23 Levels of Political Risk Macropolitical risk 3-24 Micropolitical risk 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? 3-25 Map 3.3 Relative Political Riskiness, 2006 3-26 Insurance Against Political Risks • Overseas Private Investment Corporation (OPIC) • Multilateral Investment Guarantee Agency (MIGA) 3-27 ... the ways firms can resolve international business disputes 3- 2 Chapter Objectives • Describe the impact of the host country’s technological environment on international business • Explain how firms... 3- 3 The Legal Environment While domestic firms must follow laws and customs of home country, international businesses must obey laws of home country and all host countries 3- 4 Legal Systems 3- 5.. .Chapter Objectives • Describe the major types of legal systems confronting international businesses • Explain how domestic laws affect the ability of firms to conduct international business