Chapter 2 Politics, Law, and Business Ethics

Political Ideologies

Totalitarianism

Pluralism

Anarchism

Both private and public groups need to balance each others power Every aspect of peoples lives must be controlled to preserve order Only individuals and private groups can preserve personal liberties

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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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Totalitarianism

 Leaders govern without peoples support  Government controls much of peoples lives  Leaders do not tolerate opposing viewpoints

Imposed authority

Lack of constitutional guarantees

International Business 4e

Restricted participation

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Forms of Totalitarianism
Theocratic totalitarianism
(totalitarian religious leadership)

Secular totalitarianism
(military and bureaucratic leadership)

Communist totalitarianism Tribal totalitarianism Right-wing totalitarianism

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Causes of Political Risk

Conflict and violence Terrorism and kidnapping Property seizure Policy changes Local content requirements
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Conflict and Violence

Arises from:
Peoples resentment toward government Territorial disputes between nations Ethnic, racial, or religious disputes

Reduces ability to:

Obtain materials and equipment Manufacture and distribute products Protect employees lives and firms assets

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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

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Property Seizure
Confiscation
Forced transfer of assets from a company to the government without compensation

Expropriation
Forced transfer of assets from a company to the government with compensation

Nationalization
Forced asset transfer to the government of an entire industry

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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

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Managing Political Risk

Local equity / debt Localization

Adaptation
Incorporate risk into business strategies

Development assistance Partnerships Insurance

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Managing Political Risk

Current employees with relevant information

Information gathering
Gather data to better predict and manage risk

Agencies specializing in political-risk services political-

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Managing Political Risk

Lobbying
Influencing local lawmakers

Influence local politics

Present firms views on political matters

Corruption
Foreign Corrupt Practices Act

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World s Legal Systems

Common Law
Tradition, precedent, and usage

Civil Law
Codified rules and statutes

Theocratic Law
Religious teachings form law
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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")
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Global Legal Issues II

 Standardization - Interpreting and applying laws uniformly  Product safety and liability - Responsibility for damage, injury, or death  Antitrust (antimonopoly) laws - Prevent market sharing, price fixing, and
unfair advantage

 Taxation - Income, sales, consumption and VAT

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Ethical Behavior
Personal behavior in accordance with rules or standards for right conduct or morality
Enron Tyco Worldcom Parmalat (Italy)
Ethical relativism When in Rome, do as the Romans Ethical absolutism Import ethics from home

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Social Responsibility
Go beyond legal obligations to balance commitments to investors, customers, communities, and other companies

      

Respect consumers rights Guard workers rights Protect the environment Preserve employment Encourage development Improve health Support education
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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
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