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