Bài giảng International Business - Chapter nine: Political Forces

Political ForcesMcGraw-Hill/IrwinInternational Business, 11/eCopyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.chapter nineLearning ObjectivesIdentify the ideological forces that affect businessDiscuss the fact that although most governments own businesses, they are privatizing them in growing numbersExplain the changing sources and reasons for terrorismExplain steps that traveling international business executives should take to protect themselves from terroristsEvaluate the importance to business of government stability and policy continuityExplain country risk assessment by international businesses3Ideological ForcesCommunismThe belief that the government should own all the major factors of productionProduction in these countries is at state-owned factories and farms (some exceptions)Labor unions are government-controlled4CommunismConceived by Karl Marx as “classless society”Developed by his successors into control of society by the Communist Party and an attempted worldwide spread of communismExpropriation and ConfiscationGovernment seizure of property within its borders owned by foreigners, followed by prompt, adequate, and effective compensation to the former ownersGenerally expropriated becomes confiscation (no compensation)5Ideological ForcesCapitalismAn economic system in which the means of production and distribution are for the most part privately owned and operated for private profit Ideal capitalismGovernment restricted to functions that the private sector cannot performNational defensePolice, fire, and other public servicesGovernment-to-government international relations6Ideological ForcesSocialismPublic, collective ownership of the basic means of production and distribution, operating for use rather than profitSocialist governments frequently perform in ways not consistent with the doctrineMany European countries have practiced socialism: Great Britain, France, Spain, Greece, Germany7SocialismSocialism in Developing CountriesGovernment typically owns and controls most of the factors of productionShortages of capital, technology, and skilled management and labor are characteristicMany of the educated citizens connected with government8Conservative or LiberalConservativeA person, group, or party that wishes to minimize government activities and maximize private ownership and businessRight wing is a more extreme conservative position9Conservative or LiberalLiberalIn the contemporary U.S., a person, group, or party that urges greater government involvement in business and other aspects of human activitiesLeft wing is a more extreme liberalCareful! Terms may have entirely different meanings outside the U.S.10Government Ownership of BusinessWhy Firms are NationalizedTo extract more money from the firmsTo increase the firm’s profitability For ideological reasonsTo preserve jobsTo follow previous government support (control follows money)happenstance11Unfair Competition?Private-owned companies complain that government owned companies Can cut prices unfairlyGet cheaper financingGet government contractsGet export assistanceCan hold down wages with government assistance12PrivatizationThe transfer of public sector assets to the private sector, the transfer of management of state activities through contracts and leases, and the contraction out of activities previously conducted by the stateBritain’s Margaret Thatcher, leader of privatization movementAirports, garbage, postal services frequent examples13Privatization in on the MoveTrend all over the world China is allowing state-run enterprises to diversify ownershipUsually the buyers have financial success14Privatization Anywhere Any WayNot always ownership transfer from government to private entitiesActivities previously conducted by the state may be contracted outGovernments may lease state-owned plants to private entitiesGovernments may combine a joint venture with a management contract with a private group to run a previously government-operated business15Privatizations by Region16Government ProtectionTerrorism Unlawful acts of violence committed for a wide variety of reasons, including for ransom, to overthrow a government, to gain release of imprisoned colleagues, to exact revenge for real or imagined wrongs, and to punish nonbelievers of the terrorists' religionSince the 1970s, the world has been plagued by terrorism17Government ProtectionWorld Wide Terrorist GroupsAl Qaeda, IRA, Hamas, other Islamic fundamentalist groups, ETA, Japanese Red Army, German Red Army FactionGovernment-Sponsored Terrorism: Act of WarCountries finance, sponsor, and train terrorists and/or provide sanctuaries for themIran, Iraq, Libya, Syria, Afghanistan, Cuba, Lebanon, North Korea, and Sudan18Government ProtectionKidnapping for RansomVictims held for large ransomsColumbia and Peru dangerous places for American executivesU.S. executives practice “commando management” to avoid kidnap riskArrive secretly, meet for a few days and fly off before kidnappers learn of their presence19Countermeasures by IndustryKRE (kidnap, ransom, and extortion)Insurance to cover ransom payments, antiterrorist schoolsCassidy and DavisThe world’s largest kidnapping and extortion underwriting firm is located in LondonAntiterrorist SchoolsChecklists for executives20Terrorism DevelopmentsEthnoterrorismTribe against tribe, race against race, religion against religionNuclear TerrorismFailing security standards at former Soviet installations permit uranium to be stolen, then sold to terroristsChemical and Biological TerrorismRecipes from self-taught terrorists that can be downloaded from the Internet21Government StabilityStable GovernmentMaintains itself in power and whose fiscal, monetary and political policies are predictable and not subject to sudden, radical changesUnstable GovernmentCannot maintain itself in power or makes sudden, unpredictable, or radical policy changes22Traditional HostilitiesLong-standing enmities between tribes, races, religions, ideologies, or countriesArab Countries—IsraelHutus and Tutsis in Burundi and RwandaTamils and Sinhalese in Sri Lank23ICs and Political ForcesInternational Companies (ICs)Make decisions about where to invest, where to conduct research and development, and where to manufacture productsThe financial size of many ICs provides them with a strong negotiating position24Country Risk Assessment (CRA)An evaluation that assesses the country’s economic situation and policies and its politics to determine how much risk exists of losing an asset or not being paid25Country Risk Assessment (CRA)Types of Country RisksPoliticalWars, revolutions, coupsEconomicFinancialBOP deficitsLaborLow productivity, militant unionsLegalLaws may be changedTerrorism26Information Content for CRANature of BusinessThe needs of the company Needs of a hotel company compared with those of heavy-equipment manufacturersLength of Time RequiredUtility of risk analyses of social, political, and economic factors decreases precipitously over longer time spans 27Country Risk28