1. The Political, Legal, and Technological Environment of Global Business
Chapter 2

2. Chapter Outline Political systems Four global foundations of law
Principles of international law
Legal and regulatory issues
Technological environment and global shifts in production

3. Political Systems
Democracy: government by citizens or by elected officials
Fair and free elections
Freedom of the press, speech, assembly, and religion
Economic freedom
Non-political police and court system
Civilian control of the military
Democracies are often called “free countries”.

4. Political Systems (2)
Totalitarianism: one political party or individual exerts control over every part of political and human life
Communist totalitarianism
Theocracy: government based on the principles of a particular religion.
Right-wing totalitarianism allows some economic freedom but not political freedom. Often a military dictatorship
Totalitarian states are also called “dictatorships”.

5. “Partly free” countries have some characteristics of a
Source:
“Partly free” countries have some characteristics of a
democracy and some characteristics of a dictatorship

6. Four Global Foundations of Law
Islamic law
Socialist law
Civil law
Common law

7. Four Global Foundations of Law Islamic Law (Shari’ah)
Derived from interpretation of the Qur’an and teachings of the Prophet Mohammed
Specifies behavior in politics, economics, banking, contracts, marriage, and many other social and business issues.
Found in some Islamic countries
Middle East
Central Asia

8. Implications of Islam for Business
Businesses are often expected or required to make charitable contributions.
Business should not exploit people.
A company should treat employees, investors, and customers fairly.
It is wrong to charge interest for lending money.
Islamic banks do not charge interest but make their profits from fees.
Some countries have both regular banks and Islamic banks
There is a growing global market for products that conform to Islamic law.

9. Four Global Foundations of Law Socialist Law
Originally, property in Communist countries was owned by the government
Still true in Cuba and North Korea
Mixture of state-owned and private enterprise in Russia, China, Vietnam
Government still takes an active role in business
Many regulations
Arbitrary and inconsistent enforcement of regulations

10. Four Global Foundations of Law Civil Law
Derived from Roman law
Western and central Europe
Some Latin American countries
Louisiana state law
Cases are decided on the basis of written law codes
Laws are more detailed than in common law systems.
Judges have less power to interpret the law than in common law systems.
Judges often direct investigations.

11. Four Global Foundations of Law Common Law
Comes from English law
Based on custom and precedent (previous cases)
Foundation of legal system in the United States, Canada, England, Australia, India, and
New Zealand
These countries also have written law codes
Their legal systems are a combination of common law and civil law

12. Business Law Civil Law vs. Common Law

13. Business Implications of Civil Law
Register patents, copyrights, trademarks, logos, or other intellectual property in countries where the firm may want to do business in the future
Register contracts or have them notarized.
A company has fewer choices about the terms of a contract.
Unforeseeable human actions, such as labor strikes or riots, are valid reasons for not complying with a contract.

14. Principles of International Law
Sovereignty: governments have the right to rule as they see fit.
International jurisdiction
A country has jurisdiction within its legal territory
A country has power over its citizens and businesses, wherever they are located
A country has jurisdiction over actions that harm its national security, even if those actions occurred outside its territory

15. Principles of International Law (2)
Doctrine of comity: Governments show mutual respect for the laws, institutions, and governments of other countries who are exercising jurisdiction over their own citizens (doctrine but not law)
Act of State Doctrine (U.S. law): All acts of other governments are considered to be valid in U. S. courts

16. Principles of International Law (3)
Treatment of aliens
Countries have the legal right to refuse admission of foreign citizens and to impose restrictions on their conduct, right of travel, where they can stay, and what business they may conduct
Countries can also can deport citizens of foreign countries

17. Examples of Legal and Regulatory Issues
Privatization has opened up new business opportunities.
Nationalization
Regulation of trade and investment
WTO rules on trade and investment
Antidumping regulations and countervailing duties
How companies can protect themselves in trade disputes

18. Nationalization
Nationalization is the conversion of a private enterprise to government ownership. Almost always initiated by the government.
The government may or may not pay the company's stockholders or investors for the enterprise.
When the companies are paid for the property, the price is usually set by the government and is usually far below the market value of the property.
When no payment is made, the conversion is called expropriation or confiscation

19. WTO Rules on Trade and Investment
These are examples of trade practices that are forbidden under WTO rules:
Government financial support for local firms (subsidies)
Requiring MNCs to accept local partners
Import tariffs that are higher than WTO agreements allow
“dumping” goods in foreign markets

20. Dumping Dumping occurs when
a company sells a product in a foreign market for less than the cost of production and shipment or
a company sells a product in a foreign market for less than the price charged in the home country
It is often hard to prove that a company has sold a product below cost.

21. Countervailing Duties
The World Trade Organization allows its members to punish dumping by charging an import tariff, called a countervailing duty.
In most countries, these tariffs can be imposed if
the government investigates and concludes that dumping has occurred AND
domestic producers can show that they have been harmed by dumping
Countervailing duties can also be imposed if a domestic producer has been harmed by subsidies.

22. How Companies Can Protect Themselves in Trade Disputes
Companies should monitor trade disputes
Retaliatory tariffs and quotas are often imposed on products that are not involved in the original dispute
EU retaliated against U.S. steel tariffs by raising tariffs on U. S. citrus fruit and textiles
Companies can lobby their own government to settle the dispute or to persuade the foreign government to remove their products from the list

23. Technological Environment and Global Shifts in Production
E-business capabilities
E-business issues
Language translation software for India
Biotechnology
Genetically modified crops
Biofuels, such as ethanol
Outsourcing and offshoring
Manufacturing
Knowledge work
Expert systems

24. E-Business Capabilities
Business-to-business e-commerce: global purchasing, sales, collecting payment, financial services
Business-to-consumer:
Online purchasing and payments
Online financial services
Debit cards and electronic cash
Wireless communication, cell phones, and phone cards improve communication in remote areas and poor countries

25. E-Business Issues Electronic technology and standardization
GSM vs. CDMA technology for telecommunications
Microsoft Windows vs. Linux
Linux is open source software that can be modified by users. Ubuntu is a version of Linux that is more suitable for end users than earlier versions.
Reliability of telecommunications
Software for language translation
Web sites in various languages

26. Example: Language Translation Software for India
Hindi is the national language of India. About 420 million people speak Hindi as their first language.
Most other people from India speak one of 22 regional languages as their first language.
These languages have different scripts.
Quillpad software allows users to use a standard keyboard to type words phonetically and have them translated into Hindi and 9 regional languages. English words can also be translated into those languages