Chapter 5:

The Political, Legal, and Regulatory Environments of Global Marketing

• Each of the world’s national governments regulates trade and commerce with other countries and attempts to control the access of outside enterprises to national resources. Every country has its own unique legal and regulatory system that affects the operations and activities of the global enterprise, including the global marketer’s ability to address market opportunities and threats.

• Laws and regulations constrain the cross-border movement of products, services, people, money, and know-how. The global marketer must attempt to comply with each set of national constraints. The fact that laws and regulations are frequently ambiguous and continually changing hamper these efforts.

• This chapter considers the basic elements of the political, legal, and regulatory environments of global marketing, including the most pressing current issues and some suggested approaches for dealing with those issues. Some specific topics, such as rules for exporting and importing industrial and consumer products, standards for health and safety, and regulations regarding packaging, labeling, advertising, and promotion, are covered in later chapters devoted to individual marketing mix elements.

Lecture Outline

Discussion Questions

Test your knowledge
 

1.

  True

  False

When Barack Obama was sworn in as the president of the United States, he inherited a situation that had confounded his predecessors for half a century. America's complex relationship with Cuba illustrates the impact the political, legal, and regulatory environments can have on international trade and global marketing activities.

2.

  True

  False

In Europe, the individual EU countries are giving up the right to set their own product standards, and are making other sacrifices in exchange for improved market access.

3.

  True

  False

Political risk is the possibility of a change in a country's political environment or government policy that would positively affect a company's ability to operate effectively and profitably.

4.

  True

  False

It is estimated that 90 percent of the foreign cigarettes sold in China are smuggled in.

5.

  True

  False

When cars cross borders from France to Switzerland or from France to Great Britain, they contain several bottles of wine, due to high excise and VAT can also encourage legal cross-border shopping.

6.

  True

  False

It has been estimated that tax minimization of foreign companies doing business in the United Sates cost the government $3 billion each year.

7.

  True

  False

If a foreign company is taken over by the host country government and some form of compensation is paid, "confiscation" has occurred.

8.

  True

  False

If a foreign company is taken over by the host country government and some form of compensation is paid, "expropriation" has occurred.

9.

  True

  False

Nationalization, expropriation, and confiscation are approved by international law as a legitimate exercise of government power as long as the act satisfies a "public purpose."

10.

  True

  False

When a foreign country expropriates an American corporation, the U.S. court can get involved in arbitration.