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Government and Global Business. Chapter Four. In what ways do governments influences businesses?. 4-1 – Politics and Global Business. Political System – is the means by which people in a society make the rules by which they live.

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4 1 plitics and global business

Political System – is the means by which people in a society make the rules by which they live.

  • Democracy – all citizens take part in making the rules that govern them.
  • Totalitarian System (total·i·tar·i·an) – most people are excluded from making the rules by which they live. (Typically one ruler)
4-1 Plitics and Global Business
4 1 politics and global business1

Mixed Systems – Most political systems are considered mixed. That means they have characteristics of both systems and fall somewhere in between.

4-1 Politics and Global Business
4 1 politics and global business3

Host Country – is the country in which a multinational enterprise is a guest.

Multinational enterprises fulfill a number of positive roles in a host country.

  • Employment for citizens of the host country.
  • Introduce more advanced technology
  • Increase economic development.
4-1 – Politics and Global Business
4 1 politics and global business4

Examples of Multinationals

Coca-Cola

Mars Chocolate

3M

Intel

American Express

4-1 Politics and Global Business
4 1 politics and global business5

Social Responsibility – is the process whereby people function as good citizens and are sensitive to their surroundings.

  • Home country is the country in which a multinational enterprise is head-quartered.
4-1 Politics and Global Business
4 2 how governments discourages global business

Protectionism – is a government policy of protecting local or domestic industries from foreign competition.

  • Tariff/duty - is a tax placed on products that are traded internationally.
  • Quotas – is the limit on the quantity that can be imported from a country.
4-2 How Governments Discourages Global Business
4 2 how government discourages global business

Boycott – Absolute restriction on the IMPORTS of certain products from certain countries.

  • Licensing Requirements – Governments can control imports by requiring that companies have a government import license.
4-2 How Government Discourages Global Business
4 2 how government discourages global business1

Trade Embargo – stops all import/export trade with that country.

  • Expropriation –(ex-PRO-pree-ation) the host government takes control and ownership of foreign-owned assets and companies.
4-2 How Government Discourages Global Business
4 2 government discourages global business

Economic Nationalism – the trend of some countries to restrict foreign ownership of companies and to establish laws that protect against foreign imports.

4-2 Government Discourages Global Business
4 2 how governments discourages global business1

Civil Unrest or War

These are the factors that signals the possibility of civil unrest in a country.

Social Disorder

Extreme income unevenness ( few rich folks/large number of poor folks)

Frequent changes in the structure of political parties.

4-2 How Governments Discourages Global Business
4 2 government discourages global business1

International Taxes

Customs duty – import tax

Sales Tax – Tax on the sale of products

Payroll Related Tax – Taxes deducted from a paycheck.

Value-Added Tax (VAT) – Tax on the increase in value of goods from each stage of production to final consumption.

Income Tax – Tax on the amount of income a person or company makes.

4-2 Government Discourages Global Business