Global Marketing

“Political & Legal Environments +

Global Information Systems &
Marketing Research
”
Week 3
David Shaw
shaping success in business and finance
 Chapter 5

The Political, Legal, and

Regulatory Environments of Global
Marketing
 Introduction

• The global marketer must attempt to

comply with each nation’s laws and
regulations with respect to the cross-
border movement of services,
people, money, and know-how. Laws
and regulations that change
frequently or are ambiguous can
hamper the company’s activities.
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 The Political Environment
• Made up of governmental institutions,
political parties, and organizations that
rulers and people use to wield power
• Each nation’s political culture reflects the
importance of the government and legal
system.
• Issues for foreign investors include the
governing party’s view on sovereignty,
political risk, taxes, equity dilution, and
expropriation.

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 Nation-States and Sovereignty

Every sovereign state is bound to respect

the independence of every other
sovereign state, and the courts in one
country will not sit in judgment on the
acts of government of another done
within its territory.
U.S. Supreme Court Justice
Fuller

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 Political Risk
• Risk of change in
political environment or
government policy that
would adversely affect
a company’s ability to
operate effectively and
profitably

When perceived political risk is high, a country will have

a difficult time attracting foreign direct investment

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 Political Risk
• Some examples of political risk include
– War
– Social unrest
– Politically motivated violence
– Transparency
– Social conditions (population density and wealth
distribution)
– Corruption, nepotism
– Crime
– Labor costs
– Tax discrimination

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 Taxes

• Government taxation policies

– High taxation can lead to black market
growth and cross-border shopping
• Corporate taxation
– Companies attempt to limit tax liability
by shifting location of income

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 Seizure of Assets
• Expropriation—governmental action
to dispossess a foreign company or
investor
– Compensation should be provided
in a “prompt, effective, and
adequate manner”
• Confiscation occurs when no
compensation is provided
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 Seizure of Assets

• Nationalization—a government
takes control of some or all of the
enterprises in an entire industry
– Acceptable according to international
law if
• Satisfies public purpose
• Includes compensation

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 Seizure of Assets
• Creeping expropriation—limits economic
activities of foreign firms
• May include
– Limits on repatriation of profits, dividends, or royalties
– Technical assistance fees
– Increased local content laws
– Quotas for hiring local nationals
– Price controls
– Discriminatory tariff and nontariff barriers
– Discriminatory laws on patents and trademarks

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 International Law
• The rules and principles that nation-
states consider binding among
themselves
• Disputes between nations are issues
of public international law
– World Court or International Court of
Justice (ICJ)
– Judicial arm of the United Nations
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 Common Law vs. Civil Law

• The Napoleonic Code

of 1804 drew on the
Roman legal system
and is the basis for
continental European
law today. Code law is
also known as civil law.
• U.S. law is rooted in
English common law.

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 Common Law versus Civil Law
– Common law
• Civil law country
country
– Legal system reflects
• Disputes are decided by
the structural concepts
reliance on the authority
of past judicial decisions and principles of the
Roman Empire
• Companies are legally
incorporated by state – Companies are formed
authority by contract between
• Code law is used in few two or more parties
areas; the U.S. Uniform who are fully liable for
Commercial Code the actions of the
company

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 Islamic Law
• Legal system in many Middle Eastern
countries
• Sharia—a comprehensive code governing
Muslim conduct in all areas of life, including
business
– Koran—holy book
– Hadith
• Based on life, sayings, and practices of
Muhammad
• Identifies forbidden practices, “haram”
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 Sidestepping Legal Issues

• Get expert legal

help
• Prevent conflicts
– Establish jurisdiction
– Protect intellectual
property
– Avoid bribery

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 Jurisdiction
• Refers to a court’s authority to rule on
particular types of issues arising outside of
a nation’s borders or to exercise power
over individuals or entities from different
countries
• Employees of foreign companies should
understand the extent to which they are
subject to jurisdiction of host-country
courts
• Courts have jurisdiction if it can be
demonstrated that the company is doing
business in the state the court sits

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 Intellectual Property
• Intellectual property must be registered in
each country where business is conducted
– Patent—gives an inventor exclusive right to
make, use, and sell an invention for a specified
period of time
– Trademark—distinctive mark, motto, device, or
emblem used to distinguish it from competing
products
– Copyright—establishes ownership of a written,
recorded, performed, or filmed creative work

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 Infringement of Intellectual
Property
• Counterfeiting—unauthorized
copying and production of a product
• Associative counterfeit/imitation—
product name differs slightly from a
well-known brand
• Piracy—unauthorized publication or
reproduction of copyrighted work

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 Intellectual Property

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 Protecting Intellectual Property
• In the United States, registration is
with the Federal Patent Office
• In Europe, applicants use the
European Patent Office or register
country by country
• Soon the Community Patent
Convention will cover 25 countries

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 Protecting Intellectual Property

• World Intellectual Property

Organization
– Governed by the Madrid Agreement
and the Madrid Protocol
– Allows trademark owners to seek
protection in as many as 74 countries
with a single application and fee

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 Protecting Intellectual Property
• International Convention for the Protection
of Industrial Property
– Paris Convention
– Honored by 100 countries
– Facilitates multi-country patent registration,
ensures that once a company files, it has a
“right of priority” in other countries for 1 year
from that date
• Patent Cooperation Treaty
• European Patent Convention

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 U.S. Companies Receiving the Most Patents,
2005
Company # of Patents
1. IBM 2,941
2. Hitachi 1,918
3. Canon Kabushiki Kaisha 1,875
4. Matsushita Electric Industrial 1,813
5. Hewlett-Packard 1,808
6. Samsung Electronics 1,641
7. Micron Technology 1,561
8. Intel 1,549
9. Siemems 1,345
10. Toshiba 1,338

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 Antitrust
• Laws are designed to combat restrictive business
practices and to encourage competition.
– Enforced by FTC in the United States, Fair Trade
Commission in Japan, European Commission in
European Union
– The Sherman Act of 1890 prohibits certain
restrictive business practices including fixing
prices, limiting production, allocating markets, or
any other scheme designed to limit or avoid
competition. Law applies to U.S. companies
outside U.S. borders and to foreign companies
operating in the United States.

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 Licensing and Trade Secrets
• Licensing is a contractual agreement in
which a licensor allows a licensee to use
patents, trademarks, trade secrets,
technology, and other intangible assets in
return for royalty payments or other forms
of compensation.
• Important considerations
– What assets may be licensed
– How to price assets
– The rights granted

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 Licensing and Trade Secrets
• Trade secrets are confidential 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
• To prevent disclosure, use confidentiality
contracts
• The Uniform Trade Secrets Act has been
adopted by most U.S. states
• TRIPS, Trade-Related Aspects of Intellectual
Property Rights signed by members of GATT

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 Bribery and Corruption
• Foreign Corrupt Practices Act
– Requires publicly held companies to institute
internal accounting controls that would record all
transactions
– Makes it a crime for a U.S. corporation to bribe an
official of a foreign government or political party to
obtain or retain business
– Prohibits payments to third parties when there is
reason to believe it may be channeled to foreign
officials
• Omnibus Trade and Competitiveness Act
– Allows for “grease” payments to cut red tape, such
as getting shipments trough customs, getting
permits
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 2006 Corruption Rankings
• See Table 5-4

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 Conflict Resolution
Country Lawyers per
_________100,000 People
United States 290
Australia 242
United Kingdom 141
France 80
Germany 79
Hungary 79
Japan 11
Korea 3

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 Conflict Resolution
• Litigation
• Formal arbitration
– Settles disputes outside of court
– Groups agree to abide by panel’s decision
• 1958 United Nations Convention on the
Recognition and Enforcement of Foreign
Arbitral Awards (New York Convention)
– Most important treaty regarding international
arbitration signed by 107 countries

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 The Regulatory Environment
• Agencies, both governmental and
non-governmental, that enforce laws
or set guidelines for conducting
business
• Marketing activities affected by
international and regional economic
organizations
– EU
– WTO
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 Looking Ahead to Chapter 6

• Global information systems and

market research

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 Chapter 6
Global Management Information
Systems and
Marketing Research
 Introduction
• Understand the importance of information
technology and marketing information
systems
• Utilize a framework for information
scanning and opportunity identification
• Understand the formal market research
process
• Know how to manage the marketing
information collection system and market
research effort
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 Information Technology for Global
Marketing
• Information technology refers to an
organization’s processes for creating,
storing, exchanging, using, and managing
information.
• Management information systems provide
managers and other decision-makers with
a continuous flow of information about
company operations.
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 Tools of MIS
• Intranet
• Electronic Data Interchange (EDI)
• Efficient Consumer Response System
(ECR)
• Electronic point of sale

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 Intranet
• A private network
• Allows authorized company
personnel (or outsiders) to share
information electronically
• 24-hour nerve center
• Allows companies like Amazon.com
and Dell to operate as real-time
enterprises
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 Electronic Data Interchange
• Allows business units to
– Submit orders
– Issue invoices
– Conduct business electronically
• Transaction formats are universal
• Allows computers from different
companies to speak the same
language
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 Efficient Consumer Response (ECR)
• A joint initiative by members of a
supply chain to work toward
improving and optimizing aspects of
the supply chain to benefit customers
• This is in addition to EDI
• An effort for retailers and vendors to
work closely on stock replenishment
• Utilizes electronic point of sale (EDI)

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 Customer Relationship
Management
• New business model
• Philosophy that values two-way
communication between company and
customer
• Every point of contact with a consumer is
an opportunity to collect data
• Can make employees more productive
and enhance corporate profitability

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 Customer Relationship
Management
The major thing is, “One size fits all” is
not true. CRM is designed to support the
sales process, and if I develop a system
that works in the United States, it might
not work in Europe.
—Jim Dickie, Insight Technology
Group
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 Privacy
• Safe Harbor Agreement establishes
principles for privacy protection for
companies that transfer data to the United
States from Europe
– Purposes of the information collected and used
– An “opt out” option to prevent disclosure of
personal information
– Can only transfer information to third parties that
are in compliance with Safe Harbor
– Individuals must have access to information

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 Data Warehouses

• Help fine-tune product assortments

for multiple locations
• Enhance the ability of management
to respond to changing business
conditions

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 Organizational Necessities
• An efficient, effective system that will scan
and digest published sources and
technical journals
• Daily scanning, translating, digesting,
abstracting, and electronic input of
information into a market intelligence
system
• Expanding information coverage to other
regions of the world
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 Sources of Market Information
• Personal sources
– Company executives based abroad who have
contact with distributors, consumers, suppliers,
and government officials
– Friends, acquaintances, professional
colleagues, consultants, and prospective
employees
• Direct sensory perception
– Using the senses to find out firsthand what is
going on in a particular country
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 Formal Market Research

• Global marketing research is the

project-specific, systematic gathering
of data in the search scanning mode
on a global basis
– Challenge is to recognize and respond
to national differences that influence the
way information is obtained

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 Steps in the Research Process
1. Identify the information requirement
2. Define the problem
3. Choose a unit of analysis
4. Examine data availability
5. Assess value of research
6. Design the research
7. Analyze the data
8. Present the findings
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 Step 1: Identifying the Information
Requirement
• What information do I need?
– Existing markets—customer needs already being served by
one or more companies; information may be readily
available
– Potential markets
• Latent market—an undiscovered market; demand would
be there if product was there
• Incipient market—market will emerge as macro
environmental trends continue
• Why do I need this information?

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 Step 2: Problem Definition and Overcoming
the SRC
• Self-reference criterion occurs when a person’s values and
beliefs intrude on the assessment of a foreign culture
• Must be aware of SRCs
– Enhances management’s willingness to conduct market
research
– Ensures that research design has minimal home-country
bias
– Increases management’s receptiveness to findings

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 Step 3: Choose a Unit of Analysis
• Will the market be
– Global
– A region
– A country
– A province
– A state
– A city

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 Step 4: Examine Data Availability
• Sources may be
– Company records
– Secondary sources
• Trade journals
• Government sources such as CIA World
Factbook, Statistical Yearbook of the United
Nations, World Bank
• Commercial sources such asThe Economist
and Financial Times, Marketresearch.com

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 Step 5: Assess Value of Research

• What is the information worth versus

what it will cost to collect?
• What will it cost if the data are not
collected?
• What will the company gain with this
information?

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 Step 6: Research Design—Data Collection
• Use multiple indicators
• Develop customized indicators specific to the
industry, product market, or business model
• Do not assess a market in isolation
• Observation of purchasing patterns/ behavior
is more important than reports of purchase
intention or price sensitivity

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 Step 6: Research Design—Research
Methodologies

• Primary data collection methods

– Survey research
– Interviews
– Consumer panels
– Observation
– Focus groups

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 Special Considerations for Surveys
• Benefits
– Data collection from a large sample
– Both quantitative and qualitative data possible
– Can be self-administered
• Issues
– Subjects may not want to answer or intentionally
give inaccurate response
– Translation may be difficult
• Use back and parallel translations to ensure accuracy
and validity

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 Research Methodologies
• Personal interviews
• Consumer panels
– Nielsen—TV viewing
• Observation
– Using people or
cameras
• Focus groups

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 Sampling

• A sample is a selected subset of a

population that is representative of
the entire population.
– Probability samples
– Non-probability samples

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 Step 7: Analyzing Data

• Clean the data

• Tabulate the data
using statistical
techniques—ANOVA,
regression, factor
analysis, cluster
analysis
• Perceptual mapping,
conjoint analysis

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 Presenting the Findings

• Report must clearly address problem

identified in Step 1
• Include a memo or executive
summary of the key findings along
with main report

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 Enhancing Comparability of Data
• Emic analysis • Etic analysis
– Ethnographic in – From the outside
nature – Detached
– Studies culture perspective that is
from within used in multi-
country studies
– Uses culture’s own
– Enhances
meanings and comparability but
values minimizes
precision

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 Looking Ahead to Chapter 7

• Segmentation, targeting, and

positioning

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 HAVE A NICE DAY!
Thank You

shaping success in business and finance