McGraw-Hill OnlineMcGraw-Hill Higher EducationLearning Center
Student Center | Instructor Center | Information Center | Home
Chapter Updates
Discussion Board
Career Opportunities
Business Week
PowerWeb
CESIM
E Learning Sessions
Concept Previews
Multiple Choice Quiz
Internet Assignments
Chapter Discussion
E Business Cases
Feedback
Help Center


International Business : The Challenge of Global Competition, 8/e
Donald Ball
Wendell H. McCulloch, California State University Long Beach
Paul L. Frantz, California State University Long Beach
Michael Geringer, California Polytechnic State University
Michael S. Minor, University of Texas Pan American
Political Forces

E Learning Session

  1. Ideological Forces PowerPoint (33.0K)
    1. Political climate of country exerts tremendous effect on business
    2. International companies can themselves be political forces
    3. Communism
      • Conceived by Karl Marx
      • Theory of social change directed toward an ideal of a classless society
      • Lenin and others applied the theory by seizing power, sustaining it through intimidation and commitment to a world-wide communist structure
      • Communist government takeover of a previously noncommunist country
        1. Government owns all production factors
        2. Occurred in Russia in 1917
        3. Compensation for expropriated property
          1. No foreign business owners have ever be compensated for assets seized during communist revolution and after
          2. Russian property confiscated in the US in response was subject to owners filing a claim for payment
        4. Expropriation and confiscation
          1. International laws recognize a country's right to expropriate property in its jurisdiction
          2. But it requires owners to be compensated for the expropriation
          3. Expropriation without compensation is confiscation
      • Communism collapses Concept Check: The causes of the collapse of communism include (a) central planning that led to severe shortages of consumer goods and services (b) bureaucratic reports where factory administrators had to report productivity when the factory was unable to produce anything (c) concentration of scientists and engineers on military projects rather than on consumer needs (d) Both A and B (e) A, B, and C Concept Check
        1. Reasons for the fall of communism in Russia are many and complex that include
        2. Concentration of scientists and engineers on military needs rather than consumer needs led to dissatisfaction
        3. Central planning led to severe shortage of consumer goods and services
        4. Bureaucratic report led to strange situations where factories had to report productivity when the factory was unable to produce anything
        5. Russian enterprises inflated production figures to "look good"
      • Tale of two cities
        1. Communisms fall led to the reunification of East and West Germany
        2. Berlin, the traditional capital of Germany was also unified
    4. Capitalism
      • Government is restricted by allowing production factors to be privately owned
      • Government performs functions that private interests cannot
      • Regulations and red tape
        1. All businesses are subject to a lot of rules, regulations and red tape
        2. Government approval is required for a number of business activities
        3. Capitalists' businesses spend large amounts of operating budget complying with rules and regulations
    5. Socialism Concept Check: Socialism.. (a) involves a classless society of communal ownership (b) is in power in several European countries (c) advocates government ownership or control of the basic means of production (d) B and C (e) A and B Concept Check
      • Advocates government ownership or control of the basic means of production, distribution or exchange
      • In practice socialist governments exceed this concept
      • European socialism
        1. Socialists are in power in several European nations
        2. Great Britain, France, Spain, Greece, Germany
        3. In many, efforts to privatize business, to sell state owned business to private investors, has been on the increase
      • Socialism in developing countries
        1. Most developing countries profess and practice socialism
        2. Shortage of advanced production factors is typical of developing countries
        3. Unless a developing country openly processes communism, it will usually allow some degree of private ownership
    6. Conservative or liberal Concept Check: Liberal in the US mans a philosophy of reducing government intervention in business and society. (a) True (b) False Concept Check
      • Conservative, in the US, is a philosophy of reducing government activities and maximizing private ownership of business
      • Sometime associated with the term "right wing" in the US
      • Conservative means the opposite in some countries, especially former communist countries
      • Liberal in the US means a philosophy of increased government intervention in business and society
      • Associates with the "left wing' in the US
      • Unique to the US
        1. This usage of liberal has not spread out of the US
      • Do not overemphasize the terms because of their variations of interpreted meaning
      • Importance to business of left versus right
        1. Political advocacy groups grow in power each year
        2. These groups influence legislation and sometimes litigate in the name of cause
  2. Government ownership of business Concept Check: The reasons for government expropriation include all of the following except (a) The ideological make-up of the government changes (b) Placement of a business leader as the government's choice in a position of power (c) Extracting more money from overseas-based firms (d) The government believes it can run the firms more efficiently (e) To acquire votes in local elections Concept Check
    1. Why firms are nationalized
      • Firms are not solely expropriated in communist of socialist countries
      • Several possible reasons for governments to expropriate
        1. Extract more money from the firms
        2. Government believes it can run the firms more efficiently
        3. The ideological make-up of the government changes
        4. To acquire votes in local elections
        5. Because the government invested in the firm and seeks control
        6. Happenstance
    2. Unfair competition PowerPoint (30.0K)
      • Private companies sometimes complain about unfair competition with government-owned businesses
      • Complaints include
        1. Government-owned companies can cut prices unfairly because they do need to make profit
        2. They get cheaper financing
        3. They get government contracts
        4. They get export assistance
      • Government-owned sometimes receive subsidy support, direct payments from the government
    3. Government-private collaboration difficult
      • Government and private firm objectives are usually different
  3. Privatization
    1. Privatization is the movement to sell government-owned assets to private interests
    2. Airports, Garbage, Postal Services and ?
      • Airport operations, and other transportation centers are successful examples of privatization
      • In the US many municipalities are finding privatization of services such as garbage collection more economic and efficient
      • Postal service is being privatized in many parts of the word
    3. Private buyers do well, but an American needs a passport
      • Privatization is a hot trend around the world
      • China and Mexico are good examples of the trend
    4. Privatization anywhere and any way
      • Privatization does not always involve transfer of ownership from government to private interests
      • Governments may lease plants or assets
  4. Nationalism PowerPoint (31.0K)
    1. Nationalism has been called the secular religion of out times
    2. Nationalism is a shared pride and loyalty to one's country or culture
    3. Effects of nationalism influencing business include
      • Requirements for minimum local ownership or local production
      • Reservation of certain industries for local companies
      • Preference for local suppliers of government contracts
      • Limitation on number and types of foreign workers
      • Protectionism using tariff, quotas, or other devices
      • Seeking ad "French Solution" instead of a foreign takeover of a local firm
      • Expropriation or confiscation
  5. Government protection
    1. Iraq grabs for economic-political power
      • In 1990 Iraq invaded Kuwait
      • Speculation is that oil-rich Saudi Arabia may have been an objective
      • A UN force lead by the United States and Britain intervened and drove Iraq out of Kuwait
      • As an example in the aftermath, political considerations can take precedence over economic ones in international trade decisions
    2. Terrorism
      • Since the 1970s terrorism has been on the increase
      • Terrorism worldwide
        1. Terrorism is wide spread in Italy, Ireland, Basque, and in factions of the Japanese and German Read Army
        2. Many use former soviet countries as bases of operation
      • Government-sponsored terrorism: an act of war
        1. Countries financially supporting or training terrorists include Iran, Iraq, Libya, and Syria
        2. Terrorism is a political warfare tool to advance causes
      • Kidnapping for ransom
        1. Kidnapping for ransom has become an act of political expression as well as an economic tool
        2. Colombia and Peru were among the most dangerous places for American business people
      • Paying ransom becomes counterproductive
        1. The hostage business is booming
        2. Up by more than 70% in eight years
      • Successful counter terrorist operation
        1. Terrorist incident in Peru is example of successful counter terrorist operation
        2. Japanese embassy was taken by terrorists
        3. The Peruvian government refused to negotiate with the terrorists
        4. Army eventually stormed the property freeing hostages and killing terrorists
      • Countermeasures by industry
        1. Insurance to cover possible ransom has come into being
        2. Preparing executives going overseas for caution and activities to reduce exposure to kidnapping
        3. Training support personnel to counter including drivers training, self-defense
      • Terrorism changes
        1. Many terrorist groups have lost the havens and sanctuaries
        2. New laws give new powers to the governments, especially US to hunt down and prosecute terrorists
        3. New kinds of terrorism evolve including cyber-terrorism
        4. Nuclear terrorism
          1. Lax security in former soviet countries opens possibilities of terrorist acquiring nuclear capability
          2. Instructions for making nuclear bombs are on the Internet
        5. Chemical and biological terrorism
          1. In 1995 Japan suffered the first large-scale chemical terrorist attack
          2. Records found from terrorist groups indicate development of biological weapons
  6. Government stability
    1. A government can be said to be stable if it maintains itself I power and when its fiscal, monetary, and political policies are predictable and not subject to sudden, radical changes Concept Check: A government can be said to be stable if it maintains itself in power and when its fiscal, monetary, and political policies are unpredictable and subject to sudden, radical change. (a) True (b) False Concept Check
    2. Stability and instability: examples and results
      • Instability in Lebanon
        1. Example of order to chaos
        2. Instability introduced with commencement of civil war
      • Bolivia
        1. In 152 years of independence, Bolivia has had 187 governments
        2. In 1972 the government was seized and durability was established
        3. Inflation was curtailed and GNP grew
        4. Unused wealth
          1. Bolivia is potentially a resource rich country
          2. Political instability has caused resource to be largely untouched
      • Perils of Pauline
        1. Between 1979 an 1985 12 Bolivian governments were in power
        2. Inflation soared to 25,000%
        3. Most of export value was cocaine, less than half was raw materials
      • Miracle of La Paz
        1. 1985 saw a democratically elected government
        2. Curbed wages and prices to halt inflation
        3. Foreign investment returned
  7. Traditional hostilities
    1. Arab countries-Israel
      • Israel surrounded on three sides by Arab nations
      • Some of these Arab countries were OPEC members (oil producers)
      • OPEC oil embargo affects Israel and its supporters (such as the US)
    2. Hutus and Tutsis in Burundi and Rwanda
      • African trial groups in conflict for decades
      • Flare ups of conflict have occurred in various parts of Africa over the years
      • Large segments of the population have died in conflicts
      • Conflict continues today
    3. Tamils and Singhalese in Sri Lanka
      • Very bloody civil war
      • Tamils want a separate state
      • Conflict continues today
    4. Albanians, Bosnians, Croats, and Serbs in the former Yugoslavia
      • Traditional conflict spanning centuries
      • Most conflict based on ethnicity
      • UN attempting to provide peacekeeping
    5. South Africa
      • The traditional conflicts between black and white races in South Africa is on the decrease
      • New governments have been elected that show promise of more open relations
  8. International organizations
    1. United Nations
      • UN is highly politicized
      • It provides guidelines and codes of conduct for international businesses
      • Its conferences and assemblies influence the IMF and other funding organizations
    2. IMF, GATT/WTO, OPEC
      • IMF has great influence on monetary policies of organizations
      • Although GATT/WTO has worked to reduce tariffs, it condones them in some circumstances for developing countries
      • OPEC uses oil production as a political tool
    3. EU
      • As EU develops member nations give up more sovereignty
      • Harmonized laws dealing with taxes, patents, labor conditions, competition, insurance, banking, and capital markets affect business
      • EU is no into actually making law for the union members
    4. Organization for economic cooperation and development (OECD)
      • 29-member organization of industrial countries
      • Prescribes guidelines for multinational organizations
  9. Labor
    1. Workers and labor unions will be discussed in chapter 12
  10. International Companies
    1. 48 of world's 100 biggest economic units are firms, not nations
      • Decisions about were to invest have potential political ramifications
      • Large financial size carries power
      • Power also derived from possession of capital, technology, or management skills
  11. Country risk assessment (CRA)
    1. Country risk assessment involve assess many factors other than political
    2. Types of country risk
      • Country risks are increasingly political
      • Range from the dramatic (war, revolution, coups) to less dramatic (changes by election)
      • Risks my be financial or economic
      • Labor conditions may introduce risk
      • Changing laws raise risk
      • Terrorism presence induces risk
    3. Information and content for CRA
      • Types of information for risk assessment varies with the type of business
      • Nature of business
        1. Compare a hotel company from a heavy construction company for needs
        2. Banks have a different set of needs and risks
      • Length of time required
        1. Export financing usually requires the shortest time and risk exposure
        2. Bank loans can be made at short-, medium-, or long-term rates
    4. Who does country risk assessing? PowerPoint (30.0K)
      • Risk assessment can be done in any one of several organizational departments
      • Guides to effective assessment are proposed that include involvement of top management in process of assessment
      • International organizations make general risk assessments
      • These assessments are published in business periodicals for access
    5. Lessons in international debt crisis PowerPoint (32.0K)
      • Five lessons that should have been learned
        1. The country's import/export structure can help it weather external economic shock
        2. Economies of debtor nations has impact on default risk
        3. Sustained economic growth is prerequisite for high-debt nations to service their debts
        4. The social and political cost of over-indebtedness is high
        5. The global ripple effect of seemingly independent economies




McGraw-Hill/Irwin




Copyright2002 McGraw-Hill Higher Education
Any use is subject to the Terms of Use and Privacy Policy.
McGraw-Hill Higher Education is one of the many fine businesses of The McGraw-Hill Companies.