ATAL BIHARI VAJPAYEE INDIAN INSTITUTE OF INFORMATION

TECHNOLOGY AND MANAGEMENT

International Business
Chapter 3 – The Political and Legal Environment Facing Business
Submitted to – Prof. Naval Bajpai
Submitted by – Ruchi Sengar
2021MBA-04
 POLITICAL SYSTEM

• A political system refers to the set of

formal legal institutions that constitute
a “government” or a “state”.
• The system comprises of institutions,
organizations, rules, principles and
behaviours related to conflict
resolution i.e., court system, executive,
parliament, behaviours like voting.
POLITICAL ENVIRONMENT
 INDIVIDUALISM

• Individualism refers to the primacy of

the rights and role of the individual.
• It is a belief in the freedom and worth
of the individual over the security and
welfare of the group. 
• United states has the political system
with the most pronounced
individualistic orientation.
 COLLECTIVISM

• Collectivism refers to the primacy of

the rights and role of the community.
• It represents a belief in achieving the
goals of the group and the common
good over the goals of any one
individual.
• Japan and China follows a system
that feature a collectivist orientation.
POLITICAL IDEOLOGY
 DEMOCRACY - TYPES

• Parliamentary – Citizens exercise political power by electing representatives to a legislative branch of

government called a parliament like in India.
• Liberal – Protects certain Individual freedoms, such as freedom of speech, assembly, and religion, and
certain individual liberties like right to private property and privacy. Ex – Japan and New Zealand.
• Multiparty – When  multiple political parties across the political spectrum run for national elections,
and all have the capacity to gain control of government offices, separately or in coalition like in India,
Indonesia, Germany, France.
• Representative – Where people’s elected representatives hold ultimate sovereignty like in USA.
• Social – Advocates the use of democratic means to achieve a gradual transition from capitalism to
socialism. Ex – Norway and Sweden.
TOTALITARIANISM - TYPES

• Authoritarianism – Citizens are subject, at the expense of political and civil liberties, to
state authority in many aspects of their lives like in North Korea.
• Fascism – Where a government ruled by a dictator controls the lives of the people and in
which people are not allowed to disagree with the government. Ex – Italy (from 1924-
43).
• Secular totalitarianism – Under such system, leaders maintain power by wielding the
authority of the state like China.
• Theocratic totalitarianism - Political power is monopolized by a party, group, or individual
that governs according to religious principles. Ex – Taliban party in Afghanistan.
TRENDS IN POLITICAL SYSTEM

Engines of Democracy –
• The inability of totalitarian systems to advance the economy
• An improvement in communication technology
• The conviction that democracy raises living standards
POLITICAL RISK

It refers to the risk that political decisions or events in a country

negatively affect the profitability or sustainability of an investment.
Types –
• Systematic
• Procedural
• Distributive
• Catastrophic
POLITICAL RISK – CONTD.

• Systematic – Risks that impact all firms whose activities are affected by the
political system.
• Procedural – This examines the ways in which users might be manipulated into
using the product in unintended ways that could compromise their security.
• Distributive – Profit-sharing with local partners and repatriation of funds get
restricted in this risk.
• Catastrophic - These risks disrupt society through civil wars, ethnic discord,
illegitimate regimes, an act of war, and terrorism, to name a few.
LEGAL SYSTEM - TYPES

Types –
• Common law - USA
• Civil law - India
• Theocratic law – Saudi Arabia, Iran
• Customary law
• Mixed law – Africa and Asia
TRENDS IN LEGAL SYSTEMS

• The preference for stability – One thing is common in all form of political system
is political and social stability. This stability will shape the ways in which
government officials will use the legal system to regulate the business activity.

• The influence of National legacies – Countries like China, Venezuela, Thailand

and Russia have enjoyed an acceleration of economic growth in the past few
years. Thus it is tempting to attribute to these newly developed open nations
certain principles of law that prevail in well-developed economies like those of in
USA, Australia, France.
OPERATIONAL CONCERNS

Operational concerns that face managers worldwide include -

• Starting a business
• Entering and enforcing contracts
• Hiring and firing local workers.
• Closing down the business
STRATEGIC CONCERNS

Strategic concerns that face managers worldwide –

• Product safety and liability
• Marketplace behaviour
• Product origin and local content
• Legal jurisdiction
• Arbitration
 INTELLECTUAL PROPERTY RIGHTS

• Intellectual rights refer to the right to the right to control and derive the benefits from
writing, inventions, process and identifiers.
• The Chinese connection; or, “We can copy everything except your mother”
• The role of local attitudes : -
Legal legacies – rule of law vs rule of man
Level of economic development – Generally poor countries provide weaker legal
protection of intellectual property.
Cultural attitude – Notably, individualist societies are more vigilant than collectivist
societies.
THANK YOU
For The Attention