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    MGT 3660: International Business: Session 3: National Differences in Political Economy

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    AJ Patel
    This document summarizes key topics from a session on national differences in political economy: - It discusses different political systems ranging from collectivism to individualism and totalitarian to democratic systems. - It also outlines different economic systems including market, command, and mixed economies and how they relate to political ideologies. - Finally, it briefly touches on different legal systems and how contract law, intellectual property law, and property rights differ across countries in ways that impact international business.

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    MGT 3660: International Business: Session 3: National Differences in Political Economy

    Uploaded by

    AJ Patel
    472 views25 pages
    This document summarizes key topics from a session on national differences in political economy: - It discusses different political systems ranging from collectivism to individualism and totalitarian to democratic systems. - It also outlines different economic systems including market, command, and mixed economies and how they relate to political ideologies. - Finally, it briefly touches on different legal systems and how contract law, intellectual property law, and property rights differ across countries in ways that impact international business.

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    Globalization Part 2

    Original Title

    Globalization Part 2

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    This document summarizes key topics from a session on national differences in political economy: - It discusses different political systems ranging from collectivism to individualism and totalitarian to democratic systems. - It also outlines different economic systems including market, command, and mixed economies and how they relate to political ideologies. - Finally, it briefly touches on different legal systems and how contract law, intellectual property law, and property rights differ across countries in ways that impact international business.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    472 views25 pages

    MGT 3660: International Business: Session 3: National Differences in Political Economy

    Uploaded by

    AJ Patel
    This document summarizes key topics from a session on national differences in political economy: - It discusses different political systems ranging from collectivism to individualism and totalitarian to democratic systems. - It also outlines different economic systems including market, command, and mixed economies and how they relate to political ideologies. - Finally, it briefly touches on different legal systems and how contract law, intellectual property law, and property rights differ across countries in ways that impact international business.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 25

    MGT 3660: International Business

    Session 3: National Differences in Political Economy

    Announcement
    Use your name tent Check your team No late assignment policy International business presentation I (1/28 & 1/30)

    Warm-up Quiz
    Distribution of warm-up quiz
    Average: 8.41 Standard deviation: 1.12 Distribution
    25

    20

    15

    10

    0 6 7 8 9 10

    Congrats: Melissa, Nitid, Cole (Jackob), Dylan (Kase), Liang, Sam (Morgan), Neel (Natarajan), Nishitkumar, George, Nick (Wang), Yingying, Hailey

    Warm-up Quiz
    True or false questions

    Learning Objectives
    After this session, we can do followings:
    Understand how the political systems of countries differ Understand how the economic systems of countries differ Understand how the legal systems of countries differ Explain the implications for management practice of national differences in political economy

    Where We Are
    Concepts of globalization
    Chapter 1

    Country differences
    Chapter 2-5

    The global trade and investment environment


    Chapter 6-9

    The strategy and structure of international business


    Chapter 13-15

    Business operation
    Chapter 16-20

    Class Activities
    Closing case [Indonesia Asias stumbling giant]
    What political factors explain Indonesias poor economic performance? What economic factors? Are these two related? Why do you think foreign firms exited Indonesia in the early 2000s? What are the implications for the country? What is required to reverse this trend? Why is corruption so endemic in Indonesia? What are its consequences? What are the risks facing foreign firms that do business in Indonesia? What is required to reduce these risks?

    2-7

    Political Economy
    Political economy - Political, economic, and legal systems of a country
    they interact and influence each other they affect the level of economic well-being in the nation

    Political System
    Political system - the system of government in a nation Assessed according to
    the degree to which the country emphasizes collectivism as opposed to individualism the degree to which the country is democratic or totalitarian

    Collectivism
    Collectivism stresses the primacy of collective goals over individual goals
    can be traced to the Greek philosopher, Plato (427-347 BC)

    Today, collectivism is equated with socialists (Karl Marx 1818-1883)


    advocate state ownership of the basic means of production, distribution, and exchange manage to benefit society as a whole, rather than individual capitalists

    Modern-Day Socialism
    In the early 20th century, socialism split into Communism socialism can only be achieved through violent revolution and totalitarian dictatorship
    in retreat worldwide by mid-1990s

    Social democrats socialism is achieved through democratic means


    retreating as many countries move toward free market economies state-owned enterprises have been privatized

    Totalitarianism
    Totalitarianism - form of government in which one person or political party exercises absolute control over all spheres of human life and prohibits opposing political parties

    Totalitarianism
    Four major forms of totalitarianism exist today
    Communist totalitarianism found in states where the communist party monopolizes power Theocratic totalitarianism - found in states where political power is monopolized by a party, group, or individual that governs according to religious principles Tribal totalitarianism - found in states where a political party that represents the interests of a particular tribe monopolizes power Right-wing totalitarianism - permits some individual economic freedom, but restricts individual political freedom

    Individualism
    Individualism refers to philosophy that an individual should have freedom in his own economic and political pursuits
    can be traced to Greek philosopher, Aristotle (384-322 BC) individual diversity and private ownership are desirable individual economic and political freedoms are the ground rules on which a society should be based implies democratic political systems and free market economies

    Democracy
    Democracy - a political system in which government is by the people, exercised either directly or through elected representatives
    usually associated with individualism pure democracy is based on the belief that citizens should be directly involved in decision making most modern democratic states practice representative democracy where citizens periodically elect individuals to represent them

    Link Between Political Ideology and Economic Systems


    Political ideology and economic systems are connected
    countries that stress individual goals are likely to have market based economies in countries where state-ownership is common, collective goals are dominant

    Economic System
    There are three types of economic systems
    Market economies - all productive activities are privately owned and production is determined by the interaction of supply and demand government encourages free and fair competition between private producers Command economies - government plans the goods and services that a country produces, the quantity that is produced, and the prices as which they are sold all businesses are state-owned, and governments allocate resources for the good of society because there is little incentive to control costs and be efficient, command economies tend to stagnate Mixed economies - certain sectors of the economy are left to private ownership and free market mechanisms while other sectors have significant state ownership and government planning governments tend to own firms that are considered important to national security

    Legal System
    Legal system - the rules that regulate behavior along with the processes by which the laws are enforced and through which redress for grievances is obtained
    the system in a country is influenced by the prevailing political system

    Legal systems are important for business because they


    define how business transactions are executed identify the rights and obligations of parties involved in business transactions

    There are three types of legal systems


    Common law - based on tradition, precedent, and custom Civil law - based on detailed set of laws organized into codes Theocratic law - law is based on religious teachings

    Contracts
    Contract - document that specifies the conditions under which an exchange is to occur and details the rights and obligations of the parties involved Contract law is the body of law that governs contract enforcement
    under a common law system, contracts tend to be very detailed with all contingencies spelled out under a civil law system, contracts tend to be much shorter and less specific because many issues are already covered in the civil code

    Jurisdiction of Contract Dispute


    The United Nations Convention on Contracts for the International Sale of Goods (CIGS)
    establishes a uniform set of rules governing certain aspects of the making and performance of everyday commercial contracts between buyers and sellers who have their places of business in different nations

    Ratified by the U.S. and about 70 countries


    but, many larger trading nations including Japan and the U.K. have not agreed to the provisions of CIGS and opt for arbitration instead

    Property Rights and Corruption


    Property rights - the legal rights over the use to which a resource is put and over the use made of any income that may be derived from that resource. Property rights can be violated through
    Private action theft, piracy, blackmail Public action - legally - ex. excessive taxation or illegally - ex. bribes or blackmailing high levels of corruption reduce foreign direct investment, the level of international trade, and the economic growth rate in a country

    The Foreign Corrupt Practices Act makes it illegal for U.S. companies to bribe foreign government officials to obtain or maintain business over which that foreign official has authority
    facilitating or expediting payments to secure or expedite routine government action are permitted

    Intellectual Property
    Intellectual property - property that is the product of intellectual activity Can be protected using
    Patents exclusive rights for a defined period to the manufacture, use, or sale of that invention Copyrights the exclusive legal rights of authors, composers, playwrights, artists, and publishers to publish and disperse their work as they see fit Trademarks design and names by which merchants or manufacturers designate and differentiate their products

    Intellectual Property
    Protection of intellectual property rights differs from country to country
    World Intellectual Property Organization Paris Convention for the Protection of Industrial Property

    To avoid piracy, firms can


    stay away from countries where intellectual property laws are lax file lawsuits lobby governments for international property rights agreements and enforcement

    Markets Overall Attractiveness


    The overall attractiveness of a country as a potential market and/or investment site for an international business depends on balancing the benefits, costs, and risks associated with doing business in that country
    Other things being equal, more attractive countries have democratic political institutions, market based economies, and strong legal systems that protect property rights and limit corruption

    Next Time
    Political economy and economic development

    1-25

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