Ch03 (1)

Politics, Law,Politics, Law,and Business and Business

EthicsEthics

3

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Roles of History and CultureRoles of History and Culture

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Political IdeologiesPolitical Ideologies

Both private and public groups need to balance

each other’s power

Every aspect ofpeople’s lives must be

controlled to preserve order

Only individuals andprivate groups can

preserve personal liberties

TotalitarianismTotalitarianism AnarchismAnarchismPluralismPluralism

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ImposedImposedauthorityauthorityImposedImposedauthorityauthority

Lack of Lack of constitutionalconstitutional

guaranteesguarantees

Lack of Lack of constitutionalconstitutional

guaranteesguarantees

RestrictedRestrictedparticipationparticipationRestrictedRestricted

participationparticipation

TotalitarianismTotalitarianism

Leaders govern without people’s supportLeaders govern without people’s support Government controls much of people’s livesGovernment controls much of people’s lives Leaders do not tolerate opposing viewpointsLeaders do not tolerate opposing viewpoints

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Forms of TotalitarianismForms of Totalitarianism

Theocratic totalitarianism (totalitarian religious leadership)

Secular totalitarianism (military and bureaucratic leadership)

Tribal totalitarianismTribal totalitarianism

Communist totalitarianismCommunist totalitarianism

Right-wing totalitarianismRight-wing totalitarianism

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Business in Totalitarian Business in Totalitarian NationsNations

Risk FactorsRisk Factors

• Arbitrary nature of business can mean that laws are vague or do not exist

• Bureaucrats may interpret laws however they wish

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DemocracyDemocracy

• Freedom of expression

• Periodic elections

• Full civil, property rights

• Minority rights

• Nonpolitical bureaucracies

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Types of Political RiskTypes of Political RiskTypes of Political RiskTypes of Political Risk

Conflict and violenceConflict and violenceConflict and violenceConflict and violence

Policy changesPolicy changesPolicy changesPolicy changes

Terrorism and kidnappingTerrorism and kidnappingTerrorism and kidnappingTerrorism and kidnapping

Local content requirementsLocal content requirementsLocal content requirementsLocal content requirements

Property seizureProperty seizureProperty seizureProperty seizure

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Arises from:Arises from:

People’s resentment toward government

Territorial disputes between nations

Ethnic, racial, or religious disputes

Reduces ability to:Reduces ability to:

Obtain materials and equipment

Manufacture and distribute products

Protect employees’ lives and firm’s assets

Conflict and ViolenceConflict and Violence

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Fly nonstop when possible and avoid unsecured areas of airports

During your stay, vary your routines and means of transportation

Keep a low profile and refrain from loud, flashy behavior

Give friendly but cautious answers to personal questions

Know local emergency procedures before trouble strikes

Security checklist for managers on business abroad:

Terrorism and KidnappingTerrorism and Kidnapping

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Property SeizureProperty Seizure

ConfiscationForced transfer of assets from a company to the government

without compensation

ExpropriationForced transfer of assets from a company to the government

with compensationNationalization

Forced asset transfer to the government of an entire

industry

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Policies and LawsPolicies and Laws

Policy changes restrict: Local content requirements:

Specify the portionof a good or service

to be supplied by local firms

Foreign ownership

Investment levels

Business activities

Foreign ownership

Investment levels

Business activities

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Managing Political Risk IManaging Political Risk I

AdaptationAdaptationIncorporate risk intoIncorporate risk intobusiness strategiesbusiness strategies

AdaptationAdaptationIncorporate risk intoIncorporate risk intobusiness strategiesbusiness strategies

LocalizationLocalization

Development assistanceDevelopment assistance

PartnershipsPartnerships

InsuranceInsurance

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Managing Political Risk IIManaging Political Risk II

Agencies specializingAgencies specializingin political-risk servicesin political-risk services

Current employeesCurrent employeeswith relevant informationwith relevant information

Information gatheringInformation gatheringGather data to betterGather data to better

predict and manage riskpredict and manage risk

Information gatheringInformation gatheringGather data to betterGather data to better

predict and manage riskpredict and manage risk

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Managing Political Risk IIIManaging Political Risk III

CorruptionCorruptionForeign Corrupt Practices Act

LobbyingLobbyingInfluencing local lawmakers

Influence local politicsInfluence local politicsPresent firm’s viewsPresent firm’s viewson political matterson political matters

Influence local politicsInfluence local politicsPresent firm’s viewsPresent firm’s viewson political matterson political matters

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Common LawCommon Law

PrecedentPast cases before the courts

UsageHow laws are applied

TraditionNation’s legal history

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Civil LawCivil Law

Rules and statutes

constitute a legal code

Defines all obligations, responsibilities, and

privileges

Dates to Roman times in

the fifth century B.C.

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Theocratic LawTheocratic Law

Legal tradition based on religious teachings

Islamic law Jewish law Hindu law

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Global Legal Issues IGlobal Legal Issues I

Intellectual property- Result of intellectual talent and abilities

- Piracy/counterfeits a serious problem

Patent Excludes all but the inventor from making, using, or selling the invention (WTO = 20 years)

Trademark Words or symbols that distinguish a product and its manufacturer ("Coca-Cola")

Copyright Freedom of creator to publish or dispose of original works as they choose ("Happy Birthday to You")

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Business Software PiracyBusiness Software Piracy

Source: Based on the Seventh Annual BSA and IDC Global Software Piracy Study (Washington, D.C.; Business Software Alliance, May 2010), Table 3, pp. 14–15, (www.bsa.org/globalstudy).

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Global Legal Issues IIGlobal Legal Issues II

Standardization- Interpreting and applying laws uniformly

Product safety and liability- Responsibility for damage, injury, or death

Taxation- Income, sales, consumption, and VAT

Antitrust (antimonopoly) laws- Prevent market sharing, price fixing, and

unfair advantage

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Friedman ViewFriedman ViewFriedman ViewFriedman View Cultural RelativismCultural RelativismCultural RelativismCultural Relativism

UtilitarianismUtilitarianismUtilitarianismUtilitarianismRighteous MoralismRighteous MoralismRighteous MoralismRighteous Moralism

Ethics and Social Ethics and Social ResponsibilityResponsibility

PHILOSOPHIES

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Fight to eliminate bribery and corruption

Improve labor conditions and guard human rights

Practice fair trade to help the disadvantaged

Protect the environment and conserve resources

Social Responsibility IssuesSocial Responsibility Issues

Go beyond legal obligations to balance commitments to investors, customers,

communities, and other companies

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International RelationsInternational Relations

Stable business environments

Improved business communications

Efficient distribution systems

Expanded opportunities

Diminished risk levels

Prompt and equitable dispute resolution

Favorable international political relations foster: