2-National Differences in JGKHJ J'L K'pkjkjlpolitical Economy

10/17/2013
IM 535 International Operations Management NC 373 Global Business
National Differences in Political Economy
Prof. Aziz Ezzat ElSayed, Ph.D. Professor of Industrial Engineering College of Engineering and Technology Arab Academy for Science and Technology Abu-Kir Campus, Alexandria, Egypt
Main reference: International Business: Competing in the Global Market Place, Charles W. L. Hill, Global Edition (9th Ed) 2013 , McGraw-Hill Higher Education
Copyright Prof. Dr. Aziz Ezzat ElSayed IM 535 International Operations Management - Lecture Handouts
1-1
Learning Objectives
1. Understand how the political systems
of countries differ. 2. Understand how the economic systems of countries differ. 3. Understand how the legal systems of countries differ. 4. Explain the implications for management practice of national differences in political economy
1-2
10/17/2013
What is a Political Economy?

The political economy of a nation refers to how the political, economic, and legal systems of a country are interdependent They interact and influence each other They affect the level of economic wellbeing in the nation Well-being = Welfare
How important is the relationship between the Political and Economic Status of a country ?
1-3
Economic Performance of EU Baltic Opening Case: States

The Baltic states are three countries east of the Baltic Sea: Estonia, Latvia and Lithuania, which gained independence from the Russian Empire in the wake of World War I. The 3 countries became parts of the former USSR in 1940, and regained their independence in 1991.
Estonia Latvia Lithuania
Estonia
Latvia
Lithuania
1-4
10/17/2013
Economic Performance of EU Baltic Opening Case: States

After Joining the EU in 2011, Estonia received an A+ credit rating with remarkable economic achievements after the 2008 crisis. How did Estonia achieved such a high rating ? What measures taken by its government ?
Estonia Latvia Lithuania
Review the case in your Text Book

1-5
What is a Political System?

Political System refers to the system of government in a nation Assessed according to
the degree to which the country emphasizes collectivism (more totalitarian) as opposed to individualism (more democratic)
1-6
10/17/2013
What is Collectivism?
of collective goals over individual goals
Collectivism stresses the dominance
Today, collectivism is equated with socialists (Karl Marx 1818-1883) State ownership of the basic means of production, distribution, and exchange Manage to benefit society as a whole, rather than individual capitalists
1-7
Collectivism
Socialism
Plato (427-347 BC)
The history of all previous societies has been the history of class struggles
Source: http://www.brainyquote.com/quotes/
(Karl Marx 1818-1883)

1-8
10/17/2013
Modern-Day Socialism
In the early 20th century, socialism split into 1. Communism socialism can only be achieved through violent revolution and totalitarian dictatorship

Before 1989 (USSR-Poland-Hungary-Bulgaria-..) in retreat worldwide by mid-1990s China-Vietnam-North KoreaCuba (still in power)
2. Social democrats socialism is achieved

through democratic means
retreating as many countries move toward free market economies state-owned enterprises have been privatized
1-9
Retreat of Communism
Tearing Down the Berlin Wall November 9, 1989
1 - 10
10/17/2013
What is Individualism?
Individualism refers to philosophy that
individual economic and political freedoms are the ground rules on which a society should be based
Implies democratic political systems and free market economies
1 - 11
Individualism
Greek philosopher, Aristotle (384-322 BC), who argued that individual diversity and private ownership are desirable
1 - 12
10/17/2013
What is Democracy?
Democracy is a political system in which government is by the people, exercised either directly or through elected representatives where citizens periodically elect individuals to represent them

Usually associated with individualism Pure democracy is based on the belief that citizens should be directly involved in decision making
1 - 13
What is Totalitarianism?
A form of government in which one person or political party exercises absolute control over all spheres of human life and prohibits opposing political parties
1 - 14
10/17/2013
Types of Totalitarianism
1. Communist totalitarianism :

communist party monopolizes power A party, or individual that governs according to religious principles political party that represents the interests of a particular tribe monopolizes power (e.g. African Countries : Zimbabwe-Tanzania-Uganda-Kenya) permits some individual economic freedom, but restricts individual political freedom. (e.g. Dictatorship: in Asia and Latin America Retreat since 1980s)
1 - 15
2. Theocratic totalitarianism : 3. Tribal totalitarianism :
4. Right-wing totalitarianism:

Types of Economic Systems

1. Market Economies:
All productive activities are determined by supply and demand. Businesses are private owned Government encourages free and fair competition Certain sectors of the economy are left to private sector and free market mechanisms Government plans what to produce, quantities and prices. All businesses are state (public) owned.
1 - 16
2. Mixed Economies:
3. Command Economy:
10/17/2013
Types of Economic Systems
North Korea Cuba
Collectivism Totalitarianism
China Russia India
Germany Brazil
Canada UK
USA
Hong Kong
Individualism Democracy
1 - 17
Source: ecommunity.pwsd76.ab.ca (accessed: 5-03-12) Copyright Prof. Dr. Aziz Ezzat ElSayed IM 535 International Operations Management - Lecture Handouts
What is A Legal System?

The legal system of a country refers to the rules that regulate behavior along with the processes by which the laws are enforced. There are 3 types of legal systems 1. Common law - based on tradition, precedent, and custom 2. Civic law - based on detailed set of laws organized into codes 3. Theocratic law - law is based on religious teachings
1 - 18
2-18
10/17/2013
Differences in Contract law

A Contract is a document that specifies the rights and obligations of the parties involved in a business activity Contract law is the body of law that governs contract enforcement Under a common law system:
contracts tend to be very detailed with all contingencies mentioned Under a civil law system, contracts tend to be much shorter and less specific because many issues are already covered in the civil code
1 - 19
2-19
Property Rights and Corruption

Property rights:
The legal rights over the use of a resource is and over any income that may be derived from that resource
Can be violated through Corruption due to:
1. Private action
Theft Piracy - Blackmail legally (Excessive taxation) Illegally (Bribes blackmailing)
2. Public action

high levels of corruption reduce foreign direct investment, the level of international trade, and the economic growth rate in a country
1 - 20
10
10/17/2013
Rankings of Corruption by Country
The Foreign Corrupt Practice Act makes it illegal for US Companies to bribe foreign government officials to obtain or maintain business over which that foreign official has authority
1 - 21
Intellectual Property Rights (IPR)

Intellectual property: property that is the product of intellectual activity Can be protected using: 1. Patents exclusive rights for a defined period to the manufacture, use, or sale of that invention
2. Copyrights the exclusive legal rights of authors, composers, playwrights, artists, and publishers to
publish and disperse their work as they see fit
3. Trademarks design and names by which

merchants or manufacturers designate and differentiate their products
1 - 23
2-23
11
10/17/2013
Case:
Starbucks Trademark Case in China
Shangahi
Xing Ba Ke Coffee
Xing = Star in Chinese
1 - 24
How Can IPR Be Protected?

Protection of intellectual property rights differs from country to country To avoid piracy, firms can 1. Stay away from countries where
intellectual property laws are relaxed 2. file Lawsuits 3. Lobby governments for international property rights agreements and enforcement
1 - 25
2-25
12
10/17/2013
Software Piracy Rate
1 - 26
Global Software Piracy Rate

Year 2007 2008 2009 2010 Piracy Rate 38% 41% 43% 42% Losses $47,809 $52,998 $51,443 $58,754
Source: http://globalstudy.bsa.org/2010/
1 - 27
13
10/17/2013
What is Product Safety and Liability?

Product safety laws
Set certain standards to which a product must adhere involves holding a firm and its officers responsible when a product causes injury, death, or damage
Product liability
liability laws tend to be less extensive in less developed nations

1 - 28
Important Considerations
Question 1:
Question 2:
Does the high cost of liability insurance in the U.S. make American companies less competitive? Is it ethical to follow host country standards when product safety laws are stricter in a firms home country than in a foreign country? Is it ethical to follow host country standards when liability laws are more soft in the host country?
1 - 29
Question 3:
14

2-National Differences in JGKHJ J'L K'pkjkjlpolitical Economy

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

2-National Differences in JGKHJ J'L K'pkjkjlpolitical Economy

Uploaded by

Copyright:

Available Formats

10/17/2013

IM 535 International Operations Management NC 373 Global Business

National Differences in Political Economy

What is a Political Economy?

Economic Performance of EU Baltic Opening Case: States

Economic Performance of EU Baltic Opening Case: States

Estonia Latvia Lithuania

Review the case in your Text Book

What is a Political System?

Collectivism stresses the dominance

Plato (427-347 BC)

(Karl Marx 1818-1883)

2. Social democrats socialism is achieved

Implies democratic political systems and free market economies

2. Theocratic totalitarianism : 3. Tribal totalitarianism :

Types of Economic Systems

Types of Economic Systems

North Korea Cuba

China Russia India

What is A Legal System?

Differences in Contract law

Property Rights and Corruption

Can be violated through Corruption due to:

Theft Piracy - Blackmail legally (Excessive taxation) Illegally (Bribes blackmailing)

Rankings of Corruption by Country

Intellectual Property Rights (IPR)

3. Trademarks design and names by which

Starbucks Trademark Case in China

Xing = Star in Chinese

How Can IPR Be Protected?

Software Piracy Rate

Global Software Piracy Rate

What is Product Safety and Liability?

liability laws tend to be less extensive in less developed nations

You might also like