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Set 2:The Political, Legal, and Technological Environment
Various political systems around the world
Various legal/regulatory environments
Changes affecting MNCs, countries—technology, etc.
MNCs are affected by these factors in multiple countries…
Political Environment:
Ideologies: ideas/beliefs/values about nature of political systems and governments
individualism, collectivism, socialism
Political systems: a couple of basic dimensionsrights of citizens relative to government (range democratic to totalitarian)individualism vs. collectivism as focus of system
democratic tends to emphasize individualism, totalitarian tends to emphasize collectivism.
Ideology: Individualism
Freedom to pursue individual goals without constraint.
Book argues it is similar to capitalism and free markets.Do you agree?
Is there capitalism without freedom?Is there individualism without capitalism?
Ideology:Collectivism
Group goals/needs may be more important than individual
Varous forms depending on societal goals: e.g., fascism (authoritarian, nationalistic) militarism, corporatism, totalitarianism
Ideology: Socialism
State or group ownership/control of institutions for common benefit/efficiency/effectiveness
All countries are socialist to a degree, most more than United States
Question: How is the U.S. socialist?
Extreme version is communism—all productive activity is controlled by state. Private personal property exists to varying degrees.
Political System: Democracy
Roots in ancient Greece
Government run by citizens directly or by elected representatives
Representatives can be removed (limits state’s power)
Successful democratic societies seem to need multiple political groups/parties
North Korea: 1 US: 2Italy: 6 major, dozens minor
Political System: Totalitarianism
One representative party/group with great control
Opposition usually suppressede.g., North Korea, Burma, China (but shifting and losing
control), other former communist countriesDictatorships, some monarchies/inherited leadership.Typical characteristics: censorship of press/TV/radio,
censorship of arts (literature, music, fine art), weak individual rights/civil liberties, travel restriction, limits on outside influence.
Example: China
Government opening economy:Converting state enterprises into corporations
(beware Russian example)Some trade liberalizationMore open, democratic, tolerant of freedom and
dissentState responsible for much: land ownership,
housing, education, trainingSeeking a more dynamic market economy to
address poverty and population
Example: Europe
Privatization and economic liberalization
EU-wide political and economic integration
Political power—variable and complex
Connected economically, but differs culturally
Example: The Middle East
Strong role of religion in government in many countries—theocracy vs secular government
Ranges from democratic to authoritarian, tendency: socialism > capitalism
e.g., Israel: socialist, democratic, somewhat theocratic
Syria: authoritarian, not theocraticSaudi Arabia: theocraticTurmoil/war/revolution/violence: widespread
Example: Russia
Long aftermath of communism and Soviet ruleEconomic policy—neglect, confusionWeak infrastructure, complex politics,
corruption (oligarchs forward)But: education,technological sophistication in
many fields.Concerned about West and China.
Legal and Regulatory Environment
Complicated for MNCs
MNCs must understand legal framework in each market
Islamic Law
Interpret Koran and MohammedHadith: sayings of MohammedBody of scholarly interpretation
Used in Islamic countries in Middle East, Central AsiaExtent of use/focus varies by country
Socialist/Communist LawBased on communist theory by Marx, Engels, othersIndividuals subservient to group, property subservient to state
or state companiesInfluences current law in former communist countries:
Members of former Soviet UnionPeoples’ Republic of ChinaVietnamNorth KoreaCubaWeak/absent/different business law—impediment to foreign
investmentPolitical constitutions often similar to U.S.
Common Law
Based on English lawMagna Carta (1215) and forwardGovernance through legislation, precedent mattersBasis of legal system in:
United States, Canada, United Kingdom, Australia,New Zealand
Civil or Code Law
Derived from Roman law
Career judges dominate application/interpretation
Found in:France, parts of Latin America, state of Louisiana
Example: French judges
Basic Principles of International Law
Sovereignty and Sovereign ImmunityInternational JurisdictionDoctrine of ComityAct of State DoctrineTreatment and Rights of AliensForum for Hearing and Settling Disputes
The Sovereignty and Sovereign Immunity principle: governments have the right to rule themselves as they see fit.
The International Jurisdiction principle: every country has jurisdiction over its citizens no matter where they are located.
Nationality principleTerritoriality principleProtective principle
The Doctrine of Comity principle: there must be mutual respect for the laws, institutions, and government of other countries in the matter of jurisdiction over their own citizens.
The Act of State Doctrine principle: all acts of other governments are considered to be valid by U.S. courts, even if such acts are illegal or inappropriate under U.S. law
Treatment and Rights of Aliens Countries may
refuse to admit foreign citizens
impose special restrictions on their conduct, right of travel, where they can stay, and what business they may conduct
deport them
Forum for Hearing and Settling Disputes
U.S. courts can dismiss cases brought by foreigners but they must examine issues like:
Location of the plaintiffsWhere evidence must be gatheredWhere property to be used in restitution is located
Some current legal/regulatory issues
Foreign Corrupt Practices ActIllegal to influence foreign officials by:
personal paymentpolitical contribution
Restrictive bureaucratization
Privatization
Regulating Trade and Investment
Countries use law/regulation to manage trade and investment
Unfair trade practices (WTO, other agreements)Government subsidiesRequiring local partners for MNCsBlocking trade and investment (high tariffs,
restrictive regulation)
Possible responses are the same things
Big changes continuing
Drivers include
technological change—like what???
investment flows in/out of countriesproduction moves due to labor costs
(outsourcing, offshoring)E-business: B2B, B2C, E-tailing
Affect business and all countries