International Business. Chapter Three The Political and Legal Environments Facing Business. Political System Defined.
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The Political and Legal Environments Facing Business
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. It can be based on individualism or collectivism.
Political ideology:the ideas that expresses the goals, theories, and aims of a political party/forum or a sociopolitical program
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
Democratic governments/institutions are on the rise after the fall of Berlin Wall in 1989
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. Four types of political risks are:
Legal system: the mechanism for creating, interpreting, and enforcing the laws in a specified jurisdiction
Types of legal systems:
Mixed systems are also possible.
World Bank’s Ease of Doing Business