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