Chapter 3 Flashcards
The Political & Legal Environments
3 International Business Operations
- Objectives
- Strategy
- Means
External Influences of IB
- Political | Legal principles
- Cultural factors
- Economic forces
- Geographic influences
- Technology
Factors of Political and Legal Influence
- Government’s role
- Political ideologies
- Political risk
- Legal foundations
- Basis of rule (rule of law, rule of man)
- Operational | Strategic issues
An Effective Political System
integrates the diverse elements of a society. Its test is uniting society in the face of divisive viewpoints.
Individualism
champions the primacy of the individual over the group.
Collectivism
advocates the primacy of the group over the individual.
Political Ideology
encapsulates the doctrine of political behavior and change. It describes the path to convert ideals into outcomes.
Democracy
rooted in liberalism and conservatism.
Totalitarianism
rooted in fascism and autocracy.
Democracy and Individualism
are intrinsically related and mutually reinforcing; individualism legitimates principles of democracy and democracy fortifies standards of individualism.
A Totalitarian System
consolidates power in a single agent who then controls political, economic, and social activities.
Totalitarianism and Collectivism
are intrinsically related and mutually reinforcing; collectivism legitimates principles of totalitarianism, and totalitarianism supports standards of collectivism.
Third Wave of Democratization
- Failure of totalitarian regimes to deliver prosperity
- Improving communication technology
- Economic dividends of political freedom
Third Wave of Democratization
refers to the third surge of democratically governed nations in the latter twentieth century.
4 Types of Political Systems
- Full democracy
- Flawed democracy
- Hybrid regime
- Authoritarian regime
Powering expanding authoritarianism is:
- robust economic performance in single-party states
- gaps between the principles and practices of democracy
- economic insecurities and growing populism
- competing interpretations of the idea of democracy
Political Risk
refers to the threat that decisions or events in a country will negatively affect the profitability and sustainability of an investment.
Systemic Political Risks
affect the activities of all firms by influencing investment and operating conditions in a nation.
Procedural Political Risk
institutes impediments that constrain efficiently running activities.
Distributive Political Risks
progressively eliminate the local property rights of foreign companies.
Catastrophic Political Risk
devastates the business environment for all companies.
The legal system moderates PRACTICAL aspects of business operations
including how managers:
- start a business
- enter and enforce contracts
- hire and fire workers
- close a business
The legal system moderates STRATEGIC aspects of business operations
- product origin and local content
- marketplace behaviour
- legal jurisdiction
- product safety and liability
- intellectual property protection
