Legal System and Colonization
For decades, both the business and social environment of the United States have been regarded as an example of a socio-cultural conglomerate that encompasses the interaction of various systems and cultural traditions. For this reason, the process of the legal system’s formation is rather complex throughout the country due to the fact that every state has the legal power for autonomy in such economic endeavors as state income tax and administrative law. Hence, the legal system in the US is common law, facilitating the process of law adjustment within the state. According to Wernaart (2021), the notion of common law stands for the system where the formation of law is driven by cases and legal precedents. The primary agent of legal modifications, in this context, is the judge, as judicial decisions serve as a foundation for the forthcoming changes to the legal system.
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The legislator and academics, although relevant to the system, are secondary to the legal system in the US. The only exception is the state of Louisiana, as its legal system combines civil and common law (University of South Carolina Law Library, 2018). The former stands for the systems that primarily abide by the codified laws as opposed to case law. Such a pattern of legal systems is foregrounded by the historical past of the area, especially as far as colonization is concerned. The notion of common law was first introduced by the British legal representatives, whereas the French ruling was in favor of the civil law system (Wernaart, 2021). As a result, former British colonies embraced the common law, whereas Louisiana, a state influenced primarily by French colonization, opted for the combination of two legal systems. Such a regularity leads to the conclusion that colonization as a historical process influenced the formation of the American legal system tremendously.
Socio-Economic Environment of the United States
When pondering the socioeconomic issues of a certain group, people tend to analyze social issues that directly affect the socioeconomic status of an individual, including poverty, inequality, corruption, and others. In the meantime, the concept of climate change and environmental pollution has been regarded as a primary ecological issue. However, according to the World Economic Forum (2022) report, climate change continues to be one of the most dangerous threats to the economy and society worldwide. There are a number of industries and products that contribute greatly to the issue of municipal solid waste and, consequently, namely, food waste, paper, glass, metal, plastic, rubber, leather, textiles, wood, yard trimmings, and others (Center for Sustainable Systems, 2021). Textiles are explicitly related to the apparel retail and fast-fashion industry, which accounts for nearly 4% of greenhouse gas emissions worldwide (McKinsey & Company & Global Fashion Agenda, 2020). Greenhouse gases and air pollution result in the rapid deterioration of such socio-economic phenomena as poverty, geographic inequality, famine, and economic uncertainty.
Considering these facts, it is of paramount importance for businesses to embrace the manufacturing of “green” products and services. Rubber, leather, and textiles account for nearly 9% of municipal solid waste in the US (Center for Sustainable Systems, 2021). Hence, the business that would potentially address this issue is the eco-friendly apparel retail business, which presupposes the environmentally safe approach to both manufacturing and retail sales of the product.
Likelihood of Entering the US Market
Currently, the US is considered to be one of the leading markets in terms of international trade and partnerships. However, prior to expanding one’s product to the US market, an entrepreneur needs to consider such aspects as the protection of intellectual property rights, the federal-state complex taxation system, localization of contracts, and talent pool organization. Thus, as far as intellectual property (IP) is concerned, the trademarks and patents ratified in the home country are frequently irrelevant to US IP rights.
Moreover, the contracts with the suppliers and employees, in case the business owner transfers personal resources to the US, should be localized. The income tax system is unique for every state and industry, so it is of paramount importance to account for legal advice and market analysis prior to the expansion (Wallace, 2021). Another common legal issue when entering the US market is the necessity to adopt a specific form of business, namely, choosing between a corporation and a limited liability company (LLC). The latter will be more complex due to the fact that LLC does not treat a business as a separate industry but rather as an international legal representative of a holding, creating additional challenges for IP and taxation. Hence, it may be concluded that entering the US market is a rather complicated procedure, especially for a small enterprise, but it is nonetheless possible.
Market Entry Strategies
Considering that the product in question is eco-aware apparel, it is necessary to understand that the competition in this segment is extremely high, especially when it comes to cost-efficient fast-fashion retail. Hence, the two primary strategies to choose from will include direct and indirect product exports to the markets. While the former stands for the process of marketing and selling the product directly to the target client, the latter includes a foreign distributor as a part of the supply chain (Koo, 2021). The advantages of direct exporting include independence from foreign intervention, direct communication with the customer, and higher profitability due to a smaller and cost-efficient supply chain. On the other hand, direct exports presuppose higher risks when entering a new market with no local delegation, a lack of general knowledge of the market, and considerable time and effort allocated to build a supply chain and marketing strategy from scratch.
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Indirect exporting, for its part, presents more security for financial risks and market coverage for the product. The delegation of product distribution saves the costs and time of the exporter. However, the product manufacturer has no direct contact with the client, making it harder to ensure the agility of the manufacturing. The profitability and independence in the market will also be limited due to the existence of an intermediary.
The US market, due to product diversity the market, has become immune to the conventional approach to marketing through catchy slogans and aggressive persuasion to purchase a product. According to a 2019 survey, US customers find automatic video digital marketing extremely annoying, so they are even willing to pay extra money for the service to hide advertisements (Statista, 2019). As far as the apparel industry is concerned, an example of inefficient and even discouraging advertisement would be the conventional printable and digital advertisement that uses young Caucasian men and women to showcase the product. Customers are no longer responsive to the stereotypical depiction of clothing from the catalog. On the contrary, embracing a socially responsible initiative rather than the product itself would be a beneficial strategy. For example, presenting a partnership with a local ecology-oriented NGO in order to allocate a percentage of collaboration sales to the ecological initiative can become popular with young eco-aware customers.
Legal Compliance Approaches
Currently, the business legal environment in the US is preoccupied with legal compliance approaches, especially when it comes to fair employment and taxation. Hence, when entering the US market, it is of paramount importance to establish legal compliance with labor law that secures safety, the absence of discrimination, and fair payment to every type of employee, even if the relationship is contractual and presupposes freedom of contract modifications. Another important aspect is paying an income tax based on the statutory regulations on both federal and state levels, as states have autonomy over the estimation of the income tax for international business. The lack of legal compliance, in this case, may lead to some serious financial repercussions. When companies operate in the US, they are expected to pay tax on any revenue gained within the US territory in addition to the minimum tax claimed by the state (Tax Policy Center, 2020). Tax evasion and labor discrimination are criminalized in the local legal system.
Ethics and CSR Recommendations
The first recommendation for the company would be to make sure that its trademark and patent are legalized in the US. This process can be ensured by securing IP rights through the World Intellectual Property Organization (WIPO, n.d.) and the International Trademark and Patent Systems, in particular. It will be easier for the company to follow IP procedures because the US is a member of these systems. Another recommendation for the business would be to adopt a code of ethics that would comply with the target market’s legal provisions, such as antitrust laws and corruption and harassment regulations in the workplace. Considering the aforementioned facts, it may be concluded that the process of entering the US market is a complex procedure that requires much legal accuracy and strategic planning. The market, however, creates a beneficial foundation for further business expansion.
Center for Sustainable Systems. (2021). Municipal solid waste factsheet. Web.
Koo, K. H. (2021). The effects of free trade agreements on SME’s direct and indirect exports. World Economy Brief, 11(8), pp. 1-8. Web.
McKinsey & Company, & Global Fashion Agenda. (2020). Fashion on climate: How the fashion industry can urgently act to reduce its greenhouse gas emissions [PDF document]. Web.
Tax Policy Center. (2020). Tax Policy Center briefing book. Web.
University of South Carolina Law Library. (2018). A quick primer on the world’s legal systems. Web.
Wallace, C. D. (2021). The multinational enterprise and legal control: Host state sovereignty in an era of economic globalization. BRILL.
Wernaart, B. (2021). International law and business: A global introduction. Routledge.
World Economic Forum. (2022). The global risks report 2020 (17th ed.) [PDF document]. Web.