BOOK CHAPTER 5 THE POLITICAL, LEGAL AND REGULATORY ENVIRONMENT
Supporting Lecturer : Eko Handayanto, Dr., M.M
(Rian Latiful 202010160311025, Elen Istopalupi 202010160311036,Waqiatul Rizqiah 202010160311126)
MANAGEMENT STUDY, PROGRAM FACULTY OF ECONOMICS AND BUSINESS
MUHAMMADIYAH UNIVERSITY OF MALANG
2023
INTRODUCTION
The political, legal and regulatory environment refers to the various factors that shape how a company operates in a particular country or region (Young, 2020). This environment is made up of numerous political, legal and regulatory bodies responsible for enforcing the laws and regulations governing business operations (Kazancoglu et al., 2021).
In the context of global marketing, the term "politics" refers to the influence of political factors on global marketing activities and strategies (Klein et al., 2019). It covers the interaction between companies, governments and international organizations in the international market.
Legal refers to the laws, regulations and legal frameworks that govern marketing activities and activities internationally (C. Liu, 2019). This includes compliance with local, regional and international laws, as well as compliance with industry-specific regulatory and ethical standards (Morelli, 2021)
and regulatory environment refers to the set of regulations, rules and government bodies that regulate and monitor business activities on an international scale (Geary, 2020). This includes legal frameworks and regulatory bodies that oversee and enforce compliance with laws and regulations related to various aspects of business operations (Naqvi & Flora, 2020).
Political factors can have a significant impact on business operations (Karabag, 2020). These include government policies and regulations, political stability, and the country's overall economic climate (Karabag, 2020). Legal factors also play an important role in the business environment, including laws and regulations related to employment, intellectual property, consumer protection, and contracts. Regulators are responsible for enforcing laws and regulations governing business activities such as: B. Environmental Regulations, Product Safety Standards, Financial Regulations (Of College and Research Libraries, 2020). These bodies can have a significant impact on how businesses operate, as violations can lead to fines, lawsuits, and reputational damage (Kazancoglu et al., 2021).
Understanding the political, legal and regulatory environment is essential for a company to successfully operate in a particular country or region . It helps companies identify potential risks and opportunities and develop strategies to manage complex regulatory frameworks while complying with legal requirements (Feng & Yu, 2021).
LITERATURE REVIEW
The political, legal, and regulatory environment is a set of factors that affect how businesses operate in a particular country or region (Young, 2020). The political environment includes government policies, political stability, and relationships between different countries. The legal environment involves laws and regulations that businesses must comply with, including labor laws, taxation laws, and environmental laws (Kazancoglu et al., 2021). The regulatory environment includes government agencies and bodies responsible for enforcing laws and regulations, such as the Securities and Exchange Commission (SEC) in the United States (Subba Rao et al., 2022).
The political, legal, and regulatory environment is a critical factor for businesses operating in any country (White et al., 2020). This environment refers to the laws, regulations, and policies established by the government that affect the operations of businesses. A literature review of this topic reveals that the political, legal, and regulatory environment has a significant impact on businesses in various ways (Reynaldi & Humeira, 2021).
In terms of politics, political instability, corruption, and bureaucracy are key issues that can have a negative impact on businesses (Goswami et al., 2021). Studies have shown that political instability can lead to uncertainty, which can affect investment decisions and operations of businesses (McC. Lewin & Gordon, 2020). Corruption can lead to inefficiencies, increased costs, and unfair competition, which can harm businesses' profitability (Keller, 2020). Bureaucracy can lead to delays and administrative burdens that can increase the cost of doing business.
Regarding the legal environment, laws and regulations can have a significant impact on businesses (Joesoef, 2022). For example, labor laws, tax laws, environmental regulations, and intellectual property laws can affect the operations of businesses. Studies have shown that complex regulations can increase compliance costs, reduce competitiveness, and discourage investment.
The regulatory environment is another critical factor for businesses (Dong, 2019). Regulations are put in place to protect consumers, workers, and the 4 environment . However, excessive regulations can have a negative impact on businesses. Studies have shown that excessive regulations can increase costs, reduce innovation, and discourage entrepreneurship (Chiu, 2021).
In conclusion, the political, legal, and regulatory environment has a significant impact on businesses (KS, 2021). It is essential for businesses to understand and comply with the laws, regulations, and policies established by the government (Seetharaman, 2020). Moreover, governments should strive to create a stable, transparent, and predictable environment that fosters economic growth and development.
To succeed in a particular market, businesses need to understand and navigate the political, legal, and regulatory environment effectively (Gai et al., 2021). This requires careful research and analysis of the relevant laws and regulations, as well as building relationships with key government officials and stakeholders(Dmytryk & Tokarieva, 2019). Companies may also need to adapt their operations to comply with local laws and regulations and mitigate political and regulatory risks (Umida Hashimova et al., 2020).
Overall, the political, legal, and regulatory environment is a complex and dynamic landscape that businesses must navigate to succeed in today's global economy (Teweldebirhan & Dirar, 2021). It is important for companies to stay up to date with changes in laws and regulations and to build strong relationships with key stakeholders to succeed in this environment(Soukal et al., 2021).
The study and understanding of the political, legal, and regulatory environment are crucial for businesses operating in any country or region(Young, 2020). These factors have a significant impact on a company's operations, profitability, and long-term sustainability . Understanding the political landscape, including government policies, regulations, and political stability, is essential for businesses to make informed decisions and develop effective strategies(Subba Rao et al., 2022).
Similarly, compliance with legal and regulatory requirements is critical for businesses to avoid legal issues, financial penalties, and reputational damage(Feng & Yu, 2021). Non-compliance with laws and regulations can lead to legal disputes, business disruptions, and even closure of operations. Thus, businesses need to stay up-to-date with the latest laws and regulations to ensure compliance and mitigate risks (Feng & Yu, 2021). In summary, the political, legal, and regulatory environment is crucial for businesses, and understanding these factors is essential for their success and sustainability (Feng & Yu, 2021) .
DISCUSSION
5.1 The Political Environment
The regulatory environment refers to the laws, regulations, and policies that govern the behavior of businesses and individuals in a particular industry or sector (Ouyang et al., 2020). The regulatory environment can have a significant impact on business operations, as it can influence the cost of doing business, the level of competition, and the overall profitability of a business (Jang et al., 2020).
The regulatory environment includes a range of government agencies and regulatory bodies that are responsible for enforcing laws and regulations (Akinbo et al., 2021). These agencies may have the power to issue fines, revoke licenses, or take legal action against businesses that violate regulations (Damle & Zaveri-Shah, 2022).
The regulatory environment can vary widely depending on the industry and country (Glibert, 2020). For example, some industries may be subject to strict environmental regulations, while others may be subject to more relaxed regulations. Similarly, the regulatory environment can be more or less favorable in different countries, depending on factors such as political stability, corruption, and the strength of the rule of law. Businesses must be aware of and comply with relevant regulations in order to operate legally and avoid legal problems (Agapiou, 2020).
Compliance with regulations can also help to build trust with customers, suppliers, and other stakeholders, and can help to prevent reputational damage. In addition to compliance, businesses can also engage with regulatory bodies and policymakers to help shape the regulatory environment ((Khan et al., 2021)This can involve providing feedback on proposed regulations, advocating for changes to existing regulations, and collaborating with other stakeholders to develop new policies and standards ((Porter et al., 2021a)
Overall, the regulatory environment plays an important role in shaping the business landscape and can have a significant impact on the success of individual businesses (Buteau, 2021). By staying informed about relevant regulations, engaging with regulators and policymakers, and prioritizing compliance, businesses can navigate the regulatory environment more effectively and mitigate the risks associated with non-compliance (Porter et al., 2021b).
5.2 International Law
International law is a body of legitimate rules and standards that govern the relationships between countries, and other international performing artists, such as international organizations multinational corporations, and individuals (Ivanov & Levina, 2021) . International law is essentially based on arrangements, standard hones, and common standards of law recognized by the international community (Duan & Chang, 2023). International law covers a wide range of topics, including international trade, human rights, environmental protection, armed conflict, and diplomatic relations. International law is enforced through a variety of mechanisms, including international tribunals, national courts, and diplomatic channels (Deplano, 2023).
One of the primary purposes of international law is to promote cooperation and peaceful relations between nations (Xu & Ou, 2023). International law provides a framework for resolving disputes between nations and provides guidelines for actions of States and other international actors the conduct of states and other international actors in their relations with one another (Hailes, 2022) . International law also plays an important role in the regulation of international trade and investment (Bahoo et al., 2020). International trade agreements, such as those of the World Trade Organization (WTO), establish rules for the conduct of trade between nations and provide a forum for resolving trade disputes (Kobayashi, 2019).
International law also provides a framework to protect human rights . The widespread statement of human rights and other worldwide human rights arrangements set out benchmarks for the assurance of person rights and flexibilities, and universal human rights bodies, such as the joined together countries human rights chamber and the universal criminal court, are dependable for checking and upholding these benchmarks (Huminuik, 2023). Overall, international law plays a critical role in promoting cooperation, peace, and stability between nations, and in regulating the conduct of states and other international actors in their relations with one another (Grigoriadis, 2021) .
5.3 Sidestepping Legal Problems : Important Business Issues
Maintaining a strategic distance from lawful issues is an basic perspective of a effective commerce. Here are a few vital commerce contemplations that can offer assistance businesses maintain a strategic distance from legitimate inconveniences (Canals, 2020).
- Lawful compliance:
Businesses must guarantee compliance with all significant laws and controls of the industry and the nations in which they work. These incorporate laws and controls related to work, natural security, mental property and customer assurance (Prasada, 2022).
- emergency administration:
Organizations must recognize and oversee potential dangers such as information breaches, mishaps, and item risk claims (McCaughey et al., 2022) . By executing a sound hazard administration methodology, an organization can dodge lawful inconveniences and minimize potential harm.
- Contract administration:
Businesses must guarantee that contracts with providers, clients and representatives are well composed, clear and legitimately authoritative. Legitimate contract administration makes a difference dodge debate and minimize lawful dangers (Dalla Pellegrina & Saraceno, 2021).
- Administration:
Companies ought to have successful corporate administration structures in put, counting board oversight and suitable inside controls. This makes a difference dodge legitimate issues emerging from deceptive or illicit behavior (Castellano, 2021).
- Compliance preparing:
Companies ought to give compliance preparing to their representatives, counting preparing on legitimate necessities and company approaches(Kemp et al., 2021).This makes a difference maintain a strategic distance from lawful issues emerging from representative behavior and makes a difference workers get it their obligations.
In general, businesses ought to take proactive measures to dodge lawful issues. By executing fitting chance administration techniques, complying with pertinent laws and controls, and keeping up viable corporate administration and compliance preparing programs, companies can minimize legitimate dangers and center on their center commerce (Kemp et al., 2021).
5.4 Conflict Resolution, Dispute Settlement, And Litigation
Conflict resolution, dispute settlement, and litigation are all different ways of resolving legal disputes between parties. Each approach has its own advantages and disadvantages, and businesses should consider which approach is most appropriate for their particular situation (Melianus T et al., 2021).
- Conflict resolution:
Conflict resolution involves the use of negotiation, mediation, or other nonadversarial methods to resolve disputes. This approach can be less expensive and time-consuming than litigation, and can help to preserve business relationships (Stepanova et al., 2020). However, it may not always be effective if the parties are unable to reach a mutually acceptable resolution (Skordoulis et al., 2020).
- Dispute settlement:
Dispute settlement involves the use of formal procedures to resolve disputes, such as arbitration or adjudication (Hosseini et al., 2019). This approach can be less formal and less expensive than litigation, and can provide a quicker resolution than going to court. However, the decision making process may be less transparent than in court, and the parties may have limited recourse to appeal the decision (J. Liu et al., 2019).
- Litigation:
Litigation involves taking legal action in court to resolve a dispute. This approach can be expensive and time-consuming, but may be necessary if the parties are unable to reach a resolution through other means. Litigation can provide a more formal and transparent decision-making process, but can also strain business relationships and may result in a less flexible outcome(Lin et al., 2021).
In choosing the best approach, businesses should consider a range of factors, including the nature and complexity of the dispute, the costs involved, the potential impact on business relationships, and the likelihood of success. It is also important to seek legal advice and consider the potential risks and benefits of each approach before making a decision (Lin et al., 2021).
5.5 The Regulatory Environment
Environmental regulations are a series of regulations, policies and legal action that aim to protect the environment and prevent environmental damage that adversely affects human health, biodiversity and the sustainability of our planet (Paramati dkk., 2021). Environmental regulation usually contains rules regarding the use of natural resources, waste management, pollution reduction, and efforts to promote sustainable development. (Singh & Kumar, 2021)
The following are some examples of environmental regulation:
- Air Quality Act
This law sets standards for safe and clean air quality. The law also authorizes government agencies to set rules to reduce air pollution from various sources, such as factories, motor vehicles and power plants.
- Waste Management Act
This law regulates how waste is handled and treated, including safe waste disposal and recycling. This law also contains rules regarding the supervision and monitoring of industrial waste production.
- Biodiversity Protection Regulation
This regulation aims to protect biodiversity around the world. This regulation prohibits activities that damage the environment where protected species live or threaten extinction, such as clearing forests or poaching.
- Renewable Energy Regulations
These regulations aim to promote the use of renewable energy sources and reduce the use of fossil fuels. Thus regulation contains national targets for renewable energy products and regulates financial incentives for the use of green technology.
- Greenhouse Gas Emission Regulation
This regulation aims to reduce greenhouse gas emissions and combat climate change. This regulation sets national emission targets and requires employers to monitor and report their greenhouse gas emissions.
Environmental regulations can vary in scope, both at the national and international levels. This depends on the type of resource to be protected or managed, and various other factors such as the level of economic growth, community culture, available technology, and so on. Therefore, environmental regulations must always be developed and updated to keep up with developments in environmental conditions and community needs. (Kioumoutzoglou dkk., 2021).
European Union environmental regulation began in the 1970s, when the European Union (EU) started to pay to environmental and sustainability issues. At the time, EU member states began to feel the negative environmental impact of rapid industrialization and economic growth. The European Union (EU) has a strict and comprehensive set of environmental regulations designed to protect the environment and human health from pollution and other negative impacts. This regulation aims to promote sustainable development and minimize the negative impact of human activities on the environment (Borrelli dkk., 2021).
In 1972 the United Nations (UN) Environment Conference in Stockholm demonstrated global awareness of environmental issues and sustainability. Following the conference, the EU launched a series of initiatives to improve the environment, including the creation of the European Commission for the Environment in 1973.
In 1985 the EU adopted the first Environmental Action Programme, which provided a framework for integrating environmental policy into all EU policies and activities. The program of Action resulted in a number of laws and regulations, including the EU Air Quality Act 1987 and the EU Waste Management Act 1991.
In 1997, the European Union signed the Kyoto Protocol, an international agreement aimed at reducing greenhouse gas emissions and fighting climate change. The Kyoto Protocol later became the basis for the EU Climate Change Act in 2003. Since then, the EU has continued to develop ambitious environmental regulations and sustainability policies, including the Europe 2020 program and the European Union’s Green Deal Strategy. The European Union’s environmental regulations have also influenced many other countries around the world to adopt more stringent environmental; laws and regulations. Some of the main EU environmental regulations include :
- Air Directive
This directive Focuses on air quality and includes emissions limits for air pollutants, including particulate matter, nitrogen dioxide and sulfur dioxide. EU member states must report their emission data and impose sanctions if emission limits are violated.
- Groundwater Directive
This directive aims to protect the quality of groundwater and ensure that groundwater used for human consumption and agriculture is safe. This directive also sets limits for certain chemicals in groundwater and requires regular oversight and monitoring.
- REACH Regulation
This regulation aims to ensure that chemicals manufactured or imported into the EU are well understood and safe for humans and the environment. This regulation requires manufactures and importers to repost information regarding chemicals and to test certain chemicals before they are used in products.
- Waste Directive
This directive aims to reduce the impact of waste on the environment and human health. This directive requires safe waste management and promotes recycling and reduction of waste.
- Industrial Emissions Control (IE) Regulation
These regulations aim to reduce the impact of industrial pollution on the environment and human health. These regulations set emissions limits for certain industries and require appropriate emission control technologies.
- Major Industry Pollutants Unit (IPPC) Directive
This directive aims to prevent and reduce the environmental impact of large industries on the environment. This directive requires the application of the best available techniques to prevent pollution from large industries and promote the use of renewable energy.
Other EU environmental regulations include protection against invasive species, protection of forests, protection of the marine environment and regulations on environmental risk management. All EU environmental regulations are based on the principles of sustainable development and ensure compliance with their regulations and also periodically report their implementation to the European Commission.
CONCLUSION
In global marketing, the political, legal, and regutory environment is critical and had a major impact on a company’s strategy and success. Companies must understand the political and legal environment in destination countries to ensure that their policies and practices comply with local regulations and avoid legal risks.
Companies must also consider environmental impact in their business activities and comply with rules and regulations govering the use of natural resources and the environment. In some sountries, violations of environmental regulations can result in significant legal and financial penalties.
In conclusion, the political, legal, and regulatory environment is very important in global marketing. Companies must understand and comply with local regulations governing the environment and natural resouces, and vonsider environmental impacts in their business activities. However, this environment can also provide opportunities for companies that pay attention to environmental issues and develop them in green technology.
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