Question

Discuss the various legal–political challenges that organizations encounter when doing business internationally.

Answer 1

Legal- political challenges that organizations encounter when doing business internationally.

Every country have different local rules and regulation which made by government (political) despite of globalization, and liberalization. So, it is very important for an organization if it wants to expand or do business in any foreign country. Every country’s political system have different philosophy and mind set, so on basis of this government or political parties make rules and regulations which every organization have to follow, whether they like it or not. Political environment directly impact the business environment. Organization has to analyze the current political environment of the country, is there government stability or not, free markets, control of government on businesses, economy of the country (socialist, capitalist or mixed), foreign direct investment allowed on what percentage, human rights, security, privacy, internet facility and policies of the government related to business. So when organizations doing business internationally these issues encounter it. And it should do not take it unimportant aspect; it is very important for organization’s growth and success. For example political system of USA is very different from political system of China. Types of government is also important to understand like democratic, monarchy, pluralism, etc. because it defines what kind of mind set of residents and government and how rules formed.

Legal systems include laws like common law, corporate law, civil law, and company law. Jurisdiction system of a country is also very important to understand. Laws are for the betterment of residents and if businessman doesn’t feel it correct, he or she has no other option, if they want to do business in that country they have to follow all the laws.

Some sectors countries don’t like to give control to other country businessman like defense sector, weapon sector, and chemical manufacturing sector, because of security reasons. Organizations should research about the country before entering it for business.

Tariffs, import- export policies, currency value, anti-dumping policies and rules, financing policies, free trade zones, special economic zones, and GDP of the country, these are some political and legal aspects which organizations encounter while doing international business.

Reference

Book- Challenges and Opportunities in International business.