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Daniels03 - The Political and Legal Environments Facing Business
Daniels03 - The Political and Legal Environments Facing Business
Chapter Three
The Political and Legal
Environments Facing Business
Chapter Objectives
• To discuss the different goals and functions of political
systems
• To profile trends in the emergence and diffusion of
political systems
• To identify the idea of political risk and approaches to
managing it
• To understand how different political and legal systems
affect the conduct of business
• To profile trends in the evolution and diffusion of legal
systems
• To examine the major legal issues facing international
business companies
• To profile the idea of intellectual property and the bases
of concern and controversy
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Political System Defined
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Fig. 3.1: Political and Legal
Influences on
International Business
3-4
Ways to Assess Political
Systems
• Individualistic
-people accept the primacy of individual freedoms
in the political, economic, and cultural realms
-people believe in minimal government intervention
• Collectivist
-people reason that the needs of society take
precedence over the needs of the individual
-people believe that it is the government’s role
to define the needs and priorities of the country
Collectivist paradigms may be either democratic (Japanese)
or authoritarian (Chinese) in nature.
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Political Ideology Defined
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Types of Political Ideologies:
The Two Extremes
• Democracy: widespread citizen participation in
the decision-making and governance processes,
either directly or through elected representatives
• Totalitarianism: the monopolization of power by
a single agent; opposition is neither recognized nor
tolerated
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Fig. 3.2: The Political Spectrum
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Features of Contemporary
Democratic Systems
• freedom of opinion, expression,
and the press
• freedom to organize
• free elections
• limited terms for elected officials
• an independent and fair court system
• a nonpolitical bureaucracy
and defense infrastructure
• citizen access to the decision-making process
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Fig. 3.3: Comparative Measures
of Freedom
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Map 3.2: Global Trends in
Freedom: Political Freedom 2004
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Trends in Political Systems
• Totalitarian regimes continue to fail as citizens
challenge the right of the state to govern.
• Many who champion democracy truly believe
that greater political freedom also leads to
economic freedom and higher standards of
living.
Differentialism, i.e., the clash of civilizations,
refers to the arguments that apparently innate
and irreconcilable difference amongst cultures
can trigger a backlash against Western ideas
regarding political rights and civil liberties.
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Political Risk Defined
3-13
Types of Political Risk
[ranging from the least to the most destructive]
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Legal System Defined
3-16
Types of Legal Systems
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Fig. 3.4: The Diffusion of Civil Law:
A Selective Profile
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Legal Issues in International Business
• Operational concerns
– ease of entry and exit
– hiring and firing employees
– contract enforcement
• Strategic concerns
– product safety and liability
– marketplace behavior
– product origin
– legal jurisdiction
– arbitration [continued]
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• Intellectual property rights [IPRs]:
ownership rights to intangible assets
[copyrights, patents, trademarks, etc.]
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Implications/Conclusions
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• International business is affected by laws
and regulations enacted both by countries
and by international organizations.
• Laws may be at cross-purposes; some
may diminish the ability of firms to
compete with foreign competitors.
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