chapter 12: the political environments facing business Flashcards
what is the goal of the political system
Integrated the diverse elements of society.
what is individualism
champions the primacy of the rights and role of the individual over the group
what is collectivism
advocates the primacy of the rights and the role of the group over the individual
what is a political ideology
encapsulates the doctrine of political behaviour and change. the porcedure for converting ideas into actions
explain the concept of political freedom
the degree to which fair and competitive elections occur, the extent to which individual and group freedoms are guaranteed, the legitimacy ascribed to the rule of law and the existence of freedom to press
what is democracy
- democracyy calls for participation by citizens in a fair and just decision-making process
- democracy and individualism are intrinsically related and mutually reinforcing; individualism legitimates principles of democracy and democracy supports standars of individualism
what is totalitarianism
a totalitarian system consolidates power in a single agenet who then controls political, economic, and social activities.
business implications of the totalitarianism
- Totalitarianism and collectivism are intrinsically related and mutually reinforcing; collectivism legitimates principles of totalitarianism and totalitarianism supports standards of collectivism
- Authoritarian parties often rely on shadowy politics, skewed elections, and nefarious security agencies
Three types of political freedom, Feedom House identifies three types of political systems:
A “free” country opens political competition, respect for civil liberties, independent civiv life and independent media
A “partly free” country exhibits limited political rights and civil liberties, corruption, weak rule of law, ethnic and religious strife, unfair elections and censorship
A “not free” country has few to no political rights and civil liberties. the government allows minimal to no exercise of personal choice, relies on the rule of man as the basis of law, constrains religious and social freedoms, and controls a large share, if not all, of business activity.
origin of the prevalence of political freedom
the third wave of democratization refers to the third surge of democratically governed states in the 20th century. as this wave is crested, the number of countries led by a democratic gov doubled.
various (3) forces powered past the third wave of democratization
- failure of totalitarian regimes to deliver prosperity
- improving communication technology
- economic dividends of political freedom
what drove the globalization
expansion of technology , advances in telecommunications liberated the flow of information, thereby challenging and changing social and political freedom
why have we witnessed the diffusion of democracy and the corresponding decline in totalitarianism.
because of the growing acceptance of the legitimacy of democrecy accelerated the expansion of international business
identify the four types of political systems
- full democracy
- flawed democracy
- hybrid regime
- authoritarian regime
the allure of authoritarianism is powering the resurgence of totalitarianism
- strong states support strong performance
- gaps in the principles and practices of democracy
- economic insecurity following slow growth
- escalating debate of the meaning of democracy
classify the political risk from the least to most disruptive
- systematic: shift or change in the system affects operation of all firms
- procedural: impediments that constrain the flexibility of local operations
- distributive: gradually eliminates the local porperty rights of foreign companies
- catastrophic: devastates the business environment for all companies.
explain what is a systematic political risk
influences the macro business environment and affects the operation of all firms
what is a procedural risk
institutes impediments that constrain the flexibility of local operations
what is a distributive risk
gradually eliminates the local property rights of foreign companies
what is a catastrophic risk
devastates the business environment for all companies
the legal system is the mecanism for…
conceiving, stipulating, interpreting and enforcing the laws in a formal jurisdiction
name the three components of a modern legal system
consistutional law, criminal, civil and commercial law
types of legal systems (5)
- common law: developed by judges through the decisions of courts
- civil law: based on strict application of satuary laws
- theocratic law: based on the inspirations and instructions or religious teachings
- customary law: based on norms of behaviour that gain legitimacy through ongoing practice
- mixed system: results when a nation uses two or more of the preceding types
the basis of rule
- A country’s cultural orientation toward standards of accountability, equity and fairness influences the principles that anchor its legal environment
- The rule of man holds that the ruler, in whatever form commands authority that is above the law
- The rule of man anchors the legal system in totalitarian states
- The rule of law holds that no individual is above the laws that are clearly specified, commonly understood and fairly enforced
which rule when
- Democratic political systems grant MNEs the freedom to engage in their preferred modes of international business. Democracy’s retreat creates uncertainty about operating in particular countries given that all use their legal system to encourage, regulate or prohibit business activity
- The growing confidence of emerging economies increasingly calls into question the long-running presumption that “the West knows best.”
the basis of rule
- A country’s cultural orientation toward standards of accountability, equity and fairness influences the principles that anchor its legal environment
- The rule of man holds that the ruler, in whatever form commands authority that is above the law
- The rule of man anchors the legal system in totalitarian states
- The rule of law holds that no individual is above the laws that are clearly specified, commonly understood and fairly enforced
legal issues facing international companies, operational concerns that managers face worldwide include:
- starting a business
- entering and enforcing contracts
- hiring and firing workers
- closing a business
the type of legal system in the country directly influences the standards of acceptable contracts
strategic concerns that managers face worldwide
- product origin and local content
- marketplace behaviour
- legal juridiction
- product safety and liability
- intellectual property protection
politics, law and the business environment
Countries that observe the rule of law, as opposed to the rule of man, more aggressively protect intellectual property rights. Hence, the predominant share of counterfeit product is made in countries in which the rule of man prevails
