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CHAPTER II

The Political, Legal and
Technological Environment

Learning objectives:

• 
  to explain how domestic laws affect the ability of firms to conduct international business
  
• 
  to describe the major types of legal systems
  
• 
  to describe the impact of the host country´s technological enviroment
  
• 
  to explain how firms can protect themselves from political risk
  

Introduction
International managers face intensive and constant challenges that require training and understanding of the foreign enviroment. Managing a business in a foreign country requires managers to deal with a large variety of cultural and environmental differences. As a result, international managers must continually monitor the political, legal and technological environments.
A manager´s environment is made up of constantly changing factors – both external and internal that affects the operation of the organization. If a new competitor appears in the marketplace, the managerial environmment is affected. If key clients take their business elsewhere, managers feel the impact. And if technological advances date organization´s current methods of doing business, once again the managerial environments, they need to be aware of any changes that occur because changes ultimately affect their daily decisions and actions.
³⁶ There are various acronyms in which the organization finds itself. In
international management and entrepreneurship, experts generally talk about six types of environments in which the enterprises carry on its business – geographic, economic, competitive, socio – cultural, political (legal) and technological. From this viewpoint of textbook we have dealt with political, legal and technological environment.

2. 
   Political Environment

The domestic and international political enviroment has a major impact on MNCs.
As goverment policies change, MNCs must adjust their strategies and practices to
accommodate the new perspectives and actual requirements. Moreover, in growing ₃₇
number of geographic regions and countries, goverments appear to be less stable;
therefore, these areas carry more risk than they have in the past. An important part of any business decision is assessing the political environment in which a firm operates. Laws and regulations passed by any level of government can affect the price a firm must pay for labor, zoning regulations affect the way it can use its property, and governmental protection laws affect the production technology it can be used as well as the costs of disposing of weste materials. Adverse changes in tax laws can slowly destroy a firm profitability. Civil wars, assassinations, or kidnappings of foreign businesspeople and expropriation of a firm´s property are equally dangerous to the viability of firm´s foreign operations.

1.