THE POLITICAL AND LEGAL ENVIRONMENT

Micropolitical Risk
• A political risk that only affects a certain industry or set of firms in a given country
Macropolitical Risk
• A political risk that essentially affects all businesses in a given country
in 2013? In groups of 3-4 discuss the political risk map! Find examples for the following political/legal risks for foreign businesses:



Political officials and agencies have an extensive role in a collectivist society
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The two extremes
Democracy= a political system that grants the
citizens: the power to alter the laws and structures of government the power to make all decisions (either by themselves or by their direct representatives) the power of elections and the rule of law to enforce their vote
•Source: Kekic, L. (2006) ‘A pause in democracy’s march’, The Economist: The World in 2007 data,
Respect for institutions in Latin America
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Totalitarianism
Authoritarianism = one person or a small group of people
has absolute control over others Fascism = extreme form of nationalism that calls for the supremacy of the state Secular totalitarianism = control is enforced through military power Theocratic totalitarianism = religious leaders are the political leaders
1.
Political Risks
Political Risks
• The risks that political forces or problems in a given country will have a meaningful negative impact upon the conduct of business in that country
Many transition economies are building democratic
institutions alongside market structures; however, legacies of authoritarianism remaemocratic: selected countries
THE POLITICAL AND LEGAL ENVIRONMENT
1
Political and Legal Influences on International Business
2
Now its your turn…
Form groups of 4 students 2. Read the article/case given to you and present/explain the case to the rest of the group; highlight the political risks (the company encountered and the repercussions of those)! 3. Collect and discuss the political risk factors of your home countries!
How do you think the list has changed
5. Pakistan
6. Gaza, Palestinian Territories 7. Sri Lanka 8. Yemen 9. Sudan 10. Zimbawe 11. Cote d’Ivoire 12. Haiti 13. Algeria 14. Nigeria 15. Georgia/Caucasus, Russia
Features of authoritarianism and democracy
Global Trends in Freedom: Political Freedom
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Now it´s your turn…
Authoritarian countries are often seen as more stable
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Features of contemporary democratic political systems
Freedom of opinion, expression, press, and freedom to


organize Elections in which voters decide who is to represent them Limited terms for elected officials An independent and fair court system with high regard for individual rights and property Citizen accessibility to the decision-making process
than democratic ones, and may thus be viewed favorably as business environments, especially if they are pursuing market policies (like China). What are the drawbacks of doing business in an authoritarian country?
•Source: ‘A warning for reformers’, The Economist, 17 November 2007
Trends in political systems
trend towards democracy – key drivers:
Breakdown of totalitarian regimes Improved communication technology Higher standards of living
/v_maplecroft23122010_112502/updatable/e mail/marsh/Political_Risk_20 12_Poster_MARSH.pdf
MOST DANGEROUS COUNTRIES IN THE WORLD – 2009
1. Somalia 2. Afghanistan 3. Iraq 4. Democratic Republic of Congo
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Degrees of democracy
States vary in democratic accountability, participation
and civil rights. Attributes of democracy include:
Free and fair elections, supported by media freedom
individual

Political officials and agencies have a limited role in an individualistic society
Collectivism = primacy of the rights and role of the
community
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Business regulation
generally perceived as burdensome and costly trend has been reduction in national regulations Competition law seeks to control anti-competitive
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Now its your turn…
In groups of 3-4
As more and more countries claim to be democratic,
variations among countries in the quality of democracy are becoming more significant. Think of two countries with which you are familiar and compare them according to the following figure!
Useful link
/reforms
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Individualism and collectivism as indicators
Individualism = primacy of the rights and role of the
The rule of law, including independent judiciary
Civil society – the presence of freely-functioning
voluntary groups (including religious, political and labour) is a substantive indicator of genuine pluralism
and unfair business practices:
EU competition law targets abuse of a dominant position
Trade restrictions Currencies, customs, VAT Local wars and insecurity of travelling (negative) attitude toward FDI Local political and economical unstability Nationalization of ownership Profit transfer restrictions Safety of expatriates, epidemias Intellectual property rights problems
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Internal political risks
International risks
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xportcredits/cre-crccurrent-internet-rev1.pdf
/media