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Mgt 485 CHAPTER 2

Mgt 485 CHAPTER 2. THE NON ECONOMIC ENVIRONMENT FOR INTERNATIONAL MANAGEMENT. Political Environment. Components include: Government policies that affect MNCs Stability of the government of the host country China Has a complex political environment in which the government is:

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Mgt 485 CHAPTER 2

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  1. Mgt 485CHAPTER 2 THE NON ECONOMIC ENVIRONMENT FOR INTERNATIONAL MANAGEMENT

  2. Political Environment • Components include: • Government policies that affect MNCs • Stability of the government of the host country • China • Has a complex political environment in which the government is: • Speeding up program to convert state enterprises into shareholder-owned corporations • Expanding capital markets by authorizing new stock listings • Allowing government bodies to sell of state enterprises • Accelerating worker retraining, building low-cost housing, and providing other social services • reducing tariffs

  3. Political Environment (cont.) • China (cont.) • MNCs face major obstacles when doing business with and in China • Government regulations • Lack of qualified employees • Active involvement of government institutions in business affairs • Europe • Changing political situation • MNCs doing business with individual countries risk action by the EU itself • Businesses must be aware of political happenings in the immediate area as well as throughout the continent

  4. Political Environment (cont) • Russia • Bleak economic outlook • Neglect, corruption, and confusing economic policy • Decaying infrastructure • Reform stalled by a political quagmire • Government must keep the economy on an even keel while attracting more foreign investment • Central and Eastern Europe • Political situation is in a state of flux (R-L-R) • Poland • Government plan to streamline the economy and get the country moving has been fraught with problems • Economy has proven resilient

  5. Political Environment (cont.) • Central and Eastern Europe (cont.) • Hungary • One of strongest economies in Central Europe • More foreign investment in Hungary than any other post-communist European country • Czech Republic • Quick transition to privatization • Economy suffered initially but appears to be on the rebound • Balkan countries and former republics of the Soviet Union • Still face severe economic problems • Reform proceeded more slowly than other countries in the area

  6. 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 non-socialist countries

  7. Legal and Regulatory Environment Basic Principles of International Law • Sovereignty and Sovereign Immunity • Sovereignty principle holds that governments have the right to rule themselves as they see fit • International Jurisdiction • Nationality principle holds that every country has jurisdiction over its citizens no matter where they are located • Territoriality principle holds that every nation has the right of jurisdiction within its legal territory • Protective principle holds that every country has jurisdiction over behavior that adversely affects its national security, even if the conduct occurred outside that country

  8. Legal and Regulatory Environment • Basic Principles of International Law (cont.) • Doctrine of Comity • There must be mutual respect for the laws, institutions, and government of other countries in the matter of jurisdiction over their own citizens • Act of State Doctrine • All acts of other governments are considered to be valid by U.S. courts, even if such acts are inappropriate in the U.S. • Treatment and Rights of Aliens • Countries have the legal right to refuse admission of foreign citizens and to impose special restrictions on their conduct • Forum for Hearing and Settling Disputes • U.S. courts can dismiss cases brought before them by aliens

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

  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. Technological Environment • Technology is changing at lightening speed • E-Business • Terminology • E-tailers - electronic retailers • B2C - electronic business to consumer • B2B - electronic business to business • E-cash - electronic cash • E-tailing and financial services will most affect global customers • Prepaid smart cards will give way to global digital cash • Need a system to resolve conversions of different national currencies

  12. 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 • converting payment into U.S. dollars

  13. Technological Environment (cont.) • Telecommunications • Most obvious dimension of the technological environment facing international management • Economic growth perceived to hinge on efficient communications • Technologic leapfrogging • Moving from the absence of telephones to the availability of wireless communications • Privatization of telecommunications occurring in some countries to acquire capital and technical know-how • MNCs unwilling to invest in telecommunications without the prospect of good financial return • Case of China

  14. The Employment Fallout from Technology • Technology will 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 • Changing economic dynamics • Increasing productivity / decreasing costs • Lost jobs, lowering wages

  15. Technologies That Will Influence International Business Internet Biotechnology Artificial Intelligence International Business Silicon Chips Automatic Translation Telephones Supercomputers Satellites Nanotechnology

  16. Home-health workers Computer systems analysts, programmers Travel agents Childcare workers Guards Restaurant cooks Nurses Gardeners/ groundskeepers Lawyers Teachers Janitors and cleaners Winners in Selected Occupations 0 20 40 60 80 100 120 140 160 Percentage Change for 1992-2005

  17. Bank tellers Electrical/electronic assemblers Typists/word processors Machine-tool operators Textile workers Switchboard operators Packaging/filling machine operators Phone/cable TV installers and repairers Directory-assistance operators Losers in Selected Occupations -50 -40 -30 -20 -10 0 Percentage Change for 1992-2005

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