Various regulatory activities affect international business. One of these regulatory activities is a boycott. A boycott is an organized effort aimed at restraining a firm from undertaking business with a given seller of services or products. Boycotts are useful in the international arena for economic and political reasons. An example of a boycott is the ongoing standoff by Arab countries in which firms conducting business with Israel have been blacklisted from doing business with Arab countries. This has compelled the US to adopt anti-boycott laws whereby firms that abide by the boycott are denied foreign income tax benefits by the US government. This could see firms pay huge fines or risk losing their businesses altogether, especially in case the company’s products are not unique but are nonetheless competitive in the market.
Another regulatory activity that impacts on international business is antitrust legislation. Antitrust laws prohibit restraint of trade, monopolies, and conspiracies aimed at inhibiting competition. Even as antitrust laws apply to domestic firms as well as international operations, “the United States has taken steps to protect from antitrust legislation from cooperating in the development of foreign markets“. For instance, both the 1918 Webb-Pomerone Act and the 1982 Export Trading Company Act are geared towards facilitating export by ensuring that antitrust laws were limited in their international scope. The legislation may not be useful in the international market as a firm could be compelled to abide by the antitrust laws of another country in which it is conducting its business.
Corruption and bribery have also become a way of life in many countries where international companies are likely to be compelled to grease the wheels of foreign officials to facilitate business transactions. Although most countries are opposed to giving bribes in exchange for competitive contracts, a country such as the United States is receptive of “facilitation payments” to expedite such routine needs as obtaining permits and other paperwork. Regulation governing corruption and bribery could leave managers working in the international market with the tough choice of whether to abide by foreign business practices or to abide by home-country laws.
Political risk is yet another regulatory issue that we need to consider while conducting international business. Political risks involve discontinuities within the business environment that could have a huge impact on the business goals or profits. Ideally, business is best carried out in countries with friendly and stable governments. However, this is far from the reality of the modern-day global business environment. As such, there is a dire need to monitor practices, policies and current events in countries with questionable government stability as these may adversely affect corporate operations. Different countries have different political risks. It is also important to note that political risk tends to be highest in nations that have a history of consistency or stability. An international company may be faced with three kinds of risks, namely ownership risk, in which firms with foreign subsidiaries risk losing property; transfer risk, in which a company finds it hard to transfer funds from troubled countries; and an operating risk, in which there is the risk of interference with a company’s operations, including disruption of production facilities and possible loss of contracts.