Transcript Politics, Law and Business Ethics

Politics, Law, and
Business Ethics
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
Chapter Preview
• 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 important
global legal issues
• Explain ethics and social responsibility and key issues
facing international companies
• Explain how international relations affect international
business activities
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 3 - 2
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
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
Only individuals and
private groups can
preserve personal liberties
International Business 5e
Chapter 3 - 3
Totalitarianism
 Leaders govern without people’s support
 Government controls much of people’s lives
 Leaders do not tolerate opposing viewpoints
Imposed
authority
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
Lack of
constitutional
guarantees
International Business 5e
Restricted
participation
Chapter 3 - 4
Forms of Totalitarianism
Theocratic totalitarianism
(totalitarian religious leadership)
Secular totalitarianism
(military and bureaucratic leadership)
Communist totalitarianism
Tribal totalitarianism
Right-wing totalitarianism
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 3 - 5
Democracy
Government leaders are elected
by the wide participation of the
people or their representatives
 Freedom of expression
 Periodic elections
 Full civil and property rights
 Minority rights
 Nonpolitical bureaucracies
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 3 - 6
Types of Political Risk
Conflict and violence
Terrorism and kidnapping
Property seizure
Policy changes
Local content requirements
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 3 - 7
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
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 3 - 8
Terrorism and Kidnapping
Security checklist for managers on business abroad:
 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
 Know local emergency procedures before trouble
strikes
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 3 - 9
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
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
Nationalization
Forced asset transfer to the
government of an entire
industry
International Business 5e
Chapter 3 - 10
Policies and Laws
Policy changes restrict:
 Foreign ownership
 Investment levels
 Business activities
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
Local content
requirements:
Specify the portion
of a good or service
to be supplied
by local firms
International Business 5e
Chapter 3 - 11
Managing Political Risk I
Partnerships
Adaptation
Localization
Incorporate risk into
business strategies
Development assistance
Insurance
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 3 - 12
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
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 3 - 13
Managing Political Risk III
Lobbying
Influencing local lawmakers
Influence local politics
Present firm’s views
on political matters
Corruption
Foreign Corrupt Practices Act
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 3 - 14
World’s Legal Systems
Common Law
Tradition, precedent, and usage
Civil Law
Codified rules and statutes
Theocratic Law
Religious teachings form law
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 3 - 15
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")
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 3 - 16
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
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 3 - 17
Philosophies of Ethics
and Social Responsibility
ETHICS
Personal behavior in accordance with rules or
standards for right conduct or morality
Friedman View
Cultural Relativism
Righteous Moralism
Utilitarianism
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 3 - 18
Corporate Social Responsibility
Go 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
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 3 - 19
International Relations
Favorable international
political relations foster:
 Stable business
environments
 Improved business
communications
 Efficient distribution
systems
 Prompt and equitable
dispute resolution
 Expanded opportunities
 Diminished risk levels
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 3 - 20
Chapter Review
• 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 important
global legal issues
• Explain ethics and social responsibility and key issues
facing international companies
• Explain how international relations affect international
business activities
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 3 - 21
Politics, Law, and
Business Ethics
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
All rights reserved. No part of this publication may be reproduced,
stored in a retrieval system, or transmitted, in any form or by any
means, electronic, mechanical, photocopying, recording, or
otherwise, without the prior written permission of the publisher.
Printed in the United States of America.
Copyright © 2010 Pearson Education, Inc.
publishing as Prentice Hall