Uluslararası Pazarlama THE POLITICAL, LEGAL, AND REGULATORY ENVIRONMENTS OF GLOBAL MARKETING lecture 3 &5. THE POLITICAL, LEGAL, AND REGULATORY ENVIRONMENTS OF GLOBAL MARKETINGTHE POLITICAL ENVIRONMENT ? ................the governing party ’ s attitude toward sovereignty, political risk, taxes, the threat of equity dilution, and expropriation. Sovereignty ? ......................can be defined as supreme and independent political authority. Government actions taken in the name of sovereignty occur in the context of two criteria: A country ’ s stage of development, • The political and economic system in place in • the country. Sovereignty ? Many governments in developing countries exercise control over their nations economic development by passing protectionist laws and regulations. Objective – to encourage economic development by protecting emerging or strategic industries. Sovereignty ? Government leaders can also engage in cronyism and provide favors for family members or “good friends ”. Sovereignty ? When many nations reach advanced stages of economic development, their governments declare that any practise or policy that restrains free trade is illegal. Antitrust laws and regulations are established to promote fair competition.Sovereignty ? Advanced country laws often define and preserve a nation ’ s social order. Laws may extend to political, culturel, intellectual activities and social conduct. “ Le weekend” “ Le marketing” Also , a French law passed in 1996 requires that at least %40 of the songs played by popular radio stations must be French. Sovereignty ? A current global phenomenon is the trend toward privatization, which reduces direct governmental involvement as supllier of goods and services in a given economy. Each act of privatization moves a nation ’ s economy farther in the free-market dimension. REPUBLIC OF TURKEY PRIME MINISTRY PRIVATIZATION ADMINISTRATION TARGETS OF THE PRIVATIZATION PROGRAM The major targets of the privatization program are primarily : to minimize state involvement in the industrial and commercial • activities in the economy, to provide legal and structural environment for free enterprise to • operate, to decrease the financial burden of State Economic Enterprises on the • national budget, to transfer privatization revenues to the major infrastructure projects, • to expand and deepen the existing capital market by promoting wider • share ownership, to provide efficient allocation of resources. • http://www.oib.gov.tr/baskanlik/ozellestirme_amac_eng.htmPrivatization in Turkey The privatization of Turk Telekom was named as the “ Best Privatization in Central and Eastern Europe in 2008 ” by “EMEAFINANCE ” . – 6 billion 550 million dollars USA http://www.oib.gov.tr/program/uygulamalar/privatizationn_turkey.tmCOMPLETELY PRIVATIZED COMPANIES (188) COMPANIES % of shares sold 1)Ad ı yaman Çimento Sanayii T.A. Ş . 100.00 2)Anadolubank A. Ş . 100.00 3)A ş kale Çimento Sanayii T.A. Ş . 100.00 4)ÇELBOR Ç.Çekme Boru San.ve Tic. 100.00 5)Türkiye Gemi Sanayii A. Ş . 100.00 6)Denizbank A. Ş . 100.00 7)Denizli Çimento Sanayii T.A. Ş . 100.00 8)Ergani Çimento Sanayii T.A. Ş . 100.00 9)Eti Gümü ş A. Ş . 100.00 10)Filyos Ate ş Tu ğ las ı Sanayi T.A. Ş . 100.00 http://www.oib.gov.tr/program/uygulamalar/completely_privatized.htmCOMPANIES IN THE PRIVATIZATION PORTFOLIO (19) NAME OF THE COMPANY INDUSTRY Share of PA (%)   1) Sümer Holding A. Ş . (1)(2) Textile, leather, ceramics, carpet   100.00  2) T. Denizcilik İ ş letmeleri (1) Maritime 100.00 3)Tobacco, Tobacco Products, Tobacco Products, Salt 100.00 Salt  and Alcohol Enterprises Inc. (TEKEL) 4)Turkish Electricity Distribution Electricity Distribution 100.00 Inc (TEDAS) 5)Ankara Do ğ al Elektrik Üretim Electricity 100.00 ve TicaretA. Ş . 6)Türkiye Ş eker Fabrikalar ı A. Ş . Sugar processing 100.00 1) : Some of the shares of these companies have been privatized 2) : 15 Participation Shares have been transferred to Sumer Holding on March 12.2001 http://www.oib.gov.tr/portfoy/portfolio_general.htmPolitical Risk ? ...........is the risk of a change in political environment or government policy that would adversely affect a company ’ s ability to operate effectively and profitably. It can deter a company from investing abroad. Up-to-date political risk reports on individual country markets www.eiu.com Geneva-based Business Environment Risk Intelligence www.beri.com www.prsgroup.comcauses of political risk The fundamental cause of political risk is tension between residents ’ aspirations and goals and the real conditions at a given time. Whenever the public perceives a wide gap between its aspirations and reality, there is political risk. A sectarian fight between Protestants and Catholics in Keady, Northern Ireland, during marching season. In lower- and lower-middle-income countries, an economic crisis can trigger a political risk. $ 1 = from 2.300 Rupiah to 18.000 and then settled at a rate of 10.000 Rupiahexpressions and symptoms of political risk All other things be equal, the less developed a country, the greater the political risk. Symptoms : Currency depreciation, Civil disorder, Ethnic conflict expressions and symptoms of political risk Because political risk can not be accurately predicted, the corporate culture also must be considered when making strategic decision. For the aggresive company wishing to make a minimum investment, a country with some political risk may have great market potential. For a conservative company or one considering multi-million dollar investment, the same country may have a great market loss. Agencies offering investment insurance for the companies doing business abroad The Overseas Private Investment Corporation www.opic.gov USA The Export Development Corporation taxes Generating funds necessary for social services, the military, other expenditures Unfortunately, government taxation policies on the sale of goods and services frequently motivate companies and inviduals to profit by not paying taxes. taxes In China most imports are subject to high duties + %17 VAT. ..............significant quantities of oil, cigarettes, PC, other are smuggled into China. taxes In some instances, customs documents are falsified to undercount goods in a shipment. %90 of foreign cigarettes sold in China are smuggled in. Annual sales of 100 million $ to distributors in Hong Kong, who smu smuggle the smokes across the border. taxestaxes corporate taxation – high taxes on business operations Companies are engaging in cash or barter transactions that are off the books and sheltered from the eyes of tax authorities . This, in turn, has created a liquidity squeeze that prevents companies from paying wages to employees. taxes In 1998, tax collectors seized dozens of automobiles belonging to ‘ s Russian division and froze the group ’ assets. The authorities clamed J&J owed $19 million dollars in back taxes. seizure of assets Expropriation – is a governmental action to disposses a foreign company or investor (compensation is generally provided, although not often in the “ prompt, adequate and effective manner provided for by international standards). If no compensation is provided, the action is referred to as confiscation. Nationalization – it occures when the government takes control of some or all of the enterprises in a particular industry. seizure of assets International law recognizes nationalization as a legitimate exercise of government power, as long as the fact satisfies a “public purpose” and is accompanied by “ adequate payment ” seizure of assets In 1959, the newly empovered Castro government nationalized property belonging to American sugar producers in retaliation for new American import quotas on sugar. Cuban-owned production sources were not nationalized. Castro offered compensation in the form of Cuban government bonds, which was adequate under Cuban law. The U.S. State Department viewed this particular act of nationalization as discriminatory and the compensation offered as inadequate. THE LEGAL ENVIRONMENT ? International law may be defined as the rules and principles that nation-states consider binding upon themselves. The International Court of Justice (www.icj-cij.org ), the judicial arm of US (founded in 1946). Disputes arising between nations are issues of public international law, and they may be taken before ICJ.What happens if a nation has allowed a case against it to be brought before the ICJ and then refuses to accept a judgment against it? The plaintiff nation can seek recourse from the US Security Council, which can use its full range of power to enforce the judgment. Civil law, common law, and islamic law A civil-law country is one in which the legal system reflects the structural concepts and principles of the Roman Empire in the 16th century. In common-law countries, many disputes are decided by reliance on the authority of past judicial decisions (cases). islamic law Islamic law the legal system in many Middle Eastern countries is identified with laws of Islam, which are associated with “the one and only one God, The Almighty” Sharia is a comhrehensive code governing Muslim conduct in all areas of life, including business. The code derived from 2 sources: Kuran, the Holy book and Hadithes. important business issues The global legal environment is dynamic and complex. Astute, proactive marketer can do a great deal to prevent conflicts from arising in the first place, especially concerning issues such as establishment, jurisdiction, patents and trademarks, antitrust licensing and trade secrets, bribery and ad and other promotion tools. jurisdiction ..........refers to a court ’ s authority to rule on particular types of controversies arising outside of a nation ’ s borders or to exercise power over individuals or entities from different countries. case Accusation issue - taking trade secrets accepted U.S. Court jurisdiciton, although the company ’ s lawyers requested that the U.S. District Court in Detroit transfer the case to Germany. patents, trademarks and copyrights Patents and trademarks that are protected in one country are not necessarily protected in another, so global marketers must ensure that patents and trademarks are registered in each country where business is conducted. patents, trademarks and copyrights A patent is a formal legal document that gives an inventor the exclusive right to make, use, and sell an invention for a specified period of time. A trademark is defined as a distinctive mark, motto, device, or emblem that a manufacturer affixes to a particular product or package to distinguish it from goods produced by other manufacturers. A copyright establishes ownership of a written, recorded, performed, or filmed creative work. patents, trademarks and copyrights Conterfeiting forms: Associative conterfeit Imitation Piracy Motion pictures, recorded music, computer software, textbook publishing. The USA in particular has a vested interest in intellectual property protection around the globe because it is home to many companies in the industries mentioned above. case In 1992, Bayer AG (Germany) received permission from Russia ’ s patent office to register aspirin as a trademark in that country. Rival pharmaceutical companies such as France ’ s Labaratoire UPSA were infuriated because the ruling meant that they would effectively shut out of the Russian market of 150 million people. According to spokersperson for the French company, “ The word never should have been registered in the first place. It is universally accepted generic name.” In June, 1994, the Russian patent office rescinded permission; Bayer immediately announced its intention to appeal. licensing and trade secrets Licensing – is a contractual agreement in which a licensor allows a licensee to use patents, trademarks, trade secrets, technology, or other intangible assets in return for royalty payments or other for of compensation. Trade secrets are confidental information or knowledge that has commercial value and is not in the public domain, and for which steps have been taken to keep it secret. bribery and corruption Bribery is the corrupt business practise of demanding or offering some type of consideration – typically cash payment – when negotiating a cross-border deal. case History does not record a burst of international outrage when Charles M. Schwab, head of Bethlehem Steel at the beginning of the 12th century, presented a 200.000$diamond and pearl to the mistress of Czar Alexander III ’ s nephew. In return for that consideration, Bethleem Steel won the contract to supply the rails for the Trans-Siberian railroad. What should a company do if competitors are willing to offer a bribe? Ignore bribery and act as if it does not exist. 1. Recognize the existence of bribery and evaluate 2. its effect on the customer ’ s purchase decision as if it were just another element of 4 p. The overall of a company ’ s offer must be as good as, or better than, the competitor ’ s overall offer, bribe included. It may be possible to offera lower price, a better product, better distribution, or better ad to offset the value added by the bribe. The best defence is to have a product that is clearly superior to that of competiton. THE REGULATORY ENVIRONMENT ? The regulatory environment consists of agencies, both governmental and non governmental, that enforce laws or set guidelines for conducting business. Global marketing activities may be affected by a number of international or regional economic organizations; in Europe,f.e., the EU makes laws governing member states. case Executives at many global companies are realizing the need to hire lobbyists to represent their interests and to influence the direction of regulatory process. In the early 1990s, McDonald ’ s, Nike and Toyota did not have a single representetive in Brussels. Today, each of the companies has several people representing its interests in the European Comission.