International Marketing - Lecture 6

LECTURE 6
INTERNATIONAL LEGAL ENVIRONMENT

An integral part of a country’s culture are the laws governing

business activities. Therefore, a Marketer faces as many different
legal environments as there are countries where he or she tries to
penetrate.
An integral part of a country’s culture are the laws governing

business activities. Therefore, a Marketer faces as many different
legal environments as there are countries where he or she tries to
penetrate.
For instance, an Indian company having an American agent, doing

business in France has to contend with three legal jurisdictions,
three legal systems, three tax systems, and in addition, the
supranational European Community laws and regulations, each of
which could be potentially contradicting the others.
An integral part of a country’s culture are the laws governing business

activities. Therefore, a Marketer faces as many different legal
environments as there are countries where he or she tries to penetrate.
For instance, an Indian company having an American agent, doing

business in France has to contend with three legal jurisdictions, three legal
systems, three tax systems, and in addition, the supranational European
Community laws and regulations, each of which could be potentially
contradicting the others.
Therefore, it is very important to understand the nuances of the different

systems so that the business transaction is done in the correct
environment, or at least in an environment clearly understood by the
Marketer.
The Four Heritages of today’s Legal

Systems

Systems
Islamic Law:

Systems
Islamic Law:
Pakistan, Iran, Arab Countries, and other Islamic States

follow this System, also called the Shari’ah Law. It is based
on interpretation of the Koran. It encompasses religious
duties as well as secular aspects of Law. It prescribes
specific patterns of social and economic behaviour of all
individuals.
The Four Heritages of today’s Legal Systems
Islamic Law:
Pakistan, Iran, Arab Countries, and other Islamic States follow

this System, also called the Shari’ah Law. It is based on
interpretation of the Koran. It encompasses religious duties as
well as secular aspects of Law. It prescribes specific patterns of
social and economic behaviour of all individuals.
How do individuals tackle “interest” on loans given out – such

interest is forbidden by Koran!

Systems
Socialist Law:

Systems
Socialist Law:
This is based on the fundamental tenets of the Marxist –

Socialist State, and cluster around the core concept of
Social, Political, and Economic Policies of the State.
Property, Contract, Arbitration denote different realities to
Common Law.

Systems
Socialist Law:
This is based on the fundamental tenets of the Marxist –

Socialist State, and cluster around the core concept of
Social, Political, and Economic Policies of the State.
Property, Contract, Arbitration denote different realities to
Common Law.
Common Law:
The Four Heritages of today’s Legal Systems
Socialist Law:
This is based on the fundamental tenets of the Marxist – Socialist

State, and cluster around the core concept of Social, Political, and
Economic Policies of the State. Property, Contract, Arbitration denote
different realities to Common Law.
Common Law:
Derived from English Law, and prevalent in the USA, UK, Canada, and
the British Commonwealth, this is based on Tradition, Past Practices,
and Legal Precedences set by courts through interpretation of
Statutes, Legislations and Past Rulings.

Systems
Code Law:
Code Law, where the Legal System is generally divided into

three separate Codes - Commercial, Civil, and Criminal,
is based on an all inclusive system of written rules (Codes)
of Law.
Legal Disputes
Legal Disputes
Jurisdictions of Legal Disputes

Legal Disputes
International Legal Disputes can arise in three ways:
– Between two Governments

– Between a Company and a Government, and
– Between two Companies
In International Commercial Disputes, therefore, the question

of paramount importance is, Which Law Governs in the
dispute?
Legal Disputes
The jurisdiction of the case is generally determined by:

Legal Disputes
The jurisdiction of the case is generally determined by:
– Jurisdiction clauses set in the contract

– Where the Contract was entered into
– Where the provisions of the Contract were performed
Legal Recourse in resolving International

Disputes

Disputes
Conciliation:

Disputes
Conciliation: Sorting out the problem is the best option. If

need be, use the offices of the Chambers of
Commerce, or the Commercial Attache of the local
embassies.

Disputes

embassies.
Arbitration:

Disputes

embassies.
Arbitration: There are various arbitration bodies, like the

inter Americal Commercial Arbitration
Commission, London Court of Arbitration,
International Chamber of Commerce, etc.
Legal Recourse in resolving International Disputes
Conciliation: Sorting out the problem is the best option. If need be, use the
offices of the Chambers of Commerce, or the Commercial Attache of the local
embassies.
Arbitration: There are various arbitration bodies, like the inter American
Commercial Arbitration Commission, London Court of Arbitration,
International Chamber of Commerce, etc.
Typical Arbitration Clause: All disputes arising in connection with this present contract
shall be finally settled under the rules of conciliation and arbitration of the ICC,
by one or more arbitrators appointed in accordance with the said rules.
Legal Recourse in resolving International Disputes
Litigation: A Lawsuit should be avoided unless it is absolutely necessary.

Possible consequences of a Lawsuit in a foreign country, irrespective of the
outcome, are:
» Creation of a poor image and damaged PR, both very difficult to rebuild
» Face unfair treatment in a foreign court
» Difficult to obtain a judgement that would otherwise be obtained by
arbitration
» Very high cost and very long time taken in international legal action
» Total loss of confidentiality of business strategy and practices
BRIBES IN INTERNATIONAL
MARKETING
MARKETING
Factors Responsible for Bribes
MARKETING
Home Country Factors
• It is the cost of doing business in certain countries

• It is an established practice in certain countries, which one cannot avoid
• Encouragement by the Government to “buy influence” in certain political
situations
• The importance of hiring middlemen services in certain countries, to
“bridge gap” between medieval aristocracies and modern corporations
• Increasing competition in international markets
• Pressure from top management to achieve results
• Opportunities to protect undercover operations via Swiss Banks
MARKETING
Host Country Factors
• Lure of easy money

• Political involvement in Decision Making
• Token of “Appreciation”
• Friendly gesture
• Fair “Business Deal”
• Pressure from Vendors
MARKETING
Major Types of Bribes
MARKETING
• Facilitating Payments: Disbursement of small amounts of

payments in cash or kind, such as tips or gifts to Government
Officers to expedite clearance of shipments, documents, or other
routine transactions.
MARKETING

• Middlemen Commissions: Appointment of in-between people as
middlemen (agents or consultants) to facilitate sales in a non-
routine manner, and payment of excessive allowances and
commissions (not commensurate to the services they perform) to
them.
MARKETING

middlemen (agents or consultants) to facilitate sales in a non-routine
manner, and payment of excessive allowances and commissions (not
commensurate to the services they perform) to them.
• Political Contributions: Contributions that take the form of
extortion, since they are in violation of the law and custom of the
land. Moreover, these payments, while not illegal, are specifically
made with the intention of winning favours directly or indirectly.
MARKETING
• Facilitating Payments: Disbursement of small amounts of payments in cash

or kind, such as tips or gifts to Government Officers to expedite clearance of
shipments, documents, or other routine transactions.
middlemen (agents or consultants) to facilitate sales in a non-routine manner,
and payment of excessive allowances and commissions (not commensurate
to the services they perform) to them.
• Political Contributions: Contributions that take the form of extortion, since
they are in violation of the law and custom of the land. Moreover, these
payments, while not illegal, are specifically made with the intention of
winning favours directly or indirectly.
• Cash Disbursements: Cash payments are made to important people
through slush funds or in some other way, usually in a third country, such as
deposits made into numbered Swiss Bank Accounts.
DEVELOPING MARKETS - MARKET
BEHAVIOUR
BEHAVIOUR
Stages of a Country’s Economic Development
BEHAVIOUR
1. The Traditional Society: Countries at this stage of

development lack the capability of significantly increasing the
level of Productivity. A country in this stage of development
lacks a systematic application of scientific application of
scientific and technological methods, and is burdened by low
levels of literacy and the resultant social overheads.
BEHAVIOUR
1. The Traditional Society: Countries at this stage of

development lack the capability of significantly increasing the
level of Productivity. A country in this stage of development
lacks a systematic application of scientific application of
scientific and technological methods, and is burdened by low
2. The Preconditions of Takeoff: Societies on the verge of
Economic and Technological Takeoff fall into this Transitional
Stage. It is marked by advanced technologies and scientific
applications in agriculture and production, and the development
of transportation, health care, education, power and other
public undertakings.
BEHAVIOUR
1. The Traditional Society: Countries at this stage of development lack the

capability of significantly increasing the level of Productivity. A country in
this stage of development lacks a systematic application of scientific
application of scientific and technological methods, and is burdened by low
2. The Preconditions of Takeoff: Societies on the verge of Economic and
Technological Takeoff fall into this Transitional Stage. It is marked by
advanced technologies and scientific applications in agriculture and
production, and the development of transportation, health care, education,
power and other public undertakings.
3. The Take Off: Here, the country achieves a growth pattern that becomes
“normal”. Human Resources and Social Overheads have reached a point of
steady development. Agriculture and Industrial Modernization lead to rapid
expansion at this stage.
BEHAVIOUR
1. The Traditional Society: Countries at this stage of development

lack the capability of significantly increasing the level of Productivity.
A country in this stage of development lacks a systematic application
of scientific application of scientific and technological methods, and is
burdened by low levels of literacy and the resultant social overheads.
2. The Preconditions of Takeoff: Societies on the verge of Economic
and Technological Takeoff fall into this Transitional Stage. It is marked
by advanced technologies and scientific applications in agriculture
and production, and the development of transportation, health care,
education, power and other public undertakings.
3. The Take Off: Here, the country achieves a growth pattern that
becomes “normal”. Human Resources and Social Overheads have
reached a point of steady development. Agriculture and Industrial
Modernization lead to rapid expansion at this stage.
4. The Drive to Maturity: Sustained progress is maintained and the
economy seeks to extend modern technology on all economic activity
fronts. Here the economy demonstrates that it has the technological
and entrepreneurial skills to produce anything it chooses to produce.
BEHAVIOUR
1. The Traditional Society: Countries at this stage of development lack the capability of
significantly increasing the level of Productivity. A country in this stage of development
lacks a systematic application of scientific application of scientific and technological
methods, and is burdened by low levels of literacy and the resultant social overheads.
2. The Preconditions of Takeoff: Societies on the verge of Economic and Technological
Takeoff fall into this Transitional Stage. It is marked by advanced technologies and
scientific applications in agriculture and production, and the development of
transportation, health care, education, power and other public undertakings.
3. The Take Off: Here, the country achieves a growth pattern that becomes “normal”.
Human Resources and Social Overheads have reached a point of steady development.
Agriculture and Industrial Modernization lead to rapid expansion at this stage.
4. The Drive to Maturity: Sustained progress is maintained and the economy seeks to
extend modern technology on all economic activity fronts. Here the economy
demonstrates that it has the technological and entrepreneurial skills to produce anything
it chooses to produce.
5. The Age of High Mass Consumption: This is the “final frontier” where a very large
number of people have significant amounts of discretionary income, and turns the
society towards durable consumer goods and services.
BEHAVIOUR
Objectives of Developing Countries
BEHAVIOUR
An International Marketer must be able to answer the following

questions to be able to adjust to foreign economic development:
BEHAVIOUR
An International Marketer must be able to answer the following

questions to be able to adjust to foreign economic development:
– What are the objectives of developing nations?

– What role, if any, is marketing assigned in economic growth
plans?
– What contribution must marketing make, for a country to
grow successfully?
– Which of the prevailing attitudes might hamper marketing
strategies, development and growth?
– How can the present and future market potential be
assessed?
BEHAVIOUR
Marketing in a Developed Country
BEHAVIOUR
In making a market appraisal, the economic level of a country

must be reviewed to determine which marketplace limitations
must be accounted for and adjusted to in market plans and
strategies.
BEHAVIOUR
In making a market appraisal, the economic level of a country must be reviewed to

determine which marketplace limitations must be accounted for and adjusted to in
market plans and strategies.
One such marketing review found that with increasing economic development:
– More developed countries have more levels of distribution, more specialty stores
and supermarkets, more departmental stores, and more stores in rural areas
– The influence of the foreign import agent declines
– Manufacturer - Wholesaler – Retailer functions become separated
– Wholesaler functions approximate those in fully developed nations
– The financing function of Wholesalers declines and wholesale markup increases
– The number of small stores declines and the size of the average store increases
– The role of the peddler and the “Haat” type of trade decline
– Retail margins improve
BEHAVIOUR
Less Developed Countries – Long Term
potential
BEHAVIOUR
Less Developed Countries – Long Term
potential
– The price paid for entering a market in the early stages of its
development may be lower initial returns on investment but the price
paid for waiting until the market becomes profitable may be a blocked
market with no or very limited opportunity for entry.
BEHAVIOUR
Less Developed Countries – Long Term potential
– The price paid for entering a market in the early stages of its
development may be lower initial returns on investment but the price paid
for waiting until the market becomes profitable may be a blocked market
with no or very limited opportunity for entry.
– India and China with their huge populations, are the largest potential
markets of the future – a truth that has dawned on most marketers world,
some sooner than others!
STRATEGY AND MARKET
ENTRY METHODS
STRATEGY AND MARKET
ENTRY METHODS
Empirical Research confirms that the following
observations are true:
STRATEGY AND MARKET
ENTRY METHODS
– The higher the per capita GDP, the more attractive the
country to foreign investors
STRATEGY AND MARKET
ENTRY METHODS
– Higher tax levels deter foreign investments

STRATEGY AND MARKET
ENTRY METHODS
– The export to import ratio first increases with foreign

investment, leading eventually to a decline in the
ratio. This cycle is commensurate with direct foreign
investment in manufacturing
STRATEGY AND MARKET
ENTRY METHODS
Empirical Research confirms that the following observations
are true:
– The higher the per capita GDP, the more attractive the country to
foreign investors
– The export to import ratio first increases with foreign investment,

leading eventually to a decline in the ratio. This cycle is
commensurate with direct foreign investment in manufacturing
– Urbanized Less Developed Countries (LDCs) attract more foreign

investment than agrarian LDCs
STRATEGY AND MARKET
ENTRY METHODS
Empirical Research confirms that the following observations are
true:
– The higher the per capita GDP, the more attractive the country to
foreign investors
– The export to import ratio first increases with foreign investment,

leading eventually to a decline in the ratio. This cycle is
commensurate with direct foreign investment in manufacturing
– Urbanized Less Developed Countries (LDCs) attract more foreign

investment than agrarian LDCs
– The greater the infrastructure of a country as a percentage of the

GDP, the more attractive is the country to foreign investors
STRATEGY AND MARKET
ENTRY METHODS
International Marketing Stages and Methods
STRATEGY AND MARKET
ENTRY METHODS
1. Domestic firm with no exports.

STRATEGY AND MARKET
ENTRY METHODS
2. Firm with marginal exports.

STRATEGY AND MARKET
ENTRY METHODS
3. Exports through Agents in a few markets.

STRATEGY AND MARKET
ENTRY METHODS
4. Exports through Agents and Representatives in many

markets.
STRATEGY AND MARKET
ENTRY METHODS

markets.
5. Exporting through Marketing facilities abroad.

STRATEGY AND MARKET
ENTRY METHODS

markets.
5. Exporting through Marketing facilities abroad.
6. Foreign Production for foreign markets.

International Marketing - Lecture 6

Transféré par

Informations du document

Description originale:

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

International Marketing - Lecture 6

Transféré par

Droits d'auteur :

Formats disponibles

LECTURE 6

INTERNATIONAL LEGAL ENVIRONMENT

An integral part of a country’s culture are the laws governing

An integral part of a country’s culture are the laws governing

For instance, an Indian company having an American agent, doing

An integral part of a country’s culture are the laws governing business

For instance, an Indian company having an American agent, doing

Therefore, it is very important to understand the nuances of the different

The Four Heritages of today’s Legal

The Four Heritages of today’s Legal

The Four Heritages of today’s Legal

Pakistan, Iran, Arab Countries, and other Islamic States

The Four Heritages of today’s Legal Systems

Pakistan, Iran, Arab Countries, and other Islamic States follow

How do individuals tackle “interest” on loans given out – such

The Four Heritages of today’s Legal

The Four Heritages of today’s Legal

This is based on the fundamental tenets of the Marxist –

The Four Heritages of today’s Legal

This is based on the fundamental tenets of the Marxist –

The Four Heritages of today’s Legal Systems

This is based on the fundamental tenets of the Marxist – Socialist

The Four Heritages of today’s Legal

Code Law, where the Legal System is generally divided into

Jurisdictions of Legal Disputes

Jurisdictions of Legal Disputes

International Legal Disputes can arise in three ways:

– Between two Governments

In International Commercial Disputes, therefore, the question

Jurisdictions of Legal Disputes

The jurisdiction of the case is generally determined by:

Jurisdictions of Legal Disputes

The jurisdiction of the case is generally determined by:

– Jurisdiction clauses set in the contract

Legal Recourse in resolving International

Legal Recourse in resolving International

Legal Recourse in resolving International

Conciliation: Sorting out the problem is the best option. If

Legal Recourse in resolving International

Conciliation: Sorting out the problem is the best option. If

Legal Recourse in resolving International

Conciliation: Sorting out the problem is the best option. If

Arbitration: There are various arbitration bodies, like the

Legal Recourse in resolving International Disputes

Legal Recourse in resolving International Disputes

Litigation: A Lawsuit should be avoided unless it is absolutely necessary.

Home Country Factors

• It is the cost of doing business in certain countries

Host Country Factors

• Lure of easy money

• Facilitating Payments: Disbursement of small amounts of

• Facilitating Payments: Disbursement of small amounts of

• Facilitating Payments: Disbursement of small amounts of

• Facilitating Payments: Disbursement of small amounts of payments in cash

1. The Traditional Society: Countries at this stage of

1. The Traditional Society: Countries at this stage of

1. The Traditional Society: Countries at this stage of development lack the

1. The Traditional Society: Countries at this stage of development

An International Marketer must be able to answer the following

An International Marketer must be able to answer the following

– What are the objectives of developing nations?

In making a market appraisal, the economic level of a country

In making a market appraisal, the economic level of a country must be reviewed to