Political Systems and Legal Frameworks

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Questions and Answers

What is one of the functions of political systems?

Provide healthcare

Ensure stability based on laws (correct)

Enforce religious practices

Control individual freedom

Which political system is characterized by government control over all economic and political matters?

Socialism

Democracy

Anarchy

Authoritarianism (correct)

Which legal system is known for its reliance on judicial precedents?

Common Law (correct)

Civil Law

Religious Law

Mixed Systems

How do authoritarian governments typically maintain power?

Via secret police and propaganda Signup and view all the answers

What is NOT a major type of political system?

Oligarchy Signup and view all the answers

What can be considered a source of country risk in relation to political and legal systems?

Political parties Signup and view all the answers

What type of legal system incorporates religious beliefs into its laws?

Religious Law Signup and view all the answers

Which of the following is a characteristic of socialist political systems?

Common ownership of resources Signup and view all the answers

What is a key characteristic of democracy in terms of market entry?

Openness to foreign markets Signup and view all the answers

What outcome is associated with increased market competition in a democratic system?

Benefits to various constituents Signup and view all the answers

Which political system is typically associated with command economies?

Authoritarianism Signup and view all the answers

What is a feature of mixed economies like Sweden and Singapore?

Combination of state intervention and market mechanisms Signup and view all the answers

In the context of national governance, what does it refer to?

Policies and processes for governing nations Signup and view all the answers

What benefit can result from foreign carmakers entering a market like India's?

Greater variety of models Signup and view all the answers

What is the relationship between political and economic freedom?

Higher political freedom can lead to greater economic freedom Signup and view all the answers

What can increased competition in a market lead to?

Improvements in quality and efficiency Signup and view all the answers

What was one reason for citizens boycotting Disneyland Paris?

To express opposition to globalization Signup and view all the answers

What is a significant effect of terrorism on certain industries?

Negative impact on tourism and hospitality Signup and view all the answers

Which law affects how foreign investors can enter a certain country?

Foreign investment laws Signup and view all the answers

What restriction did Japan impose concerning foreign investment?

Limits on warehouse-style stores Signup and view all the answers

Which country restricts foreign oil companies from having full ownership of their firms?

Mexico Signup and view all the answers

What kind of laws control how firms conduct marketing and distribution activities?

Controls on operating forms and practices Signup and view all the answers

What does the Foreign Corrupt Practices Act primarily address?

Corruption in foreign transactions Signup and view all the answers

In which sector does the Chinese government require foreign investors to seek partnerships with local firms?

Telecommunications Signup and view all the answers

What is the primary function of arbitration?

To hear both sides and make a decision based on facts. Signup and view all the answers

In which scenario would litigation commonly occur?

When one party files a lawsuit against another. Signup and view all the answers

What aspect of business does Christopher Johnson emphasize in his profile?

The significance of understanding cultural variations. Signup and view all the answers

What advantage does Christopher attribute to studying abroad?

It helps in developing a global business perspective. Signup and view all the answers

Which statement best describes the adversarial nature of litigation?

It is based on competition between opposing parties. Signup and view all the answers

What is the primary reason for China allowing access to foreign capital and technology?

To ensure local control of the telecom industry Signup and view all the answers

Which countries prohibit cigarette advertising on television?

Finland, France, Norway, and New Zealand Signup and view all the answers

What is a common consequence of laws on income repatriation?

Limitation on the amount of dividends firms can return home Signup and view all the answers

What can cause foreign firms to abandon business ventures in countries such as China and Russia?

Erratic legal environments Signup and view all the answers

What legislation made it illegal for U.S. firms to offer bribes to foreign parties?

The Foreign Corrupt Practices Act Signup and view all the answers

In which area might the legal systems of developing economies typically be inadequate?

Pollution control and consumer protection Signup and view all the answers

What is a key factor affecting accounting and reporting laws around the world?

Physical asset valuation differences like historical cost usage Signup and view all the answers

Which of the following is an example of extraterritoriality?

The European Union pursuing a company for monopolistic practices Signup and view all the answers

Study Notes

Major Political Systems

Three primary political systems: Authoritarianism, Socialism, Democracy; these systems can overlap and aren't mutually exclusive.

Functions of Political Systems

Protection against external threats.
Stability through the rule of law.
Governance over resource allocation within society.
Structure for interpersonal interactions among members of society.

Legal Systems

Legal system interprets and enforces laws, establishing norms for conduct.
Four major types of legal systems: Common Law, Civil Law, Religious Law, Mixed Systems.

Sources of Country Risk

Political risks stem from government structures, political parties, legislative bodies, and various lobbying groups.
Legal risks relate to laws and regulations aimed at maintaining order in commercial activities, dispute resolution, and protecting intellectual property.

Authoritarianism

Characterized by total government control over economic and political matters.
Exists in theocratic or secular forms with leadership often centralized in a dictator.
Power maintained through mechanisms like secret police and propaganda.
Examples include Cuba, North Korea, and historical regimes in China, Germany, the Soviet Union, and Spain.

Economic and Political Freedom

Democracy linked to "openness," fostering competitive markets with reduced entry barriers for foreign firms, enhancing overall product quality and lowering prices.
Example: India's reduction of barriers in the car market led to increased competition and improved quality alongside reduced prices.

Political and Economic Systems

Authoritarian regimes often correlate with command economies—state-managed production, pricing, and distribution.
Democratic systems generally operate within market economies where decisions are driven by supply and demand.
Socialism represents mixed economies, combining state intervention with market forces, with countries like Sweden and Singapore as examples.

National Governance

Refers to policies and processes governing nations, including law formation and public resource management.
Political and economic freedoms are intricately linked to national governance.
Examples of citizen actions against globalization, such as boycotts in France against Disneyland Paris and McDonald’s.

Political Risks: Wars and Violence

Wars and insurrections can severely impact business activities.
Terrorism, a strategy of using force to achieve political goals, can disrupt industries like tourism and finance.

Legal System Risks

Foreign investment laws, including restrictions in countries like Japan and Mexico, can limit market access.
Regulations governing operating practices, distribution methods, and income repatriation, deeply affect foreign firms' operations.
Example: China mandates joint ventures for foreign telecommunications investments.

Inadequate Legal Systems

Weak legal systems may struggle with law enforcement, particularly in areas such as intellectual property rights.
Developed countries can also exhibit these problems; legal inconsistencies have contributed to financial crises.

Extraterritoriality and Compliance

Extraterritoriality applies home-country laws to foreign operations, exemplified by the EU's actions against Microsoft.
The Foreign Corrupt Practices Act restricts U.S. firms from bribing foreign officials, impacting competitive parity.

Accounting and Reporting

Discrepancies in accounting practices around the world, including asset valuation and arbitration processes, affect legal proceedings and firm responsibilities in different jurisdictions.

Christopher Johnson: Case Study

Accountant with international experience gained through a study abroad program in Turkey.
Worked with Deloitte Tax and Ayco, highlighting the importance of global business insights for career development in international finance.

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Description

Explore the major political systems including Authoritarianism, Socialism, and Democracy, and understand their functions in society. Delve into the different legal systems and how they influence governance and resource allocation, while assessing country risks related to political and legal factors.