Chapter 3 - Legal, Technological and Political environments
The Legal Environment
Different laws in different countries
Common law
Found in countries like the UK, Australia, India etc
Based on the cumulative wisdom of judges' decisions on individual cases through theory
Civil law
Based on a codification, detailed listing, of what is and what is not permissible
Oiriginted from biblical times with the Romans
The judge takes the tasks of a lawyer and determining the scope of the evidence to be collected and presented in court
The judge plays a neutral role
Religious law
Based on the governing faith and practice of a particular religion
A country that applies religious law to civil law and criminal conduct is called theocracy
Iran is an example country
Bureaucratic law
Legal system in communist countries and dictatorship
The country's law is what the Bureaucrats say it is.
Domestically orientated laws
LAws of countries in which an international business operates in play a major role in shaping the opportunities available to that firm
These laws affect many facets of the firms operations
Hygene
Prices
Input costs
Wages
Employee's
Employment
Some countries employment law favours the employee more than the employer and visa versa.
This may indirectly affect domestic firms in international markets by increasing their costs
International firms may have to alter their production techniques in order to follow the law's on the international market they are exporting to that country
Changes the competitiveness of a business in that market
Laws directly affecting international business transactions
Others laws are designed to regulate international business activities
Promote country's foreign policy or military objectives
Sanctions
restraints against commerce against that country
Countries may decide to restrict the level of technology being imported through sanctions
Embargo
a comprehensive sanction against ALL commerce with a given country
These can occur through wars
Iraq and had an embargo from the United Nations after Iraq's invasion of Kuwait in 1990
Dual-use technology products
Things used for both civil and military purposes
Aero-technology was sold to China for the purpose of creating civil aircrafts, but instead China used them to create ballistic missiles
Extraterritoriality
Countries attempt to regulate business activities that are conducted outside their borders
For example, firms are vulnerable to U.S antitrust lawsuits if they engage in activities outside the United States that diminish competition in the U.S market
Pilkinton PLC, a uk firm who owns patents for producing flat glass, was sued for limiting the ability of U.S licensees to use the technology in international markets
Laws against foreign firms
Protectionism
High tariffs on imports
non-tariff barriers
Non-tariff barriers to trade are trade barriers that restrict imports or exports of goods or services through mechanisms other than the simple imposition of tariffs.
Nationalisation
Government take back control of businesses
Privatisation
Government sells assets - Thatcher period of selling British Railway, BT etc.
Limitations of foreign ownership on businesses in sectors
Expropriation
Host Government compensates the private owners for their losses
Such as property
The impact of MNC's on Host countries
Economic and political impacts
Positives
Improve consumers living standards
Greater selection on products
Local job ceation
Extra income for government through taxes paid by MNC
Shared technology
Negatives
Increased compatition
The more dependant on the MNC the local economy is, the more disastrous the implications will be when they leave that market
MNC's may have tremendous power (politically) in which they operate
Cultural impacts
increased standards of living + new lines of products = new norms, standards, and behaviours
Safer equipment and machinery
The Technological environment
A MNC must seek out local council in order to operate properly in that country with minimal 'snags'
Resource base
The foundation of a country's technological environment
Refers to a country's labour force
Are they rich in labour intensive labour force?
Also refers to materials available within that country
Are they rich in agricultural land?
Oil supplies?
Gold?
This has direct implications on what the country exports the most
Russia is high in oil reserves so they manufacture and export oil the most
What is the cost of the labour force?
Investments
Countries can change their technological environment through investments
Improvements of rail roads
The improvement of infrastructure
Communication systems
Roads
Makes exporting much easier within the country
Improves countries competitiveness and attractiveness for MNE's
Tech transfer
Improvement of human capital
Some countries promote this through encouraging FDI
Improves productivity and efficiency
Such as tax reductions
Some countries require firms to transfer their tech if they want to access the countries resources or consumers
Strong copyright/intellectual property right laws/protection are attractive for MNC's
MNE's that bring technology with them allow the host country to learn and evolve with it
Weak intellectual property rights are less attractive and discourages FDI
Causes high level of piracy costing local and international businesses
Copying of brand name/product is very bad for any company
Protects against piracy
Patent law varies between countries and can cause issues
Trademark laws also vary and can also cause issues
Causes issues like a firm's ability to operate under that name in a country