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ECONOMICS, POLITICAL, AND LEGAL SYSTEMS. Secondary international market information /data resources Brief review of International economics Trade policy The political environment Legal systems. Heavily internationally focused Economist Journal of Commerce Forbes - PowerPoint PPT Presentation
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MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 1
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
• Secondary international market information /data resources
• Brief review of– International economics– Trade policy
• The political environment
• Legal systems
MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 2
Useful Periodicals
• Heavily internationally focused– Economist– Journal of
Commerce– Forbes– Business America
(U.S. Dept. of Commerce)
– World Press Review
• Some international coverage– Wall Street
Journal, New York Times, Washington Post
– Business Week, Fortune
– Time, Newsweek
MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 3
Other
• Academic country specialists (e.g., anthropologists, economists)
• Consultants• Expatriates• Own experience
MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 4
Data Availability and Reliability
• Availability/ ability to collect data
• Motivations for releasing data– Wishful thinking vs. reality– The Web--accessible to any
fool or group• Comparability of
data/Arbitrary differences in measurements
• Recency--is the data up-to-date?
MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 5
Cost of Data
• Much “raw” data is free from– U.S. Gvt.– United Nations– Research
institutions• Commercial
directories• Consulting
services
MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 6
Library Databases
• Book– Library catalogs (e.g., SDSU
PAC)– Books in Print– Amazon.com
• Indexing• Collaborative filtering
suggestions• Periodical
– Business & Industry– Lexis-Nexis– ABI/Inform– Factiva (formerly Dow Jones)
• Foreign language– HAPI Online (Hispanic
American Periodicals Index) – Lexis-Nexis
• Government reports– Stat-USA
• Other country info– Countrywatch.com– Specialty
• Latin America Database• HAPI Online (Hispanic
American Periodicals Index)
• Academic research (usually theoretical, hard to read)– Behavioral: PsychInfo– Economics: Econlit
See handouts for details
MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 7
University of Texas Library Resource Lists
• International business source list: http://www.lib.utexas.edu/subject/business/internat.html
• Marketing source list: http://www.lib.utexas.edu/subject/business/marketing.html
MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 8
VERY BRIEF REVIEW OF ECONOMICS
• Exchange rates– Floating (supply and
demand)– fixed
• Trade balances and their impact on exchange rates
• Measuring country wealth– gross domestic product– “purchase parity” vs.
nominal
MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 9
U.S./Euro Exhange RateEuros per Dollar
00.20.40.60.8
11.21.4
1/1/
1999
7/1/
1999
1/1/
2000
7/1/
2000
1/1/
2001
7/1/
2001
1/1/
2002
7/1/
2002
1/1/
2003
7/1/
2003
1/1/
2004
7/1/
2004
1/1/
2005
Rate
MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 10
Demand for Currency Depends On
• Trade deficit (demand for foreign currency to fund this) or trade surplus (demand for country’s currency)
• Interest rates: Higher interest rates (real) attract foreign investors (especially for “stable” U.S. bonds and equities)
• Inflation: Reduces the attractiveness of holding the currency
MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 11
Nominal vs. Purchase Parity Adjusted GNPs—Examples (2004)
Country Nominal GNP PPA Luxemburg $56,230 $61,220 Norway 52,030 38,550 United States 41,400 41,400 Japan 37,180 30,040
Argentina 3,720 12,460 Czech Republic 9,150 18,400 Mexico 6,770 9,590 China 1,290 5,530
Source: World Bank http://siteresources.worldbank.org/DATASTATISTICS/Resources/GNIPC.pdf
MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 12
Nominal vs. Purchasing Power Parity GNPs
05,000
10,00015,000
20,00025,00030,00035,00040,000
0 10,000 20,000 30,000 40,000
PPA
MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 13
Nominal GNP vs. Ratio
0.001.002.003.004.005.006.007.008.00
0 10,000 20,000 30,000 40,000
Ratio
MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 14
Cautions on Interpreting Per Capita Figures
• Averages are not very meaningful!– Regional variations– Socio-economic differences
• Comparison to U.S. dollar and U.S. costs is arbitrary
MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 15
Obstacles to Trade: Protectionism
• Differing interests of consumers and manufacturers
• Benefits of trade tend to be more diffused than benefits to specific groups of protectionism
MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 16
Approaches to Protectionism
• Tariffs• Quotas• “Voluntary” export
restrictions• Subsidies to
domestic producers/exporters
• Non-tariff barriers– legal obstacles– differential
treatment
MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 17
U.S. Protectionism--justified or not...
• Defense industry• Agricultural products--
e.g., beef, sugar• Textiles• Automobiles
(“voluntary” import restrictions)
• Steel
MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 18
Justifications for Protectionism
• Protect infant industry• Resist “unfair” or inappropriate
competition• Protect home market (ensure that product
can be produced domestically)--defense• Intervene into temporary imbalance• Maintain domestic living standards• Preserve jobs• Bargaining power/retaliation (Super-301
provision in U.S.)
MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 19
Effects of Protectionism
• Reduced competition ---> inflation• More tariffs • Weaken balance of payments
(have to pay more in own currency)
• Reduce choice to consumers • May induce global trade wars
(vicious cycle)
MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 20
THE POLITICAL AND LEGAL ENVIRONMENTS
• Political history and stability
• Political relations between countries --impact on business
• Legal differences between countries
• Extra-territorial application of laws
MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 21
The Legal Environment
• Which laws apply when doing business between countries?– contractual
specifications– treaties– extra-territorial
applications of laws
– “compulsion” as a defense
MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 22
Some Political Risks
• Confiscation, expropriation, and domestication
• Economic risks– Exchange controls– Local content
requirements– Import restrictions– Tax controls– Price controls– Labor problems
MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 23
Development of Legal Systems
• Laws on the books vs. laws enforced (transparency)– Japan: “Administrative guidance”
• The ability to sue--a blessing or a curse?– Means of litigation– Implications for contract initiation
and enforcement• Evolving nature of legal systems
MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 24
Approaches to Law
• Common law (U.S., Britain, and many English speaking countries)
• Code law (much of Europe and Louisiana)
• Islamic law• Socialist based law• Asian laws
MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 25
Common Law
• Gradually evolved in British courts, settling issues as they arose
• Emphasis on precedent• Recognized by U.S. Constitution• Standards
– criminal: “Innocent until proven guilty”
– civil: “Preponderance of evidence”
MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 26
Code (Napoleonic) Law
• Law governed by explicit statutory codes--”match” codes to issues as well as possible
• Somewhat different standards in contracts --what constitutes an “act of God” canceling contractual obligations?
• Criminal law: “Guilty until proven innocent” but difficult to bring to trial
MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 27
Islamic Law
• Note that different varieties exist• Traditions of Islamic countries are
not all tied to Islamic religion per se
• Purpose of promoting justice– assets are thought to be held in “trust”– interest is frowned upon
• Much wider scope than Western law: Shar’ia: the way
MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 28
Socialist Law
• Basis for law in China, former Soviet Republics, and countries influenced by Communist allies
• Based on the view that the government owns productive resources --->– contract and intellectual property laws
are typically not well developed• Legal scholars from the West are
helping to reform
MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 29
Asian Law
• Based on compromise and accommodation
• Less emphasis on abstract principles
• Less emphasis on consistent application across circumstances
• Emphasis on informal resolution
MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 30
U.S. Laws of Interest to firms with U.S. Involvement
• Anti-trust• Foreign Corrupt
Influences• Anti-boycott laws• Trading With the Enemy