1 / 15

International Business

International Business. Chapter Three The Political and Legal Environments Facing Business. Political System Defined.

teigra
Download Presentation

International Business

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. International Business Chapter Three The Political and Legal Environments Facing Business

  2. 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. • A political system can be based on individualism or collectivism: how we decide to govern ourselves • Political ideology:the ideas that expresses the goals, theories, and aims of a political party/forum or a sociopolitical program • Why should we study the political system or the political ideology of the ruling parties of a country? What are the implications for business?

  3. Democracy vs. Totalitarianism • Democracy: is a government “of the people, by the people and for the people.” Citizen participation in the decision-making and governance processes, either directly or through elected representatives is ensured. Examples: USA, UK, India, European nations. • Totalitarianism: the monopolization of power by a single agent; opposition is neither recognized nor tolerated. Examples: Communist/Socialist countries, military dictatorship, kingdoms.

  4. Modern History of Democracy • Before World War I • After World War II • A decline in colonial empires • Rise of democratic nation states • Cold War • Fall of Berlin Wall, 1989-democratic governments/institutions are on the rise • 1990-2012 • Democracy in Latin America, Asia, Africa • Arab Spring • Is democracy universal-Western vs. Eastern Models

  5. Fundamental Features of a Democratic Political Systems • Freedom of opinion, expression, press, religion, association, and access to information • Citizen power and access to the decision-making process • Citizen equality before law • Free, fair and regular elections • Majority rule with minority protection • Independent and fair court system • Fair legal system: Rule of Law prevails

  6. Freedom House: Comparative Measures of Freedom

  7. Evolution, Democracy and the (Hegelian) Dialectic Thesis Synthesis (Thesis) Synthesis (Thesis) Antithesis Antithesis

  8. Figure 1: Freedom Over the Years

  9. Figure 2: Freedom Status

  10. Figure 3Global Competitiveness Index and Political Rights

  11. Political Risk • Political risk:refers to the threat that decisions or events in a country will negatively affect the profitability of an investment/firm. Four types of political risks are: • Systemic: a change in public policy that affect everyone • Procedural: bureaucratic delays, labor disputes, etc. • Distributive: tax and regulatory risk in respective industries • Catastrophic: random political events, nationalization • Terms: Confiscation, Expropriation, Domestication

  12. Managing Political Risks • Be a good corporate citizen (example: participate in development projects, literacy etc.) • Expand power bases through business relationships (example: joint venture, licensing, political payoffs etc.) • Study government attitude and participate government incentive programs • Maintain good relationship with political allies, other embassies in the country

  13. Legal System • Legal system: the mechanism for creating, interpreting, and enforcing the laws in a specified jurisdiction • Types of legal systems: • Common law [based on precedent, traditions] • Civil law [based upon a set of laws that comprise a code] • Theocratic law [based upon religious precepts] • Mixed systems are possible • Implications of various types of legal system for business

  14. Implications for Managers • Operational concerns • Starting and closing a business • Contract enforcement • Hiring and firing employees • Day to day operations • Strategic concerns • Country of origin issue • Marketplace behavior-nature of competition • Product safety and liability • Legal jurisdiction • Intellectual Property Rights • World Bank’s Ease of Doing Business

  15. Chapter 3: Discussion Questions • Define political system and explain why a business manager should study the political system of a country. • How does democracy differ from totalitarianism? Will the conduct of business be different in the two systems? How? • Describe how the political ideologies are changing in the world. How a manager can adapt to such changes? • What is political risk? How can we manage political risk? • Define the three types legal systems and their implications in international business.

More Related