2. INTRODUCTION
Multinational Enterprises operate in different countries
with different political and legal conditions.
• Analyze if the corporate policies will fit a desirable
political and legal environment.
• Colombia – Venezuela
• Germany – Greece
• China – Hong Kong
• North Korea – South Korea
3. POLITICAL ENVIRONMENT
It refers to:
Public Institutions:
Government.
Government Agencies.
Government owned Business.
Non public Institutions:
Interest Groups.
4. POLITICAL SYSTEM
• Challenge integration of people of different ethnic or
cultural backgrounds.
• It is influenced by forces within & outside the
country
– Internal Forces: Nature of population, size & influence of
corporations & governmental bureaucracies, & the strength
of the politicians.
– External Forces: International agreements, NGO’s,
Governmental organizations, etc.
5. POLITICAL SYSTEM
Political process functions:
– Interest articulation.
– Interest aggregation (bringing together different points
of view)
– Policy making.
– Policy implementation and adjudication.
6. BASIC POLITICAL
IDEOLOGIES
• Political Ideology:
– A body composed by complex ideas, theories and aims.
• Liberalism
• Conservatism
• Pluralism
– Language
– Ethnic Background
– Tribal Groups
– Religion
• Political Instability investors away.
7. BASIC POLITICAL
IDEOLOGIES
Principle of Identity
Obama Liberal democracy.
China Totalitarian Chinese Government.
Myanmar Fascist totalitarian government.
8. DEMOCRACY VS.
TOTALITARISM
Democracy
• Democracy is a device that ensures we shall be
governed no better than we deserve. George Bernard
Shaw
• Greeks all citizens should be equal politically and
legally, enjoy widespread freedoms, participate in the
political process.
10. CHARACTERISTICS OF A
DEMOCRATIC GOVERNMENT
1. Freedom of opinion, expression, press and freedom to organize.
2. Elections in which voters decide who is to represent them.
3. Limited terms for elected officials.
4. An independent and fair court system, with high regard for
individual rights and property.
5. A nonpolitical bureaucracy and defense infrastructure.
6. An accessibility to the decision-making process.
11. POLITICAL RIGHTS AND CIVIL
LIBERTIES
Political rights
Degree of fair and competitive elections.
Endowment of the elected representatives with
real power.
Political parties or groups.
Safeguards on the rights of minorities.
12. POLITICAL RIGHTS AND CIVIL
LIBERTIES
Civil liberties
Freedom of the press.
Equality under the law for all individuals.
The extent of personal social freedoms.
Freedom from extreme governmental
indifference and corruption.
13. RELIABILITY OF DEMOCRACY
Democracies from the 70’s are unstable. Indonesia.
CIS.
Corruption, internal division, oligarchies, military
movements, destabilization from abroad.
Two countries with a McDonalds have never fought each
other…
14. DEMOCRACY
• Election Systems
– USA Direct elections.
– UK Parliament.
– Israel Both
• Degree of centralized control
– Power to provinces
– States
– Regions
– Departments
• This leads to variations within a country challenge for
managers to locate a business.
15. DEMOCRACY
Democracies are not perfect, but
people believe that it is the best form
of government.
We need to:
• Trust - Politicians and Corruption.
• Confidence on the government.
• % of population voting.
16. TOTALITARIANISM
Decision making is restricted to a few individuals.
Theocratic Totalitarianism
Religious leaders are the political leaders.
Iran, Afghanistan
Secular Totalitarianism
Control is enforced through military power.
Cambodia, Iraq, North Korea
17. SOME FORMS OF
TOTALITARIANISM
• Fascism: Hitler, Mussolini, Franco
– Control people (brainwash)
• Authoritarianism: Pinochet, Apartheid in South Africa
– to rule people.
• Communism: Russia and China.
– Equal distribution of wealth.
18. Not free countries share one or
more of the following
characteristics:
1. Muslim majority – fundamentalist Islam.
2. Multiethnic societies.
3. Neocommunist or post communist society.
• Transition to democracy instability.
• Totalitarianism as an element of cohesion amidst the
differences.
19. THE IMPACT OF THE POLITICAL
SYSTEM ON MANAGEMENT
DECISIONS.
• Evaluation of political risk
• Political risk the probability that political conditions
could change in the future and its operations could
deteriorate in a foreign country.
• Boycotts and interest groups.
– FTA Colombia and US
• England, France – Foie Gras
20. INGREDIENTS FOR
POLITICAL RISK:
• Types and causes of political risk.
• Opinions of political leadership.
– Moody leaders Hugo Chavez – Evo Morales.
• Civil disorder.
– Crise économique France 2008 – 2009 kidnapping of
personnel.
• External relations
– Animosities Colombia – Equator
21. POLITICAL RISK REDUCTION
STRATEGIES
Local partners
Minimizing assets at risk
Political risk insurance
23. HOST GOVERNMENT ACTIONS
* OWNERSHIP RESTRICTIONS
* BOYCOTTS OF FIRMS
* TAKEOVERS
EXPROPRIATION: legal or formal seizure. With or without
compensation.
CONFISCATION: expropriation without any compensation.
DOMESTICATION: it could be represented in forced sales.
24. ESTABLISHING A POLITICAL
STRATEGY
1. Identify the issue. (e.g. environmental standards)
2. Define the political aspect of the issue. (is it within the
political domain?)
3. Assess the potential political action of other companies
and special-interest groups. (Greenpeace)
4. Identify important institutions and key individuals. (lobby
/ bribery)
5. Formulate strategies. (key objectives, the major alternatives)
6. Determine the impact of implementation. (fallout at home
and at the host country)
7. Select the most appropriate strategy and implement it.
25. THE LEGAL ENVIRONMENT
• Kinds of legal systems:
• Common Law: Based on tradition, precedent, custom &
usage.
• Civil Law: Based on a very detailed set of laws
organized into a code. Also called Codified Legal System.
• Theocratic Law: Based on religious precepts.
26. REGULATORY CHANGE
ALTER: The company can bargain to get the government
to alter its policy or actions
AVOID: The company can make strategic moves that
bypas the impact of a government’s action
ACCEDE: The company can adjust its operations to
comply with a government requirement.
ALLY: The company can attempt to avoid some risks of
government actions by seeking strategic alliances
27. LOBBYING
Lobbying is the practice and profession of influencing
governmental decisions, carried out by agents who
present the concerns of special interests to legislators
and administrators.
1830
Regulation of Lobbying Act of 1946
28. LOBBYIST
Activist usually paid by an interest group to promote
their positions to legislatures.
A lobbyist can also work to change public opinion
through advertising campaigns or by influencing 'opinion
leaders' or pundits, thereby creating a climate for the
change his or her employer desires.
29. ORGANIZATIONS THAT USE
LOBBYING
• Corporations
• Financial institutions
• Labor unions
• Professional associations
• Educational groups
• Medical interests
• Farm alliances
• public interest and social issue groups
– Common Cause
– Mothers Against Drunk Driving
– the National Abortion and Reproductive Rights Action
League
– the National Rifle Association
– the National Coalition for the Homeless