Remember, syllabus and schedule are at

Set 2: The Political, Legal, and Technological Environment Various political systems around the world Various legal/regulatory environments Changes affecting MNCs, countries—technology, etc. MNCs are affected by these factors in multiple countries…

Political Environment: Ideologies: ideas/beliefs/values about nature of political systems and governments individualism, collectivism, socialism Political systems: a couple of basic dimensions rights of citizens relative to government (range democratic to totalitarian) individualism vs. collectivism as focus of system democratic tends to emphasize individualism, totalitarian tends to emphasize collectivism.

Ideology: Individualism Freedom to pursue individual goals without constraint. Book argues it is similar to capitalism and free markets. Do you agree? Is there capitalism without freedom? Is there individualism without capitalism?

Ideology: Collectivism Group goals/needs may be more important than individual Varous forms depending on societal goals: e.g., fascism (authoritarian, nationalistic) militarism, corporatism, totalitarianism

Ideology: Socialism State or group ownership/control of institutions for common benefit/efficiency/effectiveness All countries are socialist to a degree, most more than United States Question: How is the U.S. socialist? Extreme version is communism—all productive activity is controlled by state. Private personal property exists to varying degrees.

Political System: Democracy Roots in ancient Greece Government run by citizens directly or by elected representatives Representatives can be removed (limits state’s power) Successful democratic societies seem to need multiple political groups/parties North Korea: 1 US: 2 Italy: 6 major, dozens minor

Political System: Totalitarianism One representative party/group with great control Opposition usually suppressed e.g., North Korea, Burma, China (but shifting and losing control), other former communist countries Dictatorships, some monarchies/inherited leadership. Typical characteristics: censorship of press/TV/radio, censorship of arts (literature, music, fine art), weak individual rights/civil liberties, travel restriction, limits on outside influence.

Example: China Government opening economy: Converting state enterprises into corporations (beware Russian example) Some trade liberalization More open, democratic, tolerant of freedom and dissent State responsible for much: land ownership, housing, education, training Seeking a more dynamic market economy to address poverty and population

Example: Europe Privatization and economic liberalization EU-wide political and economic integration Political power—variable and complex Connected economically, but differs culturally

Example: The Middle East Strong role of religion in government in many countries—theocracy vs secular government Ranges from democratic to authoritarian, tendency: socialism > capitalism e.g., Israel: socialist, democratic, somewhat theocratic Syria: authoritarian, not theocratic Saudi Arabia: theocratic Turmoil/war/revolution/violence: widespread

Example: Russia Long aftermath of communism and Soviet rule Economic policy—neglect, confusion Weak infrastructure, complex politics, corruption (oligarchs forward) But: education,technological sophistication in many fields. Concerned about West and China.

Legal and Regulatory Environment Complicated for MNCs MNCs must understand legal framework in each market

Four Global Foundations of Law: 1.Islamic 2.Socialist 3.Common 4.Civil or code

Islamic Law Interpret Koran and Mohammed Hadith: sayings of Mohammed Body of scholarly interpretation Used in Islamic countries in Middle East, Central Asia Extent of use/focus varies by country

Socialist/Communist Law Based on communist theory by Marx, Engels, others Individuals subservient to group, property subservient to state or state companies Influences current law in former communist countries: Members of former Soviet Union Peoples’ Republic of China Vietnam North Korea Cuba Weak/absent/different business law—impediment to foreign investment Political constitutions often similar to U.S.

Common Law Based on English law Magna Carta (1215) and forward Governance through legislation, precedent matters Basis of legal system in: United States, Canada, United Kingdom, Australia, New Zealand

Civil or Code Law Derived from Roman law Career judges dominate application/interpretation Found in: France, parts of Latin America, state of Louisiana Example: French judges

Basic Principles of International Law Sovereignty and Sovereign Immunity International Jurisdiction Doctrine of Comity Act of State Doctrine Treatment and Rights of Aliens Forum for Hearing and Settling Disputes

The Sovereignty and Sovereign Immunity principle: governments have the right to rule themselves as they see fit. The International Jurisdiction principle: every country has jurisdiction over its citizens no matter where they are located. Nationality principle Territoriality principle Protective principle

The Doctrine of Comity principle: there must be mutual respect for the laws, institutions, and government of other countries in the matter of jurisdiction over their own citizens. The Act of State Doctrine principle: all acts of other governments are considered to be valid by U.S. courts, even if such acts are illegal or inappropriate under U.S. law

Treatment and Rights of Aliens Countries may refuse to admit foreign citizens impose special restrictions on their conduct, right of travel, where they can stay, and what business they may conduct deport them

Forum for Hearing and Settling Disputes U.S. courts can dismiss cases brought by foreigners but they must examine issues like: Location of the plaintiffs Where evidence must be gathered Where property to be used in restitution is located

Some current legal/regulatory issues Foreign Corrupt Practices Act Illegal to influence foreign officials by: personal payment political contribution Restrictive bureaucratization Privatization

Regulating Trade and Investment Countries use law/regulation to manage trade and investment Unfair trade practices (WTO, other agreements) Government subsidies Requiring local partners for MNCs Blocking trade and investment (high tariffs, restrictive regulation) Possible responses are the same things

Big changes continuing Drivers include technological change—like what??? investment flows in/out of countries production moves due to labor costs (outsourcing, offshoring) E-business: B2B, B2C, E-tailing Affect business and all countries

Projected U.S. job changes

What we just did Set 2 Various political systems around the world Various legal/regulatory environments Changes affecting MNCs, countries—technology, etc.