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The Political Environment of

International Business

Anne-Charlotte Bazoud

Gabrielle Colombier

Franziska GuehlckeMarcus Bormann

Arnaud Katz

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Contents

I. Context

II. Aims - Objectives

III. Political Environment of Business

IV. Political Environment of Business in Hong Kong

V. Conclusion

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Context

Globalisation, liberalization of the World Economy

Set up in new markets, with different politic

Hong-Kong, English from 1842 to 1997

culture, laws, justice close from England,

Very different politic from the rest of China

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Aims - Objectives

Aim :

describe the most important political factors for companies which set up overseas

+ focus on the political environment of Hong-Kong.

Objectives:

- make a clear distinction between totalitarism and democracy, capitalism and

socialism

- Demonstrate that the political environment is important in choosing the countryto set up (for example war, corruption, economy opened to the other countries?)

- Analyse the political environment of Hong Kong

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Elements of the political environment

that a business must consider in order

to expand overseas

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The Political Environment

Relatively uncontrollable factors outside the firm

that influence its decision-making

Legal and PoliticalEnvironment

Socio-Cultural

Environment

Environment

Economic

Technological

Environment

Factors in government, the law and the regulatory

system that affect the way an organisation operates

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The Political Environment

Legal and Political

Environment

SYSTEM STABILITY

POLICIES

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SYSTEM

Includes the structures, processes, and activities bywhich a nation governs itself.

Political

System

Totalitarian state

Democratic state

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SYSTEM

Totalitarian state

Imposed authority

Lackofconstitutionalguarantees

Restricted participation

Companies might need to pay

bribes to government

The business law is vague

Democratic state

Freedom

Rights

Stable business environment

thanks to laws

Freedom and no censorship

Doing business seems

to be a risky proposition

Doing business in a democraticstate seems to be safer

than in a totalitarian state

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SYSTEM

Political

Ideology

Capitalist system

Socialist system

Capitalist System

- Private ownership of business

is encouraged

Socialist System

- Public ownership of business

is the norm

The political ideology affects

- foreign government attitude towards profit repatriation.

- foreign government attitude towards foreign direct investment

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SYSTEM

Political relationships

Favorable political relationships

foster stable business environments

increase international cooperation in many areas

lead to increase business opportunities and lower risk

The World Trade Organisation can facilitate political relationships

The WTO ensures that trade flows as smoothly, predictably and

freely as possible.

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STABILITY

Political Stability : A subjective governance indicator aggregated

from a variety of sources and measuring perceptions of the likelihood

of destabilization. (United Nations Development Programme web site)

Political Risk

The risk that political decisions or events in a

country negatively affect the profitability or

sustainability of an investment.

(International Business environments and operations)

4 types of political risk

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STABILITY

Systemic Political Risks

When Political processes within a countrydo not routinely

subject foreign operations to unfair treatment.

(International Business environments and operations)

Procedural Political Risks

Its Political actions which create frictions that interfere withpeople, products or funds transactions between a company or a

country.

(International Business environments and operations)

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STABILITY

Distributive Political Risks

When countries revise their distribution policies to capture

greater benefits from foreign companies.

(International Business environments and operations)

Catastrophic Political Risks

This is the Political developments that adversely

affect the operations of all companies in a

country. (International Business environments and operations)

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POLICIES

TAXATION

Governments use income and sales taxes which

can vary from country to country.

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POLICIES

Intellectual Property

Property that results from peoples intellectual talent and abilitie. (International Business An integrated approach)

The problem is that laws in some countries are softer than in others

PROPERTY

Industrial Property

Industrial property includes patents and trademarks.

(International Business An integrated approach)

Copyrights

Copyrights give creators of original works the freedom to publish or dispose

of them as they choose. (International Business An integrated approach)

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POLICIES

PRODUCT SAFETY AND LIABILITY

Product liability holds manufacturers, sellers, and

others, including individual company officers, responsible

for damage, injury, or death caused by defectiveproducts. (International Business An integrated approach)

The United States has the toughest product liability laws in the

world following by Europe.

Enforcement of product liability laws differs from

nation to nation.

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Hong Kong Political Environment

Capitalist System or Socialist System China has signed the "one country, two systems"

formula

50 years contract until 2047

Relatively high political stability

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Hong Kong Political Environment

Totalitarian state or Democratic state Limited democracy

The legal system based on the English common law

Basic Law which approved in 1990

Mini-Constitution"

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Conclusion

The political environment has an important impacton the business

There is a large field with many factors which thecompanies have to consider if they want to expandoverseas

Political environment is not stable and can change

quickly The political environment creates advantages and

disadvantages

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Sources

http://www.pearsoncourses.com/

http://www.nytimes.com/specials/hongkong/

https://www.cia.gov/library/publications/the-world-

factbook/geos/hk.html

International business, environments and operations, Daniels,

Radebaugh, Sullivan

International business : an integrated approach, John J. WILD,

Kenneth L. WILD, Jerry C.Y. HAN

http://www.pearsoncourses.com/http://www.nytimes.com/specials/hongkong/https://www.cia.gov/library/publications/the-world-factbook/geos/hk.htmlhttps://www.cia.gov/library/publications/the-world-factbook/geos/hk.htmlhttps://www.cia.gov/library/publications/the-world-factbook/geos/hk.htmlhttps://www.cia.gov/library/publications/the-world-factbook/geos/hk.htmlhttps://www.cia.gov/library/publications/the-world-factbook/geos/hk.htmlhttps://www.cia.gov/library/publications/the-world-factbook/geos/hk.htmlhttps://www.cia.gov/library/publications/the-world-factbook/geos/hk.htmlhttp://www.nytimes.com/specials/hongkong/http://www.pearsoncourses.com/