International Business Part Two Comparative Environmental Frameworks

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Chapter Three

The Political and Legal Environments Facing Business

International Business Part Two

Comparative Environmental Frameworks


3-2

• To discuss the goals and functions of a political system• To profile trends in the emergence and diffusion of contemporary

political systems• To explain the idea of political risk and describe approaches to

managing it• To understand how political and legal systems affect the conduct of

business• To describe trends in the evolution and diffusion of contemporary

legal systems• To discuss the issue of the rule of law versus the rule of man• To explain legal issues facing international companies• To explain the idea of intellectual property and to discuss areas of

concern and controversy

Chapter Objectives


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Political and Legal Factors Influencing International Business

Operations


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Definition of a Political System

• The complete set of institutions, political organizations, and interest groups,

• The relationships among institutions, and the political norms and rules that govern their functions


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Individualism vs. Collectivism

• Individualism: primacy of the rights and role of the individual

• Collectivism: primacy of the rights and role of the community


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Political Ideology

• The system of ideas that expresses the goals, theories, and aims of a sociopolitical program

• Most modern societies are pluralistic—different groups champion competing political ideologies


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The Political Spectrum


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Democracy• Wide participation by citizens in the decision-

making process• Five types:

Parliamentary is where government is appointed by parliamentary

representatives as opposed to a 'presidential rule' wherein the President is both head of state and the head of government and is elected by the voters.

Liberal is a representative democracy in which the ability of the elected

representatives to exercise decision-making power is subject to the rule of law, and usually moderated by a constitution that emphasizes the protection of the rights and freedoms of individuals, and which places constraints on the leaders and on the extent to which the will of the majority can be exercised against the rights of minorities

Multiparty is a system in which three or more political parties have the capacity to

gain control of government separately or in coalition.


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Fundamental Features of Democratic Political Systems

Representative democracy is a form of government founded on the principle of

elected individuals representing the people, as opposed to either autocracy or direct democracy.

Social A political theory advocating the use of democratic means to achieve a gradual

transition from capitalism to socialism.


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Totalitarianism

• Restricts decision making to a few individuals• Types:

Authoritarianism (pure dictatorship) Fascism ( extreme right-wing totalitarian

nationalist movement in Italy) Secular totalitarianism (gov uses imposes order

through military power Cambodia, Haiti, Iraq) also called communism

Theocratic totalitarianism (religious leaders)


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Trends in Political Systems

• Engines of democracy: Failure of totalitarian systems to deliver

economic progress Improved communication technology Belief that democracy leads to improved

standards of living


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Definition of Political Risk

• The risk that political decisions or events in a country negatively affect the profitability or sustainability of an investment

• Types: Procedural Distributive Catastrophic


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Definition of a Legal System

• The mechanism for creating, interpreting, and enforcing the laws in a specified jurisdiction

• Types: Common law (Common law uses past court decisions as precedents. It is used in the US

and 26 other countries of English origin or influence)

Civil law (Civil law represents a comprehensive set of laws organized into code. It is used in about 70 countries, including Japan and many in Europe)

Theocratic law (Islamic law is based on religious beliefs and combines common, civil, and indigenous laws to varying degrees)

Customary law (Traditional Law)

Mixed systems


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The Diffusion of Civil Law


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Trends in Legal Systems

• The preference for stability

• The influence of national legacies


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Bases of Rules

• Rule of Man

• Rule of Law


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Operational concerns that face managers worldwide

• Starting a business

• Entering and enforcing contracts

• Hiring and firing local workers

• Closing down the business


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Strategic concerns that facemanagers worldwide

• Product safety and liability

• Marketplace behavior

• Product origin

• Legal jurisdiction

• Arbitration


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• Intangible property rights that are a result of intellectual effort

• Intellectual property rights refer to the right to control and derive the benefits from writing, inventions, processes and identifiers

• Local attitudes play a large role in piracy

Intellectual property

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International Business Part Two Comparative Environmental Frameworks

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