m



 


   
 m


— Describe the three types of political systems

— Discuss each cause of political risk and how
firms can manage them
— Identify how the three legal systems are unique
— Identify global legal issues facing companies
— Discuss the roles of ethical behavior and social
responsibility in international business

© Prentice Hall, 2008 International Business 4e Chapter 3 - 2

 





Totalitarianism Pluralism Anarchism

Both private and public

groups need to balance
each other¶s power
Every aspect of Only individuals and
people¶s lives must be private groups can
controlled to preserve order preserve personal liberties

© Prentice Hall, 2008 International Business 4e Chapter 3 - 3


 


Government leaders are elected

by the wide participation of the
people or their representatives

½ Ôreedom of expression
½ Periodic elections
½ Ôull civil and property rights
½ Minority rights
½ Nonpolitical bureaucracies

© Prentice Hall, 2008 International Business 4e Chapter 3 - 4

 a 



 

½ Leaders govern without people¶s support

½ Government controls much of people¶s lives
½ Leaders do not tolerate opposing viewpoints

Lack of
Imposed Restricted
constitutional
authority participation
guarantees

© Prentice Hall, 2008 International Business 4e Chapter 3 - 5

 Ô   a 



 

a  
 



 
 




  

 



 



 







 

Communist totalitarianism

Tribal totalitarianism

Right-wing totalitarianism

© Prentice Hall, 2008 International Business 4e Chapter 3 - 6

 m
   


  !

Conflict and violence

Terrorism and kidnapping
Property seizure
Policy changes
Local content requirements

© Prentice Hall, 2008 International Business 4e Chapter 3 - 7

 m 

#


x   "  


 "
ÿ People¶s resentment ÿ Obtain materials
toward government and equipment
ÿ Territorial disputes ÿ Manufacture and
between nations distribute products
ÿ Ethnic, racial, or ÿ Protect employees¶ lives
religious disputes and firm¶s assets

© Prentice Hall, 2008 International Business 4e Chapter 3 - 8

 a  
$


Security checklist for managers on business abroad:

- Ôly nonstop when possible and avoid unsecured
areas of airports
- During your stay, vary your routines and means
of transportation
- Keep a low profile and refrain from loud, flashy
behavior
- Give friendly but cautious answers to personal
questions
- Know local emergency procedures before trouble
strikes

© Prentice Hall, 2008 International Business 4e Chapter 3 - 9

  %

Confiscation
Ôorced transfer of assets from
a company to the government
without compensation

Expropriation
Ôorced transfer of assets from
a company to the government
Nationalization
with compensation
Ôorced asset transfer to the
government of an entire
industry

© Prentice Hall, 2008 International Business 4e Chapter 3 - 10

 
 



Policy changes restrict: Local content

requirements:

½ Ô
 
 
Œ
 

 
 


½   



½     


© Prentice Hall, 2008 International Business 4e Chapter 3 - 11

 




  !

Local equity / debt

Localization
Adaptation



 
 Development assistance

 

Partnerships

Insurance
© Prentice Hall, 2008 International Business 4e Chapter 3 - 12
 




  !

Current employees
with relevant information
Information gathering
 
   



 


Agencies specializing
in political-
political-risk services

© Prentice Hall, 2008 International Business 4e Chapter 3 - 13

 




  !

Lobbying
Influencing local lawmakers
Influence local politics

 


  


Corruption
Ôoreign Corrupt Practices Act

© Prentice Hall, 2008 International Business 4e Chapter 3 - 14

 r 
& 

 

m  

Tradition, precedent, and usage

m


Codified rules and statutes

a  


Religious teachings form law

© Prentice Hall, 2008 International Business 4e Chapter 3 - 15

 




  
Intellectual property
R Result of intellectual talent and abilities
R Piracy/counterfeits a serious problem

å 

Excludes all but the inventor from making, using,
or selling the invention (WTO = 20 years)

å a

!
Words or symbols that distinguish a product and
its manufacturer ("Coca-Cola")

å m  
Ôreedom of creator to publish or dispose of original
works as they choose ("Happy Birthday to You")

© Prentice Hall, 2008 International Business 4e Chapter 3 - 16

 




  

å Standardization
R  


 



å Product safety and liability
R ¦
 



å Antitrust (antimonopoly) laws
R 
 
  




 
å Taxation
R   
 

© Prentice Hall, 2008 International Business 4e Chapter 3 - 17

  


 
Personal behavior in accordance with rules or
standards for right conduct or morality


 Ethical absolutism


 
 
 
r
 

 ! " Ethical relativism
r ¦ 
  ¦ 

© Prentice Hall, 2008 International Business 4e Chapter 3 - 18

  

    


Go beyond legal obligations to balance commitments to

investors, customers, communities, and other
companies
- Respect consumers¶ rights
- Guard workers¶ rights
- Protect the environment
- Preserve employment
- Encourage development
- Improve health
- Support education

© Prentice Hall, 2008 International Business 4e Chapter 3 - 19

 
 

 

 

Ôavorable international
political relations foster:
½ Stable business
environments
½ Improved business
communications
½ Efficient distribution
systems
½ Prompt and equitable
dispute resolution
½ Expanded opportunities
½ Diminished risk levels

© Prentice Hall, 2008 International Business 4e Chapter 3 - 20

 m
 

— Describe the three types of political systems

— Discuss each cause of political risk and how
firms can manage them
— Identify how the three legal systems are unique
— Identify global legal issues facing companies
— Discuss the roles of ethical behavior and social
responsibility in international business

© Prentice Hall, 2008 International Business 4e Chapter 3 - 21