THE LEGAL, ECONOMIC, &

POLITICAL ENVIRONMENT
OF GLOBAL MANAGEMENT
LEGAL ENVIRONMENT
 Includes laws and  Property Rights
regulatory issues  Intellectual
within which Property Rights
international  Foreign Corrupt
businesses and the Practices Act
executives who  Bureaucratization
manage them must
operate.
 Privatization
PROPERTY RIGHTS
 Refers to the legal right to use a tangible,
economic property and to derive income
and/or benefits from it.
 Examples include:
INTELLECTUAL PROPERTY RIGHTS
 Intellectual property refers to intangible
property that is the result of intellectual
activity such as books, videos, and websites.
 Intellectual property rights are those
associated with the ownership of intellectual
property.
BUREAUCRATIZATION
 Is the need to pass through many
departments and divisions that are
administered by lots of people.
 Expect to fill out many forms, follow
countless procedures, and endure long waits.
FOREIGN CORRUPT PRACTICES
ACT
 This American law makes it illegal to
influence foreign officials through personal
payments or political contributions.
PRIVATIZATION
 Is the process of transferring ownership of a
business, agency, or property from the
government to the private sector.
ECONOMIC ENVIRONMENT
 Changes in the  Cost of production
economic  Currency exchange
environment of rates
business can lead  Cost of capital
to an expansion or
contraction of
business activity.
COST OF PRODUCTION
 Since barriers to international trade today
are few, global businesses can scan the
entire world for the cheapest production
location.
 Key issues are labor cost (wages) and labor
productivity.
CURRENCY EXCHANGE RATES
 If the value of a currency goes up relative to
other currencies, then goods become more
expensive for foreign buyers to purchase.
 Political and social events can influence
exchange rates.
COST OF CAPITAL
 In the global economy, a global business can
obtain capital by borrowing money from
banks where the lending rates are low.
 They can then use these borrowed funds to
finance their business operations.
POLITICAL ENVIRONMENT
 Governments can  Regional
have a major integration
impact on global  Government
businesses by legislations
imposing  Political risk
regulations such as  Corruption
taxations, import
duties, subsidies,
and environmental
regulations.
REGIONAL INTEGRATION
 The business environment has changed with
the emergence of regional economic blocs.
EXAMPLES OF REGIONAL
ECONOMIC BLOCS
 Association of Southeast Asian Nations
(ASEAN) Free Trade Area
 European Union
 Union of South American Nations
 Arab League
 African Union
GOVERNMENT LEGISLATIONS
 While global
managers must pay
Unfair Trade Financial
attention to Practices Regulations
regional economic
blocs, they must
Environmental
also take seriously Tax Codes
Regulations
the government
regulations which
Employment Supranational
affect business Laws Regulations
operations in their
host country.
POLITICAL RISK
 Risk associated
with political
changes that may
negatively impact
domestic and
RIOTS
foreign firms.
WARS
CORRUPTION
 Refers to the
misuse of an Macro-
economic
official position for conditions
private gain.
 It normally CORRUPTION Infrastructure
involves the
payment of a bribe
to a government Operational
conditions
official in return
for privileged
treatment.