The political system play a vital part of country’s business environment, and in navigating different markets. A firm must understand the coverage & diverge, where, when & how to adjust business practices, operating procedures and strategies to meet the challenges posed by the local environment is a key to success in International business. 3
A firm looking to operate in foreign countries must heed of 3 points:
Discard belief that the firm can directly transfer to foreign environment
Need to accept the different political & legal system
The goal of the political system is to integrate the elements of a society. It includes the complete set of institutions, political organizations & interest groups, as well as the relationship among institutions and the political norms & rules that govern their activities. This system is effective when it’s supported by a legitimate consensus of people who live under it. Political System 5
Political factors implies how & to what degree the Govt. intervene the economy which influence the organization in many ways by creating the advantages & opportunities in the form of Tax Policies, Labor laws & Trade Restrictions and conversely they may also place obligations & duties on organization. Political Factors 6
Individualism Vs Collectivism Individualism refers to the primacy of the rights & role of the individual. E.g. Individualistic orientation of the US (Rule of law). Collective refers the primacy of the rights & role of the community. E.g. formal & informal relationships within the business community of Japanese & Chinese. 7
2. Political Ideology: It is the system of ideas that expresses the goals, theories, and aims of a sociopolitical program. E.g the liberal principles of the Democratic party & the conservative doctrine of the Republican party. Democratic system involves wide participation by citizen in the decision making process in the forms of parliamentary, liberal, multiparty, representative & social democracy. 8
Totalitarianism system restricts decision making to a few individuals. Unquestioning support for the official state & opposition to activities that run counter to the goals of the state. e.g One Child Policy in China prohibits a family from having more than a child otherwise subject to steep penalty of $1300. Totalitarianism are of Authoritarianism (North Korea), fascism (Italy), Secular (Vietnam, Singapore & China) & Theocratic (Taliban Party in Afghanistan) 9
E.g. The coalition of Conservative along with Liberal Democrats in England formed the Liberal-Conservative Govt. PM Mr. David Cameron & Dy. PM Nick Clegg. which will bring Economic Reform to India by reducing & eventually eliminating the country’s unprecedented & unsustainable fiscal deficit.
British Govt. decided to work on a long-term view on enterprise, markets, fiscal responsibility & building a green economy.
11 e.g. China, the second largest economy after U.S with 60% global growth, what drive others to go for China?
Market potential (poor looking at brighter economy)
Market performance (US & Britain realized in 19th took 50 years, whereas China in 9 yrs)
Infrastructure (Spent trillion of dollars in airports, dams, seaport, power plant)
Resource (Cheap manpower as 1/3rd of Mexico, 1/25th of US. )