SDSU Student Advocacy and Sweatshop Labor Essay

International
Management
TENTH EDITION
Culture, Strategy, and Behavior
Fred Luthans | Jonathan P. Doh
Chapter 2
OBJECTIVES OF THE CHAPTER
THE POLITICAL, LEGAL, AND
TECHNOLOGICAL ENVIRONMENT
The broader political, legal, and technological environment
faced by international managers is changing rapidly. Changes
in this environment are more common and rapid, presenting
challenges for managers seeking to respond and adapt to this
environment. Although there are many dimensions of the
external environment relevant to international management,
economic considerations covered in the last chapter are
among the most important, along with cultural issues covered
in Part Two. However, the political, legal, regulatory, and technological dimensions also bear on the international manager in
highly significant ways. The objective of this chapter is to
examine how the political, legal, regulatory, and technological
environments have changed in recent years, and how these
changes pose challenges and opportunities for international
managers. In Chapter 10, we return to some of these themes,
especially as they relate to political risk and managing the
political environment. In this chapter, we outline some of the
major trends in the political, legal, and technological environment that will shape the world in which international managers
will compete. The specific objectives of this chapter are
1. INTRODUCE the basic political systems that characterize
regions and countries around the world and offer brief
?examples of each and their implications for international
management.
2. PRESENT an overview of the legal and regulatory environment in which MNCs operate worldwide, and highlight differences in approach to legal and regulatory issues in different
jurisdictions.
3. REVIEW key technological developments, including the
growth of e-commerce, and discuss their impact on MNCs
now and in the future.
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The World of International
Management
Social Media and Political
Change
T
he struggle for government reform has traditionally
been a long, painful process. In the past, uprisings in
the ?Middle East were often violently and horrifically
repressed by corrupt dictators. Governments censored and
controlled news organizations, hiding the atrocities of war
from the view of the global community. For example, the
true scale of the 1982 Hama massacre, where at least
10,000 Syrian revolutionaries were killed by government
forces, is still unclear. Over the last few years, however, the
transparency of war and the resulting pace of change
appear to be rapidly increasing.
The ongoing conflict in Syria, which arose in the wake of
the ?Arab Spring? that spread across Egypt, Tunisia, and Libya
in the early 2010s, has been particularly impacted by the use
of social media. Journalism, communication, and transparency
from within Syria have all been redefined by the use of social
media by ordinary citizens. Unlike past conflicts, the Syrian
civil war and resulting refugee crisis are unraveling in real time
to a global audience in photos and ?videos through YouTube,
Facebook, and Twitter.
Social Media as an Organizing Tool
While previous uprisings lacked widespread communication
tools, those engaged in the Syrian conflict are equipped with
smartphones and social media. Syrian government loyalists,
?Syrian ?revolutionaries, and the terrorist organization Islamic
State of Iraq and Syria (ISIS) have all utilized social media to
quickly and efficiently organize their supporters. In the early
years of the conflict, the pro-revolution Facebook group ?The
Syrian Revolution 2011? swelled to nearly half a million members, while the group supporting Syrian President Bashar alAssad had nearly 3 million. ISIS has released propaganda
videos on all forms of social media, and the terror group has
maintained multiple Twitter accounts in an attempt to recruit
internationally.
Evidence suggests that revolutionaries in particular have
mobilized successfully through social media. Inspired by videos
uploaded to YouTube showing the Syrian government harshly
cracking down on nonviolent protesters, nearly 100,000 Syrians
organized via Facebook and staged a protest in Hama in
June 2011. The strength in numbers afforded by social media
has made the Syrian protests incredibly difficult to dissolve;
the mass scale of protests organized through social networking
sites far outnumbers the military and government forces sent
to suppress them. Tips on how to protect oneself from tear
gas and police batons are shared through Facebook groups,
and Twitter has served as a communication lifeline when government authorities have attempted to disperse the crowds.1,2
Social media has provided such a powerful tool to revolutionaries that the Syrian government has attempted to completely
disrupt Internet service on several occasions since 2011, most
notably during massive protests demanding the removal of
President Bashar al-Assad. Widespread outages spread
through nearly all of Syria, including Damascus, essentially
shutting off all communication with the outside world.3 Cyber
attacks have also been perpetrated by supporters of the Syrian
government in an attempt to censor photos and videos coming
from the protesters; malware programs that steal Facebook
and YouTube logins have been dispatched on a massive scale.4
Smartphones have morphed into a symbol of the revolutionary
forces, with Syrian government soldiers and ISIS border guards
often demanding to inspect cell phones of anyone passing
through their posts.5
Those fleeing the conflict have also utilized social media
to plan safe escape from Syria. Refugees who successfully
migrated to Europe assist those still making the journey
through online activity. A Facebook group dedicated to sharing
knowledge and advice with fellow refugees has over 100,000
members. Topics range from necessary supplies and route
information to messages of encouragement. Smugglers, often
necessary for safe passage, are recommended and discussed,
and even weather conditions are relayed to those making the
journey by sea.6,7 Refugees in past conflicts often separated
from their family and friends with the unfortunate yet realistic
possibility that they would never reunite. During the Syrian
conflict, refugees have been able to send messages to their
loved ones and update them on their safety throughout their
journey.8 WhatsApp, the instant messaging application, is
?popular among refugees not only for familial communication
but also for its ability to connect with transportation, smugglers, and even Greek coast guard officials in the event of
an emergency.
Social Media as a Journalistic Tool
In the early stages of the war, the Syrian government banned
international news media from covering the revolution. As a
result, social media became the primary source of photos,
?videos, and news stories from inside the conflict. The Syrian
civil war represented one of the first major conflicts in which
citizens could instantly record video from the front lines and,
using smartphones, transmit that footage to the Internet in real
time. News organizations, unable to gather information from
any other source, used the uploaded social media to build
their reports.9
Syrians from all sides of the conflict created and shared
this content on various social networking sites, attempting to
build international support for their cause.10 The sheer amount
of content uploaded is staggering; over a million ?videos from
within the revolution were uploaded to YouTube, often taken
by cellular phone. Another website, OnSyria, was used by protestors to upload nearly 200,000 videos.
More importantly, smartphones and social networks
ensured that any human rights violations from either revolutionaries or the government would be broadcast online, likely
eroding any international support that the inflicting party had.
In August 2013, one of the most defining moments in the
early years of the war occurred when hundreds of civilians
were killed in a sarin gas chemical attack in Ghouta, allegedly
perpetrated by the Syrian government. Almost instantly, witnesses and first responders uploaded photos and video of the
aftermath to social networking sites including YouTube, Reddit,
and Twitter. These images marked a critical turning point in
the global public opinion and international involvement in the
war. The U.S. government had taken a hands-off approach
prior to the attacks; however, once these human rights violations were broadcast across social media, the U.S. had no choice
but to take a formal stand against the Syrian government.11
Social Media as a Support-Building Tool
Unlike written news releases, pictures and videos have the
ability to convey information in emotional ways that transcend
language. During the Syrian civil war, social media, used as a
visual medium, led the global community to unite behind the
plight of the Syrian refugees in an unprecedented way.
Throughout early 2015, images and videos of overloaded
rafts, filled with desperately fleeing Syrians, dominated social
media. The emotion and suffering of the refugees were conveyed through these images to a worldwide audience in real
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time. Though thousands of images, stories, and videos were
shared over various social networks during the crisis, the
?September 2015 photo of a deceased toddler, Aylan Al-Kurdi,
who had drowned during his family?s attempted escape on a
raft across the Mediterranean, provoked global outcry and
underscores the power of social media as a support-building
tool. As a direct result of this image, financial and emotional
support among the global community grew almost instantly.
World leaders, including French President Fran?ois Hollande,
British Prime Minister David ?Cameron, and Irish Prime Minister
Enda Kenny, publically expressed support and shock after
?seeing the picture of the toddler. Spreading across social
?networks almost instantly, the hashtag ?#kiyiyavuraninsanlik,?
meaning ?Humanity Washed Ashore,? was shared more than
200,000 times within 24 hours. In the United States, the
United Kingdom, and Canada, the hashtag ?#RefugeesWelcome?
swelled to 1.5 million shares.12 Within four days, 78 percent of
the British public had seen the photo of Al-Kurdi, and 92 percent had at least heard about it. The photo was directly linked
to increased support: Those who had seen the photo were
nearly twice as likely to say that the United Kingdom should
take in more refugees.13 Support in the form of financial
?donations also surged. Migrant Offshore Aid Station, an NGO
focused on search and rescue efforts, reported a 1,400 percent increase in donations in the 24 hours immediately after
the pictures went viral. Donations to organizations including
Oxfam and Care Canada doubled in one week what had been
raised all year.14
The role of social media as an organizing tool, a journalistic tool, and a support-building
tool, all in the context of political change, underscores the interesting interactions of
technological progress and political conflict and change. Social media has enabled revolutionaries, governments, journalists, and even terrorists to organize quickly, communicate globally, and build support for their cause, resulting in serious ramifications for
international management. It is important for international managers to think through
these complex political, legal, and technological issues that arise in a world that embraces
rapid change so that they are prepared for potential challenges. MNCs must collaboratively work with new governments as laws, policies, and regulations are introduced and
altered. Managing the political and legal environment will continue to be an important
challenge for international managers, as will the rapid changes in the technological environment of global business.
? Political Environment
Both domestic and international political environments have a major impact on MNCs.
As government policies change, MNCs must adjust their strategies and practices to
accommodate the new perspectives and actual requirements. Moreover, in a growing
number of regions and countries, governments appear to be less stable; therefore, these
areas carry more risk than they have in the past. The assessment of political risk and
strategies to cope with it will be given specific attention in Chapter 10, but in this chapter we focus on general political systems with selected areas used as illustrations relevant
to today?s international managers.
The political system or system of government in a country greatly influences how
its people manage and conduct business. We discussed in Chapter 1 how the government
regulates business practices via economic systems. Here we review the general systems
currently in place throughout the world. Political systems vary greatly between nationstates across the world. The issue with understanding how to conduct international management extends beyond general knowledge of the governmental practices to the
specifics of the legal and regulatory frameworks in place. Underlying the actions of a
government is the ideology informing the beliefs, values, behavior, and culture of the
nation and its political system. We discussed ideologies and the philosophies underpinning them above. Effective management occurs when these different ideologies and
?philosophies are recognized and understood.
A political system can be evaluated along two dimensions. The first dimension
focuses on the rights of citizens under governments ranging from fully democratic to
totalitarian. The other dimension measures whether the focus of the political system is
Chapter 2 The Political, Legal, and Technological Environment
47
on individuals or the broader collective. The first dimension is the ideology of the system,
while the second measures the degree of individualism or collectivism. No pure form of
government exists in any category, so we can assume that there are many gradations
along the two extremes. The observed correlation suggests that democratic societies
emphasize individualism, while totalitarian societies lean toward collectivism.15
Ideologies
Individualism Adopters of individualism adhere to the philosophy that people should
be free to pursue economic and political endeavors without constraint. This means that
government interest should not solely influence individual behavior. In a business context, this is synonymous with capitalism and is connected to a free-market society, as
discussed in Chapter 1, which encourages diversity and competition, compounded with
private ownership, to stimulate productivity. It has been argued that private property is
more successful, progressive, and productive than communal property due to increased
incentives for maintenance and focus on care for individually owned property. The idea
is that working in a group requires less energy per person to achieve the same goal, but
an individual will work as hard as he or she has to in order to survive in a competitive
environment. Simply following the status quo will stunt progress, while competing will
increase creativity and progress. Modern managers may witness this when dealing with
those who adopt an individualist philosophy and then must work in a team situation.
Research has shown that team performance is negatively influenced by those who consider themselves individualistic; however, competition stimulates motivation and
?encourages increased efforts to achieve goals.16
The groundwork for this ideology was founded long ago. Philosophers such as
David Hume (1711?1776), Adam Smith (1723?1790), and even Aristotle (384?322 BC)
contributed to these principles. While philosophers created the foundation for this belief
system long ago, it can be witnessed playing out through modern practice. Eastern
Europe, the former Soviet Union, areas of Latin America, Great Britain, and Sweden all
have moved toward the idea that the betterment of society is related to the level of freedom individuals have in pursuing economic goals, along with general individual freedoms and self-expression without governmental constraint. The well-known movement
in Britain toward privatization was led by Prime Minister Margaret Thatcher during her
11 years in office (1979?1990), when she successfully transferred ownership of many
companies from the state to individuals and reduced the government-owned portion of
gross national product from 10 to 3.9 percent. She was truly a pioneer in the movement
toward a capitalistic society, which has since spread across Europe.
International managers must remain alert as to how political changes may impact
their business, as a continuous struggle for a foothold in government power often affects
leaders in office. For example, Britain?s economy improved under the leadership of Tony
Blair; however, his support of the Iraq War severely weakened his position. Conservative
David Cameron, first elected prime minister in 2010, sought to integrate traditional conservative principles without ignoring social development policies, something the Labour
Party has traditionally focused on. More recently, however, increased concerns about
immigration and the role of the EU in managing affairs in member states prompted the
United Kingdom to vote to leave the EU, a process that has been termed ?Brexit.? Government policy, in its attempt to control the economic environment, waxes and wanes,
something the international manager must be keenly sensitive to.
Europe has added complexity to the political environment with the unification of
the EU, which celebrated its 60th ?birthday? in 2017. Notwithstanding the increasing
integration of the EU, MNCs still need to be responsive to the political environment of
individual countries, some due to the persistence of cultural differences, which will be
discussed in Chapter 5. Yet, there are also significant interdependencies. For example,
the recent economic crises in Greece, Spain, Portugal, and Ireland have prompted
?Germany and France to mobilize public and private financial support, even though the
individualism
The political philosophy
that people should be free
to pursue economic and
political endeavors without
constraint (Chapter 2); the
tendency of people to look
after themselves and their
immediate family only
(Chapter 4).
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two largest economies in the euro zone have residual distrust from earlier eras of conflict
and disagreement.17 Europe is no longer a group of fragmented countries; it is a giant
and expanding interwoven region in which international managers must be aware of what
is happening politically, not only in the immediate area of operations but also throughout
the continent. The EU consists of countries that adhere to individualistic orientations as
well as those that follow collectivist ideals.
collectivism
The political philosophy
that views the needs or
goals of society as a whole
as more important than
individual desires (Chapter 2);
the tendency of people to
belong to groups or
collectives and to look after
each other in exchange for
loyalty (Chapter 4).
Collectivism Collectivism views the needs and goals of society at large as more important than individual desires.18 The reason there is no one rigid form of collectivism
is because societal goals and the decision of how to keep people focused on them differ
greatly among national cultures. The Greek philosopher Plato (427?347 BC) believed
that individual rights should be sacrificed and property should be commonly owned.
While on the surface one may assume that this would lead to a classless society, Plato
believed that classes should still exist and that the best suited should rule over the
people. Many forms of collectivism do not adhere to that idea.
Collectivism emerged in Germany and Italy as ?national socialism,? or fascism.
Fascism is an authoritarian political ideology (generally tied to a mass movement) that
considers individual and other societal interests inferior to the needs of the state and
seeks to forge a type of national unity, usually based on ethnic, religious, cultural, or
racial attributes. Various scholars attribute different characteristics to fascism, but the
following elements are usually seen as its integral parts: nationalism, authoritarianism,
militarism, corporatism, collectivism, totalitarianism, anticommunism, and opposition to
economic and political liberalism.
We will explore individualism and collectivism again in Chapter 4 in the context
of national cultural characteristics.
socialism
A moderate form of
collectivism in which there
is government ownership of
institutions, and profit is not
the ultimate goal.
Socialism Socialism directly refers to a society in which there is government ownership
of institutions but profit is not the ultimate goal. In addition to historically communist states
such as China, North Korea, and Cuba, socialism has been practiced to varying degrees in
recent years in a more moderate form??democratic socialism??by Great Britain?s Labour
Party, Germany?s Social Democrats, as well as in France, Spain, and Greece.19
Modern socialism draws on the philosophies of Karl Marx (1818?1883), Friedrich
Engels (1820?1895), and Vladimir Ilyich Lenin (1870?1924). Marx believed that governments should own businesses because in a capitalistic society only a few would benefit,
and it would probably be at the expense of others in the form of not paying wages due
to laborers. He advocated a classless society where everything was essentially communal.
Socialism is a broad political movement and forms of it are unstable. In modern times,
it branched off into two extremes: communism and social democracy.
Communism is an extreme form of socialism that was realized through violent
revolution and was committed to the idea of a worldwide communist state. During the
1970s, most of the world?s population lived in communist states. The communist party
encompassed the former Soviet Union, China, and nations in Eastern Europe, Southeast
Asia, Africa, and Latin America. Cuba, Nicaragua, Cambodia, Laos, and Vietnam headed
a notorious list. Today much of the communist collective has disintegrated. China still
exhibits communism in the form of limiting individual political freedom. China has
begun to move away from communism in the economic and business realms because it
has discovered the failure of communism as an economic system due to the tendency of
common goals to stunt economic progress and individual creativity.
Some transition countries, such as Russia, are postcommunist but still retain aspects
of an authoritarian government. Russia presents one of the most extreme examples of
how the political environment affects international management. Poorly managed
approaches to the economic and political transition resulted in neglect, corruption, and
confusing changes in economic policy.20 Devoid of funds and experiencing regular gas
pipeline leaks, toxic drinking water, pitted roads, and electricity shutoffs, Russia did not
present attractive investment opportunities as it moved away from communism. Yet more
Chapter 2 The Political, Legal, and Technological Environment
companies are taking the risk of investing in Russia because of increasing ease of entry,
the new attempt at dividing and privatizing the Unified Energy System, and the movement by the Kremlin to begin government funding for the good of society including
education, housing, and health care.21 Actions by the Russian government over the past
few years, however, continue to call into question the transparency and reliability of the
Russian government. BP, Exxon Mobil, and Ikea have each encountered de facto expropriation, corruption, and state-directed industrialization (see The World of International
Management at the beginning of Chapter 10).
One of the biggest problems in Russia and in other transition economies is corruption, which we will discuss in greater depth in Chapter 3. The 2014 Corruption
Perception Index from Transparency International ranked Russia 136th out of 174 countries, falling behind Egypt and Colombia.22 Brazil, China, and India, part of the BRIC
emerging markets block, consistently score higher than Russia. In the 2015 Heritage
Foundation?s Index of Economic Freedom, Russia?s overall rating in the measurement of
economic openness, regulatory efficiency, the rule of law, and competitiveness remained
at 52.1 this year, ranking it only 2.1 points away from being a repressive economic business environment.23 As more MNCs invest in Russia, these unethical practices will face
increasing scrutiny if political forces can be contained. To date, some multinationals feel
that the risk is too great, especially with corruption continuing to spread throughout the
country. Despite the Kremlin?s support of citizens, Russia is in danger of becoming a
unified corrupt system. Still most view Russia as they do China: Both are markets that
are too large and potentially too lucrative to ignore.
Social democracy refers to a socialist movement that achieved its goals through
nonviolent revolution. This system was pervasive in such Western nations as Australia,
France, Germany, Great Britain, Norway, Spain, and Sweden, as well as in India and
Brazil. While social democracy was a great influence on these nations at one time or
another, in practice it was not as viable as anticipated. Businesses that were nationalized
were quite inefficient due to the guarantee of funding and the monopolistic structure.
Citizens suffered a hike in both taxes and prices, which was contrary to the public interest and the good of the people. The 1970s and 1980s witnessed a response to this unfair
structure with the success of Britain?s Conservative Party and Germany?s Christian Democratic Party, both of which adopted free-market ideals. Margaret Thatcher, as mentioned
previously, was a great leader in this movement toward privatization. Although many
businesses have been privatized, Britain still has a central government that adheres to
the ideal of social democracy. With Britain facing severe budget shortfalls, Prime Minister David Cameron, first elected in 2010, proposed a comprehensive restructuring of
public services that could further alter the country?s longstanding commitment to a broad
social support program. Under his administration, austerity measures, including cuts to
military and social program spending, were implemented. The Conservatives and David
Cameron were reelected in a landslide in 2015, however, the Brexit vote was seen as a
repudiation to Cameron and he later resigned.24
It is important to note here the difference between the nationalization of businesses
and nationalism. The nationalization of businesses is the transference of ownership of a
business from individuals or groups of individuals to the government. This may be done
for several reasons: The ideologies of the country encourage the government to extract
more money from the firm, the government believes the firm is hiding money, the government has a large investment in the company, or the government wants to secure wages
and employment status because jobs would otherwise be lost. Nationalism, on the other
hand, is an ideal in and of itself whereby an individual is completely loyal to his or her
nation. People who are a part of this mindset gather under a common flag for such
reasons as language or culture. The confusing thing for the international businessperson
is that it can be associated with both individualism and collectivism. Nationalism exists
in the United States, where there is a national anthem and all citizens gather under a
common flag, even though individualism is practiced in the midst of a myriad of cultures
and extensive diversity. Nationalism also exists in China, exemplified in the movement
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against Japan in the mid-1930s and the communist victory in 1949 when communist
leader Mao Tse-tung gathered communists and peasants to fight for a common goal. This
ultimately led to the People?s Republic of China. In the case of modern China, ?nationalism
presupposes collectivism.
Political Systems
There are two basic anchors to political systems, each of which represents an ?ideal type?
that may not exist in pure form.
democracy
A political system in which
the government is
controlled by the citizens
either directly or through
elections.
Democracy Democracy, with its European roots and strong presence in Northern and
Western Europe, refers to the system in which the government is controlled by the citizens either directly or through elections. Essentially, every citizen should be involved in
decision-making processes. The representative government ensures individual freedom
since anyone who is eligible may have a voice in the choices made.
A democratic society cannot exist without at least a two-party system. Once elected,
the representative is held accountable to the electorate for his or her actions, and this
ultimately limits governmental power. Individual freedoms, such as freedom of expression
and assembly, are secured. Further protections of citizens include impartial public service,
such as a police force and court systems that also serve the government and, in turn, the
electorate, though they are not directly affiliated with any political party. Finally, while
representatives may be reelected, the number of terms is often limited, and the elected
representative may be voted out during the next election if he or she does not sufficiently
adhere to the goals of the majority ruling. As mentioned above, a social democracy combines a socialist ideology with a democratic political system, a situation that has characterized many modern European states as well as some in Latin America and other regions.
totalitarianism
A political system in which
there is only one
representative party, which
exhibits control over every
facet of political and
human life.
Totalitarianism Totalitarianism refers to a political system in which there is only one
representative party, which exhibits control over every facet of political and human life.
Power is often maintained by suppression of opposition, which can be violent. Media
censorship, political repression, and denial of rights and civil liberties are dominant ideals. If there is opposi