Global Marketing Management Global Political & Legal by F0VeXQr


									                               MKTG 3215-090
                                    Fall 2011
                               Mrs. Tamara L. Cohen

        Global Marketing

            Global Political & Legal
Class # 3.1     Environment
            Case #1: Starbucks due Sept.19
    HARD COPY of write-up due at beginning of class (no folders please)

Requirements for each Partnership Case Write-up:
•    4 - 6 pages, typed and double-spaced
•    Exhibits / Appendices / Resources in addition to 4-6 pages
•    You and your partner should submit one write-up together.
•    Use the article (reading #11 in Course Pack), also posted on web site,
     PLUS use other sources that you will find yourselves.

Your Case Write-up must include:
1.   Executive Summary (1 paragraph on 1st page)
2.   Background (brief summary of case as you see it)
3.   Problems (be incisive)
4.   Courses of action (look at several possibilities)
5.   Recommendations (which course of action?)
6.   Conclusions
7.   Exhibits / Appendices / Resources e.g. web sites,
     books, charts. Remember to acknowledge all sources.

Use headings.
   Exam #1
Monday, Sept.26
• Review PPTs & your notes from
  classes 1 - 4
• Review homework assignments and
  assigned readings
• Review your notes from elevator
  speeches in class
      Group Project due Oct.3
•   What do you need to do?                   Countries
      1. Choose your group                     taken:
         4-5 students in each group
      2. Choose your country
         1 group per country
      3. Choose your product / brand
         - NOT marketed in that country yet
         - real or imagined
•   Let me know - your group,
    country, product / brand / service
   Global Political &
  Legal Environment

 Report a case
 of a multinational
 company falling foul of the
 Foreign Corrupt Practices Act.

• Sovereign rights of nation
• Political risks
  – confiscation
  – expropriation
  – domestication
      The Sovereignty of Nations
Nations can & do abridge specific aspects of their
 sovereign rights in order to coexist with other
 nations, e.g. strategic alliances for trade

  NAFTA – North America Free Trade Agreement
  NATO – North Atlantic Treaty Organization
  WTO – World Trade Organization
  EU – European Union
  AU – African Union
Vicious cycle of
  government instability
e.g. endless civil wars,
   ethnic wars in Central
   Africa, coup d'état,
   military regimes
• Nations need investment to prosper, but investors
  shy away from unstable regions.
• World Bank: 47 nations in sub-Saharan Africa
  attract < $2 billion per year (about 1/10 of what Mexico
        Political Risks
     of Global Business
• Confiscation – company’s assets seized
 without payment
• Expropriation – investment seized by
 government but there is some
 reimbursement for assets
• Domestication – host countries gradually
 cause transfer of foreign investments to
 national control & ownership through series
 of government decrees
               Venezuela -
          expropriations in 2009
• golf courses
• President Hugo Chávez’s Venezuelan
  government’s “broad nationalizations &
  asset seizures have gone far beyond the
  oil industry to include coffee roasters,
  cattle ranches and tomato-processing
• dozen oil rigs, > 30 oil terminals, > 300
  boats, some 60 oil service companies
• Margarita Hilton Hotel
• Ternium steel company (2008)
         Violence & Terrorism
• US State Department reported 3,200
  terrorist incidents worldwide in 2004
• Goals of terrorism against multinationals
  – embarrass government & its relationship with
  – generate funds by kidnapping executives
  – use as pawns in political or social disputes
  – inflict terror within a country as did 9/11
       Political Risk
• Political risk assessment
• Government failure is greatest risk
  to international marketers
• Risk assessment of investments
“According to a communiqué by the Soro
  Government, effective Monday, 24 January,
  2011, all cocoa and coffee exports from Côte
  d'Ivoire will be suspended.”
= intense feeling of national pride & unity

• National interest & security > international relations
• Countries use nationalism to protect themselves
  against intrusions
   – threats from outside forces
   – declines in domestic economy
• Nationalism comes & goes
• Marketers should not confuse nationalism with
  widespread fear or animosity directed at
  particular country
   – Toyota in U.S. (1980s)
   – animosity toward US in France
   – unhappiness in many other countries re war in Iraq
             Economic Risks
• Exchange controls
  – stem from shortages of foreign exchange held by country
• Local-content laws
• Import restrictions
  – force foreign industry to purchase more supplies within host
    country, so creating markets for local industry
• Tax controls
• Price controls
  – essential products with high public interest
     • pharmaceuticals / food / gasoline

• Labor problems
  – labor unions have strong government support
           Political Sanctions
• Boycott of nation by one nation or by group
  of nations
   – stop all trade between countries
   – sanctions against trade of specific products
      e.g. U.S. boycotts of trade with Cuba/Iran

• History shows sanctions often
  unsuccessful Zimbabwe; Pres. Robert Mugabe
• NGOs

Political & Social Activists
• Not usually government sanctioned
• Can interrupt normal flow of trade
• Range from those who seek peaceful
  change to those who resort to
  violence & terrorism to effect change
    e.g. worldwide boycott of Nestlé products
• Internet an effective tool of activists
 U.S. State Department
                                            Asia
    Travel Warnings                         Middle East
                                            Africa
Libya                      Syria
Somalia                    Uzbekistan
Chad                       Mexico
Haiti                      Burkina Faso
Pakistan                   Nigeria
Syria                      Iraq
Niger                      Lebanon
Saudi Arabia               Algeria
Central African Republic   Mauritania
Colombia                   Afghanistan
Congo, Democratic          Mali
Republic of South Sudan
Israel, West Bank & Gaza
Cote d'Ivoire
                           Korea (North)
U.S. State Department
   Travel Warnings
Reducing Political Vulnerability
Strategies that MNCs use to minimize
 political vulnerability & risk
 – joint ventures
 – expanding the investment base
 – licensing
 – planned domestication
 – political bargaining
 – political payoffs

•   Jurisdiction & dispute resolution
•   Intellectual Property rights
•   Green Marketing laws
•   Antitrust legislation

3 heritages form basis for most legal systems:
    1. Common law (“English law”)
    2. Civil or code law (“Napoleonic Code”)
    3. Islamic law (“Shari’ah”)
    International Legal Issues
• 3 heritages of today’s
  legal systems:
     1. Common law
     2. Civil / Code law
     3. Islamic law (Shari’ah)

• Important factors in jurisdiction
  of legal disputes (World Court judges cases
   between governments not between individuals)

• Jurisdiction & conflict resolution
• Protecting intellectual property rights
  internationally (piracy & counterfeiting)
   Legal Systems of the World

LAW            LAW      (mixture)   LAW
Common & Code Law
• Common Law
 – interpretation through past
   decisions of higher courts

• Code Law
 – legal system is generally divided into 3
   separate codes
   1. Commercial
   2. Civil
   3. Criminal
     Islamic Law (Shari’ah)
• Basis for Islamic law is interpretation of
• Among unique aspects of Islamic law is
  prohibition against payment of interest

• Islamic system
  – emphasis on ethical, moral, social
    & religious dimensions to enhance
    equality & fairness for good of
   A view of Islamic law in the world

   There is considerable diversity within
  the Islamic world about the nature and
     interpretation of Islamic law. The
  above map illustrates the geographical
      influence of the main schools of
        Islamic law. (Source: Wikipedia)

“There is considerable diversity within the Islamic world about the
  nature and interpretation of Islamic law. The above map illustrates
  the geographical influence of the main schools of Islamic law.”
                          color-coded for the duration of
                          their claims to be socialist:

 Socialist                  > 60 years
                            50 - 60 years
                            40 - 50 years

 Countries                  30 - 40 years
                            20 - 30 years
                            10 - 20 years
(at some point in time)     <10 years
             Marketing Laws
All countries have laws regulating marketing
  – promotion (especially censorship of advertising)
  – product development (e.g. cheaper to meet EU standards
    with regular product range than design especially for EU market)
  – labeling
  – pricing
  – channels of distribution
                        Food product label in
                          European Union

Food product label in
       Conflict Resolution
            1. Jurisdiction?
            2. What recourse?
• Conciliation = mediation = non-binding
  agreement to resolve dispute
• Arbitration = parties agree to honor judgment
  made by mutually selected referee
• Litigation = lawsuits in public courts
Lawyers per
 in selected
  Counterfeiting & Piracy

• Lost sales from unauthorized use of
  U.S. patents, trademarks & copyrights
  > $100 billion annually
• Piracy industry has grown sophisticated
  – many counterfeit goods indistinguishable from
 Piracy rates for Computer Software
Highest                Lowest
1. Armenia       93%   1.    USA              20%
2. Moldova       92%   2.    Luxembourg       21%
    Azerbaijan   92%   3.    New Zealand      22%
    Bangladesh   92%   4.    Japan            23%
5. Zimbabwe      91%   5.    Finland          25%
6. Sri Lanka     90%         Sweden           25%
7. Yemen         89%         Belgium          25%
8. Libya         88%         Denmark          25%
9. Venezuela     87%         Austria          25%
10. Iraq         85%         Switzerland      25%
    Vietnam      85%   11.   United Kingdom   26%
12. Algeria      84%   12.   Germany          27%
    Cameroon     84%   13.   Australia        28%
    Pakistan     84%         Netherlands      28%
    Indonesia    84%   14.   Norway           29%
                Intellectual Property (IP)

IP “refers to creations of the mind: inventions,
  literary and artistic works, and symbols, names,
  images, and designs used in commerce.”
2 categories:
  1. Industrial property -            includes inventions (patents), trademarks,
     industrial designs

  2. Copyright -        literary & artistic works (e.g. books, plays, poems, paintings,
     photographs, architectural designs)

World Intellectual Property Organization
  (WIPO) - 184 member states
       Protection of Intellectual
           Property Rights
• Intellectual properties = valuable assets
• New technologies developed to prevent piracy
• Failing to protect intellectual property rights can lead
  legal loss of rights
• Cases where companies legally lost rights to
  trademarks; had to buy back these rights or pay
  royalties for their use e.g. McDonald’s in Japan & South Africa;
  Bermuda onions
Green Marketing Laws
    - focus on environmentally
       friendly products
    - focus on product packaging
       & effect on solid waste
    - rules for recycling, being
       organic, being eco-friendly
     Green marketing =
        marketing products that
        are environmentally safe.
              Antitrust Legislation
         = laws dealing with competition in
• For most of 20th century, antitrust
  laws were:
     • Nonexistent, or
     • not enforced in most countries
     • EXCEPT U.S.
• EU has severe penalties for anti-monopoly,
  price discrimination, supply restrictions, &
  full-line forcing.
• Now most countries have some sort of
  antitrust legislation.
Countries with Antitrust Laws
       Cyber law
• Taxes
  – company deemed to have taxable presence in
    country if it had permanent establishment there
• Jurisdiction of disputes & validity of contracts
  – EU Commission - online retailers trade by rules
    of home country (general rule)
International Law compliance
 – not what you’re expecting
Governments respect international law
 only when it suits their national
Don't expect that
 to change any
 time soon.
       What do we know about
the International Legal Environment?
• Various legal systems in world affect business
• Legal questions
  –   jurisdiction & legal recourse in disputes
  –   protection of intellectual property rights
  –   extended U.S. law enforcement
  –   enforcement of antitrust legislation by U.S. & foreign
• Internet & its new legal implications
• Engage competent international lawyers
         What do we know about
 the International Political Environment?
• Sovereignty of nations affects stability of government
• Different governmental types, political parties,
  nationalism, targeted fear/animosity, & trade disputes
  can affect the environment for marketing in foreign
• Political risks of global business, & ways to reduce
  political vulnerability
• Impact of violence & terrorism on global business
                                MKTG 3215-090
                                     Fall 2011
                                Mrs. Tamara L. Cohen

              Global Marketing

Class # 3.2
Multinational Negotiations
   Reading for this class:
   • Course Pack reading #2:
     excerpt from the art of woo

            • Summary of reading #2
              the art of woo
              by G. Richard Shell & Mario
• Non-task sounding
 = part of negotiation process in which
 conversation topics do not include business;
 typically a preliminary phase of negotiations
• Cultural stereotypes
 = commonly held public beliefs about specific
 social groups (cultures), based on simplified prior
• Non-verbal communication (NVC)
 = communicating without language;
 e.g. gestures, touch, body language, facial expression,
 voice, intonation, symbols, emotion, architecture, dance,
 handwriting style
• Impact of cultural STEREOTYPES
• “You get what you negotiate”
• Single most important activity of
  negotiating is LISTENING
Dangers of Stereotypes
• Negotiations
  – conducted between people, not national stereotypes
• Cultural factors often make huge differences
• Negotiation behaviors are different
  – across regions, genders, types of industry
• Age & experience make important differences
• Consider culture of customers & business
  partners, but treat them as individuals
       Cultural differences [
       4 common problems:
1. Language
  - use interpreter
  - learn languages
2. Non Verbal Communication
  - almost always hidden / below radar
3. Values
  -   objectivity (“business is business”)
  -   competitiveness
  -   equality
  -   time
4. Thinking & Decision-making processes
  - Western sequential approach vs
     Eastern holistic approach
     All business negotiations
          involve 4 steps:
1.   Non-task sounding
2.   Task-related information exchange
3.   Persuasion
4.   Concession & agreement
TIME spent on each step
   varies considerably.
                        the art of woo
                              Richard Shell & Mario Moussa

• WOO is Winning Others Over
  (Marcus Buckingham & Donald Clifton: Now, Discover Your Strengths)

• Relationship-based, emotionally intelligent
• Without coercion
  e.g. Nelson Mandela won over guards in prison and reinvented a nation

• “You can have brilliant ideas, but if you can’t get
  them across, your ideas won’t get you anywhere …”
  Lee Iacocca, former Chrysler Chairman & CEO
         Confront the 5 Barriers
                       as adapted from Richard Shell

1. What characterizes my relationship to the
   person/company I am trying to influence?
2. What is the basis for my/my company’s credibility
   with this person/company?
3. What channels of communication should I use
   (authority, rationality, vision, relationships, interest,
   politics)? Do I need to adjust my style?
4. What beliefs & values does this person/company
   hold that could block or support my case?
5. What are the other party’s interests and how can I
   address them?
         before you travel!

• Columbus may have been
  the best-known traveler
  who didn’t know where he
  was going, but he wasn’t
  the last.
        USA                           Japan

• Negotiators state          • Extensive warming
  what they want               up time and effort
• Lay cards on table         • Long explanations,
                               foll. by request, foll.
• Explanations if              by expressions of
  necessary                    sorrow/regret
• Questions should           • Consensus-based
  be asked once                decision-making
• Only ask questions         • Understand/expect
  that can be answered         that some questions
                               can’t be answered
• Value directness and
  efficiency of time in      • Use native language
  negotiation                  of bargaining partner
• Use of English preferred
           “Tricks of the Trade”
             - Bargaining with
           Japanese companies
• Formal communication at negotiating table
• Informal communication after hours
• Include lower level management on team
• Behind scenes negotiations MUST remain
  behind scenes
• Take notes at / record meetings
• Keep tally of topics of questions a relative
  importance of topics
• Persuasive tactics - subtle bluff vs. direct threat
        Japanese question…
        question… question…
• Long explanations must be expected, so come with
  appropriate technical details/experts.
• Extensive questioning is normal and necessary
  (consensus). Several people may ask same question.
• Use patience and detailed preparation.
• Explanations under close scrutiny; consistency.
• Offer to write down required info.
• If question repeated 2nd time, answer < 3 min.
• If question repeated 3rd time, answer < 1 min.
• If question repeated 4th time, probably persuasive
  tactic, not info-gathering; response: silence / change
    Non-verbal communication (NVC)
• Much NVC works across boundaries of language; some subject
  to culture
•   “Those who master NVC are likely to function more effectively in the
    cross-cultural arena, for NVC very quickly gives us what we need to
    establish--whether the other person likes us, trusts us, and whether
    we should feel optimistic about the outcome of the encounter. All this
    happens without a word being said.”
• NVC includes         - the way we use speech
                       - facial & body expressions & hand gestures
                       - 250,000 facial expressions
• NVC covers all senses:
     1. Appearance       4. Smell
     2. Movement         5. Space
     3. Touch            6. Time
  The Silent Language
of International Business
    • Edward T. Hall - anthropologist
    • concepts of space & time are tools with which
      all humans may transmit messages
    • Space is outgrowth of animal's instinctive
      defense of his lair - reflected in human
      society by office worker's jealous defense of
      his desk, or guarded, walled patio of a Latin-
      American home.
    • Time varies from Western precision to
      Eastern vagueness - revealed by
      businessman who pointedly keeps client
      waiting, or South Pacific islander who
      murders his neighbor for injustice suffered 20
      years ago
    • 60% communication is non-verbal
    • 90% communicable emotion is expressed
      non-verbally - Daniel Goleman, (‘emotional
               Body Language

• Proximity       USA & N.Europe: 18in - 3ft
                  S.Europe, Latin America, Middle East: 0 - 18 in
                  most Asians: > 3ft
• Eye contact         USA & N.Europe: moderate
                      S.Europe, Latin America, Middle East: minimal
                      most Asians: very direct
• Touching    Some cultures comfortable with some touching for building rapport.

• Interpretation; lethal combinations; time to acclimate/learn
FOOD choices

  OR           ?
Eat, drink and be wary!
• acceptance of what’s on your plate
  tantamount to acceptance of host,
  company & country
• tastiness is in the eye of the beholder –
  squeamishness from unfamiliarity
• slice thinly / swallow quickly / “tastes just like
• find out local customs about refills
• drinks customs
•   Egalitarian in USA
•   Viva la Difference
•   Southern Europe
•   Middle East
•   Japan
•   China
•   Africa
•   Latin America
•   After hours conduct
• 80% of misinterpretations & breakdowns
  caused by inefficient communication
• < 20% of time it is your counterpart
  who is being difficult

• “Seek first to understand before being
  understood.” Stephen Covey in ‘7 Habits of Highly
  Effective People’
• can have disastrous consequences
  The single most useful universal form of
6easy 6transcends language 6unequivocal

             What do we know about
            Multinational Negotiations?
• Impact of culture on negotiating behaviors.
     Culture [ 4 common problems:
              1. Language
              2. NVC
              3. Values
              4. Thinking & decision-making
• Selection of negotiating team
• Follow-up after negotiation
Orange case simulation exercise
Next class: 1. Case # 1: Starbucks
            2. GUEST: Barry Bobrow,
                        Wells Fargo
Homework: Case Study #1
              #5 Banking in Mexico

To top