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Political and Legal Systems in National Environments

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by

Ines Pfeil

on 17 November 2014

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Transcript of Political and Legal Systems in National Environments

Political and Legal Systems in National Environments
by The TEAM
1. Introduction
6. Participants in Political and Legal Systems
3. Political and Legal Environments in International Business
4. Political Systems
rules and norms
navigate between relationships
provide punishments
5. Legal Systems
Managers
navigate difficult regulations and practices
avoid unethical or questionable conduct
O
O
pportunities
reduce business costs
influence strategic decision
making
2. The Nature of Country Risk
• potential loss
• bad effects on company operations and profitability

Causes for Country Risk
• political or legal factors
• economic, social or technological developments

TEAM
How prevalent is country risk?
Lower Risk
• favourable legal climate
• political stability

Higher Risk
• political instability
• substantial government intervention

formal institutions
stability
unique
Political System
allocation of valued resources
protection
Legal System
Laws
Norms for conduct
Protection of intellectual property
Ensures order and resolves disputes
Taxes economic output
Totalitarianism
Democracy
Socialism
Secret policy
Controlled mass media
Terror tactics
Capital and wealth vested in the state
Collective welfare

Private property rights
Limited government

Democracy´s link to economic Freedom and Openness
Fair elections
Right to form a political party
Fair electoral laws

Political & Economic Systems
Totalitarianism
Socialism
Democracy
command economy
market economy
mixed economy
4 Basic Legal Systems
Common Law
Civil Law
"codified" laws = clearly written and accessible
3 separate codes
Religious Law
religious beliefs
ethical codes
moral values
Mixed Systems
tradition
previous cases
flexible
examples:
national level
state level
local level
regulate international business activity
provide administrative guidance
governing frameworks
financial support
NAFTA
ASEAN
improve the economic and political interests of their members
countries
industries
causes
economic development
business goals
domestic firms
foreign firms
Lobbying
7. Types of County Risk Produced by Political Systems
Government Takeover of Corporate Assets
Sanctions
tariffs
trade barriers
import duties
import / export quotas
Embargoes
Boycotts against Firms or Nations
refusal to engage in commercial dealing
Terrorism
reach a political goal through fear and intimidation
War, Insurrection and Violence
Confiscation
Expropriation
Penalties:
ban on exports to or imports from a certain country
indirect effects
8. Types of Country Risk Produced by Legal Systems
HOST-COUNTRY
HOME-COUNTRY
Foreign Investment Laws
Controls on Operating Forms and Practices
Marketing and Distribution Laws
Laws on Income Repatriation
Environmental Laws
Contract Laws
Internet and E- Commerce Regulations
Inadequate or Underdeveloped Legal System
Anti-boycott Regulations
Accounting and Reporting Laws
Transparency in Financial Reporting
9. Managing Country Risk
4 Specific Strategies
Proactive Environmental Scanning
Anticipating country risk:
understanding of the political and legal environment
scan of potential risks and threats
Strict Adherence to Ethical Standards
Alliances with Qualified Local Partners
Protection through Legal Contracts
Disputes
Resolving International Disputes
Conciliation
Formal process of negotiation
Arbitration
a third party decides in favor of one party
Litigation
one party files a lawsuit against another
Managing Country Risk Successfully
affect
entry strategies
operations
performance

affect:
production
marketing
distribution activities

affect:
marketing
profit
ensure security and privacy
mostly a problem of
developing
economies
in developed countries:
insufficient regulation of the banking sectors
prevent companies from participating in restrictive trade practices or boycotts
Accounting practices and standards are different around the world
=> high R&D costs
reveal substantial information about financial condition and accounting practices
e.g. Basel III global regulatory standard
Government
International Organizations
Regional Economic Blocs
Special Interest Groups
Competing Firms
Foreign Investment Laws
Controls on Operating Forms and Practice
Marketing & Distribution Laws
Laws on Income Repatriation
transfer profits back to the home country
Environmental Laws
Contract Laws
Internet and E- Commerce Regulations
Inadequate or Underdeveloped Legal System
Anti-Boycott Regulations
Accounting and Reporting Law
Transparency in Financial Reporting
Full transcript