Politics and law essay
In international business any transaction is under the influence of the three political and legal environments: the country of origin, destination country, and international. In this regard, the study of political and legal aspects of the cultural environment acquires special significance.
It should also be noted that in each of the three sections the business subjects are not limited to government agencies. With the objective limit of effective demand of the local market on the one hand, and manufactured goods/services on the other hand, any transaction in international business carried out under competition changes the ratio of demand/supply in the local market and affects the interests of various political forces. These include various unions and associations of consumers and producers, corporate-related officials of various departments, representatives of the army and the military-industrial complex, the leadership of political parties, churches, TNCs, and finally, the representatives of the shadow economy (Tjosvold & Leung, 2003). The scope of the latter, even in countries with developed economies and democracy, range from 4.1% to 13.2% of the gross national product (Elashmawi, 2001).
In connection with such a complex pattern of distribution of political power and interests, coordinated use of economic, political and psychological techniques is necessary to obtain the cooperation of a number of influential parties to ensure penetration and/or functioning in a particular local market. In other words, one or both of the counterparty to the transaction apart from confirming of its terms and taking into consideration national and international laws in parts of the deal, also must take into account the interests of the third parties not formally involved in the transaction.
Complex power relations and conflict of interests exists not only in local markets defined by national boundaries, but also in various closed market systems like the EU market and customs unions. It’s no secret that the attempts to become full partners in the international market made by the former Soviet Union states lead to destabilization of the market and falling prices in those markets (metals, armaments), where they act as exporters, and growing prices for products (foodstuffs, alcohol, cigarettes), where they serve as importers. For protection Europe has anti-dumping legislation, such as the Treaty of Rome, and coordinated actions to protect the market (Peterson & Sondergaard, 2008). In particular, the European buyers of non-ferrous metals are making the planned prices equal to LME non-ferrous metals prices minus 12-20% (Cateora et al., 2010).
At the national level, governmental actions that affect the international activity can be summarized in two groups: rigid – expropriations, confiscations, socialization; and flexible – price control, licensing and setting quotas for import/export, control of monetary and financial operations, fiscal policy, regulation of repatriation of profits of foreign investors (Moore, 2005; Hoecklin & Payne, 1995). For example, in China export activities are under full governmental control, and its intensity is often determined by the decisions of the provincial authorities. The Government conducts an expansionary policy, implementing the program of restructuring of privatized and state enterprises (Pearson & Entrekin, 2001).
In the political-legal section there is another political force, which must be taken into account in international business – nationalism. Under conditions of heated nationalism, foreign firm is surrounded by an atmosphere of suspicion and mistrust; foreign enterprises are more likely to have labor disputes, and problems with the authorities are more difficult to solve. Nationalism is not only characteristic for underdeveloped countries. In contrast, European and Latin American countries traditionally have anti-American sentiment (bright examples are the cases of destruction of McDonald’s cafйs and Coca-Cola stalls in France), and the United States have Anti-Japanese moods, caused by a large expansion of Japanese goods (Thomas, 2008; Mead, 2004).
The evaluation of political and legal aspects allows speaking of the political and, ultimately, economic and managerial risks for the company.
