irwin/mcgraw-hill [modified by evs] mgt 485-2-1 mgt 485 chapter 2 the non economic environment for...

Irwin/McGraw-Hill [Modified by EvS]

Mgt 485-2-1

Mgt 485CHAPTER 2Mgt 485CHAPTER 2

THE NON ECONOMIC ENVIRONMENT FOR

INTERNATIONAL MANAGEMENT

THE NON ECONOMIC ENVIRONMENT FOR

INTERNATIONAL MANAGEMENT

© Irwin/McGraw-Hill, Modified by EvS

2-2

Political Environment

Components include:Government policies that affect MNCsStability of the government of the host country

ChinaHas a complex political environment in which the

government is:Speeding up program to convert state enterprises into

shareholder-owned corporationsExpanding capital markets by authorizing new stock

listingsAllowing government bodies to sell of state enterprisesAccelerating worker retraining, building low-cost housing,

and providing other social servicesreducing tariffs


2-3

Political Environment (cont.) China (cont.)

MNCs face major obstacles when doing business with and in ChinaGovernment regulationsLack of qualified employeesActive involvement of government institutions in business

affairs Europe

Changing political situationMNCs doing business with individual countries risk

action by the EU itselfBusinesses must be aware of political happenings

in the immediate area as well as throughout the continent


2-4

Political Environment (cont) Russia

Bleak economic outlookNeglect, corruption, and confusing economic policyDecaying infrastructureReform stalled by a political quagmire

Government must keep the economy on an even keel while attracting more foreign investment

Central and Eastern EuropePolitical situation is in a state of flux (R-L-R)Poland

Government plan to streamline the economy and get the country moving has been fraught with problems

Economy has proven resilient


2-5

Political Environment (cont.) Central and Eastern Europe (cont.)

HungaryOne of strongest economies in Central EuropeMore foreign investment in Hungary than any

other post-communist European countryCzech Republic

Quick transition to privatizationEconomy suffered initially but appears to be

on the reboundBalkan countries and former republics of the

Soviet UnionStill face severe economic problemsReform proceeded more slowly than other countries in

the area


2-6

Legal and Regulatory Environment

Islamic Law Derived from interpretation of the Qur’an and the teachings of the

Prophet Mohammed

Socialist Law Marxist socialist system - continues to influence regulations in former

communist countries

Common Law English law - the foundation of legislation in the United States,

Canada, England, Australia, New Zealand, and others

Civil or Code Law Derived from Roman law and is found in the non-Islamic and non-

socialist countries


2-7


Basic Principles of International LawSovereignty and Sovereign Immunity

Sovereignty principle holds that governments have the right to rule themselves as they see fit

International JurisdictionNationality principle holds that every country has jurisdiction

over its citizens no matter where they are locatedTerritoriality principle holds that every nation has the right of

jurisdiction within its legal territoryProtective principle holds that every country has jurisdiction

over behavior that adversely affects its national security, even if the conduct occurred outside that country


2-8

Basic Principles of International Law (cont.)Doctrine of Comity

There must be mutual respect for the laws, institutions, and government of other countries in the matter of jurisdiction over their own citizens

Act of State DoctrineAll acts of other governments are considered to be valid by

U.S. courts, even if such acts are inappropriate in the U.S.Treatment and Rights of Aliens

Countries have the legal right to refuse admission of foreign citizens and to impose special restrictions on their conduct

Forum for Hearing and Settling DisputesU.S. courts can dismiss cases brought before them by

aliens



2-9

Examples of Legal and Regulatory Issues

Foreign Corrupt Practices Act - made it Illegal to influence foreign officials through personal payment or political contributions

Bureaucratization - Competitive regulations to reduce the ability of foreigners to do business locally

Privatization - Government deregulation and “free market”


2-10

Technological Environment

Internet Access allows people to obtain information from millions of sources

Satellites will make it possible for everyone to send and receive voice, data, and digitized images through hand-held telephones

Automatic translation telephones will allow people to communicate in their own language to anyone in the world who has access to a telephone


2-11

Technological Environment Technology is changing at lightening speed E-Business

TerminologyE-tailers - electronic retailersB2C - electronic business to consumerB2B - electronic business to businessE-cash - electronic cash

E-tailing and financial services will most affect global customersPrepaid smart cards will give way to global digital cashNeed a system to resolve conversions of different

national currencies


2-12

E-Commerce

ADVANTAGES:Tap into funds from Internet -- no need for ATM

Machines

Companies receive immediate payment, reducing

bad debts while increasing working capital

DISADVANTAGES:

Some system must be in place for

converting payment into U.S. dollars


2-13

Technological Environment (cont.)

TelecommunicationsMost obvious dimension of the technological

environment facing international managementEconomic growth perceived to hinge on efficient

communicationsTechnologic leapfrogging

Moving from the absence of telephones to the availability of wireless communications

Privatization of telecommunications occurring in some countries to acquire capital and technical know-howMNCs unwilling to invest in telecommunications without

the prospect of good financial return Case of China


2-14

The Employment Fallout from Technology

Technology will affect the nature

and number of employees technology has the potential to largely

displace employees in all industries Emerging information technology also makes

work more portableChanging economic dynamics

Increasing productivity / decreasing costsLost jobs, lowering wages


2-15

Technologies That Will Influence International Business

InternationalBusiness

ArtificialIntelligence

Biotechnology

Satellites

AutomaticTranslationTelephones

Silicon Chips

Supercomputers

Internet

Nanotechnology


2-16

Winners in Selected Occupations

0 20 40 60 80 100 120 140 160Percentage Change for 1992-2005

Home-health workersComputer systems

analysts, programmers

Travel agents

Childcare workers

Guards

Restaurant cooks

Nurses

Gardeners/ groundskeepers

Lawyers

Teachers

Janitors and cleaners


2-17

Losers in Selected Occupations

-50 -40 -30 -20 -10 0

Percentage Change for 1992-2005

Bank tellers

Electrical/electronic assemblers

Typists/word processorsMachine-tool operators

Textile workers

Switchboard operators

Packaging/filling machine operators

Phone/cable TV installers and repairersDirectory-assistance operators

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