THE POLITICAL, LEGAL AND TECHNOLOGICAL ENVIRONMENT

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CHAPTER 2

• THE POLITICAL, LEGAL AND TECHNOLOGICAL ENVIRONMENT

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Political Environment

• Structure of Government
• Ideology
• Communism government ownership
• Capitalism- private ownership
• Socialism both private and govt ownership
• Political Parties
• Single Party one party
• Dual Party two parties
• Multiple Party more than two parties

3
Political Environment

• CHINA
• Emerging economic power
• Complex and risky
• Balance national, immediate needs of the people
  with challenge of modernization
• Relationship with Taiwan
• Steps to open up the economy
• Privatizing state enterprises - Speeding up
  program to convert state enterprises into
  shareholder-owned corporations
• Accelerating worker retraining building low-cost
  housing, and providing other social services
• Reducing tariffs
• Encourage foreign investment expanding capital
  markets by authorizing new stock listings
• Allowing government bodies to sell off state
  enterprises

4
Political Environment

• CHINA
• Four Fears of Chinese people
• Inflation
• Unemployment
• Anger of farmers
• Increasing corruption

5
Political Environment

• EUROPE
• Political situation?
• MNCs doing business with individual countries
  risk action by the EU itself
• Businesses must be aware of political happenings
  in the immediate area as well as throughout the
  continent
• Strong opposition to US led intervention in Iraq
  spills over into business relationships
• Fragmented countries or a giant, interwoven
  region
• Unemployment is the Achilles heel of
  integration
• Germany and Italy have less jobs today than in
  1993.
• 16 million people are currently looking for work
  in Europe
• Employment law is so protective of workers that
  businesses dont want to hire
• Franco-German relations are the cornerstone of a
  united Europe.

6
Political Environment

• EUROPE
• Germany
• May want to secede from European Union
• 34 days paid vacation per year
• Only receive 30 of net income
• BMWs 30 more expensive in Germany than US
• 7.00 for a gallon of gas

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Political Environment

• Russia
• Political and economic situation intertwined
• MNCs are reluctant to do business
• Companies refuse to pay taxes
• 40 of businesses use barter as a way of life
• High unemployment
• Bleak economic outlook
• Neglect, corruption, and confusing economic
  policy
• Decaying infrastructure
• Reform stalled by a political quagmire
• Government must keep the economy on an even keel
  while attracting more foreign investment

8
Political Environment

• Russia
• Population decreasing at an alarming rate
• Life expectancy
• Fertility rate
• Poverty
• Poor health care
• Environmental concerns

9
Political Environment

• Central and Eastern Europe
• Many of these countries have joined the EU
• Political situation is in a state of flux
• Difficult transition to a market economy
• Problems include high unemployment, trade
  deficits
• Since the days of communism, most countries moved
  first to the political right, then the left, and
  now back to the right
• Government plan to streamline the economy and
  get the country moving has been fraught with
  problems
• More successful countries include Estonia,
  Latvia and Lithuania

10
Political Environment Middle East

• Doing business in the Middle East
• requires knowledge of regulations, legal
  environment, Islam
• Is risky and dangerous
• Islamic fundamentalists have become aggressive
  toward US and allies
• MNCs must evaluate legal framework in each market
  in which they want to do business

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Global Foundations of Law
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Legal and Regulatory Environment

• Islamic Law
• Pillars of Islamic Law
• Faith
• Prayer
• Charity
• Fasting
• Pilgrimage
• A sixth pillar? (jihad)

13
Legal and Regulatory Environment

• Socialist Law
• Marxist socialist system - continues to influence
  regulations in former communist countries. Found
  in former Soviet Union, China, Vietnam, North
  Korea and Cuba.
• Property owned by state
• 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 such as
  France and Louisiana in the US.

14
Basic Principles of International Law

• Sovereignty and Sovereign Immunity
• An international principle of law which holds
  that governments have the right to rule
  themselves as they see fit

15
Basic Principles of International Law

• International Jurisdiction
• A jurisdictional principle of international law
  which holds that every country has jurisdiction
  over its citizens no matter where they are
  located
• Nationality principle
• Territoriality principle
• Protective principle

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Basic Principles of International Law

• Doctrine of Comity
• A jurisdictional principle of international law
  which holds that there must be mutual respect for
  the laws, institutions, and government of other
  countries in the matter of jurisdiction over
  their own citizens

17
Basic Principles of International Law

• Act of State Doctrine
• A jurisdictional principle of international law
  which holds that 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

18
Basic Principles of International Law

• Treatment and Rights of Aliens
• Countries have the legal right to refuse
  admission of foreign citizens and to impose
  special restrictions on their conduct, right of
  travel, where they can stay, and what business
  they may conduct
• Nations also can deport aliens

19
Basic Principles of International Law

• Forum for Hearing and Settling Disputes
• U.S. courts can dismiss cases brought before them
  by foreigners however they are bound to examine
  issues such as
• Where the plaintiffs are located,
• Where the evidence must be gathered
• Where property to be used in restitution is
  located

20
Legal and Regulatory Issues

• Foreign Corrupt Trade Practices Act (FCPA)
• - Illegal to influence foreign officials through
  personal payment or political contributions
• - Obtain or maintain business
• - Objective Stop US MNCs from corruption in
  foreign governments and upgrade the image of the
  US abroad
• Critics fear loss of business where bribery is a
  tradition. However, US exports to bribe prone
  countries has INCREASED!
• The IRS can audit books at any time. IRS looks
  for 5,000 or slush funds
• - Experience has shown that MNCs can live within
  the guidelines established by the FCPA
• - More countries (OECD) are adopting similar
  acts

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Legal and Regulatory Issues

• Bureaucratization
• -Restrictive business practices are one of the
  biggest problems facing MNCs
• -Regulations reduce the ability of foreigners to
  compete Local politics chosen over national
  concerns
• Privatization
• - Privatization is the selling off of
  state-owned services/businesses to private, free
  enterprises
• - The objective is to encourage more effective
  and efficiently-run businesses
• Examples include
• Deregulation of German telecommunications
• Chinese military ordered to sell more than 10,000
  companies

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Additional Legal and Regulatory Issues

• Bribery and Corruption
• Nations most prone to corruption
• low GDP
• Nations least prone to corruption
• high GDP

23
Technologies That Will Influence International
Business
Internet
Biotechnology
Artificial Intelligence
International Business
Automatic Translation Telephones
Silicon Chips
Satellites
Supercomputers
Nanotechnology
24
Technological Environment

• Telecommunications
• Poor communication services poor economic
  growth
• Wireless more affordable than installed phone
  lines
• Technology has reduced middle management white
  collar jobs
• Global competition has forced some MNCs to
  outsource jobs
• Internet - people have access to information from
  millions of sources
• Asia, Europe and North America Largest numbers
  of Internet Users
• English, Chinese, Japanese, and Spanish top
  four Internet languages
• Copenhagen, Denmark best location to establish
  an e-business

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World Internet Usage
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Expected Winnersin Selected Occupations
Computer software engineers, applications
Computer support specialists
Computer software engineers, systems software
Network and computer systems administrators
Personal and home care aids
Medical assistants
Percentage change for 2000-2010
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Expected Losersin Selected Occupations
Railroad brake, signal, and switch operators
Telephone operators
Loan interviewers and clerks
Meter readers, utilities
Farmers and ranchers
Order clerks
Insurance claims and policy processing clerks
Percentage change for 2000-2010