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totalitarian system

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every aspect of people's lives must be controlled to preserve order where Leaders govern without people's support, -Government controls much of people's lives, -and Leaders do not tolerate opposing viewpointsfeatures Imposed authority Lack of constitutional guarantees restricted participation

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theocratic totalitarianism

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controlled by totalitarian religious leaders.

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Secular totalitarianism

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in which leaders rely on military and bureaucratic power for control.

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communism

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argues that social and economic equality can only be obtained by establishing an all-powerful Communist party and by granting the government ownership and control over all types of economic activity.

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Tribal totalitarianism

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is a system whereby one ethnic group imposes its will on other ethnic groups within a nation.

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Right-wing totalitarianism

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is a system whereby government endorses private ownership of property and a market-based economy, but grants few (if any) political freedoms.

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Doing Business in Totalitarian Countries

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PRO:companies need not be concerned with political opposition outside the government. CON -Doing business can be risky because the law is vague or nonexistent, - people in powerful government positions can interpret laws at will.

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political risk

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is the likelihood that a government or society will undergo political changes that negatively affect local business activity. It can threaten an exporter's market, manufacturing facilities, and the ability to repatriate profits.

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Political risk arises from: (6)

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- Corrupt or poor political leadership • Frequent changes in the form of government • Political involvement of religious or military leaders • An unstable political system • Conflict among races, religions, or ethnic groups • Poor relations with other countries

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managing political risk ( adaptation)

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Incorporate risk into business strategies, often with the help of local officials.

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aninformation gathering

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Predict and manage political risk. Sources include employees with information and political risk agencies.

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Influencing local politics

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Deal with local lawmakers and politicians directly or through lobbyists.

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legal system

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Set of laws and regulations, including the process by which laws are enacted and enforced and the ways in which courts hold parties accountable for their actions. It is influenced by cultural variables, including class barriers, religious beliefs, emphasis on individualism or conformity, and the political system. Totalitarian governments favor public ownership and enact laws limiting entrepreneurial behavior; democracies encourage entrepreneurial activity and protect businesses with property-rights laws.

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common law

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3 sources: Tradition: Country's legal history. Precedent: Past cases that have come before the courts. Usage: Ways in which laws are applied in specific situations.a. Originated in England in the eleventh century and was adopted in its territories worldwide. b. Business contracts tend to be lengthy because they consider many contingencies and possible interpretations in case of dispute. Common law systems are flexible, taking into account particular situations and circumstances. c.Practiced in Australia, Britain, Canada, Ireland, New Zealand,the United States, and some nations in Asia and Africa.

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civil law

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-Based on a detailed set of written rules and statutes that constitute a legal code. -Can be traced to Rome in the fifth century B.C. and is the oldest and most common legal tradition.-Can be less adversarial than common law because it is not interpreted according to tradition, precedent, and usage. Because laws are codified and concise, parties are concerned with the explicit wording of the code; obligations, responsibilities, and privileges follow the relevant code. c. Practiced in Cuba, Puerto Rico, Quebec, Central and South America, most of Western Europe, and parts of Asia and Africa.

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theocratic Law

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. Legal tradition based on religious teachings (e.g., Islamic, Hindu, and Jewish law).

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Intellectual property

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results from intellectual talent and abilities to produce things such as graphic designs, novels, computer software, machine-tool designs, and secret formulas.

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patent

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is a right granted to the inventor of a product or process that excludes others from making, using, or selling the invention.

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trademarks

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are words or symbols that distinguish a product and its manufacturer. Trademark protection lasts indefinitely, provided the word or symbol continues to be distinctive

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copyrights

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give creators of original works the freedom to publish or dispose of them as they choose. A ___ holder can reproduce the work, derive new works from it, sell or distribute it, perform it, and display it publicly.

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standardization

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refers to uniformity in interpreting and applying laws across countries, not to the standardizing of entire legal systems.

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toughest product liability

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developed nations have the _____ laws, whereas emerging markets tend to have weaker laws.

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Consumption taxes

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help pay for the consequences of using particular products and can be used to make imports more expensive

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value added tax

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which is common across Europe, is levied on each party that adds value to a product throughout its production and distribution.

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Antitrust (antimonopoly) laws

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help ensure availability of a wide variety of products at fair prices. The United States and European Union have strict antitrust regulation and are strict enforcers. In Japan, the Fair Trade Commission enforces antitrust laws, but it is often ineffective because absolute proof of wrongdoing is needed to bring charges. In strict antitrust countries, companies see a disadvantage against competitors whose home countries condone market sharing, whereby competitors agree to serve only designated market segments.

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Ethical Behavior

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is personal behavior in accordance with rules or standards for right conduct or morality

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friedman view

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- argues that a company's sole responsibility is to maximize profits for its owners (or shareholders) while operating within the law. -This view has lost popularity because it argues that companies do NOT have "social" obligations

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cultural relativist view

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The _______ says that a company should adopt local ethics wherever it operates because right and wrong are determined within a cultural context. "When in Rome, do as the Romans do" captures the essence of this view.

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righteous moralist view

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The _______ argues that a company should maintain its home-country ethics wherever it operates because its ethics are superior. If headquarters instructs a subsidiary manager to refrain from bribing local officials, it imposes its righteous moralist view on the local manager

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utilitarian view

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The _________ says that a company should behave in a way that maximizes "good" outcomes and minimizes "bad" outcomes wherever it operates.

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social responsibility

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is the practice of companies going beyond legal obligations to actively balance commitments to investors, customers, other companies, and communities.

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corporate social responsibliity.

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-Socially responsible businesses fight bribery and corruption because it misallocates resources, hurts economic development, and damages the integrity of free markets. =Responsible businesses monitor their own behavior and that of their employees and business partners to uphold good labor conditions and human rights. -They may also promote fair trade practices—which involve companies working with suppliers in more equitable, meaningful, and sustainable ways. -Finally, companies today pursue "green" initiatives to reduce their toll on the environment and to reduce operating costs and boost profit margins.

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interanational relation

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Favorable political relationships foster stable business environments and increase international cooperation. Stable environment requires a strong legal system to resolve disputes quickly and fairl

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