Political, Economic and Legal System in Different Countries | Brief Introduction Managerial Implications and Cases Discussion with Answers

Political, Economic and Legal System in Different Countries | Brief Introduction Managerial Implications and Cases Discussion with Answer

What kinds of Political System in the World? 

Political System has different types as following,

Collectivism and Individualism

Collectivism refers to a political system that stresses the primacy of collective goals over individual goals. When collectivism is emphasized, the needs of society as a whole are generally viewed as being more important than individual freedoms.

Individualism is an opposite of collectivism, refers to a philosophy that an individual should have freedom in his or her economic and political pursuits.

Democracy and Totalitarianism 

Democracy refers to a political system in which government is by the people, exercised either directly or through elected representatives.

Totalitarianism is a form of government in which one person or political party exercises absolute control over all spheres of human life and prohibits opposing political parties.

What kinds of Economic System in the World? 

Market Economy 

All productive activities are privately owned, as opposed to being owned by the state. Production is determined by the interaction of supply and demand and signaled to producers through the price system. 

Command Economy 

The government plans the goods and services that a country produces, the quantity in which they are produced, and the prices at which they are sold.

Mixed Economy 

Certain sectors of the economy are left to private ownership and free market mechanisms while other sectors have significant state ownership and government planning.

What kinds of Legal System in the World? 

Different Legal Systems 

There are three main types of legal systems-or legal tradition-in use around the world:

Common law is based on tradition, precedent, and custom. Tradition refers to a country's legal history. Precedent to cases that have come before the courts in the past, and custom to the ways in which laws are applied in specific situations.

Civil law is based on a detailed set of laws organized into codes. Judges under a civil law system have less flexibility than those under a common law system.

Theocratic law is one in which the law is based on religious teachings. Islamic law is the most widely practiced theocratic legal system in the modem world, although usage of both Hindu and Jewish law persisted into the twentieth century.

Differences in Contract Law

Contract law is the body of law that governs contract enforcement. It is consist of 

Common law tends to be relatively ill specified, contracts drafted under a common law framework tend to be very detailed with all contingencies spelled out. 

Civil law system tends to be much shorter and less specific because many of the issues are already covered in a civil code.

Property Rights and Corruption

Property Rights refer to the legal rights over the use to which a resource is put and over the use made of any income that may be derived from that resource. 

Corruption demanding bribes from businesses in return for the rights to operate in a country, industry, or location. 

The Protection of Intellectual Property

Intellectual property refers to property that is the product of intellectual activity, such as computer software, a screenplay, a music score, or the chemical formula for a new drug. 

A patent grants the inventor of a new product or process exclusive rights for a defined period to the manufacture, use, or sale of that invention.

Copyrights are the exclusive legal rights of authors, composers, playwrights, artists, and publishers to publish and disperse their work as they see fit. 

Trademarks are designs and names, officially registered, by which merchants or manufacturers designate and differentiate their products.

World Intellectual Property Organization is an international organization whose members sign treaties to agree to protect intellectual property.

Paris Convention for the Protection of Industrial Policy is an international agreement to protect intellectual property.

Product Safety and Product Liability

Product safety laws set certain safety standards to which a product must adhere.

Product Liability involves holding a firm and its officers responsible when a product causes injury, death, or damage. 

What is the managerial implications for Political, Economic and Legal System differences in International Business practices?

The material discussed in this chapter has two broad implications for international business. First. the political, economic, and legal systems of a country raise important ethical issues that have implications for the practice of international business. Second, the political, economic, and legal environments of a country clearly influence the attractiveness of that country as a market or investment site.

Case Discussion 

What do you think about this statement!

1. Free market economies stimulate greater economic growth, whereas state-directed economies stifle growth.

Free market economy is systems where all business and productions are owned privately, as opposed to state directed economy. In this system all productions of products and services takes place freely based on market demands and hence amount produced are planned through the market forces. This condition generates the immense motivations for the businesspeople to enhance productions and build in efficiencies to elevate their personal growth which in turn economic growth. In addition, entrepreneurs – as one of businesspeople, always get better returns through private ownership as they strive through creativity and innovation to maximize their profits. 

A state directed economic system is where the decisions relating economy are based on resource allocations, pricing, investments, and production which are truly under the control of the state government or some other authoritative entity. In conclusion the state directed economies as contrast to free market economies are typically generating slow economic growth as well as less efficiencies because of lower motivations of businesspeople that lead to decline of economic growth. 

2. A democratic political system is an essential condition for sustained economic progress.

Originally, democratic comes from ancient Greek who believe that citizen should involve directly in government decision making. Today, it is seen that the political system focusing on democracy is leading to enhanced economic growth. People in democratic state have ownership and hence have desire for growth which leads to sustainable economic growth as well through enhanced overall productivity and productions in the nation. Meanwhile, people in communist economy have no motivations and productivity because of no ownership of wealth and property although they are putting in all efforts and hard work.

In summarize, democracy gives rise to highest economic growth rates if the policy implementation shows favorable to private endeavors. Moreover, the institutions should consider the presence of the community rather than to privileged class and government. Thus, democracies are building for public interests that lead to stability and growth of the economy.

3. Read the Management Focus feature titled Did Walmart Violate the Foreign Corrupt Practices Act? If you think it did, what do you think the consequences will be for Walmart?

In the 1970s, the United States passed the Foreign Corrupt Practices Act (FCPA). This law makes it illegal to bribe a foreign government official to obtain or maintain business over which that foreign official has authority, and it requires all publicly traded companies (whether or not they are involved in international trade) to keep detailed records that would reveal whether a violation of the act has occurred. 

According to the U.S Securities and Exchange Commission press release at June 20,2019, it stated that “The Securities and Exchange Commission today charged Walmart with violating the Foreign Corrupt Practices Act (FCPA) by failing to operate a sufficient anti-corruption compliance program for more than a decade as the retailer experienced rapid international growth”. The charged based on several investigation evidence such as: 

1) Walmart failed to sufficiently investigate or mitigate certain anti-corruption risks and allowed subsidiaries in Brazil, China, India, and Mexico to employ third-party intermediaries who made payments to foreign government officials without reasonable assurances that they complied with the FCPA.

2) Walmart repeatedly failed to take red flags seriously and delayed the implementation of appropriate internal accounting controls. 

The corruption in international trade bring several consequences. A journal: Salman Bahoo, Ilan Alon, Andrea Paltrinieri (2020). Corruption in international business: A review and research agenda finds several effects corruption in international business. According to (Roy and Oliver, 2009) the rule of law and control of corruption have a strong impact on the selection of partners for joint ventures, the other (Petrou, 2014) finds that arbitrary corruption hurts the performance of subsidiaries. 

In summarize, the corruption by Walmart brings internal and external issue that reduce firm reputation with other parties or stakeholder. 

Sources

Paper 📖: Salman Bahoo, Ilan Alon, Andrea Paltrinieri (2020). Corruption in international business: A review and research agenda. International Business Review, link 🠊Corruption in International Business. DOI: https://doi.org/10.1016/j.ibusrev.2019.101660

Government Official Website 🏛: 2019, Walmart Charged with FCPA Violations ,U.S Securities and Exchange Commission, link 🠊 United Stated Securities and Exchange Commission. 

Thank you guys, I hope you will be clearly understand about the differentiation among political, economic and legal system globally. Please let in comment if you have other questions!!.