>The political environment of the company includes national and international political factors which can affect its operations. >This category also includes.

Political Environment

>The political environment of the company includes national and international political factors which can affect its operations.

>This category also includes the methods of thinking, and beliefs of all natures which can influence

the behavior of governments and citizens opposing the company without them emanating directly from a government example: nationalism). 

Definition

The Political Environment

Legal and Political Environment

SYSTEM STABILITY

POLICIES

SYSTEMIncludes the structures, processes, and activities by which a nation governs itself.

Political System

Totalitarian state Democratic state

SYSTEM

Totalitarian state

Imposed authorityLack of constitutional guaranteesRestricted participation

Companies might need to pay bribes to governmentThe business law is vague(Vogue = Uncertain )

Democratic state

FreedomRights

Stable business environmentthanks to laws Freedom and no censorship

Doing business seems to be a risky proposition

Doing business in a democratic state seems to be safer than in a totalitarian state

SYSTEM

Political Ideology

Capitalist system Socialist system

Capitalist System

- Private ownership of business is encouraged

Socialist System

- Public ownership of business is the norm

The political ideology affects - foreign government attitude towards profit repatriation(Return).- foreign government attitude towards foreign direct investment

SYSTEM

Political relationships

Favourable political relationships

foster(promote) stable business environments

increase international cooperation in many areas

lead to increase business opportunities and lower risk

The World Trade Organisation can facilitate political relationships

The WTO ensures that trade flows as smoothly, predictably and freely as possible.

STABILITY

Political Stability : « A subjective governance indicator aggregated from a variety of sources and measuring perceptions of the likelihood of destabilization. »

Political Risk

« The risk that political decisions or events in a country negatively affect the profitability or sustainability of an investment. »

4 types of political risk

STABILITY

Distributive Political Risks

« When countries revise their distribution policies to capture greater benefits from foreign companies. »

Catastrophique(horrible) Political Risks

« This is the Political developments that adversely affect the operations of all companies in a country. »

POLICIESTAXATION

Governments use income and sales taxes which can vary from country to country.

POLICIES

• Intellectual Property

« Property that results from people’s intellectual talent and abilitie. »

The problem is that laws in some countries are softer than in others

PROPERTY

• Industrial Property

« Industrial property includes patents and trademarks. »

• Copyrights

« Copyrights give creators of original works the freedom to publish or dispose of them as they choose. »

POLICIES

PRODUCT SAFETY AND LIABILITY

« Product liability holds manufacturers, sellers, and others, including individual company officers, responsible for damage, injury, or death caused by defective products. 

The United States has the toughest product liability laws in the world following by Europe.

Enforcement of product liability laws differs from nation to nation.

Three Institutions

The political system under democratic dispensation, like ours, comprises three vital institutins.

1. Legislature

2. Government

3. Judiciary

1. Taxes2. Voluntary programmes3. Providing Information4. Government contracts5. Government service6. Political activity

Business Responsibility to Government

1. Establishment and Enforcement of Laws2. Maintenance of Order3. Money and credit4. Orderly Growth5. Infrastructure6. Information7. Small industries8. Technology

Government Responsibility to Business

Example

British crown colony became Chinese territory in 1997

China is a Communist nation that values stability over individual freedoms

Hong Kong is a Special Administrative Region

Population: 6,980,412 (July 2007 est.)

Hong Kong Facts

Capitalist System or Socialist System

China has signed the "one country, two systems" formula

50 years contract until 2047

Relatively high political stability

Hong Kong Political Environment

Totalitarian state or Democratic state

Limited democracy

The legal system based on the English common law

Basic Law which approved in 1990 “Mini-Constitution"

Hong Kong Political Environment

The political environment has an important impact on the business

There is a large field with many factors which the companies have to consider if they want to expand overseas

Political environment is not stable and can change quickly

The political environment creates advantages and disadvantages

Conclusion