Unit 7: Discovery Research GB503

Unit 7: Lecture

https://youtu.be/nZLklM3mS5w

Businesses investment in Asian countries must focus on how a host country’s political system impacts the economy as well as the particular firm and business. Firms need to assess the balance to determine how local policies, rules, and regulations will affect their business. Depending on how long a company expects to operate in a country and how easy it is for it to enter and exit, a firm may also consider assessing the country’s political risk and stability.

A company may ask several questions regarding a prospective country’s government to assess possible risks:

· How stable is the government? Is it a democracy or a dictatorship?

· If a new party comes into power, will the rules of business change dramatically?

· Is power concentrated in the hands of a few, or is it clearly outlined in a constitution or similar national legal document?

· Is there a well-established legal environment both to enforce policies and rules as well as to challenge them?

· How translucent is the government’s political, legal, and economic decision-making process?

While any country can, in theory, pose a risk in all of these factors, some countries offer a more stable business environment than others. In fact, political stability is a key part of government efforts to attract foreign investment to their country. Businesses need to assess if a country believes in free markets, government control, or heavy intervention (often to the benefit of a few) in industry. Historically, democratic governments have supported capitalism and authoritarian regimes have tended to utilize a state-controlled approach to managing the economy.

Continue to read about the topic to better understand the legal environment across countries within Asia.

Reference

· Saylor Academy. (2012). 2.2 Political and Legal Factors That Impact International Trade (Links to an external site.) . Retrieved from https://saylordotorg.github.io/text_international-business/s06-02-political-and-legal-factors-th.html