Kamis, 11 Oktober 2012

Political Systems
         Political Systems: system of government in a country
         Differentiated along two related dimensions
        Emphasis on collectivism versus individualism
        Degree of democracy versus totalitarianism
         Collectivism:  stresses collective goals over individual goals (Plato and Marx)
        Socialism:  communists and social democrats
         Individualism:  stresses individual freedom in economic and political pursuits (Aristotle, Smith, Stuart Mill) advocates individual political and economic freedoms
         Democracy:  citizens directly involved in decision-making
        representative democracy
         Totalitarianism:  one person or political party exercises absolute control
        communist totalitarianism
        theocratic totalitarianism (religion based political power)
        tribal totalitarianism (monopoly of power)
        right-wing totalitarianism (economic freedom without political freedom)

Economic Systems
         Market Economy:  market mechanisms determines resource allocation
         Command economy:  goods and services produced, their mix, and the prices are planned by the government
         Mixed Economy:  hybrid arrangement where certain sectors are left to the private sector (within restrictions), while some deemed to be of national importance are state-owned and operated
Changing Political Economy 1985-95
 Legal Systems
         Systems of rules and laws that regulate behavior, processes by which laws are enforced, and redress mechanisms
         Legal Systems
        Common Law System (tradition based)
        Civil Law System (codified)
        Theocratic Law System (e.g., Islamic Law)
         International Law (Bilateral and Multilateral treaties)
Issues in International Legal Environment
         Property rights:  legal rights over use to which a resource is put and income derived
         Intellectual Property Rights:  patents, copyrights, trademarks:  major bone of contention especially in info-based economies
         Product safety and liability:  standards protecting consumers
         Enforcement of national and international laws
Implications for Business
         Political, economic, and legal systems impact the attractiveness of a country
         Country attractiveness:
        Benefits:  the issue of first mover advantages
        Costs:  bribes, inadequate infrastructure (McDonald’s in Russia), inadequate and stringent laws (different impacts)
         Political Risk
         Economic Risk
         Legal Risks
Political Risk Assessment
Likelihood the business environment will change in a way that encompasses
·         Discontinuities
·         Uncertainty    
·         Political forces
·         Business impact         
·         Macro risk
·         Micro risk
Sources of Political Risk
I.  Home Country Political Risk
         National Security Goals
         Foreign Policy Goals
II.  Host Country Political Risk
         Social Unrest/disorder
         Internal rebellion
         Armed conflicts between nations
         Local business groups
Political Risk Assessment and Market Entry
Historic FDI emphasis
3 assumptions
            1. Only investors risk assets
            2. Only FDI is integral to firm’s strategy
            3. Actions against investors are politically     
            based; actions against exporters are based on economic considerations
Evidence from Iran-US Tribunal (1980s)
Political Risk Assessment/Management
         Can we predict the next revolution?
         Managing political risk

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