politics, law, and business ethics copyright © 2010 pearson education, inc. publishing as prentice...
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Chapter 3 - 1International Business 5eCopyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
Politics, Law, andPolitics, Law, andBusiness EthicsBusiness Ethics
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
International Business 5e Chapter 3 - 2
• Describe each main type of political system
• Identify the origins of political risk and how managers can reduce its effects
• Describe each main type of legal system and important global legal issues
• Explain ethics and social responsibility and key issues facing international companies
• Explain how international relations affect international business activities
Chapter PreviewChapter Preview
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
International Business 5e Chapter 3 - 3
Political IdeologiesPolitical Ideologies
Both private and public Both private and public groups need to balancegroups need to balance
each other’s powereach other’s power
Every aspect ofpeople’s lives must be
controlled to preserve order
Only individuals andOnly individuals andprivate groups canprivate groups can
preserve personal libertiespreserve personal liberties
TotalitarianismTotalitarianism AnarchismAnarchismPluralismPluralism
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International Business 5e Chapter 3 - 4
ImposedImposedauthorityauthorityImposedImposedauthorityauthority
Lack of Lack of constitutionalconstitutional
guaranteesguarantees
Lack of Lack of constitutionalconstitutional
guaranteesguarantees
RestrictedRestrictedparticipationparticipationRestrictedRestricted
participationparticipation
TotalitarianismTotalitarianism
Leaders govern without people’s supportLeaders govern without people’s support Government controls much of people’s livesGovernment controls much of people’s lives Leaders do not tolerate opposing viewpointsLeaders do not tolerate opposing viewpoints
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International Business 5e Chapter 3 - 5
Forms of TotalitarianismForms of Totalitarianism
Theocratic totalitarianism (totalitarian religious leadership)
Secular totalitarianism (military and bureaucratic leadership)
Tribal totalitarianismTribal totalitarianism
Communist totalitarianismCommunist totalitarianism
Right-wing totalitarianismRight-wing totalitarianism
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International Business 5e Chapter 3 - 6
DemocracyDemocracy
Government leaders are elected by the wide participation of the people or their representatives
Freedom of expression
Periodic elections
Full civil and property rights
Minority rights
Nonpolitical bureaucracies
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International Business 5e Chapter 3 - 7
Types of Political RiskTypes of Political RiskTypes of Political RiskTypes of Political Risk
Conflict and violenceConflict and violenceConflict and violenceConflict and violence
Policy changesPolicy changesPolicy changesPolicy changes
Terrorism and kidnappingTerrorism and kidnappingTerrorism and kidnappingTerrorism and kidnapping
Local content requirementsLocal content requirementsLocal content requirementsLocal content requirements
Property seizureProperty seizureProperty seizureProperty seizure
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International Business 5e Chapter 3 - 8
Arises from:Arises from:
People’s resentment toward government
Territorial disputes between nations
Ethnic, racial, or religious disputes
Reduces ability to:Reduces ability to:
Obtain materials and equipment
Manufacture and distribute products
Protect employees’ lives and firm’s assets
Conflict and ViolenceConflict and Violence
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International Business 5e Chapter 3 - 9
Fly 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
Security checklist for managers on business abroad:
Terrorism and KidnappingTerrorism and Kidnapping
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International Business 5e Chapter 3 - 10
Property SeizureProperty Seizure
ConfiscationForced transfer of assets from a company to the government
without compensation
ExpropriationForced transfer of assets from a company to the government
with compensationNationalization
Forced asset transfer to the government of an entire
industry
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International Business 5e Chapter 3 - 11
Policies and LawsPolicies and Laws
Foreign ownership
Investment levels
Business activities
Foreign ownership
Investment levels
Business activities
Policy changes restrict: Local content requirements:
Specify the portionof a good or service
to be supplied by local firms
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International Business 5e Chapter 3 - 12
Managing Political Risk IManaging Political Risk I
AdaptationAdaptationIncorporate risk intoIncorporate risk intobusiness strategiesbusiness strategies
AdaptationAdaptationIncorporate risk intoIncorporate risk intobusiness strategiesbusiness strategies
LocalizationLocalization
Development assistanceDevelopment assistance
PartnershipsPartnerships
InsuranceInsurance
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International Business 5e Chapter 3 - 13
Managing Political Risk IIManaging Political Risk II
Agencies specializingAgencies specializingin political-risk servicesin political-risk services
Current employeesCurrent employeeswith relevant informationwith relevant information
Information gatheringInformation gatheringGather data to betterGather data to better
predict and manage riskpredict and manage risk
Information gatheringInformation gatheringGather data to betterGather data to better
predict and manage riskpredict and manage risk
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International Business 5e Chapter 3 - 14
Managing Political Risk IIIManaging Political Risk III
CorruptionCorruptionForeign Corrupt Practices Act
LobbyingLobbyingInfluencing local lawmakers
Influence local politicsInfluence local politicsPresent firm’s viewsPresent firm’s viewson political matterson political matters
Influence local politicsInfluence local politicsPresent firm’s viewsPresent firm’s viewson political matterson political matters
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International Business 5e Chapter 3 - 15
World’s Legal SystemsWorld’s Legal Systems
Common LawTradition, precedent, and usage
Civil LawCodified rules and statutes
Theocratic LawReligious teachings form law
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International Business 5e Chapter 3 - 16
Global Legal Issues IGlobal Legal Issues I
Intellectual property- Result of intellectual talent and abilities
- Piracy/counterfeits a serious problem
Patent Excludes all but the inventor from making, using, or selling the invention (WTO = 20 years)
Trademark Words or symbols that distinguish a product and its manufacturer ("Coca-Cola")
Copyright Freedom of creator to publish or dispose of original works as they choose ("Happy Birthday to You")
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International Business 5e Chapter 3 - 17
Global Legal Issues IIGlobal Legal Issues II
Standardization- Interpreting and applying laws uniformly
Product safety and liability- Responsibility for damage, injury, or death
Taxation- Income, sales, consumption and VAT
Antitrust (antimonopoly) laws- Prevent market sharing, price fixing, and
unfair advantage
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International Business 5e Chapter 3 - 18
Friedman ViewFriedman ViewFriedman ViewFriedman View Cultural RelativismCultural RelativismCultural RelativismCultural Relativism
UtilitarianismUtilitarianismUtilitarianismUtilitarianismRighteous MoralismRighteous MoralismRighteous MoralismRighteous Moralism
Philosophies of EthicsPhilosophies of Ethicsand Social Responsibilityand Social Responsibility
ETHICSPersonal behavior in accordance with rules
orstandards for right conduct or morality
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International Business 5e Chapter 3 - 19
Fight to eliminate bribery and corruption
Improve labor conditions and guard human rights
Practice fair trade to help the disadvantaged
Protect the environment and conserve resources
Corporate Social Corporate Social ResponsibilityResponsibility
Go beyond legal obligations to balance commitments to investors, customers, communities, and other companies
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International Business 5e Chapter 3 - 20
International RelationsInternational Relations
Stable business environments
Improved business communications
Efficient distribution systems
Prompt and equitable dispute resolution
Expanded opportunities
Diminished risk levels
Favorable international political relations foster:
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International Business 5e Chapter 3 - 21
• Describe each main type of political system
• Identify the origins of political risk and how managers can reduce its effects
• Describe each main type of legal system and important global legal issues
• Explain ethics and social responsibility and key issues facing international companies
• Explain how international relations affect international business activities
Chapter ReviewChapter Review
Politics, Law, and Politics, Law, and Business EthicsBusiness Ethics
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