Political and Lega Environments Facing Buiness

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Chapter 3
The Political and Legal Environments Facing Business

Political and legal systems across countries both coverage and vary. The cultural, political and leal, and economic systems create the potential benefits costs, and challenges of the business environment in a country.

Political systems can be assessed according to two dimensions: the degree to which they emphasize collectivism as opposes to individualism, and the degree to which they are democratic as opposed to totalitarian.

Collectivism reasons that the needs of society take precedence over the needs of the individual. Collectivism encourages state interventions in society in the belief that government's role is to define the needs and priorities of a country.

Political officials and agencies have a limited role in an individualistic society, whereas they have an extensive role in a collectivist society.

Individualism sees the primacy of the individual's freedoms in the political, economic, and cultural realms. Individualism endorses minimal intervention in the economy by the government.

Democracy and totalitarianism are the polar ends of the political spectrum. In a representative democracy, there is wide participation in the decision-making process. In totalitarian regimes, few citizens participate.

The measure of political freedom looks at the degree to which fair and competitive elections occur, the extent to which individual and group freedoms are guaranteed, and the existence of freedom of the press.

Recent data, in suggesting a situation of freedom stagnation, may signal a backlash against democracy and a resurgence of authoritarianism.

Political risk occurs because of changing opinions of political leadership, civil disorder, or external relations between the host country and the foreign investor's home country.

The type of legal system used in a country determines many elements of the business environment.

The role of law endorses systematic and objective...
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