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Principles of IB > The political and legal environment of IB (topic 5) > Flashcards

The political and legal environment of IB (topic 5) Flashcards

1
Q

PESTLE

A 
Political
Economic
Social
Technological
Legal
Environmental factors
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2
Q

Political system

A

A country’s system of politics and government. The fundamental goal of a political system is to integrate elements of a society.

Failure = instability, insurrection, national disintegration.

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3
Q

Democratic

A

A democracy calls for participation by citizens in a fair and just decision-making process.

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4
Q

Republic

A

rule by law

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5
Q

Anarchic

A

no rules

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6
Q

Democracy

A

rule by majority

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7
Q

Representative democracy

A

Protects individual freedoms; elected representatives act in the peoples’ interests.
E.g. USA, Japan.

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8
Q

Multiparty democracy

A

Three or more parties govern either separately or in a coalition.
E.g. Canada, Germany.

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9
Q

Parliamentary democracy

A

Representatives are elected into parliament.

E.g. India, Australia.

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10
Q

Social democracy

A

Applies democratic means to guide the transition from capitalism to socialism.
E.g. Norway, Sweden.

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11
Q

Pure democracy

A

based on the belief that citizens should be directly involved in decision-making.

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12
Q

Representative democracy

A

Citizens periodically elect individuals to represent them.

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13
Q

Totalitarianism

A

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

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14
Q

Communist totalitarianism

A

Communist party monopolises power.

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15
Q

Theocratic totalitarianism

A

Power is monopolised by a party, group, individual that governs according to religious principles.

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16
Q

Tribal totalitarianism

A

Found in states where a political party that represents the interests of a particular tribe monopolises power.

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17
Q

Right-wing totalitarianism

A

Permits some individual economic freedom, but restricts individual political freedom.

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18
Q

Authoritairanism

A

No deviation from state ideology.

E.g. North Korea.

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19
Q

Facism

A

A single-party state that controls through force and indoctrination.

20
Q

Secular

A

Single-party government controls elections and grants limited individual freedoms.
E.g. China.

21
Q

Institutional theory

A

Seeks to make sense of organisations as part of complex social systems. Institutions establish the ‘rules of the game’ when working, buying, and selling in a country.

22
Q

Formal rules (regulative)

A

Created, communicated, and enforced through official channels (e.g. courts, bureaucracies, constitutions). Formal institutions include the government (e.g. laws, regulations, rules).

23
Q

Informal restraints (cognitive and normative)

A

Socially shared customs, codes, traditions - usually unwritten and are communicated, created and enforced outside of official channels (e.g. culture, norms, ethics).

24
Q

‘Good’ institutions

A

Promote economic and social progress by providing the incentive structure for an economy.

25
Q

‘Bad’ institutions

A

Hamper economic and social progress by reducing incentives in an economy.

26
Q

Globalisation

A

Has caused a trend towards centralisation and concentration of power; and towards more open and free political systems.

27
Q

Two trends in the political/legal environment have emerged since the late 1980s:

A
  1. Democratic revolution (1980s-1990s)

2. A move away from centrally-planned to mixed economies (towards a market-based model)

28
Q

Free country

A

Somewhere where there is broad scope for open political competition; a climate of respect for civil liberties; significant independent civil life; and independent media.

29
Q

Political risk

A

The risk that political decisions/events in a country negatively affect the sustainability or profitability of an investment - causes uncertainty, volatility.

30
Q

Systematic risks

A

Impact all firms who operate under a particular political system.

31
Q

Procedural risk

A

Each move within the global market creates a procedural transaction - political frictions can interfere with these transactions.

32
Q

Distributive risk

A

As a business grows, officials may question the ‘distributive justice’ - are they receiving their fair share of the growing profits?

33
Q

Catastrophic risk

A

Includes random political developments that adversely affect the operations of every company in a country.

34
Q

Macro-political risks

A

Affect all firms in a country.

35
Q

Micro-political risks

A

Affect only certain firms or industries in a country.

36
Q

Mitigating risk

A

Insurance;
Recruiting local partners;
Integration;
Hedging.

37
Q

Grease payments

A

Facilitating or expediting payments (not illegal).

38
Q

Rule of man

A

Holds that the ruler commands authority that is above the law.
E.g. China.

39
Q

Rule of law

A

No individual is above laws that are clearly specified, commonly understood, and fairly enforced.

40
Q

Common law systems

A

Based on case law or precedent; derived from the principle that it is unfair to treat similar facts differently on different occasions.

41
Q

Civil law systems

A

Where core principles are codified into a referable system which serves as the primary source of law.

42
Q

International laws and regulations

A

International treaties; international codes of practice; EU legislation.

43
Q

Contract

A

A document that specifies the conditions under which an exchange is to occur.

44
Q

Contract law

A

The body of law that governs contract enforcement.
Common law = detailed, specific contracts.
Civil law = shorter and less specific.

45
Q

Legal activities involved in starting a business

A

Registering its name; choosing the appropriate tax structure; getting licenses and permits; arranging credit; securing insurance.

46
Q

Operational concerns

A

Getting started
Making and enforcing contracts
Hiring and firing workers
Closing down the business

Principles of IB (9 decks)

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