Case Analysis

2/3/18

1

Political and Legal Environments 2

1-1

Tue, Feb 6 Session 7

INB 302 Dr. Hanek

Learning Objectives

• Discuss the principles and practices of the legal system • Profile trends in contemporary legal systems • Identify and describe key legal issues facing international companies

3-2

2/3/18

2

The Legal Environment

• The legal system is the mechanism for creating, interpreting, and enforcing the laws in a specified jurisdiction

3-3

The Legal Environment

• Common law – based on tradition, precedent, and custom • Law system is flexible, allowing judges to interpret law to fit each case • Each new case creates new precedent • E.g., U.K., U.S.

3-4

2/3/18

3

The Legal Environment

• Civil law – based on a very detailed set of written laws and codes • Law system is less adversarial • Judges do not interpret the law, but apply it • E.g., Germany, France, Japan, Russia

3-5

The Legal Environment

• Theocratic law – based on religious teachings • Most common is Islamic law • Primarily a moral rather than commercial law • In reality, often a blend of Islamic law and common or civil law systems • E.g., Pakistan, Egypt, Iran

3-6

2/3/18

4

Contract Law • Contract • A document that specifies the conditions under which an exchange is to occur and details the rights and obligations of the parties involved

• Differences in contracts • Common law systems – detailed, contingencies spelled out • Civil law systems – shorter, less specific

• Business implications • Costs in drafting contracts • Flexibility in interpretation by judges and courts

3-7

Trends in Legal Systems

• What is the basis of rule in a country? • The rule of man

• legal rights derive from the individual who commands the power to impose them • associated with a totalitarian system

• The rule of law • systematic and objective laws applied by public officials who are held accountable for their administration

• associated with a democratic system

3-8

2/3/18

5

Operational Concerns

• Operational issues • Starting a business • Making and enforcing contracts • Hiring and firing local workers • Closing down the business

• In general • rich countries regulate less • poor countries regulate more

3-9

Ease of Doing Business • Measured as: starting a business, dealing with construction permits, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, and enforcing contracts • Easiest in countries with: democratic political systems, common or civil law systems, rule of law (e.g., Singapore) • Most difficult in countries with: authoritarian politics, mixed legal systems, rule of man (e.g., Central African Republic)

3-10

2/3/18

6

Strategic Concerns pCountry Characteristics

pCountry of origin – product labels pLocal content rules – import taxes

p“Buy-local” campaigns

pLegal jurisdiction pChoice-of-law-clause: specifies which country’s laws will govern a legal dispute in cross-national business dealings

3-11

Strategic Concerns pProduct safety and liability

pProduct safety laws: set safety standards to which a product must adhere

pProduct liability: holding a firm and its officers responsible when a product causes injury, death, or damage pLiability laws are likely most extensive in the U.S., somewhat extensive in other Western countries, and least extensive in less developed nations

3-12

2/3/18

7

Intellectual Property: Rights and Protection • Intellectual property refers to creative ideas, expertise, or intangible insights that grant its owner a competitive advantage • Intellectual property rights refer to the right to control and derive the benefits from writing, inventions, processes, and identifiers • no “global” patent, trademark or copyright exists

3-13

Intellectual Property: Rights and Protection •Attitudes towards intellectual property • Historical legacies • rule of man versus rule of law

• Economic circumstances • levels of economic development

• Cultural orientation • individualism versus collectivism

3-14