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BUS 231 - International

BusinessMohibul Islam Masum

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However, a large grey area exists in the middle.

It is possible to have democratic societies thatemphasize a mix of collectivism and individualism.

Similarly, it is possible to have a totalitarianism societythat is not collectivist.

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Collectivism

Collectivism refers to a political system that stressesthe primacy of collective goals over individual goals.

The needs of society as a whole are generally viewed asbeing more important than individual freedom.

An individuals right may be restricted on the groundsthat it runs counter to the good of society.

According to the Greek philosopher Plato (427-347BC), individual rights should be sacrificed for thegood of the majority and that property should beowned in common.

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In the 20 th century, the socialist ideology splitinto two broad camps:

Communists believed that socialism could beachieved only through violent revolution and

totalitarian dictatorship.

Social democrats committed themselves toachieve socialism by democratic means, no

violence and dictatorship.

Read the texts, page 43.

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Individualism advocated by the Greek philosopher Aristotle (Platos disciple, 384 -322 BC), refers to a philosophy that an individual should have freedom in

his or her economic and political pursuits.

Built on two central tenets:1. Emphasis on the importance of guaranteeing

individual freedom and self-expression.

2. The welfare of society is best served by letting people pursue their own economic self-interest, as

opposed to some collective body (such asgovernment) dictating what is in societys bestinterest.

Individualism translates into an advocacy for democratic politicalsystem and free market economics.

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Democracy and Totalitarianism

Democracy refers to a political system in whichgovernment is by the people, exercised either directlyor through elected representatives.

Modern democratic states practice representative

democracy.

Read Pg. 46.

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Totalitarianism is a form of government in whichone person or political party exercises absolutecontrol over all spheres of human life and prohibits

opposing political parties.

Four major forms of totalitarianism:

Communist Totalitarianism China, Vietnam, Laos,North Korea and Cuba.

Theocratic Totalitarianism KSA, Iran.

Tribal Totalitarianism Zimbabwe, Tanzania, Ugandaand Kenya.

Right-wing Totalitarianism military dictatorship.

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Democracy and individualism go hand in hand,as do the communist version of collectivismand totalitarianism.

However, grey areas exists.

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Economic Systems

Political ideology and economic systems are connected.

There are three broad types of economic systems:

Market EconomyCommand EconomyMixed Economy

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Market Economy all productive activities are privately owned, the goods and services that acountry produces are not planned by anyone, instead

by the interaction of supply and demand and signaledto producers through price system. The purchasing patterns of consumers determine what

is produced and in what quantity.

Does not allow supply to be restricted.Supply restriction = Monopoly.

The monopolist is likely to become increasingly

inefficient, producing high-priced, low-quality goodsand society suffers.So, govt. encourages free and fair competition between

private producers.

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Command Economy government plans the goodsand services that a country produces, the quantity and

prices to be sold at. The objective is to allocate

resources for the good of society (collectivist).

All businesses are state owned, so that the governmentcan direct them to make investments that are in thebest interest of the nation as a whole rather than inthe interests of private individuals.

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Mixed Economy certain sectors of the economy areleft to private ownership and free marketmechanisms while other sectors have significantstate ownership and government planning.

Great Britain, France and Sweden were mixedeconomies but extensive privatization has reducedstate ownership of businesses in all three nations.

Governments also tend to nationalize; take overtroubled firms they consider to be vital to nationalinterests.

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Legal Systems

The legal system of a country refers to the rules, or lawsthat regulate behavior along with the processes by which the laws are enforced and through whichredress for grievances is obtained.

Regulate business practice, define the manner in whichthe business transactions are to be executed, and setdown the rights and obligations.

Differences in legal systems can affect the attractivenessof a country as an investment site or market.

The legal system of a country is influenced by the prevailing political system (also historical tradition).

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Common Law

Common law is based on tradition, precedent andcustom. Tradition refers to a countrys legal history,

precedent to cases that have come before the courts inthe past and custom to the ways in which laws areapplied in specific situations.

Evolved in England over hundreds of years and it is nowfound in most of Great Britains colonies includingthe US.

It gives the judges the flexibility to interpret the law sothat it applies to the unique circumstances of anindividual case.

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Civil Law

Civil law system is based on a detailed set of lawsorganized into codes. More than 80 countries includingGermany, France, Japan and Russia operate with acivil law system.

Less adversarial and flexibility than a common lawsystem.

Judges only apply the law according to the codes rather

than interpreting tradition, precedent and custom.

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Theocratic Law

A theocratic law system is one in which the law is basedon religious teachings Islamic law.

Many Muslim countries have legal systems that are ablend of Islamic law and a common or civil lawsystem.

Interest payments and Islamic financial institutions inPakistan, Egypt and Malaysia.

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Differences in Contract Law

A contract is a document that specifies the conditionsunder which an exchange is to occur and details therights and obligations of the parties involved.

Contract law is the body of law that governs contractenforcement.

Common law very detailed, expensive, resolvingdisputes can be very adversarial and lengthy. Butgreater flexibility is an advantage since it allows the

judges to interpret a contract dispute in light of the prevailing situation.

Civil law much shorter and less specific since manyof the issues are already covered in a civil code.

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When there is contract dispute in international trade, which countrys law to apply?

A number of countries (less than 70), including the UShave ratified the United Nations Convention onContracts for the International Sale of Goods (CIGS).

Many of the worlds larger trading nations, including Japan and the UK have not ratified the CIGS.

International Court of Arbitration of the International

Chamber of Commerce in Paris is a recognizedarbitration court to settle contract disputes; in 2005,handled some 521 requests for arbitration involving1,422 parties from 117 countries.

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References:

International Business Competing in the GlobalMarketplace by Charles W. Hill.Internet.

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Merci!

Any Questions?