ch04 politics and law

7/24/2019 Ch04 Politics and Law

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Politics and Law


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LearningObjectivesTo understand the importance of the political

and legal environments in both the homeand host countries to the internationalbusiness executive.

To learn how governments aect businessthrough legislation and regulations.

To see how the political actions of countriesexpose rms to international risks.

To examine the diering laws regulatinginternational trade found in dierent countries.

To understand how international politicalrelations, agreements, and treaties can aectinternational business.


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A Look at Three SegmentsThe Home-CountryPerspective

Host CountryPolitical and LegalEnvironment

InternationalRelations and Laws


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The Home Country Perspective Major areas o governmental

activity that are o concern to

the international !usinessmanager"

Embargoes and Sanctions

Export Controlsegulation of !nternational

"usiness "ehavior


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Sanctions and Embargoes

#overnmental actions thatdistort ree $ows o trade ingoods% services% or ideas or

adversarial and political% ratherthan economic% purposes&

'anctions tend to consist o

speci(c coercive trade measures&Em!argoes are typically !roaderin that they prohi!it tradeentirely&


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Export Contros

#re designed to den$ or dela$ theac%uisition of strategicall$ importantgoods b$ adversaries.

The legal basis for export controls variesin nations.

&ost international business can becarried out under '( conditions.

Export licenses are issued b$ the )ept.of Commerce for commodities whoseexport is considered sensitive.


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Ho! an Export License is "ssued

Specialists in the )epartment ofCommerce match the exportedcommodit$ with the Critical

Commodities list, the countr$ ofdestination, and the recipient compan$.

!f no concerns exist in an$ one of the

three areas, a license is issued.This process is onl$ carried out if theproduct or the recipient countr$ isconsidered sensitive.


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A #e! Environment $or Export Contros

)ocus o e*portcontrols on theThird +orld

, loosening omutual !ondsamong alliednations

The increasedoreign availa!ilityo high-techproducts

The speed ochange and therapid disseminationo inormation and

innovation aroundthe world

The issue oeuipment si.e


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"mpementation and En$orcement o$

Export Contros

Export controls are increasingl$ di*cultto implement and enforce.

The number of countries that are able tomanufacture products of strategicimportance has increased.

+roducts that are in need of control are

developed and disseminated ver$ %uickl$.!t is di*cult to control the transfer oftechnolog$ and knowhow.


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%eguation o$ "nternationa

&usiness &ehavior

Regulations on (rms varies

su!stantially among nations&/ations may employ !oycotts togovern !usiness activities&

,ntitrust Laws are a regulatoryactivity&


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Host CountryPolitical ,ction and Ris1

2aries widely rom country to country

Economic Ris1Less dangerous% !ut more common


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Three Types o$ Poitica %isk

3wnership Ris1Exposes propert$ and life

3perating Ris1!nterference with the ongoingoperations of a rm

Transer Ris1(imitations on the out-ow of funds


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"nternationa %eations and La!sInternational Politics"The eect of politicson international business is determined b$both the bilateral political relations between

home and host countries and b$ multilateralagreements governing the relations amonggroups of countries.

International Law"+la$s an important role

in the conduct of international business.Treaties and agreements have a strongin-uence on international businessoperations.


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"nternationa La!

The +orld Trade 3rgani.ationde(nes internationally accepta!leeconomic practices or its mem!er

nations&The Patent Cooperation Treaty7PCT8 provides procedures or (ling

patent applications&The 9nited /ations has developedcodes and guidelines that a0ectinternational !usiness&


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ch04 politics and law

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