Chapter 2 The Political, Legal, and Technological Environment PDF

Chapter 2 The Political, Legal, and Technological Environment © McGraw Hill, LLC © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC. 1  Learning Objectives 1. Introduce the basic political systems that cha...

Chapter 2 The Political, Legal, and Technological Environment © McGraw Hill, LLC © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC. 1  Learning Objectives 1. Introduce the basic political systems that characterize regions and countries around the world and offer brief examples of each and their implications for international management. 2. Present an overview of the legal and regulatory environment in which MNCs operate worldwide, and highlight differences in approach to legal and regulatory issues in different jurisdictions. 3. Review key technological developments, including the growth of ecommerce, and discuss their impact on MNCs now and in the future. © McGraw Hill, LLC 2  Political Environment The political system or system of government in a country greatly influences how its people manage and conduct business. Political systems vary greatly among nation-states across the world. The issue with understanding how to conduct international management extends beyond the general knowledge of governmental practices to the specifics of the legal and regulatory frameworks in place. Underlying the actions of a government is the ideology informing the beliefs, values, behavior, and culture of the nation and its political system. A political system can be evaluated along two dimensions: the ideology of the system and the degree of individualism or collectivism within the system. © McGraw Hill, LLC 3  Ideologies Individualism: Adopters adhere to the philosophy that people should be free to pursue economic and political endeavors without constraint. Collectivism views the needs and goals of society at large as more important than individual desires. The reason there is no one rigid form of collectivism is that societal goals and the decision of how to keep people focused on them differ greatly among national cultures. Socialism is a moderate form of collectivism in which there is government ownership of institutions, and profit is not the ultimate goal. Communism is an extreme form of socialism that was realized through violent revolution and was committed to the idea of a worldwide communist state. © McGraw Hill, LLC 4  Individualism VS Collectivism © McGraw Hill, LLC 5  Communism VS Socialism © McGraw Hill, LLC 6  Political Systems 1 Democracy: A political system in which the government is controlled by the citizens either directly or through elections. The representative government ensures individual freedom since anyone who is eligible may have a voice in the choices made. A democratic society cannot exist without at least a two-party system. Individual freedoms, such as freedom of expression and assembly, are secured. © McGraw Hill, LLC 7  Political Systems 2 Totalitarianism: A political system in which there is only one representative party, which exhibits control over every facet of political and human life. Power is often maintained by the suppression of opposition, which can be violent. Media censorship, political repression, and denial of rights and civil liberties are dominant ideals. The most common form of totalitarianism is communist totalitarianism. © McGraw Hill, LLC 8  Legal and Regulatory Environment 1 There are four foundations on which laws are based around the world. Islamic Law: This is law derived from interpretation of the Qur’an and the teachings of the Prophet Muhammad. It is found in most Islamic countries in the Middle East and Central Asia. Socialist Law: This law comes from the Marxist socialist system and continues to influence regulations in former communist countries, especially those from the former Soviet Union, as well as China, Vietnam, North Korea, and Cuba. Since socialist law requires most property to be owned by the state or state-owned enterprises, MNCs have traditionally shied away from these countries. © McGraw Hill, LLC 9  Legal and Regulatory Environment 2 Common Law: comes from English law and the foundation of the legal system in the United States, Canada, England, Australia, New Zealand, and other nations. Civil or code law: derived from Roman law. It is found in non-Islamic and non-socialist countries such as France, some countries in Latin America, and Louisiana in the United States. Today, one-third of the world's population lives in in mixed legal systems that combine the common law with the civil law. © McGraw Hill, LLC 10  Basic Principles of International Law 1 When compared with domestic law, international law is less coherent because its sources embody not only the laws of individual countries concerned with any dispute but also treaties and conventions. Principle of sovereignty: An international principle of law that holds that governments have the right to rule themselves as they see fit. Nationality principle: A jurisdictional principle of international law that holds that every country has jurisdiction over its citizens no matter where they are located. Territoriality principle: A jurisdictional principle of international law that holds that every nation has the right of jurisdiction within its legal territory. © McGraw Hill, LLC 11  Basic Principles of International Law 2 Protective principle: A jurisdictional principle of international law that holds that every country has jurisdiction over behavior that adversely affects its national security, even if the conduct occurred outside that country. Doctrine of Comity: A jurisdictional principle of international law that holds that there must be mutual respect for the laws, institutions, and governments of other countries in the matter of jurisdiction over their own citizens. Act of State Doctrine: A jurisdictional principle of international law that holds that all acts of other governments are considered to be valid by U.S. courts, even if they are illegal or inappropriate under U.S. law. © McGraw Hill, LLC 12  Examples of Legal and Regulatory Issues 1 Below are some examples of specific laws and situations that can have a direct impact on international business. Financial services regulations: The integrated nature of financial markets means a regulatory failure in one jurisdiction can impact other jurisdictions. The Foreign Corrupt Practices Act (FCPA) - An act that makes it illegal to influence foreign officials through personal payment or political contributions (bribes). Countries use their legal and regulatory policies on international trade to affect the international management environment. © McGraw Hill, LLC 13  Examples of Legal and Regulatory Issues 2 Bureaucratization: Very restrictive foreign bureaucracies are one of the biggest problems facing MNCs. This is particularly true when bureaucratic government controls are inefficient and left uncorrected. In many developing and emerging markets, bureaucratic red tape impedes business growth and innovation. Privatization: opens a host of opportunities for MNCs looking to invest in domestic industries or create joint ventures with local firms. © McGraw Hill, LLC 14  Technological Advancements 1 Technological advancements not only connect the world at incredible speed but also aid in the increased quality of products, information gathering, and R&D. Manufacturing, information processing, and transportation are just a few examples of where technology improves organizational and personal business. In the future, technology has the potential to displace employees in all industries. © McGraw Hill, LLC 15  Technological Advancements 2 Biotechnology is the integration of science and technology to create agricultural or medical products through industrial use and manipulation of living organisms. Hunger and poor health care are worldwide issues - biotechnology is working to raise the standards. E-Business: As the Internet becomes increasingly widespread, it is having a dramatic effect on international commerce. Telecommunication: One of the most important dimensions of the technological environment facing international management is telecommunications and the impact of mobile devices. © McGraw Hill, LLC 16  Technology in the Next Decade 1 The Internet of Blockchain Things technology AI and Machine Robotics Learning © McGraw Hill, LLC 17  Technology in the Next Decade 2 The “Internet of Things”: devices with sensors, processing ability, software and other technologies that connect and exchange data with other devices and systems over the Internet or other networks. Blockchain technology: using an open ledger to record transactions and ownership, best known for its use in Bitcoin - is poised to transform the financial services industry and even contracts. AI and Machine Learning: transformative change may be found in every sector of the global economy. Robotics: coupled with other technological developments may improve processes in manufacturing, medicine, and science. © McGraw Hill, LLC 18 © McGraw Hill, LLC 21