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POLITICAL INFLUENCE
•POLITICAL ENVIRONMENT
•POLITICAL IDEOLOGY
•POLITICAL RISK
POLITICAL ENVIRONMENT
• INDIVIDUALIST ORIENTATION
eg: USA
• COLLECTIVIST ORIENTATION
eg: China
POLITICAL IDEOLOGY
TOTALITARIANISMDEMOCRACY
RADICAL
LIBERAL
CONSERVATIVE
REACTIONARY
DICTATORSHIP
COMMUNIST
THEOCRATIC
AUTHORITARIAN
POLITICAL RISK
Political Risk Explanation
Ownership risk Threats to a firm’s property or assets in a foreign country.
Operating risk Threats to a firm’s ongoing operations or the safety of its employees
Transfer risk Threats to a firm’s ability to repatriate its investments or profits out of the country.
Managing Political Risk
DIRECT APPROACHES INDIRECT APPROACHES
Reactive Approaches Maintain redundant operations in multiple host countriesHire host country employees and especially managers.Use home country government pressure on local host country
Secure risk insuranceDo contingency planning
Proactive Approaches Establish equity joint ventures with host country firmsUse local licensing agreementsBuild collaborative relationships with localsPromote host country goals
Lobby home and host governments for supportBe a good local corporate citizen
DECISION IN POLITICAL SITUATION
• IDENTIFY THE ISSUE
• DEFINE THE POLITICAL ASPECT OF THE ISSUE
• ACCESS THE POTENTIAL ACTION OF OTHER COMPANIES AND SPECIAL INTEREST GROUPS
• IDENTIFY THE IMPORTANT INSTITUTIONS AND KEY INDIVIDUALS
• FORMULATE STRATEGIES
• DETERMINE THE IMPACT OF IMPLEMENTATION OF THE STRATEGY
• SELECT THE MOST APPROPRIATE STRATEGY
LEGAL ENVIRONMENT
• COMMON LAW
• CIVIL LAW
• THEOCRATIC LAW
• CUSTOMARY LAW
• MIXED SYSTEM
UNDERSTANDING BASE OF RULE
• THE RULE OF MAN
• THE RULE OF LAW
TRENDS IN LEGAL SYSTEM
• THE PREFERENCE OF STABILITY
• THE INFLUENCE OF NATIONAL LEGACIES
• THE RECOURSE TO TRADITION IN DISPUTE RESOLUTION
Legal issues in International Business
OPERATIONAL CONCERNS• STARTING A BUSINESS
• ENTERING AND ENFORCING CONTRACTS
• HIRING AND FIRING LOCAL WORKERS
• CLOSING DOWN THE BUSINESS
Starting a business
Country Legal Origin No. of procedures
Time Cost(% of income per capita
Australia Common 2 2 1.8
China Civil 13 35 9.3
France Civil 7 8 1.1
Germany Civil 9 24 5.1
Japan Civil 8 23 7.5
Korea Civil 12 22 15.2
Russia Socialist 7 28 2.7
United Kingdom
Common 6 18 0.7
United States common 5 5 0.7
Enforcing Contracts
Country Legal Origin No. of procedures
Time (days) Cost(% claim)
Australia Common 19 181 12.8
China Civil 31 292 26.8
France Civil 21 331 11.8
Germany Civil 30 394 10.5
Japan Civil 20 242 9.5
Korea Civil 29 230 5.5
Russia Socialist 31 178 13.5
United Kingdom
Common 19 229 16.8
United States common 17 300 7.7
Closing a business
Country Legal Origin Time to Insolvency (years)
Cost(% of estate)
Australia Common 1 8
China Civil 2.4 22
France Civil 1.9 9
Germany Civil 1.2 8
Japan Civil 0.6 4
Korea Civil 1.5 4
Russia Socialist 3.8 9
United Kingdom
Common 1 6
United States common 1.5 7
Legal issues in International Business
STRATEGIC CONCERNS
• PRODUCT SAFETY & LIABILITY
• MARKET PLACE BEHAVIOUR
• PRODUCT ORIGIN & LOCAL CONTENT
• LEGAL JURISDICTION
• ARBITRATION
INTELLECTUAL PROPERTY RIGHTS
• COPYRIGHT
• TRADEMARK
• TRADE SECRETS
• PATENT
• GEOGRAPHICAL INDICATION