Session 2.
Legal, Technological, Accounting, Political
Environments and the Role of Culture
SULISTYANDARI
FACULTY OF ECONOMIC AND BUSINESS
UNSOED
International Business
Objectives
Describe the major types of legal systems
confronting international business
Explain how does domestic laws affect the ability of
firms to conduct international business
Describe the impact of the host country’s
technological environment of international business
Identify the factors that influence national
accounting systems
Discuss the primary characteristicc of culture
Describe the elements of culture
Explain how cultural conflicts may arise in
international business
The Legal Environment
Differences in Legal Systems ; national legal
systems vary dramatically for historical, cultural,
political and religious reasons.
The rule of law, the role of lawyers, the burden of
proof, the right to judicial review, and of course,
the laws themselves differ from country to country.
International Business
Legal Systems
Common Law
Civil Law
Religious Law
Bureaucratic Law
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International businesspeople must be aware of these
general differences in legal systems to avoid costly
misunderstandings.
They should also rely on the expertise of local
lawyers in each country in which they operate to help
them comply with the specific requirements of local
laws and to counsel them on substantive differences
in due process, legal liabilities, and procedural
safeguards.
International Business
Domestically Oriented Laws
The laws of the countries in which an international
business operates play a major role in shaping the
opportunities available to that firm.
Some of these laws are primarily designed to regulate
the domestic economic environtment
International Business
Such laws affect all facets of a firm’s domestic
operations : managing its workforce, financing its
operations, marketing its products, and developing
and utilizing technology.
International Business
Laws Directly Affecting International Business
Transactions
Other national laws are explicitly designed to
regulate international business activities.
Such laws are often politically motivated and
designed to promote the country’s foreign policy or
military objectives.
International Business
Laws Directed Against Foreign Firms
Constraints on Foreign
Privatization
Ownership
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The Impacts of MNCs on Host Countries
Economic and Political Impacts
Cultural Impacts
The Technological Environment
Another important dimension of a country is its
technological environtment.
The foundation of a country’s technological
environtment is its resource base.
Countries may change or shape their technological
environtments through investments. Many countries
such as Canada, Germany, and Japan, have invested
heavily in their infrastructures.
International Business
Such as : highway, communications systems, etc to
make producing and distributing product easier.
Another means for altering a country’s technological
environtments is technology transfer, the transmittal
of technology from one country to another.
International Business
The Accounting Environment
Roots of National Differences
a accounting standard and practices reflect the
influence of legal, cultural, political and economic
factors. Because these factors vary by country, the
underlying goals and philosophy of national
accounting systems also vary dramatically.
International Business
Differences in Accounting Practices
Valuation and revaluation of Assets
Valuation of Inventories
Dealing with the tax authorities
Use of Accounting Reserves
Other differences
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The Political Environments
Political Risk ; most firms are comfortable assesing
the political climates in their home countries.
However, assesing the political climates in other
countries is far more problematic.
International Business
Political risk are any changes in the political
environment that may adversely affect the value of a
firm’s business activities.
International Business
3 Categories of Political Risks
Ownership Risk
• In which the property of a firm is threatened
through confiscation or expropriation
Operating Risk
• In which the ongoing operations of a firm and/or
the safety of its employees are threatened through
changes in law, environmental standards, tax codes,
terorism, armed insurrection and so forth
Transfer Risk
• In which the government interferes with a firm’s
ability to shift funds into and out the country
International Business
The Role of Culture
Culture can even confer a competitive advantage or
disadvantage on firms.
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Characteristics of Culture
Culture reflects learned behavior that is transmitted
from one member of a society to another.
The elements of culture are interrelated
Because culture is learned behavior, it is adaptive
Culture is shared by members of the society and
indeed defines the membership of the society.
International Business
Elements of Culture
Language
Communication
Religion
Values and Attitudes
Social Structure
International Management and Cultural
Differences
Some experts believe that the world’s cultures are
growing more similar as a result of improvements in
communication and transportation
Understanding New Cultures
Cultural differences do exist. When dealing with a
new culture, many international business poeple
make mistake of relying on the self-reference
criterion, the unconscious use of one’s own culture
help assess new surroundings.
Successful international businesspeople traveling
abroad must remember that they are the foreigner
and must attempt to behave according to ther rules
of the culture at hand.
Cross-cultural Literacy
Business trip or long-term assignment, cross-cultural
literacy is the first step in acculturation, the process
by which people not only understand a foreign
culture but also modify and adapt their behavior to
make it compatible with that culture.
