Question 1

Describe the two elements which contribute to country risk. Provide examples of countries with high and low country risk, and explain the reasons for these two distinctions.

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Question 2

Provide an overview of totalitarianism, socialism and democracy. Provide examples of nations which adhere to each system.

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Question 3

Compare and contrast common law with civil law specifically as the two systems relate to international business.

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Question 4

Explain why contract laws can represent a country risk arising from the host-country legal environment, and explain the three approaches firms typically employ to settle international contractual disputes.

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Question 5

Explain command economies. Provide examples of nations that exhibit characteristics of command economies and why command economies are no longer common today.

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Question 6

Explain the connection between democracy and economic freedom. What are some of the characteristics associated with political and economic freedom?

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Question 7

Common and Civil Law (Scenario)
Zane Computer Corporation is considering the possibility of building a new manufacturing facility in a foreign country in order to lower labor and production costs. The legal department of Zane has raised some issues regarding two countries that are the top contenders for the new facility. The legal system of Country A is based on civil law, while the legal system of Country B is based on common law. Other than the legal systems of the two countries, all other aspects are virtually identical. Zane's legal experts must determine which system would be the most beneficial to Zane in the long-term.
-Which of the following supports Country A over Country B?

Accepted Answer

Country A's civil law system allows for broader scope of contractual noncompliance provisions, which could potentially provide better protection for Zane in the long-term.

Question 8

Host-Country Legal System (Scenario)
Super Sports, a large sporting goods chain based in Australia, wants to open a store in Norway. With stores around the world, Super Sports executives realize that legal systems vary from country to country. Having never opened a store in Norway, the Super Sports legal team is investigating Norwegian laws to determine how they would impact the corporation and its ability to do business in Norway.
-Which of the following is the most important issue to consider when determining the best entry strategy for Super Sports?

Accepted Answer

Inward foreign direct investment refers to the investment made by a company in a foreign country. As Super Sports wants to open a store in Norway, they need to consider the restrictions on inward foreign direct investment. This is the most important issue to consider because it will impact the corporation's ability to do business in Norway. If there are significant restrictions, it may not be feasible for Super Sports to enter the Norwegian market. Regulations regarding income repatriation are also important, but they are not as critical as inward foreign direct investment restrictions. Restrictions on promotion and advertising may impact Super Sports' marketing strategy, but they are not as important as the ability to enter the market. The recycling of product packaging is important, but it is not directly related to Super Sports' entry strategy.

Question 9

Host-Country Legal System (Scenario)
Super Sports, a large sporting goods chain based in Australia, wants to open a store in Norway. With stores around the world, Super Sports executives realize that legal systems vary from country to country. Having never opened a store in Norway, the Super Sports legal team is investigating Norwegian laws to determine how they would impact the corporation and its ability to do business in Norway.
-Which of the following would most likely oppose the opening of a Super Sports store in Norway?

Accepted Answer

Local sports retailers would most likely oppose the opening of a Super Sports store in Norway due to increased competition, which could threaten their business.

Question 10

Describe how the political and legal systems of a host country can both harm and benefit a foreign firm.

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Question 11

Common and Civil Law (Scenario)
Zane Computer Corporation is considering the possibility of building a new manufacturing facility in a foreign country in order to lower labor and production costs. The legal department of Zane has raised some issues regarding two countries that are the top contenders for the new facility. The legal system of Country A is based on civil law, while the legal system of Country B is based on common law. Other than the legal systems of the two countries, all other aspects are virtually identical. Zane's legal experts must determine which system would be the most beneficial to Zane in the long-term.
-Which of the following statements supports Country B over Country A?

Accepted Answer

The flexibility of common law allows for judicial interpretation in unique cases. This means that if Zane runs into any unique legal issues, the judges in Country B would be able to interpret the law to find a solution that works for Zane. In contrast, the civil law system of Country A relies heavily on strict application of rules and principles, leaving less room for interpretation and flexibility.

Question 12

What is transparency? Explain how transparency varies around the world.

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Question 13

Describe country risk and discuss how political and legal systems contribute to country risk. Explain the differences between political systems and legal systems in your answer.

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Question 14

Explain extraterritoriality. Provide examples to illustrate how extraterritoriality affects international business.

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Question 15

Describe the methods used by governments to seize the assets of foreign firms. How would proactive environmental scanning mitigate this risk?

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Question 16

Explain the purpose of special interest groups. How do these organizations affect international business? Provide examples to support your answer.

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Question 17

Host-Country Legal System (Scenario)
Super Sports, a large sporting goods chain based in Australia, wants to open a store in Norway. With stores around the world, Super Sports executives realize that legal systems vary from country to country. Having never opened a store in Norway, the Super Sports legal team is investigating Norwegian laws to determine how they would impact the corporation and its ability to do business in Norway.
-Which of the following supports a decision in favor of Super Sports opening a store in Norway?

Accepted Answer

Of the given options, only option A supports a decision in favor of Super Sports opening a store in Norway. MNEs (Multinational Enterprises) being able to transfer profits without restriction would be beneficial for Super Sports in terms of profit repatriation. Option B states that opening warehouse-style stores requires approval from local retailers, which may create obstacles for Super Sports. Option C states that product injury cases generally rule in favor of plaintiffs regardless of evidence, which may be a potential legal risk for Super Sports. Option D states that advertising and marketing of particular products are banned under local distribution laws, which may limit Super Sports' ability to promote and sell certain products.

Question 18

What are some of the risks and benefits for firms involved with international e-commerce?

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Question 19

Common and Civil Law (Scenario)
Zane Computer Corporation is considering the possibility of building a new manufacturing facility in a foreign country in order to lower labor and production costs. The legal department of Zane has raised some issues regarding two countries that are the top contenders for the new facility. The legal system of Country A is based on civil law, while the legal system of Country B is based on common law. Other than the legal systems of the two countries, all other aspects are virtually identical. Zane's legal experts must determine which system would be the most beneficial to Zane in the long-term.
-Which of the following questions would be more important for Zane legal experts to consider before recommending Country A or Country B?

Accepted Answer

The legal system of civil law in Country A is based on codes and statutes, while common law in Country B is based on judicial decisions and precedents. This means that the process of resolving contractual disputes with local vendors may differ significantly between the two countries, and Zane's legal experts must consider the potential advantages and disadvantages of each legal system. Questions A, B, and D may be important factors to consider for other aspects of Zane's business, but in terms of choosing between civil and common law systems, the question regarding contractual disputes is the most relevant.

Question 20

Describe the similarities and differences of common law and civil law, and explain how inadequate or underdeveloped legal systems pose a risk for international businesses.

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Quiz 7: Political and Legal Systems in National Environments