CH2 Flashcards
Political Economy
Political, economic, and legal systems of a country are interdependent, they influence each other.
Political Systems
- Collectivism vs Individualism
- Democratic vs Totalitarian
Collectivism
The needs of a society as a whole are generally viewed as being more important than individual freedoms.
Socialism
Calls for public rather than private ownership or control of property and natural resources. Karl Marx: The few benefit at the expense of the many in a capitalist society where individual freedoms are not restricted.
Individualism
- An individual should have freedom in his or her economic and political pursuits
- The interests of the individual should take precedence over the interests of the state.
- Guarantees individual freedom and self expression.
- “Welfare” of society by letting people pursue their own economic self-interests.
Democracy
- Democracy and Individualism go hand in hand.
- State power lies in the hands of the people and is exercised by them.
Totalitarianism
- Totalitarianism and the communist version of collectivism go hand in hand.
- Prohibits opposition parties, controls and regulates public and private life, political power is centralized and dictatorial.
- No individual freedom.
Economic Systems
- Market Economy
- Command Economy
- Mixed Economy
Market Economy
-All productive activities are privately owned.
-Production is determined by supply and demand.
-Government encourages vigorous free and fair competition.
-Economic decisions and the pricing of goods are guided by the interactions of a country’s individual citizens and bussinesses.
Command Economy
-Government plans the goods and services, quantity and price, then allocates them for “the good of society”.
-All businesses are state owned.
-Historically found in communist economies.
-No incentive for individuals to look for better ways to serve needs.
Mixed Economy
- Some sectors are privately owned, some are government owned
- Once common in developed world, less so now
- Government may aid troubled firms
Legal Systems
-Rules or laws that regulate behavior.
-Process through which laws are enforced.
- Influenced by the prevailing political system.
Different Legal Systems
- Common Law
- Civil Law
- Theocratic Law
Common Law
Looks at the past decisions of courts to synthesize the legal principles of past cases.
-Tradition, precedent, custom.
-More flexible than other systems.
Civil Law
- Laws organized into codes.
- Less adversarial.
- Focuses on non-criminal duties.
- Determines the rights and obligations of individuals.
Theocratic Law
-Based on religious teachings.
-Most common is Islamic law.
Contracts
A contract is an agreement between parties, creating mutual obligations that are enforceable by law.
United Nations Convention on Contracts for the International Sale of Goods (CISG)
- Establishes a uniform set of rules governing certain aspects of the making and performance of everyday commercial contracts between sellers and buyers who have their places of business in different nations.
- Applies automatically to all contracts for the sale of goods between different firms based in countries that have ratified the convention, unless the parties opt out.
Property Rights
Property is a resource that an individual or business owns (land, buildings, equipment, capital, mineral rights, businesses, intellectual property)
Public Action
Disciplinary actions, disciplinary fines, reprimands, probations, conditions or restrictions on a licensee, suspensions, summary suspensions, cease and desist orders, revocations, denials of licensure, or any other type of action taken by a member Board that is public.
Private Action
Any action instituted by any person that is not a governmental Authority.
Foreign Corrupt Practices Act (FCPA)
- Illegal to bribe a foreign government official to obtain or maintain business over which that foreign official has authority.
- Requires all publicly traded companies to keep detailed records that would reveal whether a violation of the act has occurred
Protection of Intellectual Property
- Patent
- Copyrights
- Trademarks
- World Intellectual Property Organization
- Paris Convention for the Protection of Industrial Property
Product Liability
The area of law in which manufacturers, distributors, suppliers, retailers, and others who make products available to the public are held responsible for the injuries those products cause.
The implications for management practice of national differences in political economy:
- Political, economic, and legal systems of a country raise important ethical issues that have implications for international business.
- Political, economic, and legal environments of a country clearly influence the attractiveness of that country as a market or investment site.
- A country with democratic political institutions, market-based economic system, and strong legal system clearly more attractive to do business in.
