political & legal enviroment facing business
-
Upload
naim-h-faisal -
Category
Documents
-
view
229 -
download
0
Transcript of political & legal enviroment facing business
-
8/13/2019 political & legal enviroment facing business
1/15
2001 Prentice Hall 3-1
International BusinessbyDaniels and Radebaugh
Chapter 3Political and Legal
Environments Facing
Business
-
8/13/2019 political & legal enviroment facing business
2/15
2001 Prentice Hall 3-2
ObjectivesTo discuss the different functions that political systems perform
To compare democratic and totalitarian political regimes and discusshow they can influence managerial decisions
To describe how management can formulate and implement strategies
to deal with foreign political environments
To study the different types of legal systems and the legal relationships
that exist between countriesTo examine the major legal issues in IB
-
8/13/2019 political & legal enviroment facing business
3/15
2001 Prentice Hall 3-3
Cultural Influences on International Business
EXTERNALINFLUENCES
COMPETITIVE
ENVIRONMENT
PHYSICAL AND
SOCIETAL FACTORS
Political policies and
legal practices
Cultural factorsEconomic forces
Geographical influences
OPERATIONS
OBJECTIVES
MEANS
STRATEGY
Basic political
ideologies
Impact of the political
system on managementdecisions
Formulating and
implementing political
strategies
Legal environment
-
8/13/2019 political & legal enviroment facing business
4/15
2001 Prentice Hall 3-4
The Political EnvironmentThe role of the political system is to integrate the society
Influences how business is conductedPolitical process functions
Interest articulation
Interest aggregationthe collection of interests in the political
system
Policy making Policy implementation and adjudication
MNE management
Lobbies governments on policies that affect business
Avoid appearances of inappropriate influence on the law
-
8/13/2019 political & legal enviroment facing business
5/15
2001 Prentice Hall 3-5
Basic Political IdeologiesPolitical ideologya body of constructs, theories, and aims that
constitute a sociopolitical program Pluralist societydifferent ideologies coexist because there is no
one ideology accepted by all
difficult to understand the political environment in a pluralist
society
Ultimate test of any political system is its ability to hold a societytogether despite pressures from different ideologies
Ideologies also help bring countries together
The impact of ideological differences on national boundaries
Differences in political ideology have affected boundaries in
Europe
When operating in a foreign country, must understand the
potential sources of political tension and instability
-
8/13/2019 political & legal enviroment facing business
6/15
2001 Prentice Hall 3-6
The Political Spectrum
TotalitarianismDemocracy
Democratic
Government
Nondemocratic
Government
-
8/13/2019 political & legal enviroment facing business
7/15
2001 Prentice Hall 3-7
A Political SpectrumDemocracyinvolves wide participation by citizens in the decision-
making process Freedom of opinion, expression, press, and freedom to organize
Election of political representatives
Limited term of elected officials
Independent and fair court system
Nonpolitical bureaucracy and defense infrastructure Accessibility to the decision-making process
Democratic governments differ
Presidentialversus parliamentary
Number of important political parties
Amount of citizen participation in decision making Fragility and stability of new democracies
Democracy believed to be the best form of government
-
8/13/2019 political & legal enviroment facing business
8/15
2001 Prentice Hall 3-8
Comparative Measuresof Freedom
1981 1990 1998
Free 35.9% 21.6% 40.0%
Partly Free 38.9 21.6 26.5
Not Free 20.0 40.0 33.5
Free Partly Free Not Free
Democracy
Totalitarianism
Political Rights
CivilLiberties
-
8/13/2019 political & legal enviroment facing business
9/15
2001 Prentice Hall 3-9
A Political Spectrum (cont.)Totalitarianisma single party, individual, or group of individuals
monopolizes political power Neither recognizes nor permits opposition
Theocraticreligious leaders are political leaders
Seculargovernment often imposes order through military power
Totalitarianism takes several forms
Fascismdesires to control peoples minds and souls,converting them to its own faith
Authoritarianismdesires to control the people
Communismpolitical and economic systems are virtually
inseparable
equal distribution of wealth government ownership and control of resources
-
8/13/2019 political & legal enviroment facing business
10/15
2001 Prentice Hall 3-10
Impact of the Political System on Management DecisionsPolitical Riskcaused by political instability
Promotes fear that operating position will deteriorate Tends to be higher in totalitarian regimes
Causes of political risk
Change in the opinions of political leadership
Civil disorderstemming from economic conditions, human rights
violations, or group animosity External relationsanimosity between host country and foreign
investors country
Types of political risk
Micropolitical actions are aimed at specific foreign investments
Macropolitical actions affect a broad spectrum of foreigninvestors
-
8/13/2019 political & legal enviroment facing business
11/15
2001 Prentice Hall 3-11
Government Intervention in the EconomyIndividualistic paradigm
Belief in minimal government intervention in the economy Likely to be democratic and economically free
Promotes marketplace competition
regulates marketplace when competition by itself is unreliable
or unacceptable
Communitarian paradigm Government tends to be prestigious
thrives on a respected, centralized bureaucracy
May be democratic or authoritarian
stable political party or coalition in power
Government may start partnership with business
Government action toward business is not always consistent
-
8/13/2019 political & legal enviroment facing business
12/15
2001 Prentice Hall 3-12
Formulating and Implementing Political StrategiesEstablishing a political strategy in the host country
Identify the issue Define the political aspect of the issue
Assess the potential political action of other companies and
special-interest groups
Identify important institutions and key people
Formulate strategies Determine the impact of implementation
Select the most appropriate strategy and implement
Implementing a strategymarshal whatever resources necessary to
accomplish the companys goals
Lobbyists educate and persuade government decision makers Enlist support of consumers
-
8/13/2019 political & legal enviroment facing business
13/15
2001 Prentice Hall 3-13
Kinds of Legal SystemsCommon lawbased on tradition, precedent, custom, and usage
Interpretation by the courtsCivil lawcodified legal system
Based on a detailed set of laws that make up a code
Rules for business transaction included
Based on how the law is applied to the facts
Theocratic lawbased on religious precepts
e.g., Islamic law
has remained frozen
moral rather than commercial law
intended to govern all aspects of life
Consumer safeguardsdiffer in different legal systems
Deal with product liability issues
-
8/13/2019 political & legal enviroment facing business
14/15
2001 Prentice Hall 3-14
The Legal ProfessionLawyers and their firms
Vary among countries in terms of how they practice law and serveclients
Most firms are quite small
Firms have expanded abroad in order to serve their clients
large legal firms often created through mergers or
correspondent relationships with firms in other countries Legal staffs have to understand local laws and practices
-
8/13/2019 political & legal enviroment facing business
15/15
2001 Prentice Hall 3-15
Legal Issues in International BusinessAffect many aspects of IB
National laws May affect both domestic and foreign companies operating within
the countrys borders
health and safety standards
employment practices
antitrust prohibitions contractual relationships
environmental practices
patents and trademarks
May govern cross-border activities
investment of capital payment of dividends to foreign investors
customs and duties on imports