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The

Political,

Legal,

andTechnological

EnvironmentChapter

TwoMcGraw-Hill/IrwinCopyright?

2012

by

The

McGraw-Hill

Companies,

Inc.

All

Rights

ReserveIdeologiesIndividualism2-2·IndividualismPeople

should

be

free

to

pursueeconomicandpolitical

endeavors

without

constraint.In

business

context,

similar

to

capitalism

andconnected

to

free

market

societyPrivate

property

more

successful,

productive,

andprogressive

than

communal

propertyBetterment

of

society

related

to

level

offreedomindividuals

have

in

pursuing

economic

goalsIdeologiesCollectivism2-3·CollectivismViews

needs

or

goals

of

society

as

a

whole

asmoreimportant

than

individual

desires.Does

not

value

individual

as

suchNo

rigid

form

of

collectivism

as

societal

goalsdiffer

greatly

among

culturesFascism:

nationalism,

authoritarianism,

militarism,corporatism,

collectivism,

totalitarianismIdeologiesSocialism2-4SocialismA

moderate

form

of

collectivism

in

which

there

isgovernment

ownership

of

institutions,

and

profit

isnot

the

ultimate

goal.Has

been

practiced

in

China,

North

Korea,

CubaDemocratic

socialism

is

the

more

moderate

formpracticed

by

Great

Britain’s

Labour

Party,

and

inFrance,

Spain,

and

GreeceCommunism

is

extreme

form

of

socialist

thoughtPolitical

Environment2-5Ideologies

underlie

the

actions

of

governments

Ideas

reflecting

beliefs

and

values

influencing

the

behaviorand

culture

of

nations

and

political

systems

Political

systems

can

be

evaluated

along

twodimensionsRights

of

citizens

based

on

a

system

of

government

(range democratic

to

totalitarian)Focus

of

political

system

on

individualism

vs.

collectivism.

Democratic

nations

tend

to

emphasize

individualismand

totalitarian

nations

tend

to

emphasizecollectivismNo

pure

form

of

governmentPolitical

SystemsDemocracy2-6·DemocracySystem

in

which

government

is

controlled

bycitizens

either

directly

or

through

elections.Democratic

society

cannot

exist

without

atleast

a

two-party

systemOnce

elected,

representative

is

held

accountable

toelectorate

for

actions

(which

limits

power

ofgovernment)Political

SystemTotalitarianism2-7·TotalitarianismOnly

one

representative

party

with

control

overevery

facet

of

political

and

human

lifePower

maintained

by

suppression

ofoppositionDominant

ideals

include

media

censorship,

politicalrepression,

denial

of

rights

and

civil

libertiesPolitical

EnvironmentRegional

Example:

China2-8Emerging

economic

powerGovernment

attempting

to

open

up

economySpeed

up

conversion

of

state

enterprises

into

corporationsTrade

liberalization

a

top

priority

since

joining

WTO

in

2001Becoming

a

more

open,

democratic

societyGreater

tolerance

of

individual

freedomsWorker

retraining,

low-cost

housingand

other

programsSeeking

to

unleash

a

more

dynamic market

economyPolitical

Environment:Regional

Example:

Europe2-9Privatization

and

economic

liberalizationreinforce

EU-wide

political

and

economicintegrationPolitical

power

is

variable

and

complexStrong

opposition

to

U.S.-led

intervention

in

Iraqsometimes

spills

over

into

business

relationshipsand

dealingsEurope

is

a

large

interwoven

regioneconomically,

but

contains

vast

culturaldifferencesPolitical

Environment:Example:

TheMiddleEast2-10In

Iran

and

Saudi

Arabia

laws

and

governmentbased

on

Islamic

principlesBusiness

conduct

in

Middle

East

similar

toWestern

in

many

waysWorldwide

fallout

from

war

on

terrorism

have

madebusiness

environment

risky

and

potentiallydangerousPolitical

Environment:Example:

Russia2-11Neglect

and

confusing

changes

in

economicpolicyInfrastructure

is

weak

and

a

political

quagmireCorruption

interferes

with

attraction

of

moreforeign

investmentLegal

and

RegulatoryEnvironment2-12Confusion

and

challenge

for

the

MNC

due

tomany

different

laws

and

regulations

in

globalbusiness

operationsMNCs

must

carefully

evaluate

legal

frameworkin

each

market

before

doing

businessGlobal

Foundations

of

Law2-131.Islamic

law2.Socialist

law3.Common

law4.Civil

or

code

lawGlobal

Foundations

of

LawIslamic

Law2-14·Islamic

lawDerived

from

interpretation

of

Qur’an

andteachings

of

Prophet

MuhammadFound

in

Islamic

countries:

Middle

East

and

CentralAsia,

Malaysia,

IndonesiaGlobal

Foundations

of

LawSocialist

Law2-15·Socialist

lawOrigins

in

Marxist

socialist

systemRequires

most

property

to

be

owned

by

state

orstate

enterprisesContinues

to

influence

regulations

in

formercommunist

countries·Members

of

former

Soviet

Union·Peoples’

Republic

of

China·Vietnam·North

Korea·CubaGlobal

Foundations

of

LawCommon

Law2-16·Common

lawOrigins

in

English

lawFoundation

of

legal

system

for·United

States·Canada·England·Australia·New

ZealandGlobal

Foundations

of

LawCivil

or

Code

Law2-17·Civil

or

code

lawDerived

from

Roman

lawFound

in

non-Islamic

and

non-socialist

countries·France·Some

LatinAmerican

countries·LouisianaPrinciples

of

International

LawSovereignty

and

Sovereign

Immunity2-18·Principle

of

sovereigntyAn

international

principle

of

lawwhichholds

thatgovernments

have

the

right

to

rule

themselves

asthey

see

fit.Principles

of

International

LawInternational

Jurisdiction2-19·Nationality

principleHolds

that

every

country

has

jurisdiction

over

itscitizens

no

matter

where

they

are

located.·Territoriality

principleHolds

that

every

nation

has

the

right

of

jurisdictionwithin

its

legal

territory.·Protective

principleHolds

that

every

country

has

jurisdiction

over

thebehavior

that

adversely

affects

its

national

securityeven

if

that

conduct

occurred

outside

the

country.Principles

of

International

LawDoctrine

of

Comity2-20·Doctrine

of

comityA

jurisdictional

principle

of

international

law

whichholds

that

there

must

be

mutual

respect

for

the

laws,institutions,

and

government

of

other

countries

in

the

matter

of

jurisdiction

over

their

own

citizens.Principles

of

International

LawActof

State

Doctrine2-21·Act

of

state

doctrineA

jurisdictional

principle

of

international

law

whichholds

that

all

acts

of

other

governments

areconsidered

to

be

valid

by

U.S.

courts,

even

if

suchacts

are

illegal

or

inappropriate

under

U.S.

law.Principles

of

International

LawTreatment

and

Rights

of

Aliens2-22·Treatment

and

rights

of

aliensCountries

have

the

legal

right

to

refuse

admissionof

foreign

citizens

and

to

impose

special

restrictionson

their

conduct,

right

of

travel,

where

they

can

stay,and

what

business

they

may

conduct.Nations

can

also

deport

aliensPrinciples

of

International

LawForum

for

Hearing

and

Settling

Disputes2-23·Forum

for

hearing

and

settling

disputesU.S.

courts

can

dismiss

cases

brought

before

themby

foreigners;

however,

they

are

bound

to

examineissues

such

as·where

the

plaintiffs

are

located·where

the

evidence

must

be

gathered·where

property

to

be

used

in

restitution

is

locatedRegulation

ofTrade

and

Investment2-24Individual

countries

use

legal

and

regulatorypolicies

to

affect

the

international

managementenvironmentCountry

is

perceived

to

engage

in

unfair

tradepractices

(WTO

and

similar

agreements)Government

support

(subsidies)Require

MNCs

to

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