Value creation in the economy refers to the process of creating goods and services that are worth more than the resources used to produce them. Governments can create value in the same way as businesses by buying resources such as labor and raw materials and using them to produce higher-value goods or services. Here`s a look at the role politics plays in business – domestically and internationally – and why it`s important to understand it. An additional challenge in international trade arises when international companies enter domestic markets. Consumers who buy from your business could turn to international competitors. This can be difficult because your competitors can offer similar products at a lower cost. Consumer protection law links the legal thread between businesses and consumers. This regulation makes entrepreneurs vulnerable to legal problems if they engage in fraudulent business with the client. The Legal Information Institute has a detailed guide to consumer protection laws in the commercial sector. Here are the 4 branches of this law. Why should companies care about the different political and legal systems of the world? First, despite the globalization of the economy, companies must comply with the local rules and regulations of the countries in which they operate.

In the case study in Chapter 1 «Introduction,» you discovered how U.S. Google had to deal with Chinese government restrictions on free speech to do business in China. China`s various policies and legal policies have led Google to discontinue its mainland Chinese version of its website and direct users in mainland China to a Hong Kong version. In some countries, the government controls more aspects of daily life than in others. While common language deals with totalitarian and authoritarian synonyms, there is a clear difference. For the purposes of this discussion, the most important relevant difference is ideology. Authoritarian governments centralize all control in the hands of a strong leader or a small group of leaders who have full authority. These leaders are not democratically elected and are not politically, economically or socially accountable to the people of the country.

Totalitarianism, a more extreme form of authoritarianism, occurs when an authoritarian leadership is motivated by a particular ideology, such as communism. In totalitarianism, ideology influences or controls the people, not just a person or a party. Authoritarian leaders tend to have no guiding philosophy and use more fear and corruption to maintain control. The study of political systems is vast and complex. A political systemThe system of politics and government in a country; It governs a comprehensive set of rules, regulations, institutions and attitudes. is basically the system of politics and government in a country. It governs a comprehensive set of rules, regulations, institutions and attitudes. A key distinguishing feature of political systems is the philosophy of each system regarding the rights of the individual and group, as well as the role of government. The philosophy of any political system affects the policies that govern the local economy and business environment. Continuing with a company is a good career choice. But setting up and running a business requires more than efficiency and management skills. Several external factors can help the company grow or eventually ruin it.

One of these important factors is laws that affect businesses. Understanding the balance between China`s governance structure and ideology is key to doing business in this complex country. China is both an emerging market and an emerging superpower. Its leaders see the economy as an instrument for maintaining state power, which in turn is essential for maintaining the stability and long-term growth and viability of the Communist Party. Jason Dean, Andrew Browne and Shai Oster, «China`s `State Capitalism` Sparks Global Backlash,» Wall Street Journal, November 16, 2010, accessed December 22, 2010, online.wsj.com/article/SB10001424052748703514904575602731006315198.html. China is also pursuing emerging institutional and multilateral strategies outside the region to reshape regularity in the political-economic sphere. Multilateral cooperation is at the heart of the Beijing government, as are China-Africa cooperation, the China-Caribbean Economic and Trade Cooperation Forum and the China-Arab Cooperation Forum. As a supporter of influence, China even participates in political consultations on the Andean Community, the Rio Group and MERCOSUR.

It seems that China prefers to open a new partnership rather than build on already established partnerships (Sohn, 2012: 77-82). It also reflects a great mentality of power and exceptionalism of China as a country that sees other countries under its influence, so its foreign policy is truly country-focused (Zhang, 2013: 306-323). While theoretically any country can pose a risk to all of these factors, some countries offer a more stable business environment than others. Indeed, political stability is an important part of the government`s efforts to attract foreign investment to its country. Companies need to assess whether a country believes in free markets, government control, or strong intervention (often for the benefit of a few) in the industry. The country`s view of capitalism is also a factor in commercial considerations. In the broadest sense, capitalismAn economic system in which the means of production are owned and controlled by the private sector. is an economic system in which the means of production are privately owned and controlled. In contrast, a planned economy, an economic system in which the government or state directs and controls the economy, including the means and decisions of production. is that in which the government or state directs and controls the economy, including the means and decisions for production. In the past, democratic governments have supported capitalism and authoritarian regimes have tended to adopt a state-controlled approach to managing the economy.

Before we can assess the impact on the economy, let`s first look at the different political and legal systems. How do political and legal realities affect international trade and what should companies think about when developing their global strategy? Governments have a long history of intervening in international trade through a variety of mechanisms. First, let`s briefly discuss some of the reasons for these interventions. It may seem easy to assume that companies prefer to operate only in democratic, capitalist countries where there is little or no state involvement or intervention. However, history shows that global companies in certain industries have chosen to do business with countries whose governments control that industry. Companies in sectors such as commodities and oil have found more authoritarian governments as more predictable partners for access and long-term investment in these commodities. The complexity of trade in these situations is increasing as governments throughout history have come to the aid and protect their countries` greatest commercial interests in markets around the world. The history of the oil industry shows how various governments have sometimes protected their national companies` access to oil through political violence. In modern times, the Chinese government uses a combination of government loans and investments in Africa to give Chinese companies access to local resources and raw materials. Many business analysts mention these issues in discussions of global business ethics and the role and responsibility of business in various policy environments.

Political factors can affect a company by making the market environment more or less favorable for that company. Typically, governments have a lot of power over companies and often there`s not much companies can do about it. Chinese country reports in the 2007 reports of the Ministry of Foreign Affairs on human rights practices and international religious freedom noted China`s persistent and well-documented human rights violations, in violation of internationally recognized standards, due to both the authorities` intolerance of dissent and the inadequacy of legal guarantees of fundamental freedoms. Reported ill-treatment includes arbitrary and prolonged solitary confinement, forced confessions, torture and ill-treatment of detainees, as well as severe restrictions on freedom of expression, freedom of the press, freedom of assembly, association, religion, privacy, workers` rights and restrictions on forced births. In 2006, China continued to monitor, harass, intimidate, and arrest journalists, Internet editors, defense lawyers, religious activists, and political dissidents. The activities of non-governmental organisations (NGOs), in particular those relating to the rule of law and the extension of judicial review, remain limited. Conducting a macro-environmental analysis, a good example of how political factors have influenced a company, can be associated with Nike.