political and legal systems in international business

For the purpose of this discussion, the main relevant difference is in ideology. In the Persian Gulf region alone, there are twenty-two Sharia-compliant, Islamic banks, which in 2008 had approximately $300 billion in assets.Tala Malik, “Gulf Islamic Bank Assets to Hit $300bn,” Arabian Business, February 20, 2008, accessed December 21, 2010, http://www.arabianbusiness.com/511804-gulf-islamic-banks-assets-to-hit-300bn. Start studying International Business Chapter 2: National Differences in Political, Economic, and Legal Systems. A fair judicial system also reduces political risks in overseas markets. Every country has the right of jurisdiction within its own legal territory. Most countries actually have a combination of these systems, creating hybrid legal systems. Despite the movement toward privatizing industry and free trade, government interests in their most valuable commodity, oil, remains constant. Some examples of these practices include forming joint-ventures, expanding your investment base, licensing your products/services, or political bargaining through lobbying. 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. Governments have long intervened in international trade through a variety of mechanisms. This remaining competence of the States was originated in the American Constitution and followed by all Brazilian Constitutions. In reality, neither extreme exists in its purest form. Trade Embargos and Sanctions 4. Examples include changes in interest rates, civil unrest, government actions and issues with importing or exporting goods. It depends less on written statutes and codes. President Rousseff started a program called Brasil Maior in order to promote industry in the nation. Political and legal risks are two very important aspects of running a business of which an entrepreneur should be aware. Membership is structured so as to be representative of the world’s various geographic regions and their principal economic and legal systems. Compare and contrast the two forms of economic ideology discussed in this section. A company may ask several questions regarding a prospective country’s government to assess possible risks: While any country can, in theory, pose a risk in all of these factors, some countries offer a more stable business environment than others. Religious lawAlso known as theocratic law; this legal system is based on religious guidelines. Tariffs that are calculated as a percentage of the value of the product or service. Governments and politics play a large role in international business. For example, if a company wants to borrow money from an Islamic bank, it would sell its assets or product to the bank for a fixed price. United Nations Commission on International Trade Law (UNCITRAL). For example, some countries’ governments have tried to limit the influence of American culture on local markets by limiting or denying the entry of American companies operating in the media, food, and music industries. Clearly, many global businesses and investment banks are finding creative ways to do business with these Islamic banks so that they can comply with Islamic law while earning a profit. Chinese government control on the Internet, for example, has helped propel homegrown, Baidu, a Chinese search engine, which earns more than 73 percent of the Chinese search-engine revenues. For instance, foreign governments have right to impose restrictions related to financial repatriation to other countries. For example, the Chinese government owns almost all the major banks, the three largest oil companies, the three telecommunications carriers, and almost all of the media. There is heavy reliance on settling disputes through third party negotiations rather than courts. What is a planned economy? For instance, the Hebrew law and the Islamic law are derived from religious doctrines and their scholarly interpretations. Ch 6 7 international political and legal environment 1. Democracy has a number of variations, both in theory and practice, some of which provide better representation and more freedoms for their citizens than others. Capitalism is an economic system in which the means of production are owned and controlled privately. The legal/political system is a minefield, with few international standards or regulations to fall back on. Theocratic law is the legal system based on religious doctrine, precepts, and beliefs. is also known as theocratic law and is based on religious guidelines. In the case study in Chapter 1 "Introduction", you discovered how US-based Google had to deal with the Chinese government’s restrictions on the freedom of speech in order to do business in China. Introduction The political environment of countries is a criticalconcern for the international marketer. Two additional religious law systems are the Jewish Halacha and the Christian Canon system, neither of which is practiced at the national level in a country. Brazil: Currently Dilma Rousseff is the President of Brazil. National security issues can impact both the import and exports of a country, as some governments may not want advanced technological information to be sold to unfriendly foreign interests. An economic system in which the means of production are owned and controlled privately. In order to enable Islamic investors to benchmark their investment on a regional basis and give product providers the opportunity to develop structured products tailored to the Islamic market, Standard & Poor’s (S&P), brings out Sharia Indices (Exhibit 8.4) that include only those stocks that comply with Sharia law. A substantial amount of oil-money is invested in Sharia-compliant funds. This is the national government and it has six State Governments under it. International law recognizes the sovereign right of anation to allow or deny foreign firms to conduct. While many countries in Asia and Latin America also are functioning democracies, their stage of development impacts the stability of their economic and trade policy, which can fluctuate with government changes. This could lead to rioting and looting and general disorder, which disrupts the operations of a business. Understanding the balance between China’s government structure and its ideology is essential to doing business in this complex country. In some countries, the government controls more aspects of daily life than in others. The program promotes domestic production as well as exports and is funded by the state. A political systemThe system of politics and government in a country; it governs a complete set of rules, regulations, institutions, and attitudes. In most countries, it is applied in conjunction with the common and the civil law. Report a Violation, Multiplicity of Legal Environments: Domestic, Foreign, and International, 3 Kinds of Legal Systems that exist in Different Countries across the world. Members of the commission are elected for terms of six years, the term of half-members expiring every three years. (f) Compassion is required when a business is in trouble. All business transactions must avoid riba, i.e., excessive profit, loosely defined as interest. Free trade advocates perceive this government-directed intervention as an unfair tilt against the global private sector. China’s ability to focus on dominating key industries inspires both fear and awe throughout the world. There are more than thirteen major types of government and each type consists of multiple variations. A main differentiator of political systems is each system’s philosophy on the rights of the individual and the group as well as the role of government. The burden of proof is on the plaintiff. This combination is called pluralism, which asserts that both public and private groups are important in a well-functioning political system. Source: Energy Intelligence Group, “Petroleum Intelligence Weekly Ranks World’s Top 50 Oil Companies (2009),” news release, December 1, 2008, accessed December 21, 2010, http://www.energyintel.com/documentdetail.asp?document_id=245527. Governments have several key policy areas that can be used to create rules and regulations to control and manage trade. 3. The legal framework to protect small and medium enterprises (SMEs), mainly to achieve social objectives, adversely influences the expansion of manufacturing capacities and achieving economies of scale in certain countries. It leverages state control of the financial system to channel low-cost capital to domestic industries—and to resource-rich foreign nations (such as those we read in the opening case) whose oil and minerals China needs to maintain rapid growth.Jason Dean, Andrew Browne, and Shai Oster, “China’s ‘State Capitalism’ Sparks Global Backlash,” Wall Street Journal, November 16, 2010, accessed December 22, 2010, http://online.wsj.com/article/SB10001424052748703514904575602731006315198.html. Is there a well-established legal environment both to enforce policies and rules as well as to challenge them? International Business Chapter 3: Governmental and Legal Systems. Every country has jurisdiction over its citizens, irrespective of their locations. A closer look at the solar industry in China illustrates the government’s ability to create new industries and companies based on its objectives. Start studying International Business Chapter 3: Governmental and Legal Systems. As shown in the opening case study, China is using its economic might to invest in Africa. Islamic religious law that addresses all aspect of daily life; in terms of business and finance, the law prohibits charging interest on money and other common investment activities, including hedging and short selling. Businesses need to assess if a country believes in free markets, government control, or heavy intervention (often to the benefit of a few) in industry. The national government enforces it own laws. Jason Dean, Andrew Browne, and Shai Oster, “China’s ‘State Capitalism’ Sparks Global Backlash,”, http://graphics.eiu.com/PDF/Democracy%20Index%202008.pdf, http://online.wsj.com/article/SB10001424052748703514904575602781130437538.html, http://www.arabianbusiness.com/511804-gulf-islamic-banks-assets-to-hit-300bn, http://online.wsj.com/article/SB10001424052748704852004575258541875590852.html, http://www.energyintel.com/documentdetail.asp?document_id=245527, http://online.wsj.com/article/SB10001424052748703514904575602731006315198.html. Socialist law traditionally advocates ownership of most property by the state or state-owned public enterprises, prohibiting free entry to foreign firms. Businesses in industries, such as commodities and oil, have found more authoritarian governments to be predictable partners for long-term access and investment for these commodities. In a country with Islamic legal structure, it is not considered appropriate to put pressure in the event of bankruptcy of one’s business partner. The difference between the sale and buyback price functions as the interest. In the past thirty years, governments have increasingly privatized a number of industries. 2. THE POLITICAL ENVIRONMENT (CH. 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. There are generally two legal regimes – the Civil law and the Common law systems. In general, Japanese corporate law supports inward facing investment. is an economic system in which the means of production are owned and controlled privately. It is based on traditions, past practices, and legal precedents set by the courts through interpretation of statutes, legal legislations, and past rulings. The United Nations Commission on International Trade Law (UNCITRAL) was established in 1966 by the UN General Assembly (Fig. TOS 7. Many business analysts mention these issues in discussions of global business ethics and the role and responsibility of companies in different political environments. Governments intervene in trade to protect their nation’s economy and industry, as well as promote and preserve their social, cultural, political, and economic structures and philosophies. The implications of Islamic law vary in terms of degree among the Islamic countries. Sullivan 3-1 fChapter 3 The Political and Legal Environments Facing Business Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall 3-2 fLearning Objectives (b) Gharar, the transaction involving fundamental uncertainty or speculation is prohibited. A political system is basically the system of politics and government in a country. Legal Systems. In essence, there are three main kinds of legal systems—common law, civil law, and religious or theocratic law. The most significant difference in the common law and the civil law countries is in the protection of intellectual property. 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. This external element of business includes the effects of pressure groups. Emerging economies still promise opportunity but also political risk for international businesses. China is one of the more visible examples, with its strong government and limited individual rights. The country’s population democratically elects open government system. Gambling is not liked in Islamic countries, but futures and currency hedging also involves speculation. This law is derived from the Marxist socialist system and continues to influence legal framework in former communist countries, such as the CIS, China, North Korea, Vietnam, and Cuba. For instance, in the common-law countries, the non-performance of a contract due to an ‘act of god’ may include floods, earthquakes, lightening, or similar happenings whereas under the civil law, non­-performance is not limited to ‘acts of god’, but also includes ‘unavoidable interference with performance, whether resulting from forces of nature or unforeseeable human acts’, including such factors as labour strikes and riots. Democracy is the most common form of government today. Understand government-business trade relations and how political and legal factors impact international business. PLAY. As a result of rise in terrorism during the last decade, the US and many European countries have imposed restrictions on foreigners. Therefore, a foreign firm involved in illegal business practices in India can be sued under Indian law.
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