Politics Chapter 3: Governmental and Legal System

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Questions and Answers

What is the ultimate test of any political system?

Its ability to ensure economic growth

Its ability to hold a society together (correct)

Its ability to promote individual freedom

Its ability to protect the environment

What is a major challenge that multinational enterprises (MNEs) face when operating internationally?

Cultural differences between countries

Differences in language

Changes in a country's political system (correct)

Time zone differences

What is the definition of a political system?

A type of government

A set of laws that govern business activities

A complete set of institutions, political organizations, and interest groups, and the relationships among those institutions (correct)

A system of economic policies

Why must a multinational enterprise's management carefully analyze the fit between its corporate policies and the political and legal conditions of each particular nation?

To minimize risks arising from political system changes Signup and view all the answers

What is the relationship between a country's political system and business activities?

The political system influences the extent to which government intervenes in business Signup and view all the answers

What is a key aspect of political systems that can be profiled?

The general orientation towards individualism versus collectivism Signup and view all the answers

In an individualistic paradigm, what is the role of government in the economy?

Intervene in the economy to deal with market defects Signup and view all the answers

What is the term for the coexistence of multiple ideologies within a society?

Pluralism Signup and view all the answers

In a democratic system, how do citizens participate in the decision-making process?

Directly and through elected representatives Signup and view all the answers

What is the primary goal of government in a collectivist paradigm?

To define economic needs and priorities Signup and view all the answers

What is the relationship between government and business in an individualistic paradigm?

Adversarial Signup and view all the answers

Why is understanding political ideologies important for business managers?

To adjust company practices and decision-making Signup and view all the answers

What are the three components of modern legal systems?

Constitutional law, Criminal law, and Civil and Commercial law Signup and view all the answers

Which of the following countries is NOT a common-law nation?

France Signup and view all the answers

What is the ultimate legal authority in a theocratic legal system?

Religious leaders Signup and view all the answers

What is the basis of civil law?

A detailed set of laws that comprise a code Signup and view all the answers

Which type of legal system anchors itself in the wisdom of daily experience or great spiritual or philosophical traditions?

Customary law Signup and view all the answers

What is the name of the Islamic legal system based on the Koran, the Sunnah, the writings of Islamic scholars, and the consensus of Muslim countries’ legal communities?

Shariah law Signup and view all the answers

What factor influences country-of-origin regulations?

National security concerns Signup and view all the answers

What aspect of business practices vary widely from one country to another?

Pricing, distribution, advertising, and promotion Signup and view all the answers

Why do products often need to be customized for different markets?

To comply with local product safety standards Signup and view all the answers

What is a concern for firms operating in multiple countries?

Specifying, regulating, and enforcing intellectual property rights Signup and view all the answers

What determines which law should apply and where litigation should occur in international business disputes?

National laws of the countries involved Signup and view all the answers

What is a key characteristic of intellectual property?

Difficult to create but easy to duplicate Signup and view all the answers

What is the primary goal of granting International Property Rights?

To provide a limited monopoly to an innovator Signup and view all the answers

What is a major challenge in enforcing International Property Rights?

Difficulty in globally registering a patent, trademark, or copyright Signup and view all the answers

Why is it important for multinational enterprises to analyze the fit between their corporate policies and the political and legal conditions of each nation?

To identify potential sources of political risk Signup and view all the answers

What is a possible guideline for making business decisions in underdeveloped legal systems?

Using ethical principles to guide decision-making Signup and view all the answers

Why is it important to explore possible sources of political risk for companies operating internationally?

To identify potential challenges to business operations Signup and view all the answers

What is a key aspect of a country's political transition from totalitarian to democratic?

The shift from a collectivist to an individualistic paradigm Signup and view all the answers

Study Notes

Political Environment

A political system is a set of institutions, political organizations, and interest groups, and the relationships among them, that govern their activities.
It integrates the various parts of a society into a viable, functioning entity.
Political systems influence the extent to which government intervenes in business and how business is conducted domestically and internationally.

Individualism vs. Collectivism

Individualistic paradigm: limited government role in society, adversarial relationship between government and business, and promotion of marketplace competition.
Collectivist paradigm: government defines economic needs and priorities, partners with business in major ways, and has a cooperative relationship with business.

Political Ideology

A political ideology is a body of goals, theories, and aims that constitute a sociopolitical program.
Pluralism indicates the coexistence of a variety of ideologies within a society.
Democracy and totalitarianism are the two extremes on the political spectrum.
Understanding political ideologies allows managers to adjust company practices and decision-making.

Democracy

A political system in which citizens participate in the decision-making and governance process, either directly or through elected representatives.

Legal Environment

A legal system is the means and methods a country uses to regulate business practices, define how companies conduct business transactions, specify rights and obligations, and provide legal redress.

Types of Legal Systems

Common law: based on tradition, custom, and usage, with courts playing an important role in interpreting the law.
Civil law: based on a detailed set of laws, with courts playing an important role in applying the law.
Theocratic law: based on religious precepts, with ultimate legal authority conferred upon religious leaders.
Customary law: anchors itself in the wisdom of daily experience or great spiritual or philosophical traditions.

Legal Systems Components

Constitutional law
Criminal law
Civil and commercial law

Marketplace Behavior

National laws determine permissible practices in pricing, distribution, advertising, and product promotion, and vary widely from one country to another.

Product Safety and Liability Regulation

Products must be customized to comply with local standards, which may be higher than those found in a firm's home market.
Product liability laws vary widely, with some countries having stringent laws while others have spotty or arbitrary laws.

Legal Jurisdiction

Every country specifies which law should apply and where litigation should occur when agents are involved.

Intellectual Property Rights

Ownership rights to intangible assets, such as writing, inventions, and identifiers.
Problems arise due to difficulties in creating, regulating, and enforcing intellectual property rights.
Cross-national and cross-cultural legal differences complicate specifying, regulating, and enforcing intellectual property rights.

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Description

Learn about the dynamics of politics and laws when operating internationally. Understand the risks that arise from changes in a country's political system and how it affects multinational enterprises.