>The political environment of the company includes
national and international political factors which
can affect its operations.
>This category also includes
the methods of thinking, and
beliefs of all natures which can influence the
behavior of governments and citizens opposing the
company without them emanating directly from a
government
example: nationalism).
SYSTEM
STABILITY
Legal and Political
Environment
POLICIES
Includes the structures, processes, and activities by which a
nation governs itself.
Political
System
 Totalitarian state
 Democratic state
Totalitarian state
Imposed authority
Lack of constitutional guarantees
Restricted participation
 Companies might need to pay
bribes to government
The business law is vague
(Vogue = Uncertain )
Doing business seems
to be a risky proposition
Democratic state
Freedom
Rights
 Stable business environment
thanks to laws
 Freedom and no censorship
Doing business in a democratic
state seems to be safer
than in a totalitarian state
Political
Ideology
Capitalist System
- Private ownership of business
is encouraged
 Capitalist system
 Socialist system
Socialist System
- Public ownership of business
is the norm
The political ideology affects
- foreign government attitude towards profit repatriation(Return).
- foreign government attitude towards foreign direct investment
Political relationships
Favourable political relationships
 foster(promote) 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.
Political Stability : « A subjective governance indicator aggregated from a
variety of sources and measuring perceptions of the likelihood of
destabilization. »
Political Risk
« The risk that political decisions or events in a country
negatively affect the profitability or sustainability of an
investment. »
4 types of political risk
Distributive Political Risks
« When countries revise their distribution policies to capture
greater benefits from foreign companies. »
Catastrophique(horrible) Political Risks
« This is the Political developments that adversely affect
the operations of all companies in a country. »
TAXATION
Governments use income and sales taxes which can
vary from country to country.
PROPERTY
• Intellectual Property
« Property that results from people’s intellectual talent and
abilitie. »
• Industrial Property
« Industrial property includes patents and trademarks. »
• Copyrights
« Copyrights give creators of original works the freedom to
publish or dispose of them as they choose. »
The problem is that laws in some countries are softer than in
others

PRODUCT SAFETY AND LIABILITY
« Product liability holds manufacturers, sellers, and others,
including individual company officers, responsible for damage,
injury, or death caused by defective products.
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.
The political system under democratic dispensation, like ours,
comprises three vital institutins.
1. Legislature
2. Government
3. Judiciary
1.
2.
3.
4.
5.
6.
Taxes
Voluntary programmes
Providing Information
Government contracts
Government service
Political activity
1.
2.
3.
4.
5.
6.
7.
8.
Establishment and Enforcement of Laws
Maintenance of Order
Money and credit
Orderly Growth
Infrastructure
Information
Small industries
Technology
Example


British crown colony became Chinese territory in
1997
China is a Communist nation that values stability
over individual freedoms

Hong Kong is a Special Administrative Region

Population: 6,980,412 (July 2007 est.)
 Capitalist
System
System or Socialist
 China has signed the "one country, two systems"
formula
 50 years contract until 2047
 Relatively high political stability
 Totalitarian
state
state or Democratic
 Limited democracy
 The legal system based on the English common law
 Basic Law which approved in 1990
 “Mini-Constitution"




The political environment has an important
impact on the business
There is a large field with many factors
which the companies have to consider if
they want to expand overseas
Political environment is not stable and can
change quickly
The
political
environment
creates
advantages and disadvantages