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CHAPTER OUTLINE: This chapter mainly discusses about two environments which are one of the important factors in International Business POLITICAL ENVIRONMENT LEGAL ENVIRONMENT POLITICAL ENVIRONMENT: Individualism/ Collectivism Political Ideology Democracy: Parliamentary, Liberal, Multiparty, Representative, Social Totalitarianism: Authoritarianism, Fascism, Secular, Theocratic Trends Risks: Systematic, Procedural, Distributive, Catastrophic

LEGAL ENVIRONMENT: Systems: Constitutional Law, Criminal Law, Civil and Commercial Laws Types: Common Law, Civil Law, Theocratic Law, Customary Law, Mixed system Diffusion: Diffusion of Common Law, Diffusion of Civil Law Trends: Preference for stability, Influence over national legacies, Recourse to tradition in dispute resolution. Bases of rule: Rule of Man, Rule of Law Implications: Rule of Man, Safeguards, Agrarian, Backlash.

I prowl the aisles of the software piracy mother Iode, the Golden Shopping Arcade in Hong Kongs Sham Shui Po District. Inside a stall called everything CD shop, I bought first of my installer discs Volume 2, about nine bucks or $25. Volume 2 has a beta copy of Windows 95 as well as OS/2 Warp, and every other dozen applications, including Microsoft Office. Connoisseurs of the genre compare the different versions of the installer discs like wines. Someone from Microsoft later tells me that the retail value of the disc is between $20,000 and $35,000 One journalist software trip to the software black market This is the opening sentences of the case. By, these lines we could understand that the case deals with piracy of CDs, I,e software piracy. In this case, there are two major fields involved, Political and Legal Environments. This case deals with the problem that software technology was facing a problem of digital piracy. Digital piracy is the illegal distribution and copying of the software for personal and business use. In US the software is automatically protected by law, but in China digital piracy is very high, and less penalty. Firstly let us view into the political environment. POLITICAL ENVIRONMENT: Political environment plays a vital role in this case. Government intervened with some industry associations to implement laws for anti copying software. Estimated that 35 % of it is illegal and even in some countries 75%. The Industry associations include BSA (Business Software Alliance), Software and Information Industry (SIIA), and International AntiCounterfeiting (IACC). WIPO pledged to protect worldwide by developing intellectual property rights. These associations spur the government to toughen the rules. Along with Government, Software makers and associations act singly and jointly to help policy piracy. On the other side Government threatens sanction against countries that do not police piracy. It even conducts coordinated raids and enforcements. INDIVIDUALISM / COLLECTIVISM: There are two main countries which are highlighted in the case. Those are USA and China. USA, which has most pronounced individualistic orientation and China with collectivistic orientation. Consumers in high theft countries tend to share a collectivist mindset. They view the property as being common to all and benefit of all; often they do not understand the basic concept of intellectual property rights. On the other side, consumers in low theft countries tend to share individualistic mindset. Here the concept of intellectual property rights is well understood.

POLITICAL IDEOLOGY: The political ideology behind this case is that hoping that collective political arrangements and legal actions by companies, associations, governments and institutions would lead to decline in software piracy. In USA, for example in the case the doctrines of Republican Party reflect political ideology by setting up various laws and certain various other associations such as FBI to stop piracy. TYPES OF DEMOCRACY: There are five types of democracies According to the case; many countries are in existence which is facing the problem of global piracy. One country has its own type of democracy, and we cannot list the whole countries democracies. For example, we pick the countries with highest and lowest piracy rates. USA which is low pirated country adopts the Republican Party, though which it can control the piracy threat. On the other had China which is highest pirated country, adopts communism. Top Ten Countries with HIGHEST piracy rates 2004 2003 Vietnam 92% 92% Ukraine 91% 91% China 90% 92% Zimbabwe 90% 87% Indonesia 87% 88% Russia 87% 87% Nigeria 84% 84% Tunisia 84% 82% Algeria 83% 84% Kenya 83% 80% TYPES OF TOTALITARIANISM: As we consider the highest pirated country like in types of democracy, China has Secular totalitarianism under which leaders maintain power by wielding the authority of the state. USA on the other hand adapts authoritarianism, having political and civil liberties. TRENDS IN POLITICAL SYSTEM: A diverse number of nations made the transition from non democratic to democratic, which gave rise to the idea of third wave of democratization. Due to the failure of totalitarianism, and the benefits of democracy, public access the media, improved Top Ten Countries with LOWEST piracy rates 2004 2003 United States 21% 23% New Zealand 23% 27% Austria 25% 27% Sweden 26% 27% United kingdom 27% 29% Denmark 27% 26% Switzerland 28% 31% Japan 28% 29% Finland 29% 31% Germany 29% 30%

communications technology largely via internet. On the other side of coin, these trends lead to the software piracy. Many new trends implemented in laws, which are enforced by government innovative technology, developing to new operating systems, emerging big markets etc. POLITICAL RISK: Procedural political risk: Procedural risk involves the procedural transaction between the units of a company, or units of a country. The software which is developed involves transactions and is well corrupted. In spite of all other risks, one major risk involved here are different parties has weak or strong interactions of the government, there by the stake holders should be well coordinated.

LEGAL ENVIRONMENT: A legal system is creating, interpreting and enforcing the laws. Government and other industries enforce laws and antipiracy technology. For example, USA stipulates that software is automatically protected by federal copyright law. Other transitional bodies enact and enforce anti piracy laws. LEGAL SYSTEMS: There are mainly three legal systems. Constitutional law, Criminal law, and Civil Law. The case adapts civil law, which deals with business transactions, and political officials, I,e political environment which one phase of the case. DIFFUSION: The civil and criminal laws are evolved and diffused. As we consider the two nations USA and china both adapt the diffused legal system. Laws are adapted and diffused globally, to decline the software piracy, protect the intellectual property and to decrease the piracy rate in the highest piracy rate countries. Due to the diffused Laws government enforced different legal practices. TRENDS:

UNDERSTANDING BASES OF RULE: The firms/ industries should understand exactly the bases of rule of law in any given country. As we adopted the two main countries China belong to the rule of man, where decision is taken by one man, I,e personal decision. IMPLICATIONS: In understanding the basis of rule, rule of man- will be given higher priority than law. Software industries can develop technical and business measures to thwart counterfeiters, government intervention would be unnecessary, and software industries can adopt rule of man. STRATEGIC CONCERNS: Product Safety and Liability: While launching any new software or when a transition is made, industries and associations should make sure that the product is safe and liable, and not pirated. Marketplace Behavior: National laws play a vital role here. Market place behavior specifies that which place is less pirated and which is the most, and gives the scope to avoid illegal activities. Product origin and local content: The laws should enforce affect the flow of the products beyond the border. In view point of the case, the product can be originated through internet, and laws should enforce that, legal actions can be issued if there are any illegal activities. Legal jurisdiction: It describes which country laws will apply if there is a violation. China, USA, India etc describe the legal jurisdictions upon which different countries are involved in piracy. INTELLECTUAL PROPERTY RIGHTS: The coordinated anti piracy initiatives such as high profile legal proceedings against companies using illegal software, increased government corporation in providing legal protection for intellectual property, and the criminalization of software piracy proven to be largely ineffective. Even efforts at the transnational level to get nations to sign treaties and to require them to protect and enforce intellectual property rights according to global, not local standards have not yielded the desired results.