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Politics, Law, and Business Ethics 3 Copyright © 2014 Pearson Education, Inc.

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Presentation on theme: "Politics, Law, and Business Ethics 3 Copyright © 2014 Pearson Education, Inc."— Presentation transcript:

1 Politics, Law, and Business Ethics 3 Copyright © 2014 Pearson Education, Inc.

2 3 - 2 Copyright © 2014 Pearson Education, Inc. Describe each main type of political system Identify the origins of political risk and how managers can reduce its effects Describe each main type of legal system and some important global legal issues Explain ethics and social responsibility and key issues facing international companies Explain how international relations affect international business activities Chapter Objectives

3 PepsiCo 3 - 3 Copyright © 2014 Pearson Education, Inc. Healthier snacks Lighter impact Employee welfare

4 3 - 4 Copyright © 2014 Pearson Education, Inc. Roles of History and Culture

5 3 - 5 Copyright © 2014 Pearson Education, Inc. Political Ideologies Both private and public groups need to balance each other’s power Every aspect of people’s lives must be controlled to preserve order Only individuals and private groups can preserve personal libertiesTotalitarianismAnarchismPluralism

6 3 - 6 Copyright © 2014 Pearson Education, Inc. ImposedauthorityImposedauthority Lack of constitutionalguarantees constitutionalguaranteesRestrictedparticipationRestrictedparticipation Totalitarianism  Leaders govern without people’s support  Government controls much of people’s lives  Leaders do not tolerate opposing viewpoints

7 3 - 7 Copyright © 2014 Pearson Education, Inc. Forms of Totalitarianism Theocratic totalitarianism (totalitarian religious leadership) Secular totalitarianism (military and bureaucratic leadership) Tribal totalitarianism Communist totalitarianism Right-wing totalitarianism

8 3 - 8 Copyright © 2014 Pearson Education, Inc. Business in Totalitarian Nations Risk Factors Arbitrary nature of business can mean that laws are vague or do not exist Bureaucrats may interpret laws however they wish

9 War’s causes: Poverty Slow economic growth Natural resource dependency War’s costs: $5 billion in health losses GDP falls by 2.2% Recovery takes 10 years Global Sustainability: From Civil War to Civil Society 3 - 9 Copyright © 2014 Pearson Education, Inc.

10 3 - 10 Copyright © 2014 Pearson Education, Inc. Democracy Government leaders are elected directly by the wide participation of the people or their representatives

11 3 - 11 Copyright © 2014 Pearson Education, Inc. Life and Business in Democracies Freedom of expression Periodic elections Full civil and property rights Minority rights Nonpolitical bureaucracies

12 3 - 12 Copyright © 2014 Pearson Education, Inc. Discussion Question What are the three main features of totalitarianism and the five freedoms that democracies strive to provide?

13 3 - 13 Copyright © 2014 Pearson Education, Inc. Answer to Discussion Question Totalitarian governments tend to share imposed authority, a lack of constitutional guarantees, and restricted political participation Democracies strive to provide freedom of expression, periodic elections, full civil and property rights, minority rights, and nonpolitical bureaucracies

14 3 - 14 Copyright © 2014 Pearson Education, Inc. Types of Political Risk Conflict and violence Policy changes Terrorism and kidnapping Local content requirements Property seizure

15 3 - 15 Copyright © 2014 Pearson Education, Inc. Arises from:  People’s resentment toward government  Territorial disputes between nations  Ethnic, racial, or religious disputes Reduces ability to:  Obtain materials and equipment  Manufacture and distribute products  Protect employees’ lives and firm’s assets Conflict and Violence

16 3 - 16 Copyright © 2014 Pearson Education, Inc. Fly nonstop when possible and avoid unsecured areas of airports During your stay, vary your routines and means of transportation Keep a low profile and refrain from loud, flashy behavior Give friendly but cautious answers to personal questions Travel with others when possible and ask directions guardedly Know local emergency procedures before trouble strikes Manager’s Briefcase: Your Global Security Checklist

17 3 - 17 Copyright © 2014 Pearson Education, Inc. Property Seizure Confiscation Forced transfer of assets from a company to the government without compensation Expropriation Forced transfer of assets from a company to the government with compensation Nationalization Forced asset transfer to the government of an entire industry

18 3 - 18 Copyright © 2014 Pearson Education, Inc. Policies and Laws Policy changes restrict: Local content requirements: Specify the portion of a good or service to be supplied by local firms  Foreign ownership  Investment levels  Business activities

19 3 - 19 Copyright © 2014 Pearson Education, Inc. Managing Political Risk I Adaptation Incorporate risk into business strategies Adaptation Incorporate risk into business strategies Localization Development assistance Partnerships Insurance

20 3 - 20 Copyright © 2014 Pearson Education, Inc. Managing Political Risk II Agencies specializing in political-risk services Current employees with relevant information Information gathering Gather data to better predict and manage risk Information gathering Gather data to better predict and manage risk

21 3 - 21 Copyright © 2014 Pearson Education, Inc. Managing Political Risk III Corruption Foreign Corrupt Practices Act Lobbying Influencing local lawmakers Influence local politics Present firm’s views on political matters Influence local politics Present firm’s views on political matters

22 3 - 22 Copyright © 2014 Pearson Education, Inc. Discussion Question Incorporating political risk into business strategies by modifying operations, the product mix, or some other business element is called ____________. a. Specialization b. Globalization c. Localization

23 3 - 23 Copyright © 2014 Pearson Education, Inc. Answer to Discussion Question Incorporating political risk into business strategies by modifying operations, the product mix, or some other business element is called ____________. a. Specialization b. Globalization c. Localization

24 3 - 24 Copyright © 2014 Pearson Education, Inc. Common Law Precedent Past cases before the courts Usage How laws are applied Tradition Nation’s legal history

25 3 - 25 Copyright © 2014 Pearson Education, Inc. Civil Law Rules and statutes constitute a legal code Defines all obligations, responsibilities, and privileges Dates to Roman times in the fifth century B.C.

26 3 - 26 Copyright © 2014 Pearson Education, Inc. Theocratic Law Legal tradition based on religious teachings Islamic law Jewish law Hindu law

27 3 - 27 Copyright © 2014 Pearson Education, Inc. Global Legal Issues I Intellectual property - Result of intellectual talent and abilities - Piracy/counterfeits a serious problem  Patent Excludes all but the inventor from making, using, or selling the invention (WTO = 20 years)  Trademark Words or symbols that distinguish a product and its manufacturer ("Coca-Cola")  Copyright Freedom of creator to publish or dispose of original works as they choose ("Happy Birthday to You")

28 3 - 28 Copyright © 2014 Pearson Education, Inc. Business Software Piracy Source: Based on the Eighth Annual BSA and IDC Global Software Piracy Study (Washington, D.C.; Business Software Alliance, May 2011), pp. 8–9, (www.bsa.org/globalstudy)

29 3 - 29 Copyright © 2014 Pearson Education, Inc. Global Legal Issues II  Standardization - Interpreting and applying laws uniformly  Product safety and liability - Responsibility for damage, injury, or death  Taxation - Income, sales, consumption, and VAT  Antitrust (antimonopoly) laws - Prevent market sharing, price fixing, and unfair advantage

30 3 - 30 Copyright © 2014 Pearson Education, Inc. Discussion Question What are intellectual property rights and what is their significance to business?

31 3 - 31 Copyright © 2014 Pearson Education, Inc. Answer to Discussion Question Intellectual property rights are legal rights to resources that result from intellectual abilities and any income the resources generate. They can be traded, sold, and licensed in return for fees and/or royalty payments. Intellectual property laws are designed to compensate people whose property rights are violated.

32 3 - 32 Copyright © 2014 Pearson Education, Inc. Friedman ViewCultural Relativism UtilitarianismRighteous Moralism Ethics and Social Responsibility PHILOSOPHIES

33 3 - 33 Copyright © 2014 Pearson Education, Inc. Fight to eliminate bribery and corruption Improve labor conditions and guard human rights Practice fair trade to help the disadvantaged Protect the environment and conserve resources Corporate Social Responsibility Issues Going beyond legal obligations to balance commitments to investors, customers, communities, and other companies

34 3 - 34 Copyright © 2014 Pearson Education, Inc. International Relations  Stable business environments  Improved business communications  Efficient distribution systems  Expanded opportunities  Diminished risk levels  Prompt and equitable dispute resolution Favorable international political relations foster:

35 3 - 35 Copyright © 2014 Pearson Education, Inc. Discussion Question The philosophy of business ethics and social responsibility conveyed by the expression, “When in Rome, do as the Romans do,” is called the __________ view. a. Righteous moralist b. Cultural relativist c. Utilitarian

36 3 - 36 Copyright © 2014 Pearson Education, Inc. Answer to Discussion Question The philosophy of business ethics and social responsibility conveyed by the expression, “When in Rome, do as the Romans do,” is called the __________ view. a. Righteous moralist b. Cultural relativist c. Utilitarian

37 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2014 Pearson Education, Inc. 3 - 37


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