Political and Legal Determinants of International Management Flashcards
Political environment identifies key players that the MNC has to deal with politically. Like who?
- Governamnt
- Political Parties
- Trade Unions
- Interest Groups
- Public Opinion
Name the two structures by which states are governed?
- Authoritarian
2. Democary
Characteristics of an Authoritarian government?
- Power determines
- Few rights
- Restrictions
- Few candidates
- Admin arm of the government
- Press controlled state
What alters the transaction costs for MNC & influences decision making?
Government incentives
Preferential subsidies
Political acts
What may high import tax lead an MNC to do?
FDI
What is a key skill for the MNC to have
Being politically astute
How is Air France an example of political history?
It has a virtual monopoly to all French colonies
What leads to a vast knowledge of the local martket?
Linguistics, cultural links & personal relationships
Trade & Investment dominance in Spain is a result of what?
Political pressure in the form of economic aid packages with trade conditions.
What affects business relations
Affinity & Animosity
What is the two party system?
Two broadly based parties dominate, alternating between government and opposition.
What is the Multi Party system?
Many parties that represent a wide spectrum of views, the government is likey to coalate.
In the Case Study of Argentina who was the President and what party?
Cristina Fernadnez de KIrchner
Victory Party
How did the Argentinian government interfere with the economy?
- Controls were put on trade an access to to foreign exchange
- Trade Barriers
- Tax on foreign purchases made on credit/ debit cards
Who was elected the new President? and what did he advocate?
Macri, former business man
He advocated free market
What did the new Argentinian government do?
- Devalued the Peso
- Trade barriers removed
- Capital controls lifted on repatriation
Who pledged to invest in Argentina?
Royal Dutch, Dutch Shell , Dow Chemicals and CocaCola
What is the most important political challenge for MNC’s?
The relationship with host & home nations
What do governments taffeta?
Eco-monetary
Tax policies
Price controls
Intellectual property
Legislation
Employment Realtions
What are the Political Objectives of the MNC in the Host Nation?
- Establish trade & investment climate
- Remove limits on foreign ownership
- Remove obstacles to free trade
- Gain acceptance
What is an incident where a political leader intervened?
Clinton & Saudi purchase of Aircraft
What is Politcal/Country Risk?
Exposure to the potential loss or adverse affects on company operations and profitability, caused by developments in country political and/or legal system
What is political risk?
The probability of disruption to the MNC operations form political forces and events.
What does managing political risk involve?
- Researching potential risks
- Taking steps to minimize risk
- Ensuring legal
What country, and in what year, expropriated bauxite belonging to a US mining company?
Dominican Republic
2008
What did the US company do in response to the expropriation?
Stopped operations in that country
In ___ in ____, a consortium of foreign companies planning to construct a hydroelectric power plant was hit with large-scale protests from environmental groups.
The consortium, headed by____
Brazil
2004
US owned Alcoa
What are the international political risks?
- Military Invasion
- Global Imbalances
- Trading Partner disputes
- Spill over of regional regional conflict
- Risk of Terrorism
- Neighbors
- Insecurity of resources
- Insecure Borders
What are the Internal Political Risks?
- Corruption
- Fragmented Alliances
- Weak elements of society
- Alienated Groups
- Risk of terrorism
- Social Unrest
- Fragile coalition
- Power centers
Types of political risk
- Ownership
- Operational
- Transfer
What country has the highest political risk and what index score?
Zimbabwe
43
How does one manage Political Risk?
- Lease not Buy
- Sign treaties
- Avoid high visibility acquisitions
- Host county finance
- Source locally
- Strategic alliances with local partners
- Speed up profit repatriation
- Build political support
- Monitor political and economic developments.
Three types of law systems?
- Common Law - UK
- Civil Law - US
3, Theoretical Law - Iran
What is example of jurisdiction on international levels?
International Court of Arbitration
What country has the lowest judicial independence score?
Venezuela
What are some legal issues for MNC’s?
- Rule of Origin
- Competition
- Marketing & Distribution
- Product & Liability Laws
- Patents
Example of legal issues in the area of M&D?
Tesco buying Levi Jeans cheap and selling them on
Different types of patents
- First to file
2. First to invent
What act changed the US policy with pantents from first to file to first to invent?
American inventor act.
What do political behaviors do?
Emphazise what is generally accepted practice for e.g lobbying , interst groups , corruption , bribery
