© 2014 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.6–2 1.Provide an overview of the different global political systems and their potential impact on international business. 2.Explain the differences among communism, capitalism, and socialism and how these different economic ideologies affect the conduct of international business. 3.Discuss the key political and economic risks and the role of corruption when conducting global business. 4.Analyze the different types of legal systems, and some key principles involving criminal, contract, tax, product safety, and dispute settlement law. 5.Discuss the importance of intellectual property protections in today’s global business environment, and the major types of intellectual property protections including patents, trademarks, and copyrights.

Political Systems © 2014 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.6–3

National Economic Ideologies © 2014 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.6–4

Political Risks © 2014 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.6–5 Political Risks The risks that political forces or problems in a given country will have a meaningful negative impact upon the conduct of business in that country Micropolitical Risk A political risk that only affects a certain industry or set of firms in a given country Macropolitical Risk A political risk that essentially affects all businesses in a given country

Political Risk and Global Terrorism Terrorism Risk Insurance Act of 2002 – A United States law that after a certain deductible provides U.S. businesses government insurance coverage for the risk of terrorism Overseas Private Investment Corporation (OPIC) – A U.S. government agency that sells political risk insurance to U.S. businesses operating in countries with which the United States has a bilateral investment treaty © 2014 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.6–6

© 2014 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.6–7 EXHIBIT 6.1 MOST DANGEROUS COUNTRIES IN THE WORLD – Somalia 2. Afghanistan 3. Iraq 4. Democratic Republic of Congo 5. Pakistan 6. Gaza, Palestinian Territories 7. Sri Lanka 8. Yemen 9. Sudan 10. Zimbawe 11. Cote d’Ivoire 12. Haiti 13. Algeria 14. Nigeria 15. Georgia/Caucasus, Russia

CorruptionCorruption © 2014 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.6–8 A situation where businesses are able to illegally alter relevant private and/or public decision making by way of bribes, kickbacks, blackmail, extortion, and related activities Corruption Business corruption involving other private businesses, individuals, or groups Private corruption The practice of making illegal payments to government officials or engaging in blackmail, extortion or other related activities to obtain government contracts or governmental approval for business activities Public corruption

© 2014 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.6–9 EXHIBIT 6.2 TRANSPARENCY INTERNATIONAL BRIBE PAYERS INDEX Belgium Canada Netherlands Switzerland Germany United Kingdom8.6 5 Japan Australia France Singapore United States Spain Hong Kong South Africa South Korea Taiwan Brazil Italy India Mexico China Russia 5.9 (Scores range from 0 to 10. The higher the score for the country, the lower the likelihood of companies from this country to engage in bribery when doing business abroad. Based on Transparency International’s 2008 Bribe Payers Survey of 2,742 senior business executives from 26 developed and developing countries, selected on the basis of the size of their imports and foreign direct investment inflows.)

The Legal Environment Is based on a comprehensive listing of legal rules in sets of written codes of lawIs based on a comprehensive listing of legal rules in sets of written codes of law Is comprised of legislative bodies that enact less specific legal rules that give judges or courts considerable authority in interpreting these rules based on precedent and other factorsIs comprised of legislative bodies that enact less specific legal rules that give judges or courts considerable authority in interpreting these rules based on precedent and other factors Is based on a religious document and religious teachingsIs based on a religious document and religious teachings Civil Law Legal System Common Law Legal System Theocratic Law Legal System © 2014 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.6–10

Types of Laws © 2014 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.6–11 Criminal Law Contract Law Tax Law Antitrust Laws Product Safety Law Dispute Settlement Law

LawsLaws © 2014 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.6–12 Establishes which violations of a nation’s laws are crimes punishable by possible incarceration Governs legally enforceable agreements between parties to engage in economic exchange Deal with governmental levying of taxes on individuals and corporations Promote “fair competition” among businesses Criminal Law Contract Law Tax Law Antitrust Laws

Antitrust (Anti-Monopoly) Law Collusion – The practice of companies acting in a manner which secretly thwarts competition amongst themselves Dividing up markets Collaborating to fix prices on goods and services Monopoly – The situation where there is only a single seller of a product in an industry and there are very high barriers to enter that industry © 2014 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.6–13

Product Safety Law – Establishes the standards of product safety to which the manufacturers and sellers of products are held Caveat Emptor (“Buyer Beware”) – Places the burden of determining product safety on consumers Caveat Venditor (“Seller Beware”) – Places on manufacturers or sellers the burden of making sure their products are safe or at least clearly and explicitly warning consumers about the potential safety risks of their products © 2014 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.6–14

Dispute Settlement Law © 2014 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.6–15 Governs how disputes arising in the conduct of global business are settled Dispute Settlement Law Involves bringing a dispute to a publicly or governmentally run court of law for resolution LitigationLitigation The disputing parties designate a neutral private person or group of persons to hear and decide their dispute ArbitrationArbitration

Intellectual Property Protections Intellectual Property – Property that is the product of intellectual rather than physical activity Intellectual Property Protections – The limited monopoly rights legally granted by a nation to the creator of intellectual property Patent Trademark Copyright © 2014 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.6–16

Protecting Intellectual Property © 2014 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.6–17 The right granted to the inventor of a product or process that excludes others from selling, making, or using the invention for a certain period of time A distinctive phrase, name, word, picture, symbol or design, or combination of these, that identifies a given business’ service or product and is owned by said business The exclusive legal right that authors, playwrights, publishers, artists, composers, performers, photographers, and other creators have to publish and disseminate their work as they see fit. PatentTrademarkCopyright

Loss of Intellectual Property Protection Genericized Trademark – A trademark that has become so well known or colloquial that it now describes a general class of product or service, as opposed to a specific product or service as intended by the trademark’s owner For a list of genericized trademarks, click on the following link: – Generic and genericized trademarks Generic and genericized trademarks © 2014 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.6–18

© 2014 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.6–19 KEY TERMS democracy Athenian democracy representative democracy totalitarian government communism socialism capitalism economic risks political risks micropolitical risk macropolitical risk terrorism Terrorism Risk Insurance Act of 2002 Overseas Private Investment Corporation (OPIC) corruption private corruption public corruption Foreign Corrupt Practices Act (FCPA) civil law legal system common law legal system