File Name: political and legal environment in international business .zip
Our website is made possible by displaying online advertisements to our visitors. Please consider supporting us by disabling your ad blocker. There are many external environmental factors that can affect your business. It is common for managers to assess each of these factors closely. Some common factors are political, economic, social and technological known as PEST analysis.
It involves cross-border transactions of goods and services between two or more countries. Transactions of economic resources include capital, skills, and people for the purpose of the international production of physical goods and services such as finance, banking, insurance, and construction. International business is also known as globalization. To conduct business overseas, multinational companies need to bridge separate national markets into one global marketplace.
There are two macro-scale factors that underline the trend of greater globalization. The first consists of eliminating barriers to make cross-border trade easier e. The second is technological change, particularly developments in communication, information processing , and transportation technologies.
Multinational enterprises range from any kind of business activity or market, from consumer goods to machinery manufacture; a company can become an international business. Therefore, to conduct business overseas, companies should be aware of all the factors that might affect any business activities, including, but not limited to: difference in legal systems, political systems, economic policy , language , accounting standards , labor standards , living standards, environmental standards , local cultures , corporate cultures , foreign-exchange markets , tariffs , import and export regulations, trade agreements , climate , and education.
Each of these factors may require changes in how companies operate from one country to another. Each factor makes a difference and a connection.
One of the first scholars to engage in developing a theory of multinational companies was Canadian economist Stephen Hymer. There were three phases of internationalization according to Hymer's work. The first phase of Hymer's work was his dissertation in called the International Operations of National Firms.
At first, Hymer started analyzing neoclassical theory and financial investment , where the main reason for capital movement is the difference in interest rates. After this analysis, Hymer analyzed the characteristics of foreign investment by large companies for production and direct business purposes, calling this Foreign Direct Investment FDI.
By analyzing the two types of investments, Hymer distinguished financial investment from direct investment. The main distinguishing feature was control. Portfolio investment is a more passive approach, and the main purpose is financial gain , whereas in foreign direct investment a firm has control over the operations abroad. So, the traditional theory of investment based on differential interest rates does not explain the motivations for FDI.
According to Hymer, there are two main determinants of FDI; where an imperfect market structure is the key element. The first is the firm-specific advantages which are developed at the specific companies home country and, profitably, used in the foreign country. The second determinant is the removal of control where Hymer wrote: "When firms are interconnected, they compete in selling in the same market or one of the firms may sell to the other," and because of this "it may be profitable to substitute centralized decision-making for decentralized decision-making ".
Hymer's second phase is his neoclassical article in that includes a theory of internationalization and explains the direction of growth of the international expansion of firms. In a later stage, Hymer went to a more Marxist approach where he explains that MNC as agents of an international capitalist system causing conflict and contradictions, causing among other things inequality and poverty in the world.
Hymer is the "father of the theory of MNEs", and explains the motivations for companies doing direct business abroad. Among modern economic theories of multinationals and foreign direct investment are internalization theory and John Dunning's OLI paradigm standing for ownership, location and internationalization. Dunning was widely known for his research in economics of international direct investment and the multinational enterprise. His OLI paradigm, in particular, remains as the predominant theoretical contribution to study international business topics.
Hymer and Dunning are considered founders of international business as a specialist field of study. The conduct of international operations depends on a company's objectives and the means with which they carry them out.
The operations affect and are affected by the physical and societal factors and the competitive environment. All firms that want to go international have one goal in common; the desire to increase their respective economic values when engaging in international trade transactions. To accomplish this goal, each firm must develop its individual strategy and approach to maximize value , lower costs, and increase profits.
A firm's value creation is the difference between V the value of the product being sold and C the cost of production per each product sold. Value creation can be categorized as: primary activities research and development , production, marketing and sales, customer service and as support activities information systems, logistics, human resources.
However, the success of firms that extend internationally depends on the goods or services sold and on the firm's core competencies Skills within the firm that competitors cannot easily match or imitate. For a firm to be successful, the firm's strategy must be consistent with the environment in which the firm operates. Therefore, the firm needs to change its organizational structure to reflect changes in the setting in which they are operating and the strategy they are pursuing.
Once a firm decides to enter a foreign market, it must decide on a mode of entry. There are six different modes to enter a foreign market, and each mode has pros and cons that are associated with it. The firm must decide which mode is most appropriately aligned with the company's goals and objectives. The six different modes of entry are exporting,  turnkey projects , licensing , franchising , establishing joint ventures with a host-country firm, or setting up a new wholly owned subsidiary in the host country.
The first entry mode is exporting. Exporting is the sale of a product in a different national market than a centralized hub of manufacturing. In this way, a firm may realize a substantial scale of economies from its global sales revenue. As an example, many Japanese automakers made inroads into the U. There are two primary advantages to exporting: avoiding high costs of establishing manufacturing in a host country when these are higher and gaining an experience curve.
Some possible disadvantages to exporting are high transport costs and high tariff barriers. The second entry mode is a turnkey project. In a turnkey project, an independent contractor is hired by the company to oversee all of the preparation for entering a foreign market. Once the preparation is complete and the end of the contract is reached, the plant is turned over to the company fully ready for operation. Licensing and franchising are two additional entry modes that are similar in operation.
Licensing allows a licensor to grant the rights to an intangible property to the licensee for a specified period of time for a royalty fee. Franchising, on the other hand, is a specialized form of licensing in which the "franchisor" sells the intangible property to the franchisee, and also requires the franchisee operate as dictated by the franchisor. Lastly, a joint venture and wholly owned subsidiary are two more entry modes in international business.
A joint venture is when a firm created is jointly owned by two or more companies Most joint venture are partnerships. This is in contrast with a wholly owned subsidiary, when a firm owns percent of the stock of a company in a foreign country because it has either set up a new operation or acquires an established firm in that country. Exports and import. Strategic variables affect the choice of entry mode for multinational corporation expansion beyond their domestic markets.
These variables are global concentration, global synergies, and global strategic motivations of MNC. To achieve success in penetrating a foreign market and remaining profitable, efforts must be directed towards the planning and execution of Phase I.
The use of conventional SWOT analysis , market research , and cultural research, will give a firm appropriate tools to reduce risk of failure abroad. Risks that arise from poor planning include: large expenses in marketing, administration and product development with no sales ; disadvantages derived from local or federal laws of a foreign country, lack of popularity because of a saturated market , vandalism of physical property due to instability of country; etc. There are also cultural risks when entering a foreign market.
Lack of research and understanding of local customs can lead to alienation of locals and brand dissociation. As such, they are key matters for the board and impinge on the whole business, rather than just an isolated unit. A company has to be conscious about the production costs to not waste time and money.
If the expenditures and costs are controlled, it will create an efficient production and help the internationalization. How a government governs a country governance can affect the operations of a firm. The government might be corrupt , hostile, or totalitarian ; and may have a negative image around the globe. A firm's reputation can change if it operates in a country controlled by that type of government. Elections or any unexpected political event can change a country's situation and put a firm in an awkward position.
Political risk tends to be greater in countries experiencing social unrest. When political risk is high, there is a high probability that a change will occur in the country's political environment that will endanger foreign firms there. Corrupt foreign governments may also take over the company without warning , as seen in Venezuela. Technological improvements bring many benefits, but some disadvantages as well. Some of these risks include "lack of security in electronic transactions , the cost of developing new technology Companies that establish a subsidiary or factory abroad need to be conscious about the externalizations they will produce, as some may have negative effects such as noise or pollution.
This may cause aggravation to the people living there, which in turn can lead to a conflict. People want to live in a clean and quiet environment, without pollution or unnecessary noise. If a conflict arises, this may lead to a negative change in customer's perception of the company. Actual or potential threat of adverse effects on living organisms and environment by effluents, emissions, wastes, resource depletion , etc. As new business leaders come to fruition in their careers, it will be increasingly important to curb business activities and externalizations that may hurt the environment.
These are the economic risks explained by Professor Okolo: "This comes from the inability of a country to meet its financial obligations. The effect of exchange-rate and interest rate make it difficult to conduct international business.
In practice, the biggest problem arising from economic mismanagement has been inflation. Historically many governments have expanded their domestic money supplying misguided attempts to stimulate economic activity.
According to Professor Okolo: "This area is affected by the currency exchange rate, government flexibility in allowing the firms to repatriate profits or funds outside the country. The devaluation and inflation will also affect the firm's ability to operate at an efficient capacity and still be stable.
It might be higher or lower in the host countries. Then "the risk that a government will indiscriminately change the laws, regulations, or contracts governing an investment—or will fail to enforce them—in a way that reduces an investor's financial returns is what we call 'policy risk. Terrorism is a voluntary act of violence towards a group s of people. In most cases, acts of terrorism is derived from hatred of religious, political and cultural beliefs.
Terrorism not only affects civilians, but it also damages corporations and other businesses. These effects may include: physical vandalism or destruction of property , sales declining due to frightened consumers and governments issuing public safety restrictions. Firms engaging in international business will find it difficult to operate in a country that has an uncertain assurance of safety from these attacks. Bribery is the act of receiving or soliciting of any items or services of value to influence the actions of a party with public or legal obligations.
This is considered to an unethical form of practicing business and can have legal repercussions.
It involves cross-border transactions of goods and services between two or more countries. Transactions of economic resources include capital, skills, and people for the purpose of the international production of physical goods and services such as finance, banking, insurance, and construction. International business is also known as globalization. To conduct business overseas, multinational companies need to bridge separate national markets into one global marketplace. There are two macro-scale factors that underline the trend of greater globalization.
Why should businesses care about the different political and legal systems around the world? To begin with, despite the globalization of business, firms must abide by the local rules and regulations of the countries in which they operate. Until recently, governments were able to directly enforce the rules and regulations based on their political and legal philosophies. The Internet has started to change this, as sellers and buyers have easier access to each other. Nevertheless, countries still have the ability to regulate or strong-arm companies into abiding by their rules and regulations.
Subscription price CiteScore 1. An organisation's ability to adapt to changing environmental circumstances is key to survival. IJBE examines how firms behave under different types of environment and the external influences on businesses. IJBE addresses managerial issues in the social, political, economic, competitive, and technological environments of business. The objectives of research are:.
International Business (MOD). Chapter 4: The political, legal, economic and technological environment. Zubair Hassan (): Political, legal econopmic.
Legal Environment of Business.
Когда интервьюер спросил у Сьюзан, не занималась ли она сексом с животными, она с трудом удержалась, чтобы не выбежать из кабинета, но, так или иначе, верх взяли любопытство, перспектива работы на самом острие теории кодирования, возможность попасть во Дворец головоломок и стать членом наиболее секретного клуба в мире - Агентства национальной безопасности. Беккер внимательно слушал ее рассказ. - В самом деле спросили про секс с животными. Сьюзан пожала плечами.
В АНБ он получил кличку Джабба и приобрел репутацию полубога. Он бродил по коридорам шифровалки, тушил бесконечные виртуальные пожары и проклинал слабоумие нерадивых невежд. Чатрукьян знал: как только Джабба узнает, что Стратмор обошел фильтры, разразится скандал. Какая разница? - подумал .
Девушка вытащила из кармана какой-то маленький предмет и протянула его Беккеру.
Вот что нам надо сделать. - Стратмор начал спокойно излагать свой план. - Мы сотрем всю переписку Хейла с Танкадо, уничтожим записи о том, что я обошел систему фильтров, все диагнозы Чатрукьяна относительно ТРАНСТЕКСТА, все данные о работе компьютера над Цифровой крепостью, одним словом -. Цифровая крепость исчезнет бесследно. Словно ее никогда не .
Повисла пауза. Стратмор поднял глаза вверх, собираясь с мыслями. - Сьюзан, - наконец произнес он еле слышно.
PFEE SESN RETM - Альфа-группы из четырех знаков, - задумчиво проговорила Сьюзан. - И частью программы они явно не являются.
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