Understanding the dynamics of the international business environment is a complex process because there are so many factors that can impinge the success or otherwise of an international business. The business environment is changing and its volatility is increased by the threat of competition and changing business culture. Most importantly, as MNCs venture into new and unknown grounds, they have to carefully consider respective countries’ risks that they are dealing with.
Political Ideologies and Economics
An ideology is a set of integrated beliefs, theories and doctrines that helps to direct actions of a society. political ideology is almost intertwined with economic philosophy. For example, the political ideology in USA is grounded in the Constitution, which guarantees the rights of private property and the freedom of choice. This has helped to lay the foundation for US capitalism. A change in this fundamental ideology would alter the economic environment of the USA. The political and economic ideologies of nations are important factors in managing country risks.
Political systems. In the extreme, there are two types of political systems: democracy and totalitarianism. Democracy is a system of government in which the people, either directly or through their elected officials, decide what is to be done. Good example include the USA, Canada, England and Australia. Common features of this system include (1) the right to express opinions freely (2) election of representatives for limited terms of office (3) an independent court system that protects individual property and rights and (4) a relatively nonpolitical bureaucracy and defense infrastructure that ensure the continued operation of the system. On the other hand, totalitarianism is a system of government in which one individual or political party maintains complete control and either refuses to recognise other parties or suppresses them. There are a number of types of totalitarianism that currently exist. The best known is communism in which the government owns all property and makes all decisions regarding production and distribution of goods and services. Two of the best examples are China and Cuba. Another form is theocratic totalitarianism, in which a religious group exercises total power and represses or persecutes non-orthodox factions. Iran and some of the sheikdoms of the Middle East are good examples. A third form is secular totalitarianism, in which the military controls the government and makes decisions, which it deems to be in the best interests of the country. An example is Iraq. From the above, we can see that political systems typically create the infrastructure within the economic system functions.
Abstract: Are these heady days for Nigerian political parties? This is the main question, which this paper addresses with emphasis on political ideology, being the first and most important vehicle of a political party. It is argued that despite all pretences to the contrary through their manifestoes, as much as the superficial classifications as the “left” and “right”, “progressive” and “ ...
Economic systems. There are three broad types of economic system. In a market economy, the production of goods and services is not planned but is determined by supply and demand. Prices rise and fall in tandem to demand and supply situations. Private ownership is predominant. Any restriction in-terms of supply can be in the hands of a single or a few firms. In this way, it can be detrimental to consumers. Governments are concerned about monopolies and some countries have laws to prevent restrictive business practices (eg the anti-trust laws in USA).
As for the command economy, the government determines the production of goods and prices. It is based on the collectivism ideology where the government for the good of society does allocation of the resources.(Brewer. 1993:24) Usually businesses are state-owned and the government makes investment for the good of the nation rather than that of the individual. Communist states operate with such ideology. Lastly, in mixed economy, certain sectors of the economy are left in private hands while others are operated by state-owned agencies. Mixed economies are relatively common as governments continued to manage key industries that are deemed to be vital to national interests.
GRC Business Solutions Proposal Business Information Solution Over the years, the nature of business has changed drastically. Part of the reason for this is that businesses are no longer “local” in nature in the sense that the business does not necessarily sell only within its locality. It has to obtain goods and services from locations that are remote to it, and the products and ...
Legal systems. The other important element for businesses to consider in managing country risks is legal system of the related country. This is crucial because the legal system of a country reflects the system of rules and laws that regulate behavior, along the processes by which the laws of a country are enforced. A country’s law regulate business practice, define the manner in which business transactions are executed and set down rights and obligations of those involved in business dealings. This has important implications for businesses because in today’s’ competitive environment, intellectual property are a major portion of a company’s competitive advantage. For example, Microsoft has encountered significant problems with pirated software selling as the “real thing” especially in China and the rest of the world. Country differences in such elements raise important and sometime costly consequences for firms doing business abroad.
The legal and political systems vary from country to country. Some countries’ systems may be more stable than others. Hence the global company needs to recognize these differences if they are to understand the constraints and risks under which they operate. For example, in Australia and New Zealand, changes are slow and procedures are well established. If a different party assumes government, there are no quick or radical transformations, The laws governing the actions of individuals and institutions remain largely the same regardless of which political party is in power. On the other hand, certain countries are more difficult to assess because of the frequent change in government or governmental policies (Lee. 1993:4).
... and Chinas business systems. Relevant theories and use of comparative country and corporate ... markets. The business systems that exist today are likely to change over time ... Corporate Governance, as being “the system by which companies are directed and controlled” ... business, as in the 1950s to 1980’s, every aspect of china’s economic activity was designed, controlled and operated by its government, ...
Moreover, each new government may bring along a new set of rules. For instance, the goal of one government may be to nationalize the country’s key industries, the goal of the next may be to stimulate free enterprise. A good example is Mexico, which until 1988 had a law prohibiting foreigners from owning a majority interest in a Mexican company. However, after a change in government, exceptions were allowed if the investments contribute to the welfare of the nation.
The global companies need to relate to overseas economic concerns too. Two of the obvious are fluctuating currency rates and diverse foreign policies. At the end of World War II, major nations of the world established fixed exchange rates. In today, however, floating exchange rates are the norm. Therefore, fluctuation in exchange can have important impact on the balance of trade between two countries, sales and revenues, and it also makes forecasting and budgeting more difficult. In addition, government can affect international business activities, as they set policies and conditions, like controlling the flow of capital and using tax legislation to stimulate or hinder international activities. A case in point, when Malaysia changes its policies to ensure more stringent capital control in 1999, many MNCs were unable to channel their investment out of the host country as new rulings require them to park those intended outflow for a period of one year.
Scanning the business environment is an activity that needs to be conducted on a continual basis by all international businesses. The reasons are diverse when dealing with countries risks. When global companies enter into the international arena, consistent efforts must be made to understand the ever-changing business climate in each country that they are involved in (Eiteman. 1998: 23).
Thus company objectives and policies must be aligned accordingly to meet these changes. In dealing with country risk, strategic usage of joint ventures and partnerships may be use to minimize the risk involved, example IBM Europe and General Electric in Hungary. (Lewis, 1990 : 18-29).