بسم الله الرحمن الرحيم

Political Environment

n      Change in government policies

n      MNCs must adjust their strategies and practices to accommodate the new perspectives and actual requirements

n      Less stable governments

n      Greater risk

n      Significant differences among political systems across countries and regions

China

n      Emerging economic power

n      Government’s desire to balance

n      National, immediate needs

n      Challenge of a free market economy and globalization

n      Government attempting to open up the economy

n      Speed up conversion of state enterprises into corporations

n      Expand capital markets by authorizing new stock listings

n      Sell off most of the 305,000 state enterprises (or let go bankrupt)

n      Worker retraining, low-cost housing and other programs

n      Reduce tariffs to 10 percent

Europe

n      Privatization and economic liberalization reinforce EU-wide political and economic integration

n      Political power is variable and complex

n      Strong opposition to U.S.-led intervention in Iraq sometimes spill over into business relationships and dealings

n      Europe is a large interwoven region economically, but contains vast cultural differences

Russia

n      Neglect, corruption, and confusing changes in economic policy

n      Infrastructure is weak and a political quagmire

n      Legal

n      Financial

n      Trade sectors

n      Corruption interferes with attraction of more foreign investment

Key Elements of Russia’s WTO Accession Deal with the EU

Tariffs

• Russia will not exceed an average’ tariff level of 7.6% for industrial goods, 11% for fishery products, and 13 % for agricultural goods.
• Tariff rate quotas for fresh and frozen meat and poultry will be around 600 million ($720 million) per year.

Energy

• Russian gas prices to domestic industrial users will gradually be increased.
• Russia’s state gas corporation, Gazprom, will retain its export monopoly. Export duties on gas will be capped at 30%.

Airlines

• Russia will revamp the charges currently applied to EU airlines flying over Siberia to make them cost-based and nondiscriminatory.

Banking

• Russia will maintain a ban on foreign banks opening branches.
• Under existing rules, foreign banks are allowed to open only wholly or partly owned  subsidiaries.

Services

• Russia has committed to cross-border provision and commercial establishment of certain services.
• Sectors include telecoms, transport, financial services, postal, construction, distribution, environmental, news agency, and tourism.

Central and Eastern Europe

n      Many of these countries have joined the EU

n      Movement from centrally planned to market economy plagued with problems in many countries

n      High unemployment

n      Economic slowdown

n      Large trade deficits

n      Some countries more successful in economic reforms

n      Estonia

n      Latvia

n      Lithuania

The Middle East

n      Doing business requires knowledge of :

n      Regulations

n      Legal environment

n      Tax regimes

n      Accounting methods

n      Business structures

n      Import/export regulations

n      Manpower and labor regulations

n      Restrictions on foreign capital investment

n      Doing business in Middle Eastern countries is risky and potentially dangerous :

n      War on terrorism

n      Afghanistan and Iraq wars

n      Israel—Arab conflicts

n      Rising tensions

n      Business requires knowledge of Islam :

n      Religion and way of life

n      Framework of life and society

n      Islamic fundamentalists have become aggressive toward U.S. and its allies.

Legal and Regulatory Environment

n      Confusion and challenge of international business environment is heightened by :

n      Differing laws and regulations in MNCs’ global business operations

n      Impact of these laws and regulations on ability to capitalize on economies of scale and scope

n      MNCs must carefully evaluate legal framework in each market in which they want to do business, before doing so

Four Global Foundations of Law

1. Islamic Law 

n      Derived from interpretation of the Qur’an and teachings of Prophet Muhammad

n      Found in  Islamic countries - Middle East , Central Asia

2. Socialist Law

n      Comes from Marxist socialist system

n      Continues to influence regulations in former communist countries

n      Members of former Soviet Union

n      Peoples’ Republic of China

n      Vietnam

n      North Korea

n      Cuba

n      Requires most property to be owned by the state or state enterprises

3. Common Law

n      Comes from English law

n      Foundation of legal system

n      United States

n      Canada

n      England

n      Australia

n      New Zealand

4. Civil or Code Law

n      Derived from Roman law

n      Found in non-Islamic and nonsocialist countries

n      France

n      Some Latin American countries

n      Louisiana in the U.S.

Basic Principles of International Law

International Jurisdiction :

A jurisdictional principle of international law which holds that every country has jurisdiction over its citizens no matter where they are located

n      Nationality principle

n      Territoriality principle

n      Protective principle

Sovereignty and Sovereign Immunity :

An international principle of law which holds that governments have the right to rule themselves as they see fit

Doctrine of Comity :

A jurisdictional principle of international law which holds that 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 :

A jurisdictional principle of international law which holds that all acts of other governments are considered to be valid by U.S. courts, even if such acts are illegal or inappropriate under U.S. law

Treatment and Rights of Aliens :

Countries have the legal right to refuse admission of foreign citizens and to impose special restrictions on their conduct, right of travel, where they can stay, and what business they may conduct

Nations also can deport aliens

Forum for Hearing and Settling Disputes :

U.S. courts can dismiss cases brought before them by foreigners; however they are bound to examine issues such as

n      where the plaintiffs are located,

n      where the evidence must be gathered

n      where property to be used in restitution is located

Legal and Regulatory Issues

n      Foreign Corrupt Practices Act

n      Illegal to influence foreign officials through

n      Personal payment

n      Political contributions

n      When bribes removed, MNCs more willing to do business in that country

n      Restrictive bureaucratization

n      Government controls often inefficient and uncorrected

n      Local politics often prevail over national concerns

n      Privatization

n      Individual countries use legal and regulatory policies to affect the international management environment

n      Country is perceived to engage in unfair trade practices (WTO and similar agreements)

n      Government support (subsidies)

n      Require MNCs to accept local partners

n      Response may be

n      Retaliatory tariffs

n      Restrictive trade regulations

Technological Environment and Global Shifts in Production

n      Biotechnology

n      Nanotechnology

n      Satellites

n      Automatic translation telephones

n      Artificial intelligence and embedded learning technology

n      Advancements in computer chip technology

n      Supercomputers

n      E-business

n      Business-to-business (B2B)

n      Business to consumer (B2C) transactions

n      e-tailing

n      Financial services (e-cash)

n      Telecommunications

n      Wireless or mobile telephone service

n      Economic growth hampered by poor communication services

n      Wireless is more affordable than installed phone lines

n      Some governments recognize the need to privatize this service

n      Technology, outsourcing and off shoring

n      Technology has reduced and eliminated some work in middle management and white-collar jobs

n      Global competition has forces some MNCs to outsource jobs to offshore productions (lower labor and other costs)

n      Emerging technology makes work more portable