Chapter 2
THE NON ECONOMIC
ENVIRONMENT FOR
INTERNATIONAL MANAGEMENT
2-1
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
2-2
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
2-3
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
2-4
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
2-5
Legal and Regulatory Environment
 Islamic
Law
 Derived from interpretation of the Qur’an and the teachings of the
Prophet Mohammed
 Socialist
Law
 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
 Civil
or Code Law
 Derived from Roman law and is found in the non-Islamic and nonsocialist countries
2-6
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
2-7
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”
2-8
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
2-9
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 handheld telephones

Automatic translation telephones will allow people to
communicate in their own language to anyone in the
world who has access to a telephone
2-10
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
2-11
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
2-12
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
2-13
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)
2-14