The Political Environment of International Business

The Political Environment of
International Business
Anne-Charlotte Bazoud
Gabrielle Colombier
Franziska Guehlcke
Marcus Bormann
Arnaud Katz
Contents
I. Context
II. Aims - Objectives
III. Political Environment of Business
IV. Political Environment of Business in Hong Kong
V. Conclusion
Context
• Globalisation, liberalization of the World Economy
 Set up in new markets, with different politic
• Hong-Kong, English from 1842 to 1997
 culture, laws, justice close from England,

Very different politic from the rest of China
Aims - Objectives
• Aim :
describe the most important political factors for companies which set up overseas
+ focus on the political environment of Hong-Kong.
• Objectives:
- make a clear distinction between totalitarism and democracy, capitalism and
socialism
- Demonstrate that the political environment is important in choosing the country
to set up (for example war, corruption, economy opened to the other countries?)
- Analyse the political environment of Hong Kong
Elements of the political environment
that a business must consider in order
to expand overseas
The Political Environment
Relatively uncontrollable factors outside the firm

Technological
Legal and Political
that influence its decision-making
Environment
Environment
Factors in government, the law and the regulatory

system that affect the way an organisation operates
Environment Socio-Cultural
Economic Environment
The Political Environment
SYSTEM STABILITY
Legal and Political

Environment
POLICIES
SYSTEM
Includes the structures, processes, and activities by
which a nation governs itself.
Political  Totalitarian state

System  Democratic state
SYSTEM
Totalitarian state Democratic state

Imposed authority Freedom
Lack of constitutional guarantees Rights
Restricted participation
 Companies might need to pay  Stable business environment
bribes to government thanks to laws
 The business law is vague  Freedom and no censorship
Doing business in a democratic
Doing business seems
state seems to be safer
to be a risky proposition
than in a totalitarian state
SYSTEM
Political  Capitalist system

Ideology  Socialist system
Capitalist System Socialist System
- Private ownership of business - Public ownership of business

is encouraged is the norm
The political ideology affects

- foreign government attitude towards profit repatriation.
- foreign government attitude towards foreign direct investment
SYSTEM
Political relationships
Favorable political relationships

 foster stable business environments
 increase international cooperation in many areas
 lead to increase business opportunities and lower risk
The World Trade Organisation can facilitate political relationships

 The WTO ensures that trade flows as smoothly, predictably and
freely as possible.
STABILITY
Political Stability : « A subjective governance indicator aggregated
from a variety of sources and measuring perceptions of the likelihood
of destabilization. » (United Nations Development Programme web site)
Political Risk
« The risk that political decisions or events in a
country negatively affect the profitability or
sustainability of an investment. »
(International Business environments and operations)
4 types of political risk

STABILITY
Systemic Political Risks
« When Political processes within a country do not routinely
subject foreign operations to unfair treatment. »
Procedural Political Risks

« It’s Political actions which create frictions that interfere with
people, products or funds transactions between a company or a
country. »
STABILITY
Distributive Political Risks
« When countries revise their distribution policies to capture
greater benefits from foreign companies. »
Catastrophic Political Risks

« This is the Political developments that adversely
affect the operations of all companies in a
country. » (International Business environments and operations)
POLICIES
TAXATION
Governments use income and sales taxes which
can vary from country to country.
POLICIES
PROPERTY
• Intellectual Property
« Property that results from people’s intellectual talent and abilitie. »
(International Business An integrated approach)
• Industrial Property
« Industrial property includes patents and trademarks. »
(International Business An integrated approach)
• Copyrights
« Copyrights give creators of original works the freedom to publish or

dispose of them as they choose. » (International Business An integrated approach)
 The problem is that laws in some countries are softer than in others
POLICIES
PRODUCT SAFETY AND LIABILITY
« Product liability holds manufacturers, sellers, and

others, including individual company officers, responsible
for damage, injury, or death caused by defective
products. » (International Business An integrated approach)
The United States has the toughest product liability laws in the
world following by Europe.
 Enforcement of product liability laws differs from

nation to nation.
Hong Kong Facts
• British crown colony became Chinese territory in 1997
• China is a Communist nation that values stability over

individual freedoms
• Hong Kong is a Special Administrative Region
• Population: 6,980,412 (July 2007 est.)

Hong Kong Political Environment
• Capitalist System or Socialist System

• China has signed the "one country, two systems"
formula
• 50 years contract until 2047
• Relatively high political stability

Hong Kong Political Environment
• Totalitarian state or Democratic state

• Limited democracy
• The legal system based on the English common law
• Basic Law which approved in 1990

– “Mini-Constitution"
Conclusion
• The political environment has an important impact

on the business
• There is a large field with many factors which the
companies have to consider if they want to expand
overseas
• Political environment is not stable and can change
quickly
• The political environment creates advantages and
disadvantages
Sources
• http://www.pearsoncourses.com/
• http://www.nytimes.com/specials/hongkong/
• https://www.cia.gov/library/publications/the-world-factbook/geos/hk.h
tml
• International business, environments and operations, Daniels,

Radebaugh, Sullivan
• International business : an integrated approach, John J. WILD,
Kenneth L. WILD, Jerry C.Y. HAN

The Political Environment of International Business

Uploaded by

Copyright:

Available Formats

The Political Environment of International Business

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

The Political Environment of International Business

Uploaded by

Copyright:

Available Formats

The Political Environment of

• Globalisation, liberalization of the World Economy

 Set up in new markets, with different politic

• Hong-Kong, English from 1842 to 1997

 culture, laws, justice close from England,

Relatively uncontrollable factors outside the firm

Factors in government, the law and the regulatory

Legal and Political

Political  Totalitarian state

Totalitarian state Democratic state

Political  Capitalist system

Capitalist System Socialist System

- Private ownership of business - Public ownership of business

The political ideology affects

Favorable political relationships

The World Trade Organisation can facilitate political relationships

4 types of political risk

Procedural Political Risks

Catastrophic Political Risks

« Copyrights give creators of original works the freedom to publish or

« Product liability holds manufacturers, sellers, and

 Enforcement of product liability laws differs from

• British crown colony became Chinese territory in 1997

• China is a Communist nation that values stability over

• Hong Kong is a Special Administrative Region

• Population: 6,980,412 (July 2007 est.)

• Capitalist System or Socialist System

• 50 years contract until 2047

• Relatively high political stability

• Totalitarian state or Democratic state

• The legal system based on the English common law

• Basic Law which approved in 1990

• The political environment has an important impact

• International business, environments and operations, Daniels,

You might also like