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Global Marketing

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Submitted By ceal1954
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10/27/2015

International Business Environment
LECTURE 5

Global Business Environment

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Political Risks
Political risks are any changes in political environment that may adversely affect the value of a firms’ business activities. It could be divided into:
1. Ownership Risk through confiscation and expropriation.
2. Operating risk where operations of a firm and safety of its employees are threatened through changes in law, environmental standard, tax codes, terrorism and others.
3. Transfer risk in which government interferes with a firms ability to shift funds into and out of the country.

Economic Environment and International Business
 Economic System is the way a society decides to use

and distribute its resources.
1.

Who can own property in this system?

2.

Who controls and distributes the resources in this system?

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Types of Economic Systems
1. Market Economy
In pure market economy, all productive activities are privately owned , as opposed to being owned by the state. Price and production are determined by the interaction of demand and supply.
2. Command Economy or Planned Economy
In pure command economy, all productive activities are state owned , as opposed to being owned by the individual. In pure command economy, the government plans the goods and services that a country produces, the quantity, and prices at which they are sold.
3. Mixed Economy

Capitalism/Free Enterprise/Free Market
 Private Ownership
 Profit Motive
 Competition

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Legal Environment and International Business
Legal Environment
A legal system is the mechanism for creating, interpreting and enforcing the law in a specific jurisdiction.
Country’s legal system affects business by
- regulating how companies conduct business transactions,
-specifying the rights and obligations of those engaged in business transactions.

Types of legal system
A common law system is based on tradition, precedent, custom and interpretation by the courts. For example,
USA, England, Australia etc. This system is more flexible and based on judgment of the court.
2. A code law system is based on a systematic and extensive codification of laws. For example, Germany,
France, Japan.
3. A theocratic law system is based on religious percepts.
4. A mixed legal system combines elements of other system. 1.

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Impact of Legal Environment on International Business
Legal regulations either impact day to day operation or affect companies long term competiveness
1. Operational Concern
-starting a business;
-entering and enforcing a contract (detailed and precise vs. short and less specific);
-Hiring and Firing local workers;
-closing down a business.

Legal Environment and International Business
2. Strategic Concern
-Product Safety and liability
-Market behavior regarding pricing, distribution, advertising and promotion
3. Intellectual Property Right
Intangible property rights for intellectual efforts (books, music, software, design and brand names). Legal problems and conditions complicate regulating and enforcing intellectual property right.

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Intellectual Property Right
 Copyrights are the exclusive legal rights of authors,

composers, play wrights, artists, and publishers to publish and disperse their work as they see fit.
 A patent grants the inventor of a new product or process exclusive rights for a defined period to the manufacture, use, or sale of that invention.
 Trademarks are designs and names, often officially registered, by which merchants or manufacturers designate and differentiate their products.

Copyright

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Patent

Trade-mark

Starbucks vs. Xing Ba Ke Coffee (2006)

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Trademark

Intellectual Property Right
 World Intellectual Property Organization
 Trade Related Aspects of Intellectual Property Rights (or

TRIPS-1995)

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Legal Environment and International Business
4. Individual Property Rights
Property rights can be violated by two ways: private action
(theft, blackmail) and public action (politician and public bureaucrats extort income and resources by levying excessive tax, license fee or by illegal means i.e. bribe, corruption.

Individual Property Rights

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The Nature of EconomicTransformation
 Deregulation
 Privatization
 Legal Systems

Country’s overall attractiveness and International business  Benefits
 Costs
 Risks

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Country’s overall attractiveness and International business 11

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