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Political, legal & cultural environment
 

Political, legal & cultural environment

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    Political, legal & cultural environment Political, legal & cultural environment Presentation Transcript

    • POLITICAL, LEGAL & CULTURAL ENVIRONMENT Unit 2 Chapter 1
    • POLITICAL ENVIRONMENT
      • Even in the times of MNCs and Trans-national units, national politics still plays a dominant role.
      • Example:
      • It involves the characteristics and policies of:
      • political parties
      • Nature of the constitution
      • Government system
      • Government environment framing
      • Macroeconomic policies
    • The importance to businesses of the political environment
        • The stability of the political system affects business confidence
        • Governments pass legislation that directly affects the way businesses operate
        • Governments see business organisations as an important vehicle for social reform
        • The economic environment is influenced by the actions of government
        • Government is a major consumer of goods and services supplied by firms
    • Economic System
      • Performance of the private business depends to a greater extend on Economic System.
      • Communist/ Socialistic Economy —centrally
      • planned economy — no consumer control
      • Capitalistic Economy — Free market economy — Abstract economy — Market Economy
      • Mixed Economy.
      • Communist Economy: China, east Germany, Soviet Union, Czechoslovakia, Hungary, Poland etc… (Most of them now moved to the Capitalistic Economy)
      • Capitalistic Economy: US, Japan, Australia, Canada and members of EEC.
      • Mixed Economy: India
    • Trend in Political Philosophies
      • Different parties have different philosophies, but in most of the countries the policies point at the same direction.
      • Till 1980s and 1990s
        • most countries preferred public sector to private. Including Eastern Europe and USSR.
        • MNCs or foreign investors were not prohibited.
        • Rather it was simpler and decisions were faster
      • Coalition governments are making scenario complex, confusing and uncertain.
      • Some Political Leaders are powerful enough to make a difference.
      • Hostilities between some countries affect business of firms even in third countries.
    • New Tribalism
      • Soviet Union was made of 104 ethnic groups.
      • Several countries are on the verge of giving birth to new nations, because of:
        • Want self-rule.
        • Will increase efficiency.
        • Revolution in telecom has instigated.
      • Fiji (2000) has attracted investments from lot of Indian companies and investors.
    • LEGAL ENVIRONMENT
      • Legal environment is closely linked with the political environment.
      • Kinds of Legal System—
        • Common Law – based on past decisions.
        • Code Law – based on the written laws.
        • Theocratic Law – based on religion.
    • Three set of laws affecting IB:
      • International laws, treaties etc..
        • Incoterms – laid by International Chamber of Commerce.
        • Settlement of disputes
        • – Judicial dispute Settlement.
        • – Extra-Judicial dispute Settlement.
      • Laws of foreign countries.
        • Regulation related to Products
          • Product Standard
          • Disclosure.
          • Environment laws
          • Product liability
          • Packing and labeling
        • Regulation of price.
        • Regulation of promotion
        • Regulation of trade practices
      • 3. Laws of home country.
        • Lets consider India
    • Indian Law
      • Foreign Trade Development and Regulation Act, 1992.
        • Facilitating imports and exports.
        • Prohibiting, or restricting exports and imports.
      • Foreign Exchange Management Act.
      • Antiquities and treasures Act, 1972
      • Export Quality Control and Inspection Act, 1963.
    • CULTURAL ENVIRONMENT
      • When doing business abroad, a company first should determine whether a usual business practice in a foreign country differs from its home-country experience.
      • Understanding the cultures of groups of people is useful because business employs, sells to, buys from, is regulated by, and is owned by people.
    • Culture:
      • Culture: consists of specific learned norms based on attitudes, values, and beliefs, all of which exist in every society.
      • Culture cannot easily be isolated from such factors as economic and political conditions.
      • Example:Eye Contact
    • Cultural attitude:
      • It includes:
      • Dressing Habits,
      • Eating habits,
      • Living Styles,
      • Priority of needs
    • Culture and Thinking process
      • Self- Reference Criterion
        • Example: Beef
      • Guidelines for the new businessmen:
        • Resist tendency to conduct business immediately on landing.
        • Offer favors
        • Contact, cultivate and conduct field work
        • Introduce the product line to a sample group.
        • Extend product acceptance.
    • Cultures are:
      • Low- context Culture: Example – US
      • High- context Culture: Example – India
      • Monochromic: Example – US, Germany
      • Polychromic: Example – India, France
    • Language
      • Language : all languages are complex and reflective of Environment
      • Translating one language into another.
      • Silent Languages : color associations, sense of appropriate distance, time, body language.