political and legal differences in international business

International Business - Chapter 1 Flashcards | Quizlet Many observers note that it was the direct result of Chinese government intervention in what was deemed a key industry. The political and legal environment of foreign markets is different from that of the domestic. The first, and perhaps most obvious, is an. G.O.P. Targets Researchers Who Study Disinformation Ahead of 2024 In contrast a planned economy is one in which the government or state directs and controls the economy. National security issues can impact both the import and exports of a country, as some governments may not want advanced technological information to be sold to unfriendly foreign interests. In the case study in Chapter 1 "Introduction", you discovered how US-based Google had to deal with the Chinese governments restrictions on the freedom of speech in order to do business in China. Politically, a countrys government may seek to protect jobs or specific industries. Businesses in industries, such as commodities and oil, have found more authoritarian governments to be predictable partners for long-term access and investment for these commodities. Available under Creative Commons-ShareAlike 4.0 International License. Neither extreme exists in its purest form in the real world. Government-business trade relations are the relationships between national governments and global businesses. Legal Changes As these changes unfold, an international retailer doing business in China would have several aspects of the changes to consider. While global teams can provide cost savings and help firms access. Within reason, in democracies, businesses understand that most rules survive changes in government. It governs a complete set of rules, regulations, institutions, and attitudes. In the past thirty years, governments have increasingly privatized a number of industries. Chinas different set of political and legal guidelines made Google choose to discontinue its mainland Chinese version of its site and direct mainland Chinese users to a Hong Kong version. Chapter 4: The Legal, PoliticalTrade Environment - Food and Agriculture Globalization leads to firms following each other around the world, thereby _____. If a new party comes into power, will the rules of business change dramatically? The Internet has started to change this, as sellers and buyers have easier access to each other. At the other extreme is totalitarianism, which contends that every aspect of an individuals life should be controlled and dictated by a strong central government. Sharia has clear guidelines for aspects of life. Domestic Chinese manufacturers received quick loans with favorable terms as well as speedy approvals. Governments intervene in trade for a combination of political, economic, social, and cultural reasons. Clearly, many global businesses and investment banks are finding creative ways to do business with these Islamic banks so that they can comply with Islamic law while earning a profit. The legal/political aspect is very important in global marketing. Political and Legal Factors That Impact International Trade A political system is basically the system of politics and government in a country. Root (1994) said that the political environment of the target country is able to affect a marketer to make a decision on the entry mode . The most commonly known example of religious law is Islamic law, also known as Sharia. International Business Chapter 2: National Differences in Political, Economic, and Legal Systems International Business Chapter 4: National Differences International Business Chapter 6: The Global Trade and Investment Environment The regulations will be more business-friendly and there will be a higher degree of incentives offered for those who want to enter that market. There is no consensus on how to measure democracy, definitions of democracy are contested and there is an ongoing lively debate on the subject. Legal Differences Learning Outcomes Describe the impact of legal differences on global trade Governments around the world maintain laws that regulate business practices. In current times, the Chinese government has been using a combination of government loans and investment in Africa to obtain access for Chinese companies to utilize local resources and commodities. This new combination has also posed more questions for businesses that are encountering new issuessuch as privacy, individual rights, and intellectual rights protectionsas they try to do business with China, now the second-largest economy in the world behind the United States. Democratic governments derive their power from the people of the country, either by direct referendum (called a direct democracy) or by means of elected representatives of the people (a representative democracy). A company may ask several questions regarding a prospective countrys government to assess possible risks: While any country can, in theory, pose a risk in all of these factors, some countries offer a more stable business environment than others. creating some uniformity across markets. The complexity of trade in these situations increases, as throughout history, governments have come to the aid and protection of their nations largest business interests in markets around the world. PDF National Differences in Political Economy New York CNN . Democracy can be seen as a set of practices and principles that institutionalise and thus ultimately protect freedom. What businesses must focus on is how a countrys political system impacts the economy as well as the particular firm and industry. At one end of the political ideology extremes is anarchism, which contends that individuals should control political activities and public government is both unnecessary and unwanted. The Cultural, Political and Legal Environment of International Business How do political and legal realities impact international trade, and what do businesses need to think about as they develop their global strategy? A closer look at the solar industry in China illustrates the governments ability to create new industries and companies based on its objectives. China has successfully combined state intervention with private investment to develop a robust, market-driven economyall within a communist form of government. Central to Chinas approach are policies that champion state-owned firms and other so-called national champions, seek aggressively to obtain advanced technology, and manage its exchange rate to benefit exporters. The most recent one emphasizes the governments goal for China to become a technology powerhouse by 2020 and highlights key areas such as green technology, hence the solar industry expansion. Governments have several key policy areas in which they can create rules and regulations in order to control and manage trade, including tariffs, subsidies; import quotas and VER, currency controls, local content requirements, antidumping rules, export financing, free-trade zones, and administrative policies. Only two Asian countries are represented: Japan and South Korea. U.S. counterintelligence officials say revised Chinese law potentially turns normal business activities into espionage. Legal Differences | Introduction to Business - Lumen Learning Half of the worlds population lives in a democracy of some sort, although only some 14 percent reside in full democracies. China is one of the more visible examples, with its strong government and limited individual rights. The Christian Canon system is observed in the Vatican City. This combination is called pluralism, which asserts that both public and private groups are important in a well-functioning political system. The Internet has started to change this, as sellers and buyers have easier access to each other. The Chinese model of an authoritarian government and a market-oriented economy has, at times, tilted favor toward companies, usually Chinese, who understand how to navigate the nuances of this new system. Within reason, in democracies, businesses understand that most rules survive changes in government. At the same time, an agreement would be signed for the bank to sell back the assets to the company at a later date and at a higher price. Central to Chinas approach are policies that champion state-owned firms and other so-called national champions, seek aggressively to obtain advanced technology, and manage its exchange rate to benefit exporters. Despite the advances in democracy in recent decades, more than one third the worlds population still lives under authoritarian rule. It might seem straightforward to assume that businesses prefer to operate only in democratic, capitalist countries where there is little or no government involvement or intervention. By Steven Lee Myers and Sheera Frenkel. In fact, political stability is a key part of government efforts to attract foreign investment to their country. The Chinese model of an authoritarian government and a market-oriented economy has, at times, tilted favor toward companies, usually Chinese, who understand how to navigate the nuances of this new system. Civil law is based on a detailed set of laws that constitute a code and focus on how the law is applied to the facts. The most direct impact on business can be observed in Islamic lawwhich is a moral, rather than a commercial, legal system. Research: How Cultural Differences Can Impact Global Teams It may seem evident that businesses would prefer to operate in open, democratic countries; however, it can be difficult to determine which countries fit the democratic criteria. If a new party comes into power, will the rules of business change dramatically? In essence, there are three main kinds of legal systemscommon law, civil law, and religious or theocratic law. Is there a well-established legal environment both to enforce policies and rules as well as to challenge them? Political Risks in International Markets The political risks in international markets are as follows; 1. The study of political systems is extensive and complex. How Corporate Cultures Differ Around the World - Harvard Business Review In the case study in Chapter 1 "Introduction", you discovered how US-based Google had to deal with the Chinese governments restrictions on the freedom of speech in order to do business in China. GovernmentBusiness Trade Relations: The Impact of Political and Legal Factors on International Trade, http://graphics.eiu.com/PDF/Democracy%20Index%202008.pdf, http://online.wsj.com/article/SB10001424052748703514904575602781130437538.html, http://online.wsj.com/article/SB10001424052748704852004575258541875590852.html, http://www.energyintel.com/documentdetail.asp?document_id=245527, http://online.wsj.com/article/SB10001424052748703514904575602731006315198.html, source@https://2012books.lardbucket.org/books/individual-finance. Despite the movement toward privatizing industry and free trade, government interests in their most valuable commodity, oil, remains constant. 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\newcommand{\Span}{\mathrm{span}}\) \( \newcommand{\kernel}{\mathrm{null}\,}\) \( \newcommand{\range}{\mathrm{range}\,}\) \( \newcommand{\RealPart}{\mathrm{Re}}\) \( \newcommand{\ImaginaryPart}{\mathrm{Im}}\) \( \newcommand{\Argument}{\mathrm{Arg}}\) \( \newcommand{\norm}[1]{\| #1 \|}\) \( \newcommand{\inner}[2]{\langle #1, #2 \rangle}\) \( \newcommand{\Span}{\mathrm{span}}\)\(\newcommand{\AA}{\unicode[.8,0]{x212B}}\). 5 Common Challenges of International Business | HBS Online The other extreme is totalitarianism, which contends that every aspect of an individuals life should be controlled and dictated by a strong central government. Firms need to assess the balance to determine how local policies, rules, and regulations will affect their business. For example, some countries governments have tried to limit the influence of American culture on local markets by limiting or denying the entry of American companies operating in the media, food, and music industries. Government-business trade relations are the relationships between national governments and global businesses. We also acknowledge previous National Science Foundation support under grant numbers 1246120, 1525057, and 1413739. Legal systems are discussed in terms of the protections they offer . This provision has generated an entire set of financial products and strategies to simulate interestor a gainfor an Islamic bank, while not technically being classified as interest. What is capitalism? However, in defense, power generation, telecoms, metals, minerals, aviation, and other sectors, a growing number of emerging-market governments, not content with simply regulating markets, are moving to dominate them.Ian Bremmer, The Long Shadow of the Visible Hand, Wall Street Journal, May 22, 2010, accessed December 21, 2010, http://online.wsj.com/article/SB10001424052748704852004575258541875590852.html. In practice, countries use a combination of one or more of these systems and often adapt them to suit the local values and culture. It might seem straightforward to assume that businesses prefer to operate only in democratic, capitalist countries where there is little or no government involvement or intervention. In the broadest sense, capitalism is an economic system in which the means of production are owned and controlled privately. Why should businesses care about the different political and legal systems around the world? International Business Chapter 3: National Differences in - Studocu Several things stand out in the 2008 index. Political Environment In International Business | ipl.org SPECIAL DIFFICULTIES IN INTERNATIONAL BUSINESS - LinkedIn (D&C 134:11) Political and Legal Differences This chapter focuses on political and legal differences that business people must consider. How did this happen so fast? In practice, countries use a combination of one or more of these systems and often adapt them to suit the local values and culture. Fact Check: The difference between Trump's indictment and Hillary - CNN Free trade advocates perceive this government-directed intervention as an unfair tilt against the global private sector. This page titled 2.3: Political and Legal Factors That Impact International Trade is shared under a CC BY-NC-SA 3.0 license and was authored, remixed, and/or curated by Anonymous via source content that was edited to the style and standards of the LibreTexts platform; a detailed edit history is available upon request. Reading: Political and Economic Differences. Chapter 11 Assignment - N/A; Chapter 15 Assignment - N/A; . Understand government-business trade relations and how political and legal factors impact international business. How do political and legal realities impact international trade, and what do businesses need to think about as they develop their global strategy? China is both an emerging market and a rising superpower. Impact of Political & Legal Differences on International Retailing Course: International Business (6800:305) 44 Documents. Authoritarian leaders tend not to have a guiding philosophy and use more fear and corruption to maintain control. Although the terms freedom and democracy are often used interchangeably, the two are not synonymous. Chapter 4 "World Economies" provides more details about developed and developing countries and emerging markets. The nature of a country's political economy plays a big role in whether it is attractive to foreign business and entrepreneurship. Free trade advocates perceive this government-directed intervention as an unfair tilt against the global private sector. Authoritarian governments centralize all control in the hands of one strong leader or a small group of leaders, who have full authority. The other extreme is totalitarianism, which contends that every aspect of an individuals life should be controlled and dictated by a strong central government. Governments are also motivated by economic factors to intervene in trade. State-owned companies control more than 75 percent of all crude oil production, in contrast with only 10 percent for private multinational oil firms.Ian Bremmer, The Long Shadow of the Visible Hand, Wall Street Journal, May 22, 2010, accessed December 21, 2010, http://online.wsj.com/article/SB10001424052748704852004575258541875590852.html; Really Big Oil, Economist, August 10, 2006, accessed December 21, 2010, http://www.economist.com/node/7276986. Chinas ability to focus on dominating key industries inspires both fear and awe throughout the world. Multinationals now find themselves competing as never before with state-owned companies armed with substantial financial and political support from their governments.Ian Bremmer, The Long Shadow of the Visible Hand, Wall Street Journal, May 22, 2010, accessed December 21, 2010, http://online.wsj.com/article/SB10001424052748704852004575258541875590852.html. Totalitarianism, a more extreme form of authoritarianism, occurs when an authoritarian leadership is motivated by a distinct ideology, such as communism. In some countries, the government controls more aspects of daily life than in others. 2.3: Political and Legal Factors That Impact International Trade Identify the different legal systems. The Christian Canon system is observed in the Vatican City. The authors unpack their recent research. National security issues can impact both the import and exports of a country, as some governments may not want advanced technological information to be sold to unfriendly foreign interests. CONTENT What businesses must focus on is how a country's political system impacts the economy as well as the particular firm and industry. Legal Challenges in International Business | Zegal Political differences are described along two dimensions: collectivist vs. individualist and democratic vs. totalitarian. Clarence Thomas and Ketanji Brown Jackson criticize each other in - CNN The economic system refers to the way in which a country organizes its economy: most are command, market, or mixed economies. U.S. Law regulating behaviour regarding the conduct of international business in the taking of bribes and other unethical actions Intellectual Property Products of the mind, ideas (e..g books, music, computer software, designs, technological know-how); intellectual property can be protected by patents, copyrights, and trademarks The company now has a 25 percent market share of polysilicon and almost 50 percent of the global market for solar-power equipment.Jason Dean, Andrew Browne, and Shai Oster, Chinas State Capitalism Sparks Global Backlash, Wall Street Journal, November 16, 2010, accessed December 22, 2010, http://online.wsj.com/article/SB10001424052748703514904575602731006315198.html. Chapter 4 "World Economies" provides more details about developed and developing countries and emerging markets. Democratic governments derive their power from the people of the country either by direct referendum, called a direct democracy, or by means of elected representatives of the people, known as a representative democracy. One entrepreneur, Zhu Gongshan, received $1 billion in funding, including a sizeable investment from Chinas sovereign wealth fund, in record time, enabling his firm GCL-Poly Energy Holding to become one of the worlds biggest in less than three years. Choice of structure: It is paramount to consider the structure of the company and the objectives which it wants to pursue. In this paper the parameters of the political, legal, and the cultural environment of international business will be considered, The paper also relates how political, legal, and cultural incidents or situations may become roadblocks to the smooth operation of business ventures in foreign countries. Many observers note that it was the direct result of Chinese government intervention in what was deemed a key industry. When you're doing business in a foreign market . For example, in Islamic law, business is directly impacted by the concept of interest. Before we can evaluate the impact on business, lets first look at the different political and legal systems. This system is commonly referred to as a socialist market economy with Chinese characteristics. The Chinese are eager to portray their version of combining an authoritarian form of government with a market-oriented economy as a better alternative model for fledging economies, such as those in Africa. Is there a well-established legal environment both to enforce policies and rules as well as to challenge them? Informal differences are also critical to understand. Democracy can be seen as a set of practices and principles that institutionalise and thus ultimately protect freedom. Is power concentrated in the hands of a few, or is it clearly outlined in a constitution or similar national legal document? State Capitalism: Governments Seeking to Control Key Industries. The most recent one emphasizes the governments goal for China to become a technology powerhouse by 2020 and highlights key areas such as green technology, hence the solar industry expansion. What are three policy areas in which governments can create rules and regulations in order to control, manage, and intervene in trade.
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