Remember, syllabus and schedule are at

http://yourpeakescape.com/uscupstate

Set 2:The Political, Legal, and Technological Environment

Various political systems around the world

Various legal/regulatory environments

Changes affecting MNCs, countries—technology, etc.

MNCs are affected by these factors in multiple countries…

Political Environment:

Ideologies: ideas/beliefs/values about nature of political systems and governments

individualism, collectivism, socialism

Political systems: a couple of basic dimensionsrights of citizens relative to government (range democratic to totalitarian)individualism vs. collectivism as focus of system

democratic tends to emphasize individualism, totalitarian tends to emphasize collectivism.

Ideology: Individualism

Freedom to pursue individual goals without constraint.

Book argues it is similar to capitalism and free markets.Do you agree?

Is there capitalism without freedom?Is there individualism without capitalism?

Ideology:Collectivism

Group goals/needs may be more important than individual

Varous forms depending on societal goals: e.g., fascism (authoritarian, nationalistic) militarism, corporatism, totalitarianism

Ideology: Socialism

State or group ownership/control of institutions for common benefit/efficiency/effectiveness

All countries are socialist to a degree, most more than United States

Question: How is the U.S. socialist?

Extreme version is communism—all productive activity is controlled by state. Private personal property exists to varying degrees.

Political System: Democracy

Roots in ancient Greece

Government run by citizens directly or by elected representatives

Representatives can be removed (limits state’s power)

Successful democratic societies seem to need multiple political groups/parties

North Korea: 1 US: 2Italy: 6 major, dozens minor

Political System: Totalitarianism

One representative party/group with great control

Opposition usually suppressede.g., North Korea, Burma, China (but shifting and losing

control), other former communist countriesDictatorships, some monarchies/inherited leadership.Typical characteristics: censorship of press/TV/radio,

censorship of arts (literature, music, fine art), weak individual rights/civil liberties, travel restriction, limits on outside influence.

Example: China

Government opening economy:Converting state enterprises into corporations

(beware Russian example)Some trade liberalizationMore open, democratic, tolerant of freedom and

dissentState responsible for much: land ownership,

housing, education, trainingSeeking a more dynamic market economy to

address poverty and population

Example: Europe

Privatization and economic liberalization

EU-wide political and economic integration

Political power—variable and complex

Connected economically, but differs culturally

Example: The Middle East

Strong role of religion in government in many countries—theocracy vs secular government

Ranges from democratic to authoritarian, tendency: socialism > capitalism

e.g., Israel: socialist, democratic, somewhat theocratic

Syria: authoritarian, not theocraticSaudi Arabia: theocraticTurmoil/war/revolution/violence: widespread

Example: Russia

Long aftermath of communism and Soviet ruleEconomic policy—neglect, confusionWeak infrastructure, complex politics,

corruption (oligarchs forward)But: education,technological sophistication in

many fields.Concerned about West and China.

Legal and Regulatory Environment

Complicated for MNCs

MNCs must understand legal framework in each market

Four Global Foundations of Law:

1. Islamic 2. Socialist3. Common 4. Civil or code

Islamic Law

Interpret Koran and MohammedHadith: sayings of MohammedBody of scholarly interpretation

Used in Islamic countries in Middle East, Central AsiaExtent of use/focus varies by country

Socialist/Communist LawBased on communist theory by Marx, Engels, othersIndividuals subservient to group, property subservient to state

or state companiesInfluences current law in former communist countries:

Members of former Soviet UnionPeoples’ Republic of ChinaVietnamNorth KoreaCubaWeak/absent/different business law—impediment to foreign

investmentPolitical constitutions often similar to U.S.

Common Law

Based on English lawMagna Carta (1215) and forwardGovernance through legislation, precedent mattersBasis of legal system in:

United States, Canada, United Kingdom, Australia,New Zealand

Civil or Code Law

Derived from Roman law

Career judges dominate application/interpretation

Found in:France, parts of Latin America, state of Louisiana

Example: French judges

Basic Principles of International Law

Sovereignty and Sovereign ImmunityInternational JurisdictionDoctrine of ComityAct of State DoctrineTreatment and Rights of AliensForum for Hearing and Settling Disputes

The Sovereignty and Sovereign Immunity principle: governments have the right to rule themselves as they see fit.

The International Jurisdiction principle: every country has jurisdiction over its citizens no matter where they are located.

Nationality principleTerritoriality principleProtective principle

The Doctrine of Comity principle: there must be mutual respect for the laws, institutions, and government of other countries in the matter of jurisdiction over their own citizens.

The Act of State Doctrine principle: all acts of other governments are considered to be valid by U.S. courts, even if such acts are illegal or inappropriate under U.S. law

Treatment and Rights of Aliens Countries may

refuse to admit foreign citizens

impose special restrictions on their conduct, right of travel, where they can stay, and what business they may conduct

deport them

Forum for Hearing and Settling Disputes

U.S. courts can dismiss cases brought by foreigners but they must examine issues like:

Location of the plaintiffsWhere evidence must be gatheredWhere property to be used in restitution is located

Some current legal/regulatory issues

Foreign Corrupt Practices ActIllegal to influence foreign officials by:

personal paymentpolitical contribution

Restrictive bureaucratization

Privatization

Regulating Trade and Investment

Countries use law/regulation to manage trade and investment

Unfair trade practices (WTO, other agreements)Government subsidiesRequiring local partners for MNCsBlocking trade and investment (high tariffs,

restrictive regulation)

Possible responses are the same things

Big changes continuing

Drivers include

technological change—like what???

investment flows in/out of countriesproduction moves due to labor costs

(outsourcing, offshoring)E-business: B2B, B2C, E-tailing

Affect business and all countries

Projected U.S. job changes

What we just didSet 2

Various political systems around the world

Various legal/regulatory environments

Changes affecting MNCs, countries—technology, etc.