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27165028 International Business

27165028 International Business






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    27165028 International Business 27165028 International Business Presentation Transcript

    • International Business Chapter Three The Political and Legal Environments Facing Business
    • Chapter Objectives
      • To discuss the different goals and functions of political systems
      • To profile trends in the emergence and diffusion of political systems
      • To identify the idea of political risk and approaches to managing it
      • To understand how different political and legal systems affect the conduct of business
      • To profile trends in the evolution and diffusion of legal systems
      • To examine the major legal issues facing international business companies
      • To profile the idea of intellectual property and the bases of concern and controversy
    • Political System Defined
      • Political system: the complete set of institutions, political organizations, and interest groups, the relationships amongst those institutions, and the political norms and rules that govern their functions
      • The ultimate test of any political system is its ability to hold a society together.
    • Fig. 3.1: Political and Legal Influences on International Business
    • Ways to Assess Political Systems
      • Individualistic
      • -people accept the primacy of individual freedoms
      • in the political, economic, and cultural realms
      • -people believe in minimal government intervention
      • • Collectivist
      • -people reason that the needs of society take
      • precedence over the needs of the individual
      • -people believe that it is the government’s role
      • to define the needs and priorities of the country
      • Collectivist paradigms may be either democratic (Japanese) or authoritarian (Chinese) in nature.
    • Political Ideology Defined
      • Political ideology: the body of constructs, theories, and aims that constitute a sociopolitical program
      • • Pluralism indicates the coexistence of a variety of ideologies within a particular society.
      • • Shared ideologies create bonds within and between countries; differing ideologies split societies apart.
    • Types of Political Ideologies: The Two Extremes
      • Democracy: widespread citizen participation in the decision-making and governance processes, either directly or through elected representatives
      • • Totalitarianism: the monopolization of power by a single agent; opposition is neither recognized nor tolerated
      • In theocratic totalitarianism, religious leaders are also the political leaders; in secular totalitarianism, the government imposes order via military power.
    • Fig. 3.2: The Political Spectrum
    • Features of Contemporary Democratic Systems
      • freedom of opinion, expression,
      • and the press
      • freedom to organize
      • free elections
      • limited terms for elected officials
      • an independent and fair court system
      • a nonpolitical bureaucracy and defense infrastructure
      • citizen access to the decision-making process
    • Fig. 3.3: Comparative Measures of Freedom
    • Map 3.2: Global Trends in Freedom: Political Freedom 2004
    • Trends in Political Systems
      • Totalitarian regimes continue to fail as citizens challenge the right of the state to govern.
      • Many who champion democracy truly believe that greater political freedom also leads to economic freedom and higher standards of living.
      • Differentialism, i.e., the clash of civilizations, refers to the arguments that apparently innate and irreconcilable difference amongst cultures can trigger a backlash against Western ideas regarding political rights and civil liberties.
    • Political Risk Defined
      • Political risk: the expectation, i.e., the likelihood, that the political climate in a country will change in such a way that a firm’s operating position or investment value will deteriorate
      • MNEs do their best to effectively deal with the threat of political risk through active and/or passive approaches.
    • Types of Political Risk [ranging from the least to the most destructive]
      • Systemic [a change in public policy]
      • Procedural [bureaucratic delays, labor disputes, etc.]
      • Distributive [tax and regulatory revisions]
      • Catastrophic [random political events]
    • Leading Sources of Political Risk
      • Expropriation or nationalization
      • International war or civil strife
      • Unilateral breaches of contract
      • Destructive governmental actions
      • Harmful actions against people
      • Restrictions on the repatriation of profits
      • Differing points of view
      • Discriminatory taxation policies
    • Legal System Defined
      • Legal system: the mechanism for creating, interpreting, and enforcing the laws in a specified jurisdiction
      • Generally, differences in the structure
      • of law influence the attractiveness of
      • a particular country as an investment site.
    • Types of Legal Systems
      • Common law [based on precedent]
      • Civil law [based upon a set of laws that comprise a code]
      • Theocratic law [based upon religious precepts]
      • Customary law anchors itself in the wisdom of daily experience or important traditions. A mixed legal system emerges when two or more legal systems are used within a single country.
    • Map 3.3: Legal Systems in the World Today
    • Fig. 3.4: The Diffusion of Civil Law: A Selective Profile
    • Legal Issues in International Business
      • Operational concerns
        • ease of entry and exit
        • hiring and firing employees
        • contract enforcement
      • Strategic concerns
        • product safety and liability
        • marketplace behavior
        • product origin
        • legal jurisdiction
        • arbitration [continued]
      • Intellectual property rights [IPRs]: ownership rights to intangible assets [copyrights, patents, trademarks, etc.]
      • Generally, less developed countries provide less protection for IPRs than do industrialized nations. Those countries with a more individualistic orientation view IPRs as intrinsically legitimate, but those with a more collectivist outlook extol the virtues of shared ownership.
    • Implications/Conclusions
      • Many countries are in a state of political transition. Presently, there is a shift away from totalitarian governments toward more democratic political ideals and freer market principles.
      • [continued]
      • International business is affected by laws and regulations enacted both by countries and by international organizations.
      • Laws may be at cross-purposes; some may diminish the ability of firms to compete with foreign competitors.