International Business Law

International Business Law

Question 1

The era of globalization has completely transformed the business environment in today's market place. Today businesses are becoming extremely concerned about different issues and risks such as managing competitive environment, economic conditions, local market conditions and foreign governmental laws, legal settings and court structure in the country where they tend to set up their new ventures and exploit market opportunities for their products and services existing there. These are the most important issues, though not limited, in conducting and confronting when someone deals with the new markets in international frontiers. Some other important issues which are especially concerned with legal structure and setup in the respective country includes decision of right market entry strategy, managing transaction risks associated with the contract in different sales of goods and services, managing currency and exchange rate risks, managing distance and communication risks and managing some other risks such as cultural, language and political structure in the foreign country (Schaffer et al., 2012, pp.38-40). This increasing concern among number of businesses across the globe has given birth to numerous researches in both emerged and emerging markets. The objective of these empirical researches in both developed and emerging markets is to mitigate the possible risks by employing the policies, international legal laws and strategies in order to ensure that businesses are safeguarded form the possible threats when confronting and engaging in international business transactions.

Schaffer et al. (2012, pp.38-40) stated that international business is more challenging in terms of business law and legal issues as compared to the domestic business markets. This is so because there is likelihood of gap between foreign and native country in terms of different local rules and regulations, geographical distances, cultural languages gap and gaps associated with economic and political climates prevailing in the each trading country. Researchers state that addition of each risk element in context of international business would increase the degree of uncertainty in international business. In addition, many policy makers, researchers and scholars conduct their empirical studies by emphasizing the hypothesis that international and domestic trade do fit in same analytical framework and both entail the same rules of the game in business.

A recent research by Dani Rodrik (2008) would further help understand the risks of international trade exposure to foreign laws and courts who has studied the risk in relation to the embeddedness of the markets. According to him, there are clear set of rules in domestic trade because it takes place within thoroughly embedded markets and rules are applied across all transactions in equal amount of proportion. On the other hand, he relates international trade as weakly embedded market where there is not set structure of rules to be existed and even if they exist they do not apply evenly. The concept of embeddedness as proposed Rodrik (2008) does not support the earlier researchers who found that international laws of significant with international business. He argued that embeddedness in the market requires that there is regulatory authority for ...