Mgt 485 Chapter 2: 1. Chapter 2 The Political, Legal, and Technological Environment The specific...

Mgt 485 Chapter 2: 1

Cha

pter 2

The Political, Legal, andTechnological EnvironmentThe specific objectives of this

chapter are:1. EXAMINE some of the major changes that

are currently taking place in the political environment of China, Europe, Russia, and Central and Eastern Europe.

2. PRESENT an overview of the legal and regulatory environment in which MNCs operate worldwide.

3. REVIEW key technological developments as well as their impact on MNCs now and in the future.


Political Environment

Change in government policies MNCs must adjust their strategies and

practices to accommodate the new perspectives and actual requirements

Less stable governments Greater risk

Significant differences among political systems across countries and regions



Emerging economic power Government’s desire to balance

National, immediate needs Challenge of a free market economy and globalization

Government attempting to open up the economy

1. Speed up conversion of state enterprises into corporations

2. Expand capital markets by authorizing new stock listings

3. Sell off most of the 305,000 state enterprises (or let go bankrupt)

4. Worker retraining, low-cost housing and other programs

5. Reduce tariffs to 10 percent

China



Privatization and economic liberalization reinforce EU-wide political and economic integration

Political power is variable and complex Strong opposition to U.S.-led

intervention in Iraq sometimes spill over into business relationships and dealings

Europe is a large interwoven region economically, but contains vast cultural differences

Europe



Neglect, corruption, and confusing changes in economic policy

Infrastructure is weak and a political quagmire

Legal Financial Trade sectors

Corruption interferes with attraction of more foreign investment

Russia


Tariffs

Key Elements of Russia’s WTO Accession Deal with the EU

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Russia will not exceed an average’ tariff level of 7.6% for industrial goods, 11% for fishery products, and 13 % for agricultural goods.

Tariff rate quotas for fresh and frozen meat and poultry will be around 600 million ($720 million) per year.

EnergyRussian gas prices to domestic industrial users will gradually be increased.

Russia’s state gas corporation, Gazprom, will retain its export monopoly. Export duties on gas will be capped at 30%.

AirlinesRussia will revamp the charges currently applied to EU airlines flying over Siberia to make them cost-based and nondiscriminatory.


Banking

Key Elements of Russia’s WTO Accession Deal with the EU

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Russia will maintain a ban on foreign banks opening branches.

Under existing rules, foreign banks are allowed to open only wholly or partly owned subsidiaries.

ServicesRussia has committed to cross-border provision and commercial establishment of certain services.

Sectors include telecoms, transport, financial services, postal, construction, distribution, environmental, news agency, and tourism.

Adapted from: Table 2-1: Key Elements of Russia’s WTO Accession Deal with the EU



Many of these countries have joined the EU

Movement from centrally planned to market economy plagued with problems in many countries

High unemployment Economic slowdown Large trade deficits

Some countries more successful in economic reforms

Estonia Latvia Lithuania

Central and Eastern Europe



Doing business requires knowledge of

Regulations Legal environment Tax regimes Accounting methods Business structures Import/export regulations Manpower and labor regulations Restrictions on foreign capital

investment

The Middle East



Doing business in Middle Eastern countries is risky and potentially dangerous

War on terrorism Afghanistan and Iraq wars Israel—Arab conflicts Rising tensions

Business requires knowledge of Islam

Religion and way of life Framework of life and society Islamic fundamentalists have become

aggressive toward U.S. and its allies.

The Middle East


Legal and Regulatory Environment

Confusion and challenge of international business environment is heightened by Differing laws and regulations in MNCs’

global business operations Impact of these laws and regulations on

ability to capitalize on economies of scale and scope

MNCs must carefully evaluate legal framework in each market in which they want to do business, before doing so


Four Global Foundations of Law

Derived from interpretation of the Qur’an and teachings of Prophet Muhammad

Found in Islamic countries Middle East Central Asia

Islamic Law



Comes from Marxist socialist system

Continues to influence regulations in former communist countries Members of former Soviet Union Peoples’ Republic of China Vietnam North Korea Cuba

Requires most property to be owned by the state or state enterprises

Islamic Law

Socialist Law



Comes from English lawFoundation of legal

system United States Canada England Australia New Zealand

Islamic Law

Socialist Law

Common Law



Derived from Roman law

Found in non-Islamic and nonsocialist countries France Some Latin American

countries Louisiana in the U.S.

Islamic Law

Socialist Law

Common Law

Civil or Code Law


Basic Principles of International Law

Sovereignty and Sovereign Immunity

An international principle of law which holds that governments have the right to rule themselves as they see fit




International Jurisdiction

A jurisdictional principle of international law which holds that every country has jurisdiction over its citizens no matter where they are located

Nationality principle Territoriality principle Protective principle





Doctrine of Comity

A jurisdictional principle of international law which holds that there must be mutual respect for the laws, institutions, and government of other countries in the matter of jurisdiction over their own citizens



Doctrine of Comity



Act of State Doctrine

A jurisdictional principle of international law which holds that all acts of other governments are considered to be valid by U.S. courts, even if such acts are illegal or inappropriate under U.S. law



Doctrine of Comity




Treatment and Rights of Aliens

Countries have the legal right to refuse admission of foreign citizens and to impose special restrictions on their conduct, right of travel, where they can stay, and what business they may conductNations also can deport aliens



Doctrine of Comity





Forum for Hearing and Settling Disputes

U.S. courts can dismiss cases brought before them by foreigners; however they are bound to examine issues such as

where the plaintiffs are located,

where the evidence must be gathered

where property to be used in restitution is located



Doctrine of Comity



Forum for Hearing and Settling Disputes


Legal and Regulatory Issues

Foreign Corrupt Practices Act Illegal to influence foreign officials through

Personal payment Political contributions

When bribes removed, MNCs more willing to do business in that country

Restrictive bureaucratization Government controls often inefficient and

uncorrected Local politics often prevail over national

concernsPrivatization


Regulation of Tradeand Investment

Individual countries use legal and regulatory policies to affect the international management environment

Country is perceived to engage in unfair trade practices (WTO and similar agreements) Government support (subsidies) Require MNCs to accept local partners

Response may be Retaliatory tariffs Restrictive trade regulations


Technological Environment and Global Shifts in Production

BiotechnologyNanotechnologySatellitesAutomatic translation telephonesArtificial intelligence and embedded

learning technologyAdvancements in computer chip

technologySupercomputersE-business

Business-to-business (B2B) Business to consumer (B2C) transactions e-tailing & financial services Financial services (e-cash)


Technological Environment

Internet Access allows people to obtain information from millions of sources

Satellites will make it possible for everyone to send and receive voice, data, and digitized images through hand-held telephones

Automatic translation telephones will allow people to communicate in their own language to anyone in the world who has access to a telephone


Technological Environment and Global Shifts in Production

Telecommunications Wireless or mobile telephone service

Economic growth hampered by poor communication services

Wireless is more affordable than installed phone lines Some governments recognize the need to privatize

this serviceTechnology, outsourcing and

offshoring Technology has reduced and eliminated some

work in middle management and white-collar jobs Global competition has forces some MNCs to

outsource jobs to offshore productions (lower labor and other costs)

Emerging technology makes work more portable


Technological Environment (cont.)

Telecommunications Most obvious dimension of the technological

environment facing international management

Economic growth perceived to hinge on efficient communications

Technologic leapfrogging Moving from the absence of telephones to the

availability of wireless communications Privatization of telecommunications occurring

in some countries to acquire capital and technical know-how

MNCs unwilling to invest in telecommunications without the prospect of good financial return

Case of China


The Employment Fallout from Technology

Technology will affect the nature and number of employees technology has the potential to largely

displace employees in all industries Emerging information technology also

makes work more portable Changing economic dynamics

Increasing productivity / decreasing costs

Lost jobs, lowering wages


Expected Winnersin Selected Occupations

-80 -60 -40 -20 0 20 40 60 80 100

Computer software engineers, applications

Computer support specialists

Computer software engineers, systems software

Network and computer systems administrators

Personal and home care aids

Medical assistants

100

97

90

82

62

52

Percentage change for 2000-2010Adapted from: Figure 2-1: Winners and Losers in Selected Occupations: Percentage Change Forecasts for 2000-2010


Expected Winnersin Selected Occupations

-80 -60 -40 -20 0 20 40 60 80 100

-61

-35

-28

-26

-25

-20

Percentage change for 2000-2010

Losers

-20

Railroad brake, signal, and switch operators

Telephone operators

Loan interviewers and clerks

Meter readers, utilities

Farmers and ranchers

Order clerks

Insurance claims and policy processing clerks

Adapted from: Figure 2-1: Winners and Losers in Selected Occupations: Percentage Change Forecasts for 2000-2010

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Mgt 485 Chapter 2: 1. Chapter 2 The Political, Legal, and Technological Environment The specific...

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