Transcript Chapter 3 slides

3
Politics, Law,
and Business Ethics
Copyright © 2014 Pearson Education, Inc.
Chapter Objectives
• Describe each main type of political system
• Identify the origins of political risk and how managers
can reduce its effects
• Describe each main type of legal system and some
important global legal issues
• Explain ethics and social responsibility and key issues
facing international companies
• Explain how international relations affect international
business activities
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PepsiCo
• Healthier snacks
• Lighter impact
• Employee welfare
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Roles of History and Culture
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Political Ideologies
Totalitarianism
Anarchism
Pluralism
Both private and public
groups need to balance
each other’s power
Every aspect of
people’s lives must be
controlled to preserve order
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Only individuals and
private groups can
preserve personal liberties
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Totalitarianism
 Leaders govern without people’s support
 Government controls much of people’s lives
 Leaders do not tolerate opposing viewpoints
Imposed
authority
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Lack of
constitutional
guarantees
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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Business in Totalitarian Nations
Risk Factors
• Arbitrary nature of
business can mean that
laws are vague or do not
exist
• Bureaucrats may
interpret laws however
they wish
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Global Sustainability:
From Civil War to Civil Society
War’s causes:
• Poverty
• Slow economic growth
• Natural resource dependency
War’s costs:
• $5 billion in health losses
• GDP falls by 2.2%
• Recovery takes 10 years
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Democracy
Government leaders are elected directly by
the wide participation of the people or their
representatives
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Life and Business in Democracies
• Freedom of expression
• Periodic elections
• Full civil and property rights
• Minority rights
• Nonpolitical bureaucracies
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Discussion Question
What are the three
main features of
totalitarianism and the
five freedoms that
democracies strive to
provide?
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Answer to Discussion Question
Totalitarian governments tend
to share imposed authority, a
lack of constitutional
guarantees, and restricted
political participation
Democracies strive to provide
freedom of expression,
periodic elections, full civil and
property rights, minority rights,
and nonpolitical bureaucracies
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Types 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:
Reduces ability to:
 People’s resentment
toward government
 Obtain materials
and equipment
 Territorial disputes
between nations
 Manufacture and
distribute products
 Ethnic, racial, or
religious disputes
 Protect employees’ lives
and firm’s assets
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Manager’s Briefcase:
Your Global Security Checklist
 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
 Travel with others when possible and ask
directions guardedly
 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
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Nationalization
Forced asset transfer to the
government of an entire
industry
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Policies and Laws
Policy changes restrict:
 Foreign ownership
 Investment levels
 Business activities
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Local content
requirements:
Specify the portion
of a good or service
to be supplied
by local firms
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Managing Political Risk I
Partnerships
Adaptation
Localization
Incorporate risk into
business strategies
Development assistance
Insurance
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Managing Political Risk II
Current employees
with relevant information
Information gathering
Gather data to better
predict and manage risk
Agencies specializing
in political-risk services
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Managing Political Risk III
Lobbying
Influencing local lawmakers
Influence local politics
Present firm’s views
on political matters
Corruption
Foreign Corrupt Practices Act
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Discussion Question
Incorporating political risk into
business strategies by
modifying operations, the
product mix, or some other
business element is called
____________.
a. Specialization
b. Globalization
c. Localization
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Answer to Discussion Question
Incorporating political risk into
business strategies by
modifying operations, the
product mix, or some other
business element is called
____________.
a. Specialization
b. Globalization
c. Localization
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Common Law
Tradition
Nation’s legal history
Precedent
Past cases before the courts
Usage
How laws are applied
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Civil Law
Dates to Roman times in
the fifth century B.C.
Rules and statutes
constitute a legal code
Defines all obligations,
responsibilities, and
privileges
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Theocratic Law
Legal tradition based on religious teachings
Islamic law
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Jewish law
Hindu 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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Business Software Piracy
Source: Based on the Eighth Annual BSA and IDC Global Software Piracy Study (Washington, D.C.; Business Software Alliance, May 2011), pp. 8–9, (www.bsa.org/globalstudy)
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Global Legal Issues II
 Standardization
- Interpreting and applying laws uniformly
 Product safety and liability
- Responsibility for damage, injury, or death
 Taxation
- Income, sales, consumption, and VAT
 Antitrust (antimonopoly) laws
- Prevent market sharing, price fixing, and
unfair advantage
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Discussion Question
What are intellectual
property rights and
what is their
significance to
business?
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Answer to Discussion Question
Intellectual property rights are
legal rights to resources that
result from intellectual abilities
and any income the resources
generate.
They can be traded, sold, and
licensed in return for fees and/or
royalty payments.
Intellectual property laws are
designed to compensate people
whose property rights are
violated.
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Ethics and Social Responsibility
PHILOSOPHIES
Friedman View
Cultural Relativism
Righteous Moralism
Utilitarianism
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Corporate Social Responsibility Issues
Going beyond legal obligations to balance
commitments to investors, customers,
communities, and other companies




Fight to eliminate bribery and corruption
Improve labor conditions and guard human rights
Practice fair trade to help the disadvantaged
Protect the environment and conserve resources
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International Relations
Favorable international
political relations foster:
 Stable business
environments
 Improved business
communications
 Efficient distribution
systems
 Expanded opportunities
 Diminished risk levels
 Prompt and equitable
dispute resolution
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Discussion Question
The philosophy of business
ethics and social responsibility
conveyed by the expression,
“When in Rome, do as the
Romans do,” is called the
__________ view.
a. Righteous moralist
b. Cultural relativist
c. Utilitarian
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Answer to Discussion Question
The philosophy of business
ethics and social responsibility
conveyed by the expression,
“When in Rome, do as the
Romans do,” is called the
__________ view.
a. Righteous moralist
b. Cultural relativist
c. Utilitarian
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