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Task 3 Political Economics and International Business
Why is it important for businesses to understand and care about political economics and different political systems? As you complete these activities you will develop a deeper understanding of the effect politics has on trade, regulations, and practices. The political system and government in a country includes these rules, regulations, and practices based on values and beliefs. Therefore, each country’s political system has an impact on the policies that govern the business environment both locally and internationally.
What is political economics?
- Watch the video
- Why International Political Economy Is at the Heart of World Order in the 21st Century.
Learn more about political economics.
Read the ebook Chapter 3 through legal systems. As you read focus on:
Answer all question 1-4
- What did PepsiCo encounter as they moved into the international marketplace?
- What are the major political systems?
- What are the major economic systems?
- What are legal systems and how are they affected by culture?
Investigate the political factors that affect international business.
- Watch the video Impact of Political Factors
This A section from the Video I watched.
A :What Is the Political Environment in International Business?
The political environment in international business consists of a set of political factors and government activities in a foreign market that can either facilitate or hinder a business’ ability to conduct business activities in the foreign market. There is often a high degree of uncertainty when conducting business in a foreign country, and this risk is often referred to as political risk or sovereign risk.
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Common Political Factors
Let’s look at some common political factors that influence the international business landscape. The type of economic system a country builds is a political choice. Foreign countries often will have different economic systems from your domestic market, and adjustments often need to be made to take these differences into account.
For example, a country may operate in a market economy where private individuals own most of the property and operate most of the businesses. A market economy is usually the best economic environment for a foreign business because of the protection of private property and contract rights.
Some countries lean more towards a socialist economy where many industries and businesses are owned by the state. Operating businesses in this environment will be more difficult, but products can still be produced and sold as people still pick their jobs and earn money.
A few countries operate under a communistic economic system where the state pretty much controls all aspects of the economy. Conducting business in this environment ranges from difficult to impossible.
Of course, the reality is that all economies are mixed economies that take parts from two or more of the ‘pure’ economic systems. For example, you can conduct business in communist China in Hong Kong and other special areas where a market economy is allowed to operate.
Businesses also must often contend with different governmental systems. Examples include democracies, authoritarian governments, and monarchies. Some governments are easier to work with than others. Democracies, for example, are answerable to their citizens and the rule of law.
Authoritarian regimes are usually answerable to no one, including the law. It is less risky to conduct business in democracies and constitutional monarchies, a monarchy with a constitution that protects the public and subjects the monarch to the rule of law, than in countries with authoritarian regimes.
The next major factor is trade agreements. Countries often enter into trade agreements to help facilitate trade between them. If your country has entered into a trade agreement with another country, conducting business in that country will usually be easier and less risky because the trade agreement will provide some predictability and protection. One great advantage, for example, is that your products will be subjected to fewer trade barriers that serve as obstacles to exporting your products into the country.
A trade barrier is simply anything that makes it harder for a company to export products to a foreign country. Formal trade barriers are enacted by governments for the purpose of restricting imports to protect a country’s domestic industries. Formal trade barriers include tariffs, which are taxes on imports that help make domestic products more competitive, and product quotas that limit the
CHAPTER THREE POLITICAL ECONOMY AND ETHICS
LEARNIN OBJECTIVES.
After studying this chapter, you should be able to
- Describe the key feature of each form of political system.
- Explain how the three types of economic systems differ.
- Summarize the main elements of each type of legal systems.
- Outline the global legal issues facing international firms.
- Describes the main issues of global ethics and social responsibility.
PEPSICo’s GLOBAL CHALLENGE
PURCHACE, NEW YORK – ENTERPRENUEL Despite its enormity PepsiCo’s (www.pepsi.com) sales have grown an amazing 13. percent annually for nearly half a century. To keep sales bubbling, PepsiCo is targeting international sales, which comprise 40 percent of total revenue, and is investing aggressively in India.
Which ranks among PepsiCo’s top 10 markets and its three fastest- growing countries. PepsiCo needed the approval of India’s Government before it could be increase the investment there by nearly a third. PepsiCo alewives it is essential that we use coordinates showed its respect for the importance of local politics in Law in China by performing strategic alliances with local business there.
Like all companies operating integrating nationally, PepsiCo must carefully navigate unfamiliar political, economic, and legal systems. If PepsiCo’s bottling operations in China were to drain the water table to unacceptable levels. It would face the wrath of Chana regulators and its people Likewise, British regulators, for example, would be health claims. PepsiCo’s knows that today companies are expected to be model citizens wherever they operate.
PepsiCo’s CEO, Indra Nooyi is moving the company’s product line in healthier directions. She introduced the motto “Performance with Purpose” to reflect how the company is transforming its Global business. She wants the company balance It’s drive for profits with making healthier snacks, decreasing its impact on the environment, and taking care of its workforce. Born and raised in India, Nooyi believes it is essential that we use corporations as a productive player in addressing some of the big issues facing the world.
Nooyi also helped spark green indicatives at PepsiCo. She has proved that investments in water – and heat – related conservation projects can be worthy endeavors. In addition to their environmental benefits those projects now save the endeavors. In addition to their environmental benefits, those projects now save the company $55 million annually. Nooyi says, Companies today are b bigger than many economies. We are little republics; we are engines of efficiency. If companies don’t do responsible things, who is going to? As you read the chapter, consider how companies’ adaptor political, economic, and legal systems worldwide while fulfilling
As businessmen and woman venture abroad, they can encounter social and economic environments that are unlike anything they’ve ever experienced.
Political economy is study of how a country manages its affairs by using political, economic, and legal systems. Any nation’s political economy reflects how its people put their preferred political economic, and legal theories into practice and the institutions they create. Yet, political economy does not arise in a vacuum -n it forms with a cultural context. Therefore, political economies vary from nation to nation in their degree of openness, individualism, equality, transparency, flexibility, and so on.
