International business 5th griffin chapter 03

Chapter Objectives 1• Describe the major types of legal systems confronting international businesses • Explain how domestic laws affect the ability of firms to conduct international busi

Chapter Objectives 1

• Describe the major types of legal systems confronting international businesses

• Explain how domestic laws affect the

ability of firms to conduct international business

• List the ways firms can resolve

international business disputes

The Legal Environment

While domestic firms must follow laws and customs of home country, international businesses must obey laws of home country and all host countries

Legal Systems

• Reinforced by French Napoleonic code

• Judge determines scope of evidence collected and presented

Hong Kong follows many traditions of the

British Common Law legal system.

Laws Affecting International Business Transactions

Sanction Embargo Extraterritoriality

Laws Directed Against Foreign Firms

Economic and Political Impacts of

MNCs on Host Countries

• Advantages

– Greater selection – Higher standards – Job creation

– Tax benefits – Technology

• Disadvantages

– Competition – Job loss

– Dependency on economic health

of MNC – Political power

• Disadvantages

– Abuse of less developed policies

in the areas of safety and

environmental concerns

– Negligent product offerings

Dispute Resolution

• Which country’s law applies?

• In which country should the issue be resolved?

• Which technique should be used to resolve the conflict?

• How will the settlement be enforced?

Arbitration is the process by which both

parties to a conflict agree to submit their cases to a private individual or body whose decision they will honor

Skilled labor

Low-cost labor Infrastructure

International Treaties Protecting

Intellectual Property Rights

• International Convention for the

Protection of Industrial Property Rights (i.e., the Paris Convention)

• Berne Convention for the Protection of Literary and Artistic Works

• Universal Copyright Convention

• Trade-Related Intellectual Property

Rights Agreement

Political Risk Assessment

Ownership

risk

TransferriskOperating

risk

• Repatriation

• Currency devaluations

• Increased taxation

Levels of Political Risk

Macropolitical

risk

Micropolitical

risk

Basic Country Knowledge

• Is the country a democracy or dictatorship?

• Does country rely on free market or government controls?

• Does government view foreign firms as positive influence?

• Are firm’s customers private or public?

• Does government act arbitrarily?

• Is existing government stable?

Map 3.3 Relative Political

Riskiness, 2006

Insurance Against Political Risks

• Overseas Private Investment Corporation (OPIC)

• Multilateral Investment Guarantee

Agency (MIGA)