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Chapter Three

The Political and Legal
Environments Facing Business
International Business
Part Two
Comparative Environmental
Frameworks
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• To discuss the goals and functions of a political system
• To profile trends in the emergence and diffusion of contemporary
political systems
• To explain the idea of political risk and describe approaches to
managing it
• To understand how political and legal systems affect the conduct of
business
• To describe trends in the evolution and diffusion of contemporary
legal systems
• To discuss the issue of the rule of law versus the rule of man
• To explain legal issues facing international companies
• To explain the idea of intellectual property and to discuss areas of
concern and controversy
Chapter Objectives
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Definition of a Political System
• The complete set of institutions, political
organizations, and interest groups,
• The relationships among institutions, and
the political norms and rules that govern
their functions
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Individualism vs. Collectivism
• Individualism: primacy of the rights and
role of the individual
• Collectivism: primacy of the rights and role
of the community
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Political Ideology
• The system of ideas that expresses the
goals, theories, and aims of a
sociopolitical program
• Most modern societies are pluralistic—
different groups champion competing
political ideologies
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Democracy
• Wide participation by citizens in the
decision-making process
• Five types:
 Parliamentary
 Liberal
 Multiparty
 Representative
 Social
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Totalitarianism
• Restricts decision making to a few
individuals
• Types:
 Authoritarianism
 Fascism
 Secular totalitarianism
 Theocratic totalitarianism
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Trends in Political Systems
• Engines of democracy:
 Failure of totalitarian systems to deliver
economic progress
 Improved communication technology
 Belief that democracy leads to improved
standards of living
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Definition of Political Risk
• The risk that political decisions or events
in a country negatively affect the
profitability or sustainability of an
investment
• Types:
 Procedural
 Distributive
 Catastrophic
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Definition of a Legal System
• The mechanism for creating, interpreting,
and enforcing the laws in a specified
jurisdiction
• Types:
 Common law
 Civil law
 Theocratic law
 Customary law
 Mixed systems
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Trends in Legal Systems
• The preference for stability
• The influence of national legacies
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Bases of Rules
• Rule of Man
• Rule of Law
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Operational concerns that face
managers worldwide
• Starting a business
• Entering and enforcing contracts
• Hiring and firing local workers
• Closing down the business
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Strategic concerns that face
managers worldwide
• Product safety and liability
• Marketplace behavior
• Product origin
• Legal jurisdiction
• Arbitration
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• Intangible property rights that are a result
of intellectual effort
• Intellectual property rights refer to the right
to control and derive the benefits from
writing, inventions, processes and
identifiers
• Local attitudes play a large role in piracy
Intellectual property