Week 1: Political, economic, and legal systems, Sept 14 Flashcards
functions of LR benefits of international business
the benefits are a function of the size of the market, present wealth of consumers in that market, and the likely future wealth of consumers, stability, and infrastructure
costs of international business
- political
- economic
- legal
political costs
includes the cost of paying bribes or lobbying for favourable or fair treatment
economic costs
relates primarily to the sophistication of the economic system, including the infrastructure and supporting businesses
legal costs
occur when it is more costly to do business in countries with dramatically different product, workplace, and pollution standards, or where there is poor legal protection for property rights
political risk
likelihood that political forces will cause drastic changes in a country’s business environment that adversely affects the profit and other goals of a business enterprise
economic risk
likelihood that economic mismanagement will cause drastic changes in a countries business enviro that adversely affects the profit and other goals of a business enterprise
legal risk
likelihood that a trading parter will opportunistically break a contract or expropriate property rights
collectivism
-the needs of society as a whole are generally viewed as more important that individual freedoms
-socialist political systems are based on collectivism
individualism
-an individual should have freedom in his or her economic and political pursuits
-welfare of society best served by letting people pursue their own economic self interest
democracy
based on individualism, elected governments
totalitariansim
various forms; communist, theocratic, tribal, right-wing
pseudo-democracies
-lie between our democracies and totalitarianism systems
-authoritarian elements have captured some or much of the machinery of state and use this in an attempt to restrict political and civil liberties
market economy
-private ownership
-supply and demand
-govt encourages free and fair competition
command economy
-state ownership
-govt planning determines production and pricing
-incentives becomes problematic
mixed economy
-mix of private and govt ownership
-supply and demand, but also regulation
common law
- based on cumulative wisdom and judges decisions - differs from country to country
-eg, defective products
statutory law
-enacted by legislative action
-eg, legal fees
civil laaw
-most common type of system
-based on codification and detailed listings
religious law
-based on faith and practice of a particular religion “theocracy”
bureaucratic law
law is what the bureaucrats say it is
sanction
restrains against commerce
embargos
comprehensive sanction against all commerce with a given country
dual use
export controls for (usually) high tech
extraterritoriality
regulate business outside borders
nationalization
transfer of ownership from private to public
-expropriation - compensation
-confiscation - no compensation
repatriation
controls on return of profits to home country
property Safety laws
set certain standards to which a product must adhere
product liability
involves holding a firm and its officers responsible when a product causes injury, death, or damage
-when product safety law are stricter in a firm’s home country than in a foreign country, or when liability laws are more lax, the firm has to decide whether to adhere to home or host country standards
domestically oriented laws
-foreign ownership restrictions
-health and safety
-enviro
-labour
-criminal and civil liability
-property rights
intellectual property
-patents, copyrights, and trademarks
-IP laws exist, but enforecement is lax
-IP protection limits access
-IP protection creates opportunities
- R&D
- protect investors
***technique to resolve conflicts: litigation, arbitration, mediation, negotiation, slide 22
