Scribd
Upload
14 views31 pages

Lecture-4 A

The document discusses the political and legal environments impacting international business, focusing on the functions of political systems, types of political regimes, and their influence on managerial decisions. It outlines various legal systems, major legal issues in international business, and the significance of intellectual property rights. Additionally, it highlights the political risks for businesses and strategies to navigate these challenges.

Uploaded by

Raisul Islam Bappy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
14 views31 pages

Lecture-4 A

The document discusses the political and legal environments impacting international business, focusing on the functions of political systems, types of political regimes, and their influence on managerial decisions. It outlines various legal systems, major legal issues in international business, and the significance of intellectual property rights. Additionally, it highlights the political risks for businesses and strategies to navigate these challenges.

Uploaded by

Raisul Islam Bappy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 31

International

Business
The Political and Legal
Environments Facing Business
Chapter Objectives
 Discuss the different functions political
systems perform
 Compare political regimes and how they
influence managerial decisions
 Describe how management formulates and
implements strategies to deal with differing
political environments
 Study different types of legal systems and
relationships
 Exam major legal issues in international
business

3-2
NAFTA: The North American Free Trade Agreement; CAIS :Central
America Integration System; UNASUR: Union of South American
Nations; EU: European Union; AU : African Union; PIF: Pacific
Islands Forum; AL : Arab League; SCO: Shanghai Cooperation
Organization
Political Spectrum

3-3
Introduction

The role of the political system is to integrate the


various parts of its society into a viable, functioning
whole.

It also influences the extent to which government


intervenes in business, and the way in which business
is conducted domestically and internationally.
The Functions of the
Political Process
 Interest Articulation
 Interest Aggregation
 Policy Making
 Policy Implementation and Adjudication
The Functions of the
Political Process
The Functions of the
Political Process
Individualism
The general orientation within a society
concerning the primacy of the rights and role
the individual vs. that of the larger community.
Individualism:
Political officials and agencies have a limited
role in society.
Make and apply regulations to correct market
inefficiencies: accessibility to information,
promoting fair and just competition.
Government is detached from and independent of the
day-to-day practices of business in an individualistic
society.
Collectivism
 Government officials should intervene in the
structure of industries, conduct of companies, and
actions of managers to ensure they benefit society.

 Setting up formal and informal partnerships with


the business community to develop successful
companies.

 Governments are highly connected to and


interdependent with business.
Democracy
 Freedom of opinion, expression, press &
organization
 Elections
 Limited terms for elected officials
 Independent court system
• High regard for individual rights
• Respect for property
 Nonpolitical bureaucracy and defense
infrastructure
 Accessibility to the decision-making process

3-8
Indicators of Political
Rights
 Degree to which fair & competitive elections occur
 Ability of voters to endow representatives with
real power
 Ability to organize political parties
 Existence of safeguards on the rights of minorities

3-4
Indicators of Civil
Liberties
 Existence of freedom of the press
 Equality under the law for all individuals
 Extent of personal social freedoms
 Degree of freedom from extreme
governmental indifference or corruption

3-6
Comparative Measures of
Freedom

POLITICAL RIGHTS

Not Free Partly Free Free

CIVIL LIBERTIES

3-7
Totalitarianism
A political system in which a single agent,
whether an individual, group, or party,
monopolizes all political power.
Aims to subordinate all aspects of the day-to-
day life of people to the power of the state.
Merging the concepts of the state and the
people.
Order is often imposed through military
power.
Neither recognizes nor permits opposition.
Tools used include: violence, persecution,
propaganda, censorship.
3-9
 Authoritarianism: a political system that
aims to rule completely all affairs of all
citizens.
 Fascism: to control people’s minds and
souls through the supremacy of the state.
 Secular Totalitarianism: using the power
of the state or the army to enforce control
of all aspects of the business
environment. Communism and total
government ownership and control of the
factors of production.
 Theocratic Totalitarianism: religious
leaders are the political leaders,
Trends in Political Systems
1. Breakdown of Totalitarian Regimes.
Many totalitarian regimes failed to deliver
economic progress to the vast majority of their
populations.

2. Improved Communication Technology


Weakened the ability of totalitarian states to
control citizens’ access to information.

3. Higher Standards of Living


State of Totalitarianism
 Multi-ethnic societies where power is
not held by a dominant ethnic group
 Neocommunist or post communist
transitional societies
 Many are creeping towards market
model
• Political changes
• Economic changes

3-10
Political Risks for International
Business
 Political Risk:
Risk
The chance that political
decisions, events, or conditions
in a country will affect the
business environment in ways
that lead investors:
- To lose some or all of the value
of their investment, or
- Be forced to accept a lower than
expected rate of return.
3-11
Sources of Political Risk
 Systemic: Political risk created by shifts in public
policy, such as a new political leadership that may
adopt a different approach than its predecessor.
 Procedural: Political actions can sometimes create
frictions that interfere with the procedural
transactions between units. (Government
corruption, labor disputes, a partisan judicial
system)
 Distributive: Political actions that aim to claim a
greater share of rewards.
 Catastrophic: Random political developments.
Political Strategies for
International Businesses
 Identify the exact issue
• Trade barrier?
• Environmental standards?
• Workers rights, etc?
 Define/determine the political aspect of the issue
 Assess the potential political action of other
companies
 Identify important institutions and individuals
 Formulate strategies
• Key objectives
• Alternatives
• Probable effectiveness

3-13
Legal Environment
 Common law systems (tradition/precedent)
• United States
• United Kingdom
 Civil law: based on a systematic and extensive codification
of laws. Political officials prepare a written collection of
laws. Judges apply existing laws instead of creating them.
• Germany
• France
• Japan
 Theocratic law (based on religious principles and rules)
Islamic Law that is based on the Qur’an, the practices of the prophet,
the writings of scholars, and consensus of the community.
• Sudan
• Pakistan
 A Customary Law System: follows the wisdom of daily
experience.
 A Mixed Legal System. 3-14
Impact of Laws on International
Business
 National laws affect all local business
activities.
 National laws affect cross-border activities.
 International treaties and conventions may
govern some cross-border transactions.
Legal Issues in International Business

Managers look at legal issues from two


perspectives:

 Operational (Procedural) Concerns: How do legal


regulations impact day-to-day operations?
 starting a business,
 hiring and firing,
 entering and enforcing contracts,
 closing down the business
Legal Issues in International Business

 Strategic Concerns: How do legal regulations


affect companies’ long-term competitiveness?
 Product safety and liability
 Marketplace behavior
 Product origin
 Legal jurisdiction
 Arbitration
Intellectual Property Rights (IPRs)
Now, countries are competing on the strength of their
brainpower to create might, prestige, and wealth.

The output of this brainpower is called intellectual


property- books, designs, brand names, software.

Problems occur because IP is hard to conceive but easy


to copy. (Piracy)

IPRs refer to the right to control and derive the benefits


from writing (copyrights), inventions (patents),
processes (trade secrets) and identifiers (trademarks).
Intellectual Property Rights (IPRs)
 Legal problems arise because countries because not
all countries formally support the various conventions
that protect IPRs.

 The Paris Convention for the Protection of Industrial


Property

 The Berne Convention for the Protection of Literary


and Artisitic Works.

 The Trade Related Aspects of Intellectual Property


Rights (TRIPS) code of the WTO.
Why Some Countries are Less Inclined
to Protect IPRs
1. Level of Economic Development: Poorer countries
provide weaker legal protection than do richer countries.

Rich countries: protecting ideas is the only way to energize


the incentive to innovate.
Poor countries: Strict protection of IPRs restricts the diffusion
of new technologies, inflates the prices, inhibits economic
development by controlling the use of existing knowledge.

2. National Cultural Attributes:

Individualist v. Collectivist Orientations


Legal Issues for
International Businesses
 Worker relations
• Health and safety standards
• Workweek
 Employment practices
 Antitrust prohibitions
 Contractual relationships
 Environmental practices
 Patents, trademarks, and intellectual
property protection
 Taxes and reporting requirements
3-15
Chapter Review
 Discuss the different functions political
systems perform
 Compare political regimes and how they
influence managerial decisions
 Describe how management formulates
and implements strategies to deal with
differing political environments
 Study different types of legal systems and
relationships
 Exam major legal issues in international
business

3-16

You might also like