political and legal differences in international business

According to Mohe (2008), culture refers to a trend that shows assumptions held by a given society with respect to religion, ethics, forms of communication as well as social characteristics. Legal Differences Learning Outcomes Describe the impact of legal differences on global trade Governments around the world maintain laws that regulate business practices. Common law is based on traditions and precedence. By Steven Lee Myers and Sheera Frenkel. To further illustrate the complexity of the definition of a democracy, the Economist Intelligence Units annual Index of Democracy uses a detailed questionnaire and analysis process to provide a snapshot of the current state of democracy worldwide for 165 independent states and two territories (this covers almost the entire population of the world and the vast majority of the worlds independent states (27 micro states are excluded) [as of 2008)].Economist Intelligence Unit, The Economist Intelligence Units Index of Democracy 2008, Economist, October 29, 2008, accessed December 21, 2010, http://graphics.eiu.com/PDF/Democracy%20Index%202008.pdf. However, in the past two decades, China has pursued a new balance of how much the state plans and manages the national economy. In contrast a planned economy is one in which the government or state directs and controls the economy. This system is commonly referred to as a socialist market economy with Chinese characteristics. The Chinese are eager to portray their version of combining an authoritarian form of government with a market-oriented economy as a better alternative model for fledging economies, such as those in Africa. With its huge population, China is in constant need of energy to meet the needs of its people and businesses. Lets focus briefly on how the political and economic ideologies that define countries impact their legal systems. In the broadest sense, capitalism is an economic system in which the means of production are owned and controlled privately. Within reason, in democracies, businesses understand that most rules survive changes in government. For example, whether the company plans to only sell or buy products in the international markets or it also wants to produce and manufacture products in such markets. What is a planned economy? Identify the different legal systems. The most direct impact on business can be observed in Islamic lawwhich is a moral, rather than a commercial, legal system. According to Islamic law, banks cannot charge or benefit from interest. As a result, there are a variety of institutions, including the Economist, which analyze and rate countries based on their openness and adherence to democratic principles. While global teams can provide cost savings and help firms access. January 08, 2020 Summary. A closer look at the solar industry in China illustrates the governments ability to create new industries and companies based on its objectives. Chinas Communist Party outlines its goals in five-year plans. Chinas expanding solar-energy industry is dependent on polycrystalline silicon, the main raw material for solar panels. In fact, political stability is a key part of government efforts to attract foreign investment to their country. Although almost half of the worlds countries can be considered to be democracies, the number of full democracies is relatively low (only 30); 50 are rated as flawed democracies. Of the remaining 87 states, 51 are authoritarian and 36 are considered to be hybrid regimes. As could be expected, the developed OECD countries dominate among full democracies, although there are two Latin American, two central European and one African country, which suggest that the level of development is not a binding constraint. In the broadest sense, capitalism is an economic system in which the means of production are owned and controlled privately. Historically, democratic governments have supported capitalism and authoritarian regimes have tended to utilize a state-controlled approach to managing the economy. Make it a point to watch exchange rates closely, as they can fluctuate. CNN's Marshall Cohen explains the similarities and differences between Hillary Clinton's email scandal and former President Donald Trump's federal indictment. State companies, like their private sector counterparts, get to keep the profits from oil production, creating a significant incentive for governments to either maintain or regain control of this very lucrative industry. The political and legal environment of foreign markets is different from that of the domestic. How did this happen so fast? Federal prosecutors arrested three investors on Thursday on insider trading charges related to a deal to take former President Donald Trump's media business public. Baidu self-censors and, as a result, has seen its revenues soar after Google limited its operations in the country.Rolfe Winkler, Internet Plus China Equals Screaming Baidu, Wall Street Journal, November 9, 2010, accessed December 21, 2010, http://online.wsj.com/article/SB10001424052748703514904575602781130437538.html. First, lets briefly discuss some of the reasons behind these interventions. Democratic governments derive their power from the people of the country, either by direct referendum (called a direct democracy) or by means of elected representatives of the people (a representative democracy). Some industries may be considered essential for national security purposes, such as defense, telecommunications, and infrastructurefor example, a government may be concerned about who owns the ports within its country. Chinas different set of political and legal guidelines made Google choose to discontinue its mainland Chinese version of its site and direct mainland Chinese users to a Hong Kong version. In totalitarianism, the ideology influences or controls the people, not just a person or party. What are three policy areas in which governments can create rules and regulations in order to control, manage, and intervene in trade. Accessibility StatementFor more information contact us [email protected]. Any changes are usually a reflection of a changing economic environment, like the world economic crisis of 2008, and not a change in the government players. President Joe Biden on Wednesday emphatically denied that he was involved or present when his son Hunter Biden is alleged to have texted a Chinese business partner in 2017, claiming that he was . Political Environment In International Business. The countrys view on capitalism is also a factor for business consideration. In current times, the Chinese government has been using a combination of government loans and investment in Africa to obtain access for Chinese companies to utilize local resources and commodities. How do political and legal realities impact international trade, and what do businesses need to think about as they develop their global strategy? On the other hand, governments may influence trade to reward a country for political support on global matters. 3.3 The Global Business Environment Learning Objective Appreciate how cultural, economic, legal, and political differences between countries create challenges to successful business dealings. What is capitalism? A main differentiator of political systems is each systems philosophy on the rights of the individual and the group as well as the role of government. At the same time, an agreement would be signed for the bank to sell back the assets to the company at a later date and at a higher price. In fact, political stability is a key part of government efforts to attract foreign investment to their country. China is one of the more visible examples, with its strong government and limited individual rights. 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With its huge population, China is in constant need of energy to meet the needs of its people and businesses. sensitive to these differences. Many business analysts mention these issues in discussions of global business ethics and the role and responsibility of companies in different political environments. Political differences are described along two dimensions: collectivist vs. individualist and democratic vs. totalitarian. Even if a consensus on precise definitions has proved elusive, most observers today would agree that, at a minimum, the fundamental features of a democracy include government based on majority rule and the consent of the governed, the existence of free and fair elections, the protection of minorities and respect for basic human rights. The difference between the sale and buyback price functions as the interest. Within reason, in democracies, businesses understand that most rules survive changes in government. In contrast, a planned economy is one in which the government or state directs and controls the economy, including the means and decision making for production. Whereas, in the U.S., this type of practice is often considered to be unethical and controversial. The political economy of a country refers to its political and economic systems, together. The history of the oil industry shows how various governments have, on occasion, protected their national companies access to oil through political force. This combination is called pluralism, which asserts that both public and private groups are important in a well-functioning political system. There are more than thirteen major types of government, each of which consists of multiple variations. Globalization leads to firms following each other around the world, thereby _____. Understanding the balance between Chinas government structure and its ideology is essential to doing business in this complex country. Each political systems philosophy impacts the policies that govern the local economy and business environment. Democracy is the most common form of government around the world today. The regulations will be more business-friendly and there will be a higher degree of incentives offered for those who want to enter that market. State companies, like their private sector counterparts, get to keep the profits from oil production, creating a significant incentive for governments to either maintain or regain control of this very lucrative industry. However, history demonstrates that, for some industries, global firms have chosen to do business with countries whose governments control that industry. The most commonly known example of religious law is Islamic law, also known as Sharia. (AACSB: Reflective Thinking, Analytical Skills). Source: Energy Intelligence Group, Petroleum Intelligence Weekly Ranks Worlds Top 50 Oil Companies (2009), news release, December 1, 2008, accessed December 21, 2010, http://www.energyintel.com/documentdetail.asp?document_id=245527. U.S. Law regulating behaviour regarding the conduct of international business in the taking of bribes and other unethical actions Intellectual Property Products of the mind, ideas (e..g books, music, computer software, designs, technological know-how); intellectual property can be protected by patents, copyrights, and trademarks Before we can evaluate the impact on business, lets first look at the different political and legal systems. Chapter 11 Assignment - N/A; Chapter 15 Assignment - N/A; . Many are permitted to engage in sale-buyback or leaseback of an asset. What Are the Different Political Systems? As you might expect, established democracies, such as those found in the United States, Canada, Western Europe, Japan, and Australia, offer a high level of political stability. We also acknowledge previous National Science Foundation support under grant numbers 1246120, 1525057, and 1413739. Chinas Communist Party outlines its goals in five-year plans. As a result, global businesses monitor and evaluate the political and legal climate in countries in which they currently operate or hope to operate in the future. There is no consensus on how to measure democracy, definitions of democracy are contested and there is an ongoing lively debate on the subject. It might seem straightforward to assume that businesses prefer to operate only in democratic, capitalist countries where there is little or no government involvement or intervention.
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