The Political and Legal Environments Facing Business
CHAPTER THREE
THE POLITICAL AND LEGAL ENVIRONMENTS FACING BUSINESS
OBJECTIVES
• To discuss the different goals and functions of political systems
• To profile trends in the emergence and diffusion of political systems
• To identify the idea of political risk and approaches to managing it
• To understand how different political and legal systems affect the conduct of business
• To profile trends in the evolution and diffusion of legal systems
• To examine the major legal issues facing international business companies
• To profile the idea of intellectual property and the basis of concern and controversy
Chapter Overview
When firms source, produce, and/or market products in foreign countries, they encounter dynamic and challenging political and legal environments. Chapter Three provides a conceptual foundation for the examination of the political and legal dimensions of international business operations. It compares major political regimes, discusses their potential influence upon the development of effective business strategies, and considers the relevance of political risk. The chapter also examines the major types of legal systems that exist today, as well as the strategic and operational concerns they pose. It concludes with a discussion of intellectual property rights and the associated challenges confronted in an age of globalization.
Chapter Outline
OPENING CASE: CHINA’S BUSINESS ENVIRONMENT [See Map 3.1.]
During its thirty years of communist rule, China prohibited foreign investment and restricted foreign trade. Then, China enacted the Law on Joint Ventures Using Chinese and Foreign Investment in 1978. China’s subsequent transformation has been fueled by a landslide of foreign investments made in response to the country’s market potential, market performance, improved infrastructure, enormous resources, and strategic position. Frustrating this process, however, have been the politics of China’s elaborate bureaucracy, as
THE POLITICAL AND LEGAL ENVIRONMENTS FACING BUSINESS
OBJECTIVES
• To discuss the different goals and functions of political systems
• To profile trends in the emergence and diffusion of political systems
• To identify the idea of political risk and approaches to managing it
• To understand how different political and legal systems affect the conduct of business
• To profile trends in the evolution and diffusion of legal systems
• To examine the major legal issues facing international business companies
• To profile the idea of intellectual property and the basis of concern and controversy
Chapter Overview
When firms source, produce, and/or market products in foreign countries, they encounter dynamic and challenging political and legal environments. Chapter Three provides a conceptual foundation for the examination of the political and legal dimensions of international business operations. It compares major political regimes, discusses their potential influence upon the development of effective business strategies, and considers the relevance of political risk. The chapter also examines the major types of legal systems that exist today, as well as the strategic and operational concerns they pose. It concludes with a discussion of intellectual property rights and the associated challenges confronted in an age of globalization.
Chapter Outline
OPENING CASE: CHINA’S BUSINESS ENVIRONMENT [See Map 3.1.]
During its thirty years of communist rule, China prohibited foreign investment and restricted foreign trade. Then, China enacted the Law on Joint Ventures Using Chinese and Foreign Investment in 1978. China’s subsequent transformation has been fueled by a landslide of foreign investments made in response to the country’s market potential, market performance, improved infrastructure, enormous resources, and strategic position. Frustrating this process, however, have been the politics of China’s elaborate bureaucracy, as