Professional Documents
Culture Documents
the different in political and economic system among countries make international
business to become complex. Explain briefly relationship between political and
economic system and its implication to international business. Give some
illustration to strengthen your argument.
POLITICAL SYSTEMS
There are two types of political in the world;
A. Democracy
Democracy system is the system of national government by people, direct (e.g
Switzerland), or through elected representative (e.g Autralia). In respresentative
democracy, citizen periodically elect individuals to represent them. These elected
reprensentatives then form a government, whose function is to make decisions on
behalf of the electorate. Representative democracy rests on the assumption that if
elected representatives bfail to perform this job adequately, they will be voted
down at the next election
Representative democracy include;
a. an individual’s right to freedom of expression, opinion, and organization..
b. a free media
c. regular election in which all eligible citizen are allowed to vote
d. universal adult suffrage
e. limited terms for elected representatives
f. a fair court system that is independent from the political system
g. a nonpolitical state bureaucracy
h. a nonpolitical police force and armed service
i. relatively free access to state information
B. Autocracy/dictatorship/totalitarianism/socialism
In totalitarian country, all the constitutional guarantees on which reprensentative
democracies are built such as an individuals right to freedom of expression and
organization, a free media, and regular elections are denied to the citizens.
There are four major forms of totalitarianism exist in the world today, as follows;
a. Communist totalitarianism
Communism us a version of collectivism that advocates that socialism can be
achieved only through totalitarian dictatorship. The major exceptions to this
trend are China, Vietnam, Laos, North Korea, and Cuba.
b. Theocratic totalitarianism
Theocratic totalitarianisms is found in states where political power is
monopolized by a party, group, or individual that governs according to
religious principles. The most common form of theocratic totalitarianism is
based on islam and is exemplified by states such as Iran and Saudi Arabia.
c. Tribal totalitarianism
Tribal totalitarianism is found principally in African countries such as
Zimbabwe, Tanzania, Uganda, and Kenya.
d. Right-wing totalitarianism
Right wing totalitarianism generally permits individual economic freedom but
restricts individual political freedom on the grounds that it would lead to the
rise of communism.
The relationship between the political system and economic system are;
Economic systems are closely linked with political systems;
2. the political, economic, and legal systems of a country can raise important ethical
issues that have implications for the practice of international business.
Illustration:
China and India
China = Liberal economic but not politic freedom
India = Political freedom but not to liberal economic
2. theories of international trade has evolved from classic to new theory since 16
century. National Competitive Advantage is one of the latest as proposed by
porter. Explain the concept and compare with theory of Comparative Advantage.
3. a multi National Company (MNC) likes to take benefit from regional economic
cooperation such as AFTA, NAFTA, APEC etc. Discuss benefit that an MNC can
take from the implementation of those economic cooperation.
Benefit that MNC can take from the implementation of those economic
cooperataion, that are:
1. MNCs engage in international investment over which the firm has
managerial control.
2. MNC can take the information and information communication
technology.
3. MNC can combine OLI (Ownership, Location, Internalisation) advantages
- ownership of firm specific proprietary assets/advantages
- location/foreigh country specific advantages
- markets or resources (natural, labor, knowledge, financial)
- Internalization to overcome market inefficiencies
- Lower transaction costs
- Overcome problems in codifying, pricing, protecting, and
enforcing IPR.
Negative impact
a. Memperlakukan faktor endowment sebagai faktor semata
akibatnya supply dan demand akan di tentukan dan menentukan harga di
pasaran.
b. Dampak langsung krisis financial
c. Kemungkinan hilangnya pasar produk ekspor karena kalah
bersaing dengan produksi Negara lain yang lebih murah dari Negara lain
yang lebih murah dan berkualitas
Positive impact
a. Peluang usaha
b. Kenaikan kinerja financial Negara-negara yang dianggap masih terbelakang
dengan melakukan kebijakan industri
c. Terbukanya pasar untuk produk-produk export
d. Semakin mudah mengakses modal investasi dari luar negeri
e. Meningkatkan kegiatan pariwisata.