Chapter 2 - Summary International Business PDF

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Professor Mona Makhija...

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Political economy- political, economic, and legal systems of a country are interdependent, they interact and influence each other and the countrys economic wellbeing  

Political system- system of government in a nation  Individualism vs collectivism  Democratic vs totalitarian  Interrellated- totalitarism leads toward collectivism

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Collectivism- refers to a political system that stresses the primacy of collective goals over individual goals  Needs of a society as a whole are generally viewed as being more important than individual freedoms  

Plato Socialismo Traced to Karl Marx who argues that few benefit at the expense of many in capitalist societies o State of ownership of the basic means of production, distribution and exchange o Communism- socialism can only be achieved through violent revolution and totalitarian dictatorship o Social democrats- committed themselves to achieving socialism by democratic means, turning, their backs on violent revolution and dictatorship o In many countries state ownership ran very poorly

Individualism- the individual should have freedom in his or her economic and political pursuits Democracy- political system in which government is by the people exercised directly or though elected representatives  Representative democracy Totalitarianism- is a form of government in which one person or political party exercises absolute control over all spheres of human life and prohibits opposing political parties

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All rights denied to citizens, political repression, media censored, those who questioned are imprisoned or killed

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Communist totalitarianism- most widespread

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Theocratic totalitarianism- political power is monopolize by a party, group, or individual that governs according to religious principles

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Tribal totalitarianism- political party that represents the interest of a particular tribe monopolizes power

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Right wing totalitarianism- permits some individual economic freedom but restricts individual political freedom. Over hostility to socialist or communist ideas

Market economy- all productive activities are privately owned, production is determined by supply and demand  Must not be monopolies, antitrust laws, competition, efficiency  

Command economy- government plans the goods and services the a country produces, the quantity and the price  Collectivist  Businesses are state owned so the government can direct them to make investments that are in the best interest of the nation

Mixed economy- certain sectors of the economy are left to private ownership and free market, while other sectors have state ownership Legal system- rules, laws that regulate behavior along with the processes by which the laws are enforced through which redress for grievances is obtained  Regulate business practice, define he manner in which business transactions are executed, and set down the rights and obligations of those involved in business transactions  Influenced by political system o Collectivist/totalitarian- laws that restrict private enterprise Common law- based on tradition, precedent, and custom  US, and other former Great Britain colonies

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Power to interpret the law in regards to the unique situation, giving flexibility

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Altered, clarified, or amended

Civil law- based on a detailed set of laws organized in to codes  Judges rely on detailed legal codes rather than interpreting tradition, precedent, and custom 

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Only have power to apply the law

Theocratic law- law based on religious teaching  Islamic law

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The difference between common and civil law systems can be illustrated by the approach of each to contract law  Contract- a document that specifies the conditons under which an exchange is to occur and details the rights and obligations of the parties involved  

Contract law- body of law that governs contract enforcement More expensive to draw up contracts in a common law system because everything must be spelled out

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Property rights- refer to 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  In many countries these laws are not enforced by the authorities  Private action- violating property rights through theft, piracy, blackmail and the like by private individuals and groups 

Public action/corruption- public officials, such as politicians and government bureaucrats, extort income, resources, or the property itself from the holder o Levying excessive taxation, requiring licenses and permits, taking assets into state ownership without compensation

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Foreign Corrupt Practices Act- 1970s, makes it illegal to bribe a foreign government official to obtain or maintain business over which that foreign official has authority. Requires all publicly traded companies to keep detailed recorded that would reveal whether a violation of the act has occurred   1997- OECD adopted the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions  makes member states to make the bribery of foreign public officials a criminal offense   Intellectual property- property that is the product of intellectual activity, such as computer software ownership rights over it  Patents, copyrights, trademarks  World Intellectual Property Organization  Paris Convention for the Protection of Industrial Property

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