Professional Documents
Culture Documents
Political and Legal Issues
Political and Legal Issues
Political and Legal Issues
Individualism:
Political officials and agencies have a limited role in
society.
Make and apply regulations to correct market inefficiencies:
accessibility to information, promoting fair and just
competition.
Government is detached from and independent of the day-
to-day practices of business in an individualistic society.
Collectivism
Government officials should intervene in the structure of
industries, conduct of companies, and actions of
managers to ensure they benefit society.
3-4
Indicators of Civil Liberties
Existence of freedom of the press
Equality under the law for all
individuals
Extent of personal social freedoms
Degree of freedom from extreme
governmental indifference or
corruption
3-6
Totalitarianism
A political system in which a single agent, whether an
individual, group, or party, monopolizes all political
power.
Political Risk:
Risk
The chance that political decisions, events,
or conditions in a country will affect the
business environment in ways that lead
investors:
- To lose some or all of the value of their
investment, or
- Be forced to accept a lower than expected
rate of return.
3-11
Sources of Political Risk
Systemic: Political risk created by shifts in public policy,
such as a new political leadership that may adopt a different
approach than its predecessor.
3-13
Legal Environment
Common law systems (tradition/precedent)
• United States
• United Kingdom
Civil law: based on a systematic and extensive codification of laws.
Political officials prepare a written collection of laws. Judges apply
existing laws instead of creating them.
• Germany
• France
• Japan
Theocratic law (based on religious principles and rules)
Islamic Law that is based on the Qur’an, the practices of the prophet, the writings
of scholars, and consensus of the community.
• Sudan
• Pakistan
A Customary Law System: follows the wisdom of daily experience.
A Mixed Legal System.
3-14
Impact of Laws on International Business
National laws affect all local business
activities.
National laws affect cross-border
activities.
International treaties and
conventions may govern some cross-
border transactions.
Legal Issues in International Business
Managers look at legal issues from two
perspectives: