International Business Part Two Comparative Environmental Frameworks

Chapter Three The Political and Legal Environments Facing Business

Chapter Objectives
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

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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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Democracy
Wide participation by citizens in the decision-making process Five types:
     Parliamentary Liberal Multiparty Representative Social
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Totalitarianism
Restricts decision making to a few individuals Types:
    Authoritarianism Fascism Secular totalitarianism Theocratic totalitarianism

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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 Civil law Theocratic law Customary law Mixed systems
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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 face managers worldwide

Product safety and liability Marketplace behavior Product origin Legal jurisdiction Arbitration

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Intellectual property
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

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