THE NON ECONOMIC ENVIRONMENT FOR INTERNATIONAL MANAGEMENT

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Chapter 2 THE NON ECONOMIC ENVIRONMENT FOR
INTERNATIONAL MANAGEMENT
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Political Environment

• CHINA
• Complex and risky
• Many of Class of 77 graduates are coming into
  influential positions.
• steps to open up the economy
• privatizing state enterprises
• expanding the size of capital markets
• Accelerating worker retraining
• creating new social services
• Reducing tariffs

3
Political Environment

• EUROPE
• Political situation continues to change making it
  difficult to firmly establish a foothold of power
• No longer a series of fragmented countries, but a
  giant, interwoven region
• International management must be aware of
  political happenings throughout the entire
  continent

4
Political Environment

• Russia
• many MNCs are reluctant to do business there
• Companies refuse to pay taxes
• Price of oil has declined sharply
• barter has become a way of life
• High unemployment

5
Political Environment

• Central and Eastern Europe
• These nations are making the transition to a
  market economy
• Since the days of communism, most moved first to
  the political right, then the left, and now back
  to the right

6
Legal and Regulatory Environment

• Islamic Law
• Derived from interpretation of the Quran 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

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Basic Principles of International Law

• Principle of sovereignty
• International jurisdiction
• Nationality principle
• Territoriality principle
• Protective principle
• Doctrine of comity
• Act of State doctrine
• All acts of other governments are considered to
  be valid by local courts
• Treatment and rights of Aliens

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Examples of Legal and Regulatory Issues

• Foreign Corrupt Practices Act - made it Illegal
  to influence foreign officials through personal
  payment or political contributions
• Bureaucratization - Regulations to reduce the
  ability of foreigners to do business locally
• Privatization - Government deregulation and
  free market

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2000 Corruption Perception Index (AWSJ Mar. 12,
2001)

• Rank Country CPI Score
• 1 Finland
  10.0
• 2 Denmark
  9.8
• 3 New Zealand, Sweden 9.4
• 5 Canada
  9.2
• 6 Iceland, Norway, Singapore 9.1
• 9 Netherlands
  8.9
• 15 Hong Kong 7.7
• 23 Japan
  6.4
• 28 Taiwan
  5.5
• 63 China
  3.1
• 69 India, Philippines 2.8
• 76 Vietnam
  2.5
• 85 Indonesia
  1.7

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

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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
• Payment conversion

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Telecommunications

• As a result of the wireless telephone service,
  growth in this technology has been rapid
• future growth
• Many countries believe that without an efficient
  telephone system, their economic growth will
  stagnate
• Governments are accepting the fact that
  attracting foreign investment and know-how in
  telecommunications means giving up control to
  private industry

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The Employment Fallout from Technology

• how will technology 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 portable

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Favorite Places Identified by Japanese Companies

• 1. China
• 2. United States
• 3. Thailand
• 4. Indonesia
• 5. Malaysia
• 6. Taiwan
• 7. India
• 8. Vietnam
• 9. South Korea
• 10. The Philippines
• (AWSJ Mar. 12,
  2001)