Professional Documents
Culture Documents
Political and Legal Systems in National Environments
Political and Legal Systems in National Environments
Country Risk
Exposure to potential loss or adverse effects on
company operations and profitability caused by
developments in a countrys political and/or legal
environments. Also referred to as political risk.
Each country has a unique political and legal
system that may pose challenges for company
strategy and performance
Totalitarianism
Socialism
Democracy
These categories are not mutually exclusive. E.g.,
most democracies include some elements of
socialism.
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Totalitarianism
Government controls all economic and political matters.
Either theocratic (religion-based) or secular
A state party is led by a dictator. Membership is mandatory
for those wanting to advance.
Power sustained via secret police, propaganda, regulation of
free discussion and criticism.
Examples: China (19491980s), Germany (19331945),
Soviet Union (19181991), and Spain (19391975).
Today, some states in the Middle East and Africa employ
totalitarianism.
Many ex-totalitarian states have much government
intervention, red tape, and bureaucracy
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Socialism
Capital and wealth vested in the state and used
primarily as a means of production for use rather
than for profit.
Group welfare outweighs individual welfare.
Governments role is to control the basic means of
production, distribution, and commercial activity.
Socialism occurs in much of the world as social
democracy (e.g., Western Europe, Brazil, India).
Frequent government intervention in the private
sector.
Corporate income tax rates are higher.
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Religious Law
Strongly influenced by religious beliefs,
ethical codes, and moral values, viewed as
mandated by a supreme being.
Most important religious legal systems are
based on Hindu, Jewish, and Islamic law.
Islamic law spells out norms of behavior
regarding politics, economics, banking,
contracts, marriage, and many other social
and business issues.
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Socialist Law
Found mainly in China, former Soviet
Union, and a few states in Africa
Based on Civil Law, with elements of
socialist principles that emphasize state
ownership of property -- state rights take
precedence over individuals
Tends toward loose treatment of property
and intellectual property rights
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Contract Law
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