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Unit 5: Political and Economic Environment

l z Although the duties and function of agencies vary, all influence day-to-day business notes
practices.
l z Frequently regulated business activities include competitive practices, industry specific
activities, general issues of concern, and monetary regulations.

5.5 keywords

Confiscation: It means seizing of company’s assets without payment.

Democracy: It is for the people, by the people, and of the people, its similar to participative
management, in this system people are encouraged to participate in decision making, a peoples
representative can be selected by the people through a process of election, and the responsibility
of leading the nation is kept on the shoulders of the elected representative. e.g, India.
Dictatorship: It is also called as authoritarianism, which is quite opposite to democracy, here
the hole power is in the hands of the leader, and people should follow the leader, all the policies
related to economy, business etc are governed by the leader. e.g, Saudi Arabia.
Domestication: It occurs when host country takes steps to transfer foreign investments to national
control and ownership through series of government decrees.
Expropriation: It requires reimbursement, for the government seized investment.
General Instability Risk: It is related to the uncertainty about the future viability of a host
country’s political system.
Operation Risk: It proceeds from the uncertainty that a host government might constrain the
investor’s business operations in all areas including production, marketing and finance.
5.6 review Questions

1. Discuss the political environment. What are its features?
2. What are the different types of political systems?
3. What is the need for government intervention in business?
4. What do you mean by sovereignty of nations?

5. Enumerate the political risks of global business.
6. Discuss the different types of political parties.
7. What are the factors affecting global business?
8. Give an overview of the world economy.

9. What are the various stages of market development?
10. Write short notes on:
(a) Central Communications Commission (CCC)
(b) Food and Drug Administration (FDA)

answers: self assessment

1. (c) 2. (a)
3. (d) 4. International

5. GNP 6. three

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