Chapter Three The Political and Legal Environments Facing Business International Business Part Two Comparative Environmental Frameworks

3-2 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall To discuss the goals and functions of a political system To profile trends in the emergence and diffusion of contemporary political systems To explain the idea of political risk and describe approaches to managing it To understand how political and legal systems affect the conduct of business To describe trends in the evolution and diffusion of contemporary legal systems To discuss the issue of the rule of law versus the rule of man To explain legal issues facing international companies To explain the idea of intellectual property and to discuss areas of concern and controversy Chapter Objectives

3-3 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Definition of a Political System The complete set of institutions, political organizations, and interest groups, The relationships among institutions, and the political norms and rules that govern their functions

3-4 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Individualism vs. Collectivism Individualism: primacy of the rights and role of the individual Collectivism: primacy of the rights and role of the community

3-5 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Political Ideology The system of ideas that expresses the goals, theories, and aims of a sociopolitical program Most modern societies are pluralistic— different groups champion competing political ideologies

3-6 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Democracy Wide participation by citizens in the decision-making process Five types:  Parliamentary  Liberal  Multiparty  Representative  Social

3-7 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Totalitarianism Restricts decision making to a few individuals Types:  Authoritarianism  Fascism  Secular totalitarianism  Theocratic totalitarianism

3-8 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Trends in Political Systems Engines of democracy:  Failure of totalitarian systems to deliver economic progress  Improved communication technology  Belief that democracy leads to improved standards of living

3-9 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Definition of Political Risk The risk that political decisions or events in a country negatively affect the profitability or sustainability of an investment Types:  Procedural  Distributive  Catastrophic

3-10 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Definition of a Legal System The mechanism for creating, interpreting, and enforcing the laws in a specified jurisdiction Types:  Common law  Civil law  Theocratic law  Customary law  Mixed systems

3-11 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Trends in Legal Systems The preference for stability The influence of national legacies

3-12 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Bases of Rules Rule of Man Rule of Law

3-13 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Operational concerns that face managers worldwide Starting a business Entering and enforcing contracts Hiring and firing local workers Closing down the business

3-14 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Strategic concerns that face managers worldwide Product safety and liability Marketplace behavior Product origin Legal jurisdiction Arbitration

3-15 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Intangible property rights that are a result of intellectual effort Intellectual property rights refer to the right to control and derive the benefits from writing, inventions, processes and identifiers Local attitudes play a large role in piracy Intellectual property