Political Environment


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Political Environment

  1. 1. The Political Environment of International Business Anne-Charlotte Bazoud Gabrielle Colombier Franziska Guehlcke Marcus Bormann Arnaud Katz
  2. 2. Contents <ul><li>I. Context </li></ul><ul><li>II. Aims - Objectives </li></ul><ul><li>III. Political Environment of Business </li></ul><ul><li>IV. Political Environment of Business in Hong Kong </li></ul><ul><li>V. Conclusion </li></ul>
  3. 3. Context <ul><li>Globalisation, liberalization of the World Economy </li></ul><ul><li>Set up in new markets, with different politic </li></ul><ul><li>Hong-Kong, English from 1842 to 1997 </li></ul><ul><li>culture, laws, justice close from England, </li></ul><ul><li>Very different politic from the rest of China </li></ul>
  4. 4. Aims - Objectives <ul><li>Aim : </li></ul><ul><li>describe the most important political factors for companies which set up overseas </li></ul><ul><li>+ focus on the political environment of Hong-Kong. </li></ul><ul><li>Objectives: </li></ul><ul><li>make a clear distinction between totalitarism and democracy, capitalism and socialism </li></ul><ul><li>Demonstrate that the political environment is important in choosing the country to set up (for example war, corruption, economy opened to the other countries?) </li></ul><ul><li>Analyse the political environment of Hong Kong </li></ul>
  5. 5. Elements of the political environment that a business must consider in order to expand overseas
  6. 6. The Political Environment Relatively uncontrollable factors outside the firm that influence its decision-making Legal and Political Environment Factors in government, the law and the regulatory system that affect the way an organisation operates External Environment Socio-Cultural Environment Environment Economic Technological Environment
  7. 7. The Political Environment Legal and Political Environment SYSTEM STABILITY POLICIES
  8. 8. SYSTEM Includes the structures, processes, and activities by which a nation governs itself. Political System <ul><li>Totalitarian state </li></ul><ul><li>Democratic state </li></ul>
  9. 9. SYSTEM Doing business seems to be a risky proposition Doing business in a democratic state seems to be safer than in a totalitarian state Totalitarian state Imposed authority Lack of constitutional guarantees Restricted participation <ul><li>Companies might need to pay </li></ul><ul><li>bribes to government </li></ul><ul><li> The business law is vague </li></ul>Democratic state Freedom Rights <ul><li>Stable business environment </li></ul><ul><li>thanks to laws </li></ul><ul><li> Freedom and no censorship </li></ul>
  10. 10. SYSTEM Political Ideology <ul><li>Capitalist system </li></ul><ul><li>Socialist system </li></ul>The political ideology affects - foreign government attitude towards profit repatriation. - foreign government attitude towards foreign direct investment Capitalist System <ul><li>Private ownership of business </li></ul><ul><li>is encouraged </li></ul>Socialist System <ul><li>Public ownership of business </li></ul><ul><li>is the norm </li></ul>
  11. 11. SYSTEM Political relationships <ul><li>Favorable political relationships </li></ul><ul><li>foster stable business environments </li></ul><ul><li>increase international cooperation in many areas </li></ul><ul><li>lead to increase business opportunities and lower risk </li></ul><ul><li>The World Trade Organisation can facilitate political relationships </li></ul><ul><li>The WTO ensures that trade flows as smoothly, predictably and freely as possible. </li></ul>
  12. 12. STABILITY Political Stability : « A subjective governance indicator aggregated from a variety of sources and measuring perceptions of the likelihood of destabilization. » (United Nations Development Programme web site) Political Risk « The risk that political decisions or events in a country negatively affect the profitability or sustainability of an investment. » (International Business environments and operations) 4 types of political risk
  13. 13. STABILITY Systemic Political Risks « When Political processes within a country do not routinely subject foreign operations to unfair treatment. » (International Business environments and operations) Procedural Political Risks « It’s Political actions which create frictions that interfere with people, products or funds transactions between a company or a country. » (International Business environments and operations)
  14. 14. STABILITY Distributive Political Risks « When countries revise their distribution policies to capture greater benefits from foreign companies. » (International Business environments and operations) Catastrophic Political Risks « This is the Political developments that adversely affect the operations of all companies in a country. » (International Business environments and operations)
  15. 15. POLICIES TAXATION Governments use income and sales taxes which can vary from country to country.
  16. 16. POLICIES <ul><li>Intellectual Property </li></ul><ul><li>« Property that results from people’s intellectual talent and abilitie. » (International Business An integrated approach) </li></ul><ul><li>The problem is that laws in some countries are softer than in others </li></ul>PROPERTY <ul><li>Industrial Property </li></ul><ul><li>« Industrial property includes patents and trademarks. » </li></ul><ul><li>(International Business An integrated approach) </li></ul><ul><li>Copyrights </li></ul><ul><li>« Copyrights give creators of original works the freedom to publish or dispose of them as they choose. » (International Business An integrated approach) </li></ul>
  17. 17. POLICIES PRODUCT SAFETY AND LIABILITY «  Product liability holds manufacturers, sellers, and others, including individual company officers, responsible for damage, injury, or death caused by defective products. » (International Business An integrated approach) The United States has the toughest product liability laws in the world following by Europe. <ul><li>Enforcement of product liability laws differs from nation to nation. </li></ul>
  18. 18. Hong Kong Facts <ul><li>British crown colony became Chinese territory in 1997 </li></ul><ul><li>China is a Communist nation that values stability over individual freedoms </li></ul><ul><li>Hong Kong is a Special Administrative Region </li></ul><ul><li>Population: 6,980,412 (July 2007 est.) </li></ul>
  19. 19. Hong Kong Political Environment <ul><li>Capitalist System or Socialist System </li></ul><ul><ul><ul><li>China has signed the &quot;one country, two systems&quot; formula </li></ul></ul></ul><ul><ul><ul><li>50 years contract until 2047 </li></ul></ul></ul><ul><ul><ul><li>Relatively high political stability </li></ul></ul></ul>
  20. 20. Hong Kong Political Environment <ul><li>Totalitarian state or Democratic state </li></ul><ul><ul><ul><li>Limited democracy </li></ul></ul></ul><ul><ul><ul><li>The legal system based on the English common law </li></ul></ul></ul><ul><ul><ul><li>Basic Law which approved in 1990 </li></ul></ul></ul><ul><ul><ul><ul><li>“ Mini-Constitution&quot; </li></ul></ul></ul></ul>
  21. 21. Conclusion <ul><li>The political environment has an important impact on the business </li></ul><ul><li>There is a large field with many factors which the companies have to consider if they want to expand overseas </li></ul><ul><li>Political environment is not stable and can change quickly </li></ul><ul><li>The political environment creates advantages and disadvantages </li></ul>
  22. 22. Sources <ul><li>http://www.pearsoncourses.com/ </li></ul><ul><li>http://www.nytimes.com/specials/hongkong/ </li></ul><ul><li>https://www.cia.gov/library/publications/the-world-factbook/geos/hk.html </li></ul><ul><li>International business, environments and operations , Daniels, Radebaugh, Sullivan </li></ul><ul><li>International business : an integrated approach , John J. WILD, Kenneth L. WILD, Jerry C.Y. HAN </li></ul>