Political Systems in Ghana
CHAPTER
THREE
Politics and Law in Business
3
Learning Objectives
Describe each main type of political system.
Identify the origins of political risk and how managers can reduce its effects.
List the main types of legal systems and explain how they differ.
Describe the major legal issues facing international companies.
Explain how international relations affect international business activities.
This chapter is designed to introduce the student to the various types of political and legal systems in existence around the world today and their impact on business. The potential benefits, costs, and risks of doing business in a country are partly a function of its political and legal systems. A political system includes the structures, processes, and activities by which a nation governs itself. It is important for managers to understand whether a political system is characterized by wide or narrow participation because it forms the context for the creation of laws, and the selection of political leaders. Several main political ideologies form the context in which international firms operate globally. Political risk is the likelihood that a government or society will undergo political changes that negatively affect local business activity. International companies manage political risk through avoidance, adaptation, information gathering, and influencing local politics. A legal system is the set of laws and regulations, including the process by which a country’s laws are enacted and enforced. Three legal systems include common law, civil law, and theocratic law. Global legal issues include standardization across different legal systems, intellectual property, product safety and liability, taxation, and antitrust regulations. The positive or negative atmosphere of international relations is important to international companies. Favorable political relations lead to increased business opportunities and
THREE
Politics and Law in Business
3
Learning Objectives
Describe each main type of political system.
Identify the origins of political risk and how managers can reduce its effects.
List the main types of legal systems and explain how they differ.
Describe the major legal issues facing international companies.
Explain how international relations affect international business activities.
This chapter is designed to introduce the student to the various types of political and legal systems in existence around the world today and their impact on business. The potential benefits, costs, and risks of doing business in a country are partly a function of its political and legal systems. A political system includes the structures, processes, and activities by which a nation governs itself. It is important for managers to understand whether a political system is characterized by wide or narrow participation because it forms the context for the creation of laws, and the selection of political leaders. Several main political ideologies form the context in which international firms operate globally. Political risk is the likelihood that a government or society will undergo political changes that negatively affect local business activity. International companies manage political risk through avoidance, adaptation, information gathering, and influencing local politics. A legal system is the set of laws and regulations, including the process by which a country’s laws are enacted and enforced. Three legal systems include common law, civil law, and theocratic law. Global legal issues include standardization across different legal systems, intellectual property, product safety and liability, taxation, and antitrust regulations. The positive or negative atmosphere of international relations is important to international companies. Favorable political relations lead to increased business opportunities and