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MGCR 382 (143)
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Lecture 6

Lecture 6

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McGill University
Management Core
MGCR 382
John Saba

International Business Lecture 6Midterm exam covers chapter 123 and 6 page 148159 onlyChapter 3Legal Technological Accounting and Political Environments contDescribe the major types of legal systems confronting international businesses cont Objective 1 Types of legal systemsCommon lawCivil lawReligious lawBureaucratic law Bureaucratic law is the legal system followed by communist countries and dictatorships It is whatever the countrys bureaucrats say it is regardless of the formal law of the land Bureaucratic law is frequently inconsistent unpredictable and lacking in appeal procedures ExamplesFormer Soviet Union Today China and a few states in AfricaContracts can be made or broken at the whim of those in powerExampleThe 1997 collapse of Zaires dictatorship caused a mad scramble to validate contracts made during the prior government and negotiate new contracts with the replacement governmentMost of these systems are based on civil law with elements of socialist principles that emphasize State ownership of propertyState rights take precedence over individual rightsTends toward loose treatment of property and intellectual property rights In countries relying on bureaucratic law the ability of an international business to manage its operations is compromised by bureaucrats and arbitrary rulesExampleChina To punish or get what they want from foreign business persons and investors Chinese bureaucrats with much discretionary power often selectively apply or threat to apply strict regulation that otherwise are dormantObjective 2Domestic lawsHow burdensome is it for business in your country to comply with governmental administrative requirements permits regulation reportingSingaporeranked1Hong Kongranked2Rwandaranked3Switzerlandranked14Canada ranked41USA ranked49Domestic home country law affect a firms domestic operation but they may also affect its international operation in 3 ways1Domestic laws which regulate international business activities that originates inside a countrys borders Governments impose law as and regulation on how the firm Manages its work force laws on recruitment compensation and labour relations Finances its operations Develops and uses technology Government regulate in 4 other areas1Product safety and liability Product liability holds manufacturers sellers and others including a firms officers responsible for damage injury or death caused by defective products US Canada and the EU have the toughest product liability lawDeveloping countries have the weakest lawsSpecial case Tobacco litigation Litigants have pursued tobacco firms in Europe and the US Effect These tobacco firms have shifted marketing of cigarettes to developing countries2Local content requirementsThese rules force firms To supply a specific amount of a product locallyTo use local raw materials To procure parts from local suppliers To employ local workers Purpose To foster local business activity and create jobsDisadvantages These rules may force firms To take on poorly trained or excess workers
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