CHAPTER # 3

THE POLITICAL AND LEGAL

ENVIRONMENTS FACING Business
 INTRODUCTION
MNEs must operate in countries that are characterized by
different political, legal, and economic frameworks
conditions.
For the MNEs to be successful, its management must
carefully analyze the interaction between corporate policies
and the political, legal, and economic environments in order
to maximize efficiency (whether its corporate policies will fit
a desirable political & legal environment or not ).
Political and Legal Factors often play a critical role in
international business. It is useful to understand the
complexities of the host country legal system as well as
foreign country. This chapter discusses the political and legal
systems that managers encounter and the factors they need to
consider when operating in different countries.
 Concept
The legal environment in international business consists of
the different legal factors that influence business activities in a
foreign market. Legal system of a country is framed by the
government. The laws which are passed by the government home
and abroad for business operation is called legal environment.
Legal Environment Managers must be aware of the legal systems
in the countries in which their firms operate, the basic nature of
the legal profession (both domestic and international) and the
legal relationships that exist between and among countries.
Government actions which affects the operations of a domestic
and international company or business. The political
environment of he company includes national and international
political factors which can affect its operations. These factors are
called political as they principally derive from the actions of
governments which can be at a local or foreign level. We can
split the international political environment into three
dimensions: The political environment of the country of origin,
The political environment in the destination country and The
international political environment
 Individualism vs. Collectivism
Individualism values personal independence. Within
individualist cultures, people are more likely to “see
themselves as separate from others, define themselves
based on their personal traits, and see their
characteristics as relatively stable and unchanging.”
An individualist’s sense of self is defined more by
who they are on the “inside,” minimizing the
influence of factors, contexts, and people “outside”
the individual. Individualists tend to communicate
in direct styles- they say what they mean, prioritizing
that information is conveyed explicitly and
unambiguously. European and “Western” cultures are
typically more individualist.
Collectivism values personal interdependence. In collectivist
cultures, people are more likely to “see themselves as connected
to others, define themselves in terms of relationships with others,
and see their characteristics as more likely to change across
different contexts.” A collectivist’s sense of self is defined more
by who they are with other people, or by their membership in a
group. Maintaining social harmony, getting along with others,
and meeting social expectations are more important in
collectivist cultures. They tend to communicate in indirect styles-
collectivists imply what they really mean, but might say
otherwise to avoid conflict or embarrassment. Asian and African
cultures tend to be more collectivist, for example.
The individualist idea of having a more immutable, authentic
private self is not as appealing in collectivist cultures.
Individualist self-expressions and styles may even seem selfish,
disruptive, or alienating to a more collectivist person or group.
Inversely, the collectivist priority for social agreement and
cooperation may seem stiflingly conformist to someone who’s
more individualist. In general, collectivists tend to fit molds,
while individualists break them (or at least value and imagine
doing so).
1. Feudalism: The word 'feudalism' derives from the
medieval Latin terms feudalis, meaning fee, and feodum,
meaning fief. The fee signified the land given (the fief) as a
payment for regular military service. Feudalism is a system
of land ownership and duties. It was used in the Middle
Ages. With feudalism, all the land in a kingdom was the
king's. However, the king would give some of the land to
the lords or nobles who fought for him, called vassals. These
gifts of land were called fiefs.
2. Socialism: Socialism is a populist economic and political
system based on public ownership (also known as collective
or common ownership) of the means of production. Those
means include the machinery, tools, and factories used to
produce goods that aim to directly satisfy human needs.
Communism and socialism are umbrella terms referring to
two left-wing schools of economic thought; both oppose
capitalism, but socialism predates the "Communist
Manifesto," an 1848 pamphlet by Karl Marx and Friedrich
Engels, by a few decades.
3. Bureaucratic Socialism: Bureaucratic collectivism is a theory
of class society. It is used by some Trotskyists to describe the nature
of the Soviet Union under Joseph Stalin, and other similar states
in Central and Eastern Europe and elsewhere (such as North Korea).
4. Communism: Communism (from Latin communis, "common,
universal") is a philosophical, social, political,
economic ideology and movement whose ultimate goal is the
establishment of a communist society, namely a socioeconomic order
structured upon the ideas of common ownership of the means of
production and the absence of social classes, money and the state.
5. Russian Communism: The Russian Revolution was a period
of political and social revolution across the territory of the Russian
Empire, commencing with the abolition of the monarchy in 1917, and
concluding in 1923 after the Bolshevik establishment of the Soviet
Union at the end of the Civil War.
It began during the First World War, with the February
Revolution that was focused in and around Petrograd (now Saint
Petersburg), the capital of Russia at that time. The revolution erupted
in the context of Russia's major military losses during the War, which
resulted in much of the Russian Army being ready to mutiny. In the
chaos, members of the Duma, Russia's parliament, assumed control of
the country, forming the Russian Provisional Government.
6. Democracy: The term is derived from the Greek words dēmokratiā,
dēmos (“people”) and kratos (“rule”) "rule by [the] people") is a form
of government in which the people have the authority to choose their
governing legislation. Who people are and how authority is shared
among them are core issues for democratic theory, development
and constitution. Some cornerstones of these issues are freedom of
assembly and speech, inclusiveness, equality, membership, consent,
voting, right to life and minority rights.
7. Representative Democracy: A representative democracy is an
indirect democracy where sovereignty is held by the people's
representatives.
8. Bureaucracy: A bureaucracy is an organization made up of many
departments and divisions that are administered by lots of people.
Bureaucracy has a bad reputation because it has come to mean an
organization or government that is chin-deep in red tape and
unnecessary procedures. When dealing with a bureaucracy, expect to
fill out lots of forms and wait. Bureaucracies are mocked in the
hilarious film "Brazil," where people have mind-numbing jobs they do
while sitting at desks. Bureaucracy is an organization administered by
people behind desks, or bureaus. Bureaus, get it?
9. Fascism: Fascism is a form of far-right, authoritarian
ultranationalism characterized by dictatorial power, forcible
suppression of opposition, and strong regimentation of
society and of the economy which came to prominence in
early 20th century Europe. The first fascist
movements emerged in Italy during World War-I,
before spreading to other European countries. Opposed
to liberalism, Marxism, and anarchism, fascism is placed on
the far-right within the traditional left–right spectrum.
Benito Mussolini (left) and Adolf Hitler (right), the leaders
of Fascist Italy and Nazi Germany respectively, were both
fascists.
10. Capitalism: Capitalism is an economic system in
which private individuals or businesses own capital goods.
The production of goods and services is based on supply and
demand in the general market—known as a market
economy—rather than through central planning—known as
a planned economy or command economy.
 Attribute Communism Socialism
Basic Philosophy From each according to his From each according to his
ability, to each according to hisability, to each according to his
needs. contribution.
Economy Planned By Central government Central government
Ownership of All economic resources are Individuals own personal
Economic Resources publicly owned and controlled property but all industrial and
by the government. Individuals production capacity is
hold no personal property or communally owned and
assets. managed by a democratically
elected government.
Distribution of Production is intended to meet Production is intended to meet
Economic Production all basic human needs and is individual and societal needs
distributed to the people at no and distributed according to
charge. individual ability and
contribution.
Class Distinction Class is abolished. The ability Classes exist but differences
to earn more than other workers are diminished. It is possible
is almost nonexistent. for some people to earn more
than others.
Religion Religion is effectively Freedom of religion is
abolished. allowed.
Characteristics of Democracy
1. Freedom of opinion, expression, press
and freedom to organize
2. Elections
3. Limited terms for elected officials
4. An independent and fair court system
5. A nonpolitical bureaucracy and defense
infrastructure
6. Citizen accessibility to the decision-
making process
 Types of Democracy
1) Direct democracy: A direct democracy or pure democracy is a
type of democracy where the people govern directly. It requires wide
participation of citizens in politics.
i) Athenian democracy or classical democracy refers to a direct
democracy developed in ancient times in the Greek city-state of
Athens.
ii) A popular democracy is a type of direct democracy based on
referendums and other devices of empowerment and concretization of
popular will.
iii) An industrial democracy is an arrangement which involves
workers making decisions, sharing responsibility and authority in the
workplace.
2) Representative democracies: A representative democracy is an
indirect democracy where sovereignty is held by the people's
representatives.
i) A liberal democracy is a representative democracy with protection
for individual liberty and property by rule of law.
ii) An illiberal democracy has weak or no limits on the power of the
elected representatives to rule as they please.
Types of representative democracy include:
iii) Electoral democracy– type of representative democracy based
on election, on electoral vote, as modern occidental or liberal
democracies.
iv) Dominant-party system– democratic party system where only one
political party can realistically become the government, by itself or in
a coalition government.
v) Parliamentary democracy– democratic system of government where
the executive branch of a parliamentary government is typically a
cabinet, and headed by a prime minister who is considered the head of
government.
vi) Westminster democracy– parliamentary system of government
modeled after that of the United Kingdom system.
vii) Presidential democracy– democratic system of government where
a head of government is also head of state and leads an executive
branch that is separate from the legislative branch.
viii) Jacksonian democracy– a variant of presidential democracy
popularized by U.S. President Andrew Jackson which promoted the
strength of the executive branch and the Presidency at the expense of
Congressional power.
ix) Soviet democracy or Council democracy– form of democracy
where the workers of a locality elect recallable representatives into
organs of power called soviets (councils.) The local soviets elect the
members of regional soviets who go on to elect higher soviets.
x) Totalitarian democracy– a system of government in which
lawfully elected representatives maintain the integrity of a nation state
whose citizens, while granted the right to vote, have little or no
participation in the decision-making process of the government.
3) A non-partisan democracy is system of representative government
or organization such that universal and periodic elections (by secret
ballot) take place without reference to political parties.
4) An organic or authoritarian democracy is a democracy where the
ruler holds a considerable amount of power, but their rule benefits the
people. The term was first used by supporters of Bonapartism.
5) Types based on location
i)A cellular democracy developed by Georgist libertarian economist
Fred E. Foldvary, uses a multi-level bottom-up structure based on
either small neighborhood governmental districts or contractual
communities.
ii) A workplace democracy refers to the application of democracy to
the workplace.
6) Types based on level of freedom
i) A liberal democracy is a representative democracy with protection
for individual liberty and property by rule of law.
ii) In contrast, a defensive democracy limits some rights and freedoms
in order to protect the institutions of the democracy.
7) Types based on ethnic influence
i) Ethnic democracy: Ethnic democracy is a political system that
combines a structured ethnic dominance with democratic, political and
civil rights for all. Both the dominant ethnic group and the minority
ethnic groups have citizenship and are able to fully participate in the
political process.
ii) Ethnocracy: An ethnocracy is a type of political structure in
which the state apparatus is controlled by a dominant ethnic group (or
groups) to further its interests, power and resources. Ethnocratic
regimes typically display a 'thin' democratic façade covering a more
profound ethnic structure, in which ethnicity (or race or religion) – and
not citizenship – is the key to securing power and resources. An
ethnocratic society facilitates the ethnicization of the state by the
dominant group, through the expansion of control likely accompanied
by conflict with minorities or neighbouring states.
iii) Herrenvolk democracy: Herrenvolk democracy is a system of
government in which only the majority ethnic group participates in
government, while minority groups are disenfranchised. Similar
concepts include ethnic democracy and ethnocracy. The German
term Herrenvolk, "master race", was used in 19th century discourse
that justified colonialism with the supposed racial superiority of
Europeans.
8) Religious democracies: A religious democracy is a form of
government where the values of a particular religion have an effect on
the laws and rules, often when most of the population is a member of
the religion, such as:
i) Christian democracy: Christian democracy is a political ideology
that emerged in 19th-century Europe under the influence of Catholic
social teaching, as well as Neo-Calvinism. Christian democratic
political ideology advocates for a commitment to social
market principles and qualified interventionism. It was conceived as a
combination of modern democratic ideas and traditional Christian
values, incorporating the social teachings espoused by
the Catholic, Lutheran, Reformed, and Pentecostal traditions in
various parts of the world. After World War II, the Protestant and
Catholic movements of the Social Gospel and Neo-Thomism,
respectively, played a role in shaping Christian democracy.
ii) Islamic democracy: There exist a number of perspectives on the
relationship of Islam and democracy among Islamic political theorists,
the general Muslim public, and Western authors. Some modern Islamic
thinkers rejected the notion of democracy as a foreign idea incompatible
with Islam. Others have argued that traditional Islamic notions such
as shura (consultation), maslaha (public interest), and ’adl (justice)
justify representative government institutions which are similar to
Western democracy.
iii) Jewish and Democratic State: "Jewish and democratic state" is
the Israeli legal definition of the nature and character of the State of
Israel. The "Jewish" nature was first defined within the Declaration of
Independence of 1948. The "Democratic" character was first officially
added in the amendment to the Basic Law: the Knesset that was passed
in 1985 (amendment 9, clause 7A).
iv) Theodemocracy: Theodemocracy is a theocratic political
system propounded by Joseph Smith, founder of the Latter Day Saint
movement. According to Smith, a theodemocracy is a fusion of
traditional republican democratic principles- under the United States
Constitution- along with theocratic rule. Smith described it as a system
under which God and the people held the power to rule
in righteousness. Smith believed that this would be the form of
government by the Second Coming of Christ.
9) Other types of democracy: Other types of democracy include:
i) Anticipatory democracy– relies on some degree of disciplined and
usually market-informed anticipation of the future, to guide major
decisions.
ii) Associationalism, or Associative Democracy– emphasis on freedom
via voluntary and democratically self-governing associations.
iii) Adversialism, or Adversial Democracy– with an emphasis on
freedom based on adversial relationships between individuals and groups
as best expressed in democratic judicial systems.
iv) Bourgeois democracy: Some Marxists, Communists, Socialists
and Left-wing anarchists refer to liberal democracy as Bourgeois
democracy, alleging that ultimately politicians fight only for the rights of
the bourgeoisie.
v) Consensus democracy– rule based on consensus rather than
traditional majority rule.
vi) Constitutional democracy– governed by a constitution.
vii) Deliberative democracy– in which authentic deliberation, not
only voting, is central to legitimate decision making. It adopts elements
of both consensus decision-making and majority rule.
viii) Democratic centralism– organizational method where members of
a political party discuss and debate matters of policy and direction and
after the decision is made by majority vote, all members are expected to
follow that decision in public.
ix) Democratic dictatorship (also known as democratur)
x) Democratic republic – republic which has democracy through
elected representatives
xi) Democratic socialism– form of socialism ideologically opposed to
the Marxist–Leninist styles that have become synonymous with
socialism; democratic socialists place an emphasis
on decentralized governance in political democracy with social
ownership of the means of production and social and economic
institutions with workers' self-management.
xii) Economic democracy– theory of democracy involving people
having access to subsistence, or equity in living standards.
xiii) Grassroots democracy– emphasizes trust in small decentralized
units at the municipal government level, possibly using urban secession
to establish the formal legal authority to make decisions made at this
local level binding.
xiv) Guided democracy– form of democratic government with
increased autocracy where citizens exercise their political rights without
meaningfully affecting the government's policies, motives, and goals.
xv) Interactive democracy– proposed form of democracy utilising
information technology to allow citizens to propose new policies,
"second" proposals and vote on the resulting laws (that are refined by
Parliament) in a referendum.
xvi) Jeffersonian democracy– named after American statesman
Thomas Jefferson, who believed in equality of political opportunity
(for male citizens), and opposed to privilege, aristocracy and
corruption.
xvii) Liquid democracy– form of democratic control whereby voting
power is vested in individual citizens who may self-select provisional
delegates, rather than elected representatives.
xviii) Market democracy– another name for democratic capitalism,
an economic ideology based on a tripartite arrangement of a market-
based economy based predominantly on economic incentives through
free markets, a democratic polity and a liberal moral-cultural system
which encourages pluralism.
xix) Multiparty democracy– two-party system requires voters to
align themselves in large blocs, sometimes so large that they cannot
agree on any overarching principles.
xx) New Democracy– Maoist concept based on Mao Zedong's "Bloc
of Four Classes" theory in post-revolutionary China.
xxi) Participatory democracy– involves more lay citizen
participation in decision making and offers greater political
representation than traditional representative democracy, e.g., wider
control of proxies given to representatives by those who get directly
involved and actually participate.
xxii) People's democracy– multi-class rule in
which the proletariat dominates.
xxii) Radical democracy– type of democracy that
focuses on the importance of nurturing and
tolerating difference and dissent in decision-making
processes.
xxiv) Revolutionary democracy– ideology of
the Ethiopian People's Revolutionary Democratic
Front.
xxv) Semi-direct democracy– representative
democracy with instruments, elements, and/or
features of direct democracy.
xxvi) Sociocracy– democratic system of
governance based on consent decision making,
circle organization, subsidiarity, and double-linked
representation.
Example of Islamic Democracy
(KSA)
The major indicators for political rights
1. The degree to which fair and competitive elections
occur.
2. The ability of voters to provide their elected
representatives with real power.
3. The ability of peoples to organize into political
parties or other competitive political grouping of their
choice.
The major indicators for Civil Liberties
1.The existence of freedom of the press.
2.Equality under the law for all individuals.
3.The extent of personal social freedoms.
4.The degree of freedom from extreme
governmental indifference or corruption.
 Totalitarianism
The essence of totalitarianism can be found in its
very name; it is a form of rule in which the
government attempts to maintain 'total' control over
society, including all aspects of the public and
private lives of its citizens.
There are several characteristics that are common to
totalitarian regimes, including:
1. Rule by a single party
2. Total control of the military
3. Total control over means of communication (such
as newspapers, propaganda, etc…)
4. Police control with the use of terror as a control
tactic
5. Control of the economy
Totalitarianism & Its Types
It is a system of Govt. in which there is only one
political party and no rival parties are allowed. The
individuals submit totally to the requirements of the
state. Three types of totalitarianism are as under:
Theocratic Totalitarianism: It is a system of Govt. by
priests in which the laws of the state are the laws of
God. Here religious leaders are also the political
leaders.
Secular totalitarianism: It is the Govt. that is not
concerned with spiritual or religious affairs. Here the
government often imposes order through military
power and it is based on worldly (materialistic) rather
than religious concepts.
Communism: It is a form of secular totalitarianism.
Under communism, the political and economic systems
are virtually inseparable. Social and economic system
in which there is no private ownership and the means
of production belong to all members of the society.
 Capitalism
Capitalism generally refers to an economic system in
which the means of production are mostly privately
owned and operated for profit, and in which
investments, distribution, income, production and
pricing of goods and services are determined through
the operation of a free market. Economic system in
which a countries trade and industry are controlled by
private owners for profit, rather than by the state.
Features of Capitalism
1.The Right of private property
2.Freedom of enterprise
3.Freedom of choice by the consumers
4.Profit motive
5.Competition
6.Class conflict
7.Importance of price system
 Socialism
All socialist economic theories and arrangements are
united by the desire to achieve greater equality.
Socialist economics is a term which refers in its
descriptive sense to the economic effects of nations
with large state sectors where the government directs
the kind and nature of production.
Features of Socialist Economy
1. State ownership
2. No private enterprise
3. Economic equality
4. Equality of opportunity
5. Economic planning
6. Classless society
7. Lack of incentives
 THE IMPACT OF THE POLITICAL SYSTEM ON
MANAGEMENT DECISIONS
A. Political Risk: Political risk reflects the expectation
that the political climate in a foreign country will change
in such a way that a firm’s operating position will
deteriorate.
1. Types and Causes of Political Risk. Political actions
that may adversely affect a firm’s operations would
include government takeovers of property, operational
restrictions and damage to property or personnel. In
addition, civil unrest and disorder and antagonistic
external relations (including boycotts and other forms of
protest) may also negatively impact a firm’s operations.
2. Micro and Macro Political Risks: Micro political
risks are those aimed only at specific foreign investments
(e.g., a particular MNE), whereas macro political
risks affect a broad spectrum of foreign investors.
B. Government Intervention in the Economy: When
companies move abroad, management must deal with
governments that may have different attitudes about
their roles in their respective economies—attitudes
which may be inconsistent over time. Under
an individualistic paradigm the government believes
in minimal interference in the economy; it may
intervene to deal with market defects but generally
promotes marketplace competition. Under
a communitarian paradigm, however, whether
democratic (Japanese) or authoritarian (Chinese) in
nature, the government defines economic needs and
priorities and partners with business in major ways.
 INTERNATIONAL LEGAL
ENVIRONMENT
The International legal environment regulates the operations
of firms in international markets. Firms operating internationally
face major challenges in conforming to different laws,
regulations, and legal systems in different countries. If your
company engages in any transactions overseas, it will have to
familiarize itself with the general concepts of public and private
international law as well as foreign law, because all can affect
the manner in which you can engage in business abroad. We'll
look at the most essential aspects of the international legal
system that are relevant to businesses.
Public international law is the system of rules and principles
governing the conduct of and relationships between states and
international organizations as well some of their persons.
Private international law governs relationships between
persons and organizations engaged in international transactions
and addresses which laws will apply when the parties are in a
legal dispute.
Foreign law is a law enacted by a foreign country.
 Legal System
Legal system refers to a procedure or process for
interpreting and enforcing the law. It elaborates the rights
and responsibilities in a variety of ways. There are generally
considered to be five legal systems in the world today: civil
law, common law, customary law, religious law, and mixed
legal systems.
1. Civil law systems have their origin in the Roman legal
tradition. Civil systems vary widely, both in procedure and
substantive law, so conducting research on a particular
nation's civil law system should include looking at that
nation's specific system of law, but they do have some
trademark characteristics. Nations with civil law systems
have comprehensive, frequently updated legal codes. Most
importantly, case law is a secondary source in these
jurisdictions. France and Germany are two examples of
countries with a civil law system.
2. Common law systems, while they often have statutes, rely more
on precedent, judicial decisions that have already been
made. Common law systems are adversarial, rather than
investigatory, with the judge moderating between two opposing
parties. The legal system in the United States is a common law
system (with the exception of Louisiana, which has a mix of civil
and common law).
3. Customary law systems are based on patterns of behavior (or
customs) that have come to be accepted as legal requirements or
rules of conduct within a particular country. The laws of customary
legal systems are usually unwritten and are often dispensed by
elders, passed down through generations. As such, customary law
research depends greatly on the use of secondary
sources. Oftentimes, customary law practices can be found in mixed
legal system jurisdictions, where they've combined with civil or
common law.
4. Religious legal systems are systems where the law emanates from
texts or traditions within a given religious tradition. Many Islamic
nations have legal systems based in whole or in part on the Quran.
5. Mixed legal systems refer to legal systems where two or more of
the above legal systems work together.
 Legal Issues in International Business
Followings are the most general legal issues you should be aware of
when running an international business:
1) COMPANY LAWS: The first thing you will have to do when
expanding your business to another country is to register the
appropriate business structure. This can be a branch or a subsidiary of
your own company, or a new entity, the choice is all yours. Whatever
you decide you must consider the relevant company laws.
2) EMPLOYMENT LAWS: Running a global business means you
will employ staff in different locations. Employment laws differ
substantially from jurisdiction to jurisdiction and are usually applied
strictly by the local authorities. Making sure you comply with all
relevant wage, health and safety and other legal requirements is a must
for the proper operation of your business.
3. CORRUPTION ISSUES: Corruption is still a major issue in most
of the countries in the world. When doing business internationally,
please be extremely cautious with payments, as they can be considered
a corrupt practice in other parts of the world. Especially if you fall
under the jurisdiction of the US Foreign Corrupt Practices Act, you can
get prosecuted for a payment that was presented to you as a completely
ordinary customary practice.
4. INVESTMENT TREATIES: When deciding whether to
expand your business to a different country by investing there,
it is worth having a look if there are any investment agreements
in place between your home country and country in which you
intend to invest. There are numerous bilateral and multilateral
agreements whose goal is to promote foreign investment and
afford substantial protection to investors. Making use of such
treaties is really beneficial, as they impose a number of
obligations to the receiving state as to the level of legal
protection they should afford to foreign investors.
5. LEGAL SYSTEMS: Another important issue for businesses
that operate on an international level is the respect for the
fundamental difference between legal systems. There are
generally two legal regimes–the Civil law and the Common law
systems. The UK and USA are representatives of the common
law culture, where legal precedent is the leading factor.
Continental Europe is the core of the Civil law countries, where
mandatory legal rules are the primary source of law.
6. TAX LAWS: Compliance with tax regulations is a major
part of the legal obligations a business has. When doing
business internationally, you will have to pay taxes in all
different locations. There are international agreements
between states which support and ease such activities, and
help businesses plan their tax obligations. Tax is always one
of many big issues for all businesses so don’t take this
lightly.
7. IP RIGHTS: Intellectual property rights usually are
assigned in each country you have applied. This means that
if you have your company name trademark registered in one
state, protection will be afforded only in this jurisdiction.
The same premise is valid for patents. In practice, the
consequences of this regime are that in order to have your IP
rights protected, you should apply for such protection in any
country you are seeking it.
8. EXCLUSIVE DISTRIBUTION AGREEMENTS: Often times
when entering a new market, you will be offered the opportunity of
signing an exclusive distribution agreement with a single distributor,
who will be the only permitted entity to sell your products. There are
certain benefits to entering into such an agreement – usually, it allows
faster and easier entry into the market. On the other hand, however, it
limits significantly growth perspectives, as you will not be permitted to
allow a different distributor to sell or deliver your goods or services.
Moreover, such agreements have stringent conditions and are hard to
terminate. Another disadvantage is the distributor who holds exclusive
rights generally controls your business in this country, therefore can
have substantive power over it. When offered such a possibility,
evaluate the pros and cons and consider carefully your decision based
on your specific situation.
FINAL WORDS: RUNNING AN INTERNATIONAL BUSINESS
Running an international business is an exciting endeavor but you must
make sure your business complies with all legal requirements.
Otherwise, you could find your business being derailed because of it.
•Make sure you comply with all key legal requirements of running an
international business with a fact-find call with our legal team.
 Questions
1. Explain the terms: legal and political environment.
2. How would you differentiate between individualism
and collectivism?
3. State the different political ideologies..
4. Differentiate between communism and fascism.
5. What are the characteristics of democracy?
6. Discuss the different types of democracy.
7. State the major indicators for political rights.
8. What are the major indicators for Civil Liberties?
9. Define totalitarianism & state its classification.
10. Define capitalism with its features.
11. Define socialism with its features.
12. State impact of political system on mgt. decisions .
13. Define legal system and discuss its different types.
14. What are the legal issues in international business?
Thank
You
So
Much