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Political Environment
>The political environment of the company includes national and international political factors which can affect its operations.
>This category also includes the methods of thinking, and beliefs of all natures which can influence
the behavior of governments and citizens opposing the company without them emanating directly from a government example: nationalism).
Definition
The Political Environment
Legal and Political Environment
SYSTEM STABILITY
POLICIES
SYSTEMIncludes the structures, processes, and activities by which a nation governs itself.
Political System
Totalitarian state Democratic state
SYSTEM
Totalitarian state
Imposed authorityLack of constitutional guaranteesRestricted participation
Companies might need to pay bribes to governmentThe business law is vague(Vogue = Uncertain )
Democratic state
FreedomRights
Stable business environmentthanks to laws Freedom and no censorship
Doing business seems to be a risky proposition
Doing business in a democratic state seems to be safer than in a totalitarian state
SYSTEM
Political Ideology
Capitalist system Socialist system
Capitalist System
- Private ownership of business is encouraged
Socialist System
- Public ownership of business is the norm
The political ideology affects - foreign government attitude towards profit repatriation(Return).- foreign government attitude towards foreign direct investment
SYSTEM
Political relationships
Favourable political relationships
foster(promote) stable business environments
increase international cooperation in many areas
lead to increase business opportunities and lower risk
The World Trade Organisation can facilitate political relationships
The WTO ensures that trade flows as smoothly, predictably and freely as possible.
STABILITY
Political Stability : « A subjective governance indicator aggregated from a variety of sources and measuring perceptions of the likelihood of destabilization. »
Political Risk
« The risk that political decisions or events in a country negatively affect the profitability or sustainability of an investment. »
4 types of political risk
STABILITY
Distributive Political Risks
« When countries revise their distribution policies to capture greater benefits from foreign companies. »
Catastrophique(horrible) Political Risks
« This is the Political developments that adversely affect the operations of all companies in a country. »
POLICIESTAXATION
Governments use income and sales taxes which can vary from country to country.
POLICIES
• Intellectual Property
« Property that results from people’s intellectual talent and abilitie. »
The problem is that laws in some countries are softer than in others
PROPERTY
• Industrial Property
« Industrial property includes patents and trademarks. »
• Copyrights
« Copyrights give creators of original works the freedom to publish or dispose of them as they choose. »
POLICIES
PRODUCT SAFETY AND LIABILITY
« Product liability holds manufacturers, sellers, and others, including individual company officers, responsible for damage, injury, or death caused by defective products.
The United States has the toughest product liability laws in the world following by Europe.
Enforcement of product liability laws differs from nation to nation.
Three Institutions
The political system under democratic dispensation, like ours, comprises three vital institutins.
1. Legislature
2. Government
3. Judiciary
1. Taxes2. Voluntary programmes3. Providing Information4. Government contracts5. Government service6. Political activity
Business Responsibility to Government
1. Establishment and Enforcement of Laws2. Maintenance of Order3. Money and credit4. Orderly Growth5. Infrastructure6. Information7. Small industries8. Technology
Government Responsibility to Business
Example
British crown colony became Chinese territory in 1997
China is a Communist nation that values stability over individual freedoms
Hong Kong is a Special Administrative Region
Population: 6,980,412 (July 2007 est.)
Hong Kong Facts
Capitalist System or Socialist System
China has signed the "one country, two systems" formula
50 years contract until 2047
Relatively high political stability
Hong Kong Political Environment
Totalitarian state or Democratic state
Limited democracy
The legal system based on the English common law
Basic Law which approved in 1990 “Mini-Constitution"
Hong Kong Political Environment
The political environment has an important impact on the business
There is a large field with many factors which the companies have to consider if they want to expand overseas
Political environment is not stable and can change quickly
The political environment creates advantages and disadvantages
Conclusion
