1. Politics, Law, and Business Ethics
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

2. International Business 5e
Chapter Preview
Describe each main type of political system
Identify the origins of political risk and how managers can reduce its effects
Describe each main type of legal system and important global legal issues
Explain ethics and social responsibility and key issues facing international companies
Explain how international relations affect international business activities
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
International Business 5e

3. Political Ideologies Totalitarianism Anarchism Pluralism
Both private and public
groups need to balance
each other’s power
Every aspect of
people’s lives must be
controlled to preserve order
Only individuals and
private groups can
preserve personal liberties
Totalitarianism
Anarchism
Pluralism
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
International Business 5e

4. International Business 5e
Totalitarianism
Leaders govern without people’s support
Government controls much of people’s lives
Leaders do not tolerate opposing viewpoints
Imposed
authority
Lack of
constitutional
guarantees
Restricted
participation
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
International Business 5e

5. Forms of Totalitarianism
Theocratic totalitarianism
(totalitarian religious leadership)
Secular totalitarianism
(military and bureaucratic leadership)
Tribal totalitarianism
Communist totalitarianism
Right-wing totalitarianism
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International Business 5e

6. International Business 5e
Democracy
Government leaders are elected by the wide participation of the people or their representatives
Freedom of expression
Periodic elections
Full civil and property rights
Minority rights
Nonpolitical bureaucracies
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International Business 5e

7. Types of Political Risk
Conflict and violence
Terrorism and kidnapping
Property seizure
Policy changes
Local content requirements
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
International Business 5e

8. International Business 5e
Conflict and Violence
Arises from:
Reduces ability to:
People’s resentment
toward government
Territorial disputes
between nations
Ethnic, racial, or
religious disputes
Obtain materials
and equipment
Manufacture and
distribute products
Protect employees’ lives
and firm’s assets
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
International Business 5e

9. Terrorism and Kidnapping
Security checklist for managers on business abroad:
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
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
International Business 5e

10. Property Seizure 1 2 3 Confiscation Expropriation Nationalization
Forced transfer of assets from a company to the government without compensation 2
Expropriation
Forced transfer of assets from a company to the government with compensation 3
Nationalization
Forced asset transfer to the government of an entire industry
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
International Business 5e

11. Policies and Laws Local content requirements: Policy changes restrict:
Foreign ownership
Investment levels
Business activities
Specify the portion
of a good or service to be supplied
by local firms
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
International Business 5e

12. Managing Political Risk I
Localization
Development assistance
Partnerships
Insurance
Adaptation
Incorporate risk into
business strategies
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
International Business 5e

13. Managing Political Risk II
Agencies specializing
in political-risk services
Current employees
with relevant information
Information gathering
Gather data to better
predict and manage risk
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
International Business 5e

14. Managing Political Risk III
Corruption
Foreign Corrupt Practices Act
Lobbying
Influencing local lawmakers
Influence local politics
Present firm’s views
on political matters
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
International Business 5e

15. World’s Legal Systems Common Law Civil Law Theocratic Law
Tradition, precedent, and usage
Civil Law
Codified rules and statutes
Theocratic Law
Religious teachings form law
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
International Business 5e

16. International Business 5e
Global 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")
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
International Business 5e

17. International Business 5e
Global 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
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
International Business 5e

18. Philosophies of Ethics and Social Responsibility
Personal behavior in accordance with rules or
standards for right conduct or morality
Friedman View
Cultural Relativism
Righteous Moralism
Utilitarianism
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
International Business 5e

19. Corporate Social Responsibility
Go beyond legal obligations to balance commitments to investors, customers, communities, and other companies
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
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
International Business 5e

20. International Relations
Favorable international
political relations foster:
Stable business environments
Improved business communications
Efficient distribution systems
Prompt and equitable dispute resolution
Expanded opportunities
Diminished risk levels
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
International Business 5e

21. International Business 5e
Chapter Review
Describe each main type of political system
Identify the origins of political risk and how managers can reduce its effects
Describe each main type of legal system and important global legal issues
Explain ethics and social responsibility and key issues facing international companies
Explain how international relations affect international business activities
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
International Business 5e

22. Politics, Law, and Business Ethics
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

23. Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
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Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall