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Chapter 2 THE NON ECONOMIC ENVIRONMENT FOR INTERNATIONAL MANAGEMENT

Chapter 2 THE NON ECONOMIC ENVIRONMENT FOR INTERNATIONAL MANAGEMENT. Political Environment. CHINA: Complex and risky Many of “Class of ’77” graduates are coming into influential positions. steps to open up the economy: privatizing state enterprises

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Chapter 2 THE NON ECONOMIC ENVIRONMENT FOR INTERNATIONAL MANAGEMENT

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  1. Chapter 2 THE NON ECONOMIC ENVIRONMENT FOR INTERNATIONAL MANAGEMENT

  2. Political Environment CHINA: • Complex and risky • Many of “Class of ’77” graduates are coming into influential positions. • steps to open up the economy: • privatizing state enterprises • expanding the size of capital markets • Accelerating worker retraining • creating new social services • Reducing tariffs

  3. Political Environment EUROPE: • Political situation continues to change making it difficult to firmly establish a foothold of power • No longer a series of fragmented countries, but a giant, interwoven region • International management must be aware of political happenings throughout the entire continent

  4. Political Environment Russia: • many MNCs are reluctant to do business there • Companies refuse to pay taxes • Price of oil has declined sharply • barter has become a way of life • High unemployment

  5. Political Environment Central and Eastern Europe: • These nations are making the transition to a market economy • Since the days of communism, most moved first to the political right, then the left, and now back to the right

  6. Legal and Regulatory Environment • Islamic Law • Derived from interpretation of the Qur’an and the teachings of the Prophet Mohammed • SocialistLaw • Marxist socialist system - continues to influence regulations in former communist countries • Common Law • English law - the foundation of legislation in the United States, Canada, England, Australia, New Zealand, and others • CivilorCodeLaw • Derived from Roman law and is found in the non-Islamic and non-socialist countries

  7. Basic Principles of International Law • Principle of sovereignty • International jurisdiction • Nationality principle • Territoriality principle • Protective principle • Doctrine of comity • Act of State doctrine • All acts of other governments are considered to be valid by local courts • Treatment and rights of Aliens

  8. Examples of Legal and Regulatory Issues • Foreign Corrupt Practices Act - made it Illegal to influence foreign officials through personal payment or political contributions • Bureaucratization- Regulations to reduce the ability of foreigners to do business locally • Privatization- Government deregulation and “free market”

  9. 2000 Corruption Perception Index (AWSJ Mar. 12, 2001) Rank Country CPI Score 1 Finland 10.0 2 Denmark 9.8 3 New Zealand, Sweden 9.4 5 Canada 9.2 6 Iceland, Norway, Singapore 9.1 9 Netherlands 8.9 15 Hong Kong 7.7 23 Japan 6.4 28 Taiwan 5.5 63 China 3.1 69 India, Philippines 2.8 76 Vietnam 2.5 85 Indonesia 1.7

  10. 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

  11. E-Commerce • ADVANTAGES: • Tap into funds from Internet -- no need for ATM Machines • Companies receive immediate payment, reducing bad debts while increasing working capital • DISADVANTAGES: • Some system must be in place for • Payment conversion

  12. Telecommunications • As a result of the wireless telephone service, growth in this technology has been rapid • future growth: • Many countries believe that without an efficient telephone system, their economic growth will stagnate • Governments are accepting the fact that attracting foreign investment and know-how in telecommunications means giving up control to private industry

  13. The Employment Fallout from Technology • how will technology 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

  14. Favorite Places Identified by Japanese Companies 1. China 2. United States 3. Thailand 4. Indonesia 5. Malaysia 6. Taiwan 7. India 8. Vietnam 9. South Korea 10. The Philippines (AWSJ Mar. 12, 2001)

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