chapter 12: the political environments facing business

Question 1

what is the goal of the political system

Answer 1

Integrated the diverse elements of society.

Question 2

what is individualism

Answer 2

champions the primacy of the rights and role of the individual over the group

Question 3

what is collectivism

Answer 3

advocates the primacy of the rights and the role of the group over the individual

Question 4

what is a political ideology

Answer 4

encapsulates the doctrine of political behaviour and change. the porcedure for converting ideas into actions

Question 5

explain the concept of political freedom

Answer 5

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

Question 6

what is democracy

Answer 6

• 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

Question 7

what is totalitarianism

Answer 7

a totalitarian system consolidates power in a single agenet who then controls political, economic, and social activities.

Question 8

business implications of the totalitarianism

Answer 8

• 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

Question 9

Three types of political freedom, Feedom House identifies three types of political systems:

Answer 9

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.

Question 10

origin of the prevalence of political freedom

Answer 10

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.

Question 11

various (3) forces powered past the third wave of democratization

Answer 11

• failure of totalitarian regimes to deliver prosperity
• improving communication technology
• economic dividends of political freedom

Question 12

what drove the globalization

Answer 12

expansion of technology , advances in telecommunications liberated the flow of information, thereby challenging and changing social and political freedom

Question 13

why have we witnessed the diffusion of democracy and the corresponding decline in totalitarianism.

Answer 13

because of the growing acceptance of the legitimacy of democrecy accelerated the expansion of international business

Question 14

identify the four types of political systems

Answer 14

• full democracy
• flawed democracy
• hybrid regime
• authoritarian regime

Question 15

the allure of authoritarianism is powering the resurgence of totalitarianism

Answer 15

• 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

Question 16

classify the political risk from the least to most disruptive

Answer 16

• 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.

Question 17

explain what is a systematic political risk

Answer 17

influences the macro business environment and affects the operation of all firms

Question 18

what is a procedural risk

Answer 18

institutes impediments that constrain the flexibility of local operations

Question 19

what is a distributive risk

Answer 19

gradually eliminates the local property rights of foreign companies

Question 20

what is a catastrophic risk

Answer 20

devastates the business environment for all companies

Question 21

the legal system is the mecanism for…

Answer 21

conceiving, stipulating, interpreting and enforcing the laws in a formal jurisdiction

Question 22

name the three components of a modern legal system

Answer 22

consistutional law, criminal, civil and commercial law

Question 23

types of legal systems (5)

Answer 23

1. common law: developed by judges through the decisions of courts
2. civil law: based on strict application of satuary laws
3. theocratic law: based on the inspirations and instructions or religious teachings
4. customary law: based on norms of behaviour that gain legitimacy through ongoing practice
5. mixed system: results when a nation uses two or more of the preceding types

Question 24

the basis of rule

Answer 24

• 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

Question 25

which rule when

Answer 25

• 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.”

Question 26

the basis of rule

Answer 26

• 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

Question 27

legal issues facing international companies, operational concerns that managers face worldwide include:

Answer 27

• 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

Question 28

strategic concerns that managers face worldwide

Answer 28

• product origin and local content
• marketplace behaviour
• legal juridiction
• product safety and liability
• intellectual property protection

Question 29

politics, law and the business environment

Answer 29

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