International Business Part Two Comparative Environmental Frameworks Chapter

International Business Part Two Comparative Environmental Frameworks Chapter Three The Political and Legal Environments Facing Business Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

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

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

Individualism vs. Collectivism • Individualism: primacy of the rights and role of the individual • Collectivism: primacy of the rights and role of the community 4 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

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

Democracy • Wide participation by citizens in the decision-making process • Five types: § § § Parliamentary Liberal Multiparty Representative Social 6 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Totalitarianism • Restricts decision making to a few individuals • Types: § § Authoritarianism Fascism Secular totalitarianism Theocratic totalitarianism 7 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

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

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

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

Trends in Legal Systems • The preference for stability • The influence of national

Bases of Rules • Rule of Man • Rule of Law 12 Copyright ©

Operational concerns that face managers worldwide • • Starting a business Entering and enforcing contracts Hiring and firing local workers Closing down the business 13 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Strategic concerns that face managers worldwide • • • Product safety and liability Marketplace behavior Product origin Legal jurisdiction Arbitration 14 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

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