#5978 - International Management The Political Legal And Technological Environment - International Management

The Political, Legal and Technological Environment

TERMS

• Individualism – The political philosophy that people should be free to pursue economic and political endeavours without constraint

• Collectivism – The political philosophy that views the needs or goals of society as a whole as more important than individual desires

• Socialism – A moderate form of collectivism in which there is government ownership of institutions and profit is not the ultimate goal.

• Democracy – A political system in which the government is controlled by the citizens either directly or through elections.

• Totalitarianism – A political system in which there is only one representative party which exhibits control over every facet of political and human life.

• Principle of Sovereignty – An international principle of law which holds that governments have the right to rule themselves as they see fit.

• Biotechnology – The integration of science and technology to create agricultural or medical products through industrial use and manipulation of living organisms.

POLITICAL ENVIRONMENT

• Domestic and international political environments have a major impact on MNC’s. As government policies change MNC’s must adjust their strategies and practices.

• Underlying the actions of a government is the ideology informing the beliefs, values, behaviour and culture of the nation and its political system.

• Effective management occurs when different ideologies and philosophies are recognised and understood.

• A political system can be evaluated along two dimensions

  • Focuses on the rights of citizens under governments (ideology of the system)

  • Measures whether the focus is on the individuals or broader collective (Degree of individualism/collectivism)

• Democratic = individualism

• Totalitarian = collectivism

Ideologies

• Idea is that working in in a group requires less energy per person to achieve the same goal, but an individual will work as hard as he or she has to in order to survive in a competitive environment.

• Team performance is negatively influenced by those who consider themselves individualistic; however, competition stimulates motivation and encourages increased efforts to achieve goals.

Collectivism

• No rigid form of collectivism as societal goals and the decision of how to keep people focused on them differ greatly among national cultures.

Socialism

• A broad political movement and forms of it are unstable. In modern times it has branched into two extremes:

  • Communism – extreme form of socialism which was realised through violent revolution and was committed to the idea of a worldwide communist state.

  • Social democracy – refers to a socialist movement that achieved its goals through nonviolent revolution.

• Nationalisation of a business – transference of ownership of a business to the government. This may be done due to:

  • Ideologies of country encourage the government to extract more money from the firm

  • Government believe the firm is hiding money

  • Government has large investment in the company

  • Government wants to secure wages and employment stages so jobs are not lost

• Nationalism – an ideal whereby an individual is loyal to their nation.

Democracy

• A democratic society cannot exist without at least a two party system.

• Individual freedoms, such as freedom of expression, are secured.

• Protections of citizens include impartial public services such as the police force. They are not directly affiliated with any political party.

Totalitarianism

• Media censorship, political repression and denial of rights and civil liberties.

• If there is opposition to the government the response maybe imprisonment.

• Torture sometimes used as a form of rehabilitation or a warning to others.

LEGAL AND REGULATORY ENVIRONMENT

• MNC’s face many different laws and regulations in their global business activities.

• Adhering to disparate legal frameworks sometimes prevents large MNC’s from capitalising on manufacturing economies of scale and scope within regions.

• Slower time to market and greater costs due to complexity and magnitude of bureaucracies.

• MNC’s must take time to carefully evaluate the legal framework in each market in which they do business before launching products or services in those markets.

• Four foundations on which laws are based around the world (Islamic, Socialist, Common and Civil/Code Law)

Regulation of Trade and Investment

• Rapid increase in trade and investment has raised concerns among countries that others are not engaging in fair trade.

TECHNOLOGICAL ENVIRONMENT AND GLOBAL SHIFTS IN PRODUCTION

• Technological advancements connect the world at incredible speed ad aid in the increased quality of products, information gathering and R&D.

• The need for instant communication increases exponentially as global markets expand.

• Technology contributes to flattening the world into a more level playing field. (Thomas Friedman, The World is Flat)

Biotechnology

• Digital age has given rise to innovations...