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Global Business Today Ninth Edition Chapter 2
© 2016 by McGraw-Hill Education.
This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This
document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
24
National Differences in Political,
Economic, and Legal Systems
Chapter Outline
OPENING CASE: Putin’s Russia
INTRODUCTION
POLITICAL SYSTEMS
Collectivism and Individualism
Country Focus: Venezuela under Hugo Chavez, 1999-2013
Democracy and Totalitarianism
ECONOMIC SYSTEMS
Market Economy
Command Economy
Mixed Economy
DIFFERENT LEGAL SYSTEMS
Different Legal Systems
Differences in Contract Law
Property Rights and Corruption
Country Focus: Corruption in Nigeria
Management Focus: Did Walmart Violate the Foreign Corrupt Practices Act?
The Protection of Intellectual Property
Management Focus: Starbucks Wins Key Trademark Case in China
Product Safety and Product Liability
FOCUS ON MANAGERIAL IMPLICATIONS
SUMMARY
CRITICAL THINKING AND DISCUSSION QUESTIONS
CLOSING CASE: Ghana: An African Dynamo
Learning Objectives
Global Business Today Ninth Edition Chapter 2
1. Understand how the political systems of countries differ.
2. Understand how the economic systems of countries differ.
3. Understand how the legal systems of countries differ.
4. Explain the implications for management practice of national difference in political economy.
Chapter Summary
This chapter focuses on the different political, economic, and legal systems that are influential in
the world. It is made clear to the reader that these differences are significant, and must be clearly
understood by the managers of international firms. The section that focuses on legal systems
includes a discussion of intellectual property including patents, copyrights, and trademarks.
Protecting intellectual property is a particularly problematic issue in international trade. Finally,
the chapter ends with a discussion of the managerial implications of differing political, economic,
and legal systems of a country.
Opening Case: Putin’s Russia
Summary
The opening case explores the state of the Russian economy since the collapse of the USSR, and in
particular under the leadership of Vladimir Putin. While Russia’s economy has grown rapidly in
the so-called pseudo-democracy that now exists, the country is heavily dependent on oil and gas
exports – both industries that are still largely state controlled. Indeed, the presence of the
government remains an issue for the economy as a whole. Currently, roughly half of the total
economy is still controlled by the state, a situation that could hamper future growth. Even private
enterprises are dealing with considerable red tape and corrupt government officials. Both the
World Bank and Transparency International have highlighted these problems as factors preventing
commerce from flourishing in Russia. Discussion of the case can revolve around the following
questions:
Suggestion Discussion Questions
QUESTION 1: Discuss the implications of corruption on the development and growth of a
country. How can Russia’s current political system best be described? What conclusions can you
draw regarding Russia’s economic prospects?
© 2016 by McGraw-Hill Education.
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26
QUESTION 2: Discuss the pros and cons of investing in Russia. As a CEO of a company in the
oil industry would you invest in Russia? How does a stable government affect a country’s ability
to attract investment?
Chapter Outline with Lecture Notes, Video Notes, and Teaching Tips
INTRODUCTION
A) Different countries have different political systems, economic systems, and legal systems.
Cultural practices can vary dramatically from country to country, as can the education and skill
level of the population. All of these differences have major implications for the practice of
international business.
B) This chapter explores how the political, economic, and legal systems of countries differ.
Together these systems are known as the political economy of a country.
C) The opening case on the changing political system in Russia illustrates how economic growth
in a country can be affected by its politics. A series of reforms introduced after the collapse of the
Soviet Union in 1991 were directed at creating a sustainable democracy and free market economy.
Global Business Today Ninth Edition Chapter 2
However, more recently, under the leadership of Vladimir Putin, some of these democratic
freedoms have been curtailed. Today, the state accounts for about 50 percent of all economic
activity and the government has both direct and indirect control over strategically important
sectors including oil and gas.
POLITICAL SYSTEMS
A) By political system we mean the system of government in a nation. Political systems can be
assessed according to two related dimensions. The first is the degree to which they emphasize
collectivism as opposed to individualism. The second dimension is the degree to which they are
democratic or totalitarian.
Collectivism and Individualism
B) Collectivism refers to a system that stresses the primacy of collective goals over individual
goals. When collectivism is emphasized, the needs of the society as whole are generally viewed as
being more important than individual freedoms. Advocacy of collectivism can be traced to Plato,
in modern times the collectivist mantle has been picked up by socialists, and their champion, Karl
Marx.
Socialism
C) Communists generally believed that this could only be achieved through violent revolution and
totalitarian dictatorship, while social democrats worked to achieve the same goals by democratic
means.
D) While state owned firms might have been intended to promote the public interest, experience
suggests that this is not always the case. In many countries the performance of state owned
companies has been poor. Protected from significant competition by their monopoly position, and
guaranteed governmental financial assistance, many state owned enterprises became increasingly
inefficient. Consequently, a number of Western democracies voted social democratic parties out
of office and moved toward free market economies by selling state-owned enterprises to private
investors, a process known as privatization.
Individualism
E) Individualism refers to a political philosophy that an individual should have freedom over his
or her economic and political pursuits. In contrast to collectivism, individualism stresses that the
interests of the individual should take precedence over the interests of the state.
F) Individualism, while advocated by Aristotle, in modern days was encouraged by David Hume,
Adam Smith, John Stuart Mill, and most recently, Friedrich von Hayek, James Buchanan, and
Milton Friedman. Individualism focuses on i) guaranteeing individual freedom and self-
expression, and ii) letting people pursue their own self-interest in order to achieve the best overall
good for society. The U.S. Declaration of Independence and the Bill of Rights embody the spirit
Global Business Today Ninth Edition Chapter 2
of individualism.
G) While collectivism asserts the primacy of the collective over the individual, individualism
asserts the opposite. This ideological difference shapes much of recent history and the Cold War.
Individualism is usually associated with democratic political systems and free markets.
Country Focus: Venezuela under Hugo Chavez, 1999-2013
Summary
This feature explores the political and economic situation in Venezuela under Hugo Chavez. When
Chavez, who was elected president in 1998, ran on a platform against corruption and economic
mismanagement, Venezuela’s economy was in a deep recession. Once in office, Chavez consolidated his
hold over the government by drafting a new constitution that put him in power until 2012. Chavez died in
2013, but during his presidency Venezuela was considered to be only “partly free.” Economically, things
were also difficult for Venezuela. Chavez did achieve some gains. Unemployment, though still high, fell
to 7.6 percent in 2013 from its high of 14.5 percent in 1998. Similarly, poverty remained a problem despite
falling from 50 percent to 28 percent in 2012. Yet, corruption was rampant, and there was a move to take
certain industries into state ownership, with the oil industry being a particular target.
Suggested Discussion Questions
Please see Critical Thinking Question 5 for discussion of this feature.
Lecture Note: Since Chavez’s death in 2013, the situation in Venezuela has become extremely
uncertain. To learn more, consider {http://www.businessweek.com/news/2014-08-12/venezuela-
sees-chavez-friends-rich-after-his-death-amid-poverty} and
{http://www.businessweek.com/news/2014-05-03/chavez-food-utopia-withers-as-development-
plans-left-unfulfilled}.
Democracy and Totalitarianism
H) Democracy and totalitarianism are at different ends of a political dimension. Democracy refers
to a political system in which government is by the people, exercised either directly or through
elected representatives. Totalitarianism is a form of government in which one person or political
party exercises absolute control over all spheres of human life, and opposing political parties are
prohibited.
Democracy
I) Democracy in its pure state, with each individual voting on every issue, has generally been
replaced by representative democracy, where elected representatives vote on behalf of
constituents.
Video Note: A central theme in President George Bush’s administration is a focus on spreading
democracy around the globe. To learn more about this, consider the video in the International
Global Business Today Ninth Edition Chapter 2
Business Library on Pinterest (http://www.pinterest.com/mheibvideos/) Experts Discuss Global
Democracy.
Totalitarianism
J) Under totalitarianism, a single political party, individual, or group of individuals monopolize the
political power and do not permit opposition. There are four major forms of totalitarianism:
communist totalitarianism, (a form of totalitarianism that advocates achieving socialism through
totalitarian dictatorship), theocratic totalitarianism, (a form of totalitarianism in which political
power is monopolized by a party, group, or individual that governs according to religious
principles), tribal totalitarianism (a form of totalitarianism found mainly in Africa in which a
political party that represents the interests of a particular tribe monopolizes power), right wing
totalitarianism (a form of totalitarianism in which individual economic freedom is allowed but
individual political freedom is restricted in the belief that it could lead to communism). There has
been a general trend away from communist and right wing totalitarianism and towards democracy.
Video Note: Yum! is opening locations in Myanmar. To learn more about how the company is
approaching the market, consider the video in the International Business Library on Pinterest
(http://www.pinterest.com/mheibvideos/) Yum! To Bring First KFC to Myanmar in 2015.
Pseudo-Democracies
K) The political system in many nations of the world can best be described as imperfect or pseudo-
democracies – lying somewhere between a pure democracy and complete totalitarianism.
ECONOMIC SYSTEMS
A) There is a connection between political ideology and economic systems. In countries where
individual goals are given primacy over collective goals, a free market system is more likely to
exist. In contrast, in countries where collective goals are dominant, enterprises may be state-
owned, and markets may be restricted. Three broad types of economic systems can be identified-a
market economy, a command economy, and a mixed economy.
Market Economy
B) In a pure market economy the goods and services that a country produces, and the quantity in
which they are produced, is not planned by anyone. Rather price and quantity are determined by
supply and demand. For a market economy to function there must be no restrictions on either
supply - no monopolistic sellers. In a market economy, government encourages free and fair
competition between private producers.
Command Economy
C) In a pure command economy the goods and services that a country produces, the quantity in
which they are produced, and the price at which they are sold are all planned by the government.
Global Business Today Ninth Edition Chapter 2
Resources are allocated "for the good of society". The government owns most, if not all,
businesses.
Mixed Economy
D) A mixed economy includes some elements of each. Until recently, Great Britain, France, and
Sweden were all considered mixed economies. Today, however, as a result of extensive
privatization, these countries function as market economies. In contrast, in recent years Russia and
Venezuela have seen an increase in state-owned business.
LEGAL SYSTEMS
A) The legal system of a country refers to the rules, or laws, that regulate behavior, along with the
processes by which the laws of a country are enforced and through which redress for grievances is
obtained.
B) The legal environment of a country is of immense importance to international business because
a country's laws regulate business practice, define the manner in which business transactions are to
be executed, and set down the rights and obligations of those involved in business transactions.
Differences in the structure of law can have an important impact upon the attractiveness of a
country as an investment site and/or market.
Teaching Tip: To learn more about international law and the legal systems of the countries of the
world consider {http://www.doingbusiness.org/law-library}.
Different Legal Systems
C) There are three main types of legal systems in use around the world: common law, civil law,
and theocratic law.
Common Law
D) The common law system (based on tradition, precedent, and custom) evolved in England over
hundreds of years. It is now found in most of Great Britain’s former colonies, including the
United States.
Civil Law
E) A civil law system is based on a very detailed set of laws organized into codes. Over 80
countries, including Germany, France, Japan, and Russia, operate with a civil law system.
Theocratic Law
F) Islamic law is the most widely practiced theocratic law system (based on religious teachings)
in the modern world.
Global Business Today Ninth Edition Chapter 2
Differences in Contract Law
G) Contract law is the body of law that governs contract enforcement. A contract is a document
that specifies the conditions under which an exchange is to occur and details the rights and
obligations of the parties involved. The United Nations Convention in Contracts for the
International Sales of Goods (CIGS) establishes a uniform set of rules governing certain aspects
of the making and performance of everyday commercial contracts between sellers and buyers who
have their places of business in different nations. By adopting CIGS, a nation signals to other
nations that it will treat the Convention’s rules as part of its law.
Property Rights and Corruption
H) Control over property rights (the bundle of legal rights over the use to which a resource is put
and over the use made of any income that may be derived from that source) are very important for
the functioning of business. Property rights can be violated by either private action (theft, piracy,
blackmail, Russian Mafia) or public action (governmental bribery and corruption,
nationalization).
Private Action
I) Private action refers to theft, piracy, blackmail, and the like by private individuals or groups.
Public Action and Corruption
J) Public action to violate property rights occurs when public officials extort income or resources
from property holders using various legal mechanisms including excessive taxation, requiring
expensive licenses or permits from property holders, or taking assets into state ownership without
compensating the owners.
K) In some countries, corruption is kept to a minimum while in other corruption is rampant.
Country Focus: Corruption in Nigeria
Summary
This feature describes the corruption that has characterized Nigeria’s economy over the last 50
years. When the country initially gained its independence from Britain in 1960, expectations were
high that Nigeria would become an economic heavyweight in Africa. With abundant natural
resources and a large population, it seemed the stage was set for success. However, the 2012
United Nations Human Development Index ranked the country 153 out of 187 nations, noting that
Nigeria suffers from extreme poverty, illiteracy, and high debt. Several factors have been blamed
for Nigeria’s troubles including political instability and corruption. Furthermore, in 2013
Transparency International still ranked Nigeria one of the most corrupt countries in the world.
Global Business Today Ninth Edition Chapter 2
Suggested Discussion Questions
1. What is meant by corruption? Explain how a corrupt political system affects the well being of a
country. What are the implications of corruption for Nigeria?
2. With its huge oil reserves and large population, Nigeria was expected to emerge as a major
player in Africa. Yet today the country is extremely poor with little expectation for an economic
turnaround any time in the near future. Explain how Nigeria came to be in such a sad state.
3. Clearly, Nigeria’s corrupt government has been a major factor in the country’s demise. In
contrast, other countries including Finland and Canada expressly prohibit corruption. In your
opinion, would Nigeria be better off following the example of countries like Finland and Canada?
Why or why not?
L) The Foreign Corrupt Practices Act makes it a violation of the United States law to bribe a
foreign government official in order to obtain or maintain business over which the foreign official
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33
has authority, and requires all publicly traded countries to keep detailed records so that it is clear
whether a violation of the act has occurred or not.
Management Focus: Did Walmart Violate the Foreign Corrupt Practices Act?
Summary
This feature explores corruption at Walmart’s Mexico division where managers allegedly bribed
Mexican government officials to obtain permission to build the San Juan Teotihuacan store in the
early 2000s. After leaders at Walmart’s headquarters were alerted of the situation, Walmart
launched an internal investigation. However, the investigation was turned over to Walmart
Mexico to complete and only after a 2012 New York Times article again raised questions about the
situation did Walmart reopen the investigation. Today, the company has spent more than $300
million on lawyers looking into the issue and Walmart is also facing scrutiny by the SEC and the
U.S. Department of Justice.
Suggested Discussion Questions
Please see Critical Thinking Question 6 for discussion of this feature.
The Protection of Intellectual Property
M) Intellectual property refers to property, such as computer software, a screenplay, or the
chemical formula for a new drug that is the product of intellectual activity. Intellectual property
rights include patents (documents giving the inventor of a new product or process exclusive rights
to the manufacture, use, or sale of that invention); copyrights (exclusive legal rights of authors,
composers, playwrights, artists, and publishers to publish and dispose of their work as they see fit);
and trademarks (designs and names, often officially registered, by which merchants or
manufacturers designate and differentiate their products).
Teaching Tip: For information on intellectual property rights and policies go to the World Trade
Organization’s web page at {http://www.wto.org/english/tratop_e/trips_e/trips_e.htm} and the
United States Patent and Trade Office’s web page {http://www.uspto.gov/ip/}.
N) The protection of intellectual property rights differs greatly from country to country. While
many countries have stringent intellectual property regulations on their books, the enforcement of
these regulations has often been lax.
Lecture Note: The U.S. Department of Commerce has made intellectual property protection a
priority. To learn more about what the Department is doing go to
{http://www.stopfakes.gov/about}.
Teaching Tip: Protecting intellectual property abroad is a key concern for many companies. The
U.S. government maintains a web site devoted to helping companies understand their rights on
intellectual property. To learn more, go to
Global Business Today Ninth Edition Chapter 2
{http://www.export.gov/regulation/eg_main_018818.asp}.
Teaching Tip: For more information on U.S. Trademark law go to
{http://www.law.cornell.edu/topics/trademark.html}.
O) Over 185 nations are part of the World Intellectual Property Organization. These countries
have all signed an international agreement to protect intellectual property rights known as the
Paris Convention for the Protection of Industrial Property. In addition, an agreement known
as the Trade Related Aspects of Intellectual Property Rights (TRIPS) requires WTO members to
grant and enforce patents lasting at least 20 years and copyrights lasting 50 years.
Teaching Tip: The World Intellectual Property Organization provides extensive information on
various treaties and agreements between countries regarding the protection of intellectual property.
Go to {http://www.wipo.int/portal/index.html.en} and click on About WIPO, and then on How
WIPO Works, and on Treaties.
Management Focus: Starbucks Wins Key Trademark Case in China
Summary
This feature focuses on intellectual property laws in China. When Starbucks entered China in
1999, the company was quickly challenged by a look-alike competitor, Shanghai Xing Ba Ke
Coffee Shop. Not only did the name Xing Ba Ke mimic the Starbucks name, but Xing Ba Ke’s
stores were virtual replicas of those operated by Starbucks. In 2003, Starbucks sued Xing Ba Ke
for trademark violations. In 2006, Starbucks won its case, and Xing Ba Ke was fined $62,000 and
ordered to stop using its name. The case was seen as a break through of sorts, a signal that China
was finally caving to pressure from other nations and the World Trade Organization to respect
intellectual property rights. Today, Starbucks operates over 400 stores in China and expects the
market to become second only to the U.S.
Suggested Discussion Questions
1. Discuss the concept of property rights protection and why it is so important to companies. What
does the court ruling against Xing Ba Ke mean for other companies that are already doing business
in China, or are considering entering the market?
2. How important is the Chinese market to Starbucks? Does the presence of look-alike companies
like Xing Ba Ke deter firms from entering the market?
Global Business Today Ninth Edition Chapter 2
© 2016 by McGraw-Hill Education.
This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This
document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
35
Discussion Points: With its growing middle class, the potential in the Chinese market is vast.
Some students might argue that the presence of Xing Ba Ke is actually a positive force for
Starbucks in that the coffee shop helps to promote the idea of coffee consumption in the Starbucks’
way. Most students however, will probably suggest that companies like Xing Ba Ke are a
nuisance because they could potentially damage the reputation of Starbucks if customers have a
negative experience at the stores, and because they require constant monitoring, are a drain on
profits.
Lecture Note: To extend this discussion, consider {http://www.businessweek.com/articles/2014-
04-03/starbuckss-howard-schultz-on-mobile-payments-china-and-oprah} and
{http://www.businessweek.com/news/2014-09-24/starbucks-expanding-into-russia-s-urals-even-
as-sanctions-mount}.
Teaching Tip: To explore Starbucks in more depth, go to the company’s web site at
{http://www.starbucks.com/}. Click on “International” to explore individual country sites.
Product Safety and Product Liability
P) Different countries have different product safety laws (safety standards to which a product
must adhere). In some cases businesses must customize products to adhere to local standards if
they are to do business in a country, whether these standards are higher or just different. Product
liability involves holding a firm and its officers responsible when a product causes death, injury,
or damage. Some executives believe that the high cost of liability insurance in U.S. hampers the
competitiveness of U.S. companies in the global marketplace.
Q) When product standards are lower in other countries, firms face an important ethical dilemma.
Should they produce products only of the highest standards even if this puts them at a competitive
disadvantage relative to other producers and results in not maximizing value to shareholders? Or
should they produce products that respond to local differences, even if that means that consumers
may not be assured of the same levels of safety in different countries?
FOCUS ON MANAGERIAL IMPLICATIONS
A) The material discussed in this chapter has two broad implications for international business.
First, political, economic, and legal systems of a country raise important ethical issues that have
implications for the practice of international business. Second, the political, economic, and legal
environment of a country clearly influences the attractiveness of that country as a market and/or
investment site.
B) The overall attractiveness of a country as a potential market and/or investment site for an
international business depends on balancing the benefits, costs, and risks associated with doing
business in that country.
C) In general, a country with democratic political institutions, a market-based economic system,
and strong legal system that protects property rights and limits corruption will be more attractive to
Global Business Today Ninth Edition Chapter 2
companies than a country that lacks democratic institutions, where there is strong government
regulation of economic activity, and where the level of corruption is high and the rule of law is not
respected.
Critical Thinking and Discussion Questions
1. Free market economies stimulate greater economic growth, whereas state-directed economies
stifle growth. Discuss.
2. A democratic political system is an essential condition for sustained economic progress.
Discuss.
3. What is the relationship between corruption (i.e., bribe taking by government officials) in a
country and economic growth? Is corruption always bad?
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37
4. You are the CEO of a company that has to choose between making a $100 million investment in
either Russia or Poland. Both investments promise the same long-run return, so your choice of
which investment to make is driven by considerations of risk. Assess the various risks of doing
business in each of these nations. Which investment would you favor and why?
5. Read the Country Focus on Chavez’s Venezuela, then answer the following questions:
a. Under Chavez’s leadership, what kind of economic system was put in place in Venezuela?
How would you characterize the political system?
b. How do you think that Chavez’s unilateral changes to contracts with foreign oil companies will
affect future investment by foreigners in Venezuela?
c) How will the high level of public corruption in Venezuela impact future growth rates?
d) Currently, Venezuela is benefiting from a boom in oil prices. What do you think might happen
if oil prices retreat from their current high level?
e) In your estimation, what is the long run prognosis for the Venezuelan economy? Is this a
country that is attractive to international businesses?
Answer:
Global Business Today Ninth Edition Chapter 2
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b) In the oil industry, which the country depends on for some 70 percent of its exports, Chavez
pushed out foreign companies, and expanded the hold of the state run company. Chavez
announced in 2005 that the state would increase its royalties on oil sales from 1 percent to 30
percent, and that in 2006, the tax rate of oil sales would also increase from 34 percent to 50
percent. Most students will recognize that by making it more difficult for foreign investors to do
business in the country, in the oil industry or otherwise, Chavez threatened future economic
growth. Indeed, oil production in the country has fallen by one third since 2000.
c) Corruption in Venezuela is rampant. In 2012, Transparency International lowered its ranking of
the country to 165 out of 174, making it one of the most corrupt countries in the world.
Government officials are permitted to demand bribes in return for permission to expand operations
or enter new lines of business. Many students will recognize the challenges of operating in an
environment like the current situation in Venezuela. Some students will probably suggest that
firms may reassess their investments given the new political and economic risks present in the
country. Many students will probably conclude that a market that is considered to be only partly
free, with rampant corruption and nationalization taking place, is no longer a worthwhile
destination.
d) Oil prices are currently high making Venezuela, one of the world’s largest producers of oil, very
rich. So far, Venezuela has been using the oil profits for various social programs. Most students
will probably recognize that if oil prices begin to retreat, these programs will probably suffer.
Some students may wonder whether falling oil prices could spell disaster for Venezuela’s oil
industry. Venezuela has been maximizing the state’s share of oil revenues by pushing out foreign
companies and increasing the hold of state-run Petroleos de Venezuela SA. Consequently, if
prices do fall, this organization will be more significantly affected.
e) A recent World Bank study puts Venezuela as being one of the most regulated economies in the
world. The move to take various enterprises under state control is also impeding economic
growth. In the oil industry, for example, Chavez reduced the stakes owned by foreign companies
to give the state run company a bigger position. Most students will probably conclude that given
the levels of corruption and regulation, the country is just too risky to consider as a destination for
international companies.
Lecture Note: Victor Chavez died in 2013. To explore Venezuela since his passing, consider
{http://www.businessweek.com/ap/2014-03-05/on-death-anniversary-chavez-revolution-
challenged}.
6. Reread the Management Focus feature: Did Walmart Violate the Foreign Corrupt Practices Act?
What is your opinion? If you think it did, what do you think the consequences will be for
Walmart?
Global Business Today Ninth Edition Chapter 2
Closing Case: Ghana: An African Dynamo
Summary
The closing case explores the changes in Ghana’s political system that have helped the country
achieve one of the fastest growth rates in sub-Saharan Africa and indeed the entire world. After
Ghana gained its independence from Great Britain in 1957, the country suffered from high levels
of corruption and a series of military coups that limited the development of a stable political
system. In 1981, a coup put Jeremy Rawlings in power. Over the next 20 years, Rawlings worked
to eliminate corruption and eventually to implement democratic policies. Under Rawlings’ watch,
some 300 state-owned enterprises were privatized. The recent discovery of oil has further
benefited Ghana. Today, there is an effort underway to upgrade the country’s infrastructure.
Discussion of the case can revolve around the following questions:
QUESTION 1: After gaining independence from Britain, Ghana’s economy languished for three
decades. Why was this the case? What does the Ghana experience teach you about the connection
between economic and political systems and economic growth?
QUESTION 2: What were the main changes that Gerry Rawlings made in the Ghanian political
and economic systems? What were the consequences of these changes? What are the lessons
here?
QUESTION 3: What external forces helped to persuade Rawlings to change political and
economic practices in Ghana? Do you think he would have made the changes he did without these
external forces?
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40
QUESTION 4: If Ghana had discovered large oil reserves in the 1980s, instead of the 2000s, do
you think things would have played out differently? Why?
QUESTION 5: What is the difference between the approach of Nigeria toward oil revenues and
that of Ghana (the Nigerian experience is documented in the Country Focus in this chapter)?
Which approach is in the best long-run interests of the country?
QUESTION 6: What does Ghana need to do to remain on its current track of sustained economic
growth?
Global Business Today Ninth Edition Chapter 2
Continuous Case Concept
Recent sanctions by the United States and Europe against Russia are posing problems for global
automakers. The sanctions, imposed in response to Vladimir Putin’s policy decisions are creating
challenges not only for Russian citizens, but also for U.S. and European companies. France’s
Renault is likely to be hit hardest. It is the most dependent on the Russian market followed by
South Korea’s Kia and Hyundai, and Japan’s Nissan, and German automakers VW and Mercedes.
If these sanctions persist, the companies could experience considerable production issues.
Already, General Motors is offering buyouts to its workers in Russia as sales slump in the country.
• Ask students to consider the impact of the sanctions relative to the overall attractiveness of
the Russian market. What are the political and economic costs of doing business in
countries like Russia where political problems threaten economic growth?
• Then, ask students to consider what strategic alternatives are open to companies like
Renault that depend on the Russian market.
• Finally, ask students to consider the tradeoffs of operating in an emerging market like
Russia where political uncertainty is high as compared to a more established market.
This exercise could be used at the beginning of the discussion of this chapter’s material, and/or
again at the end. It is especially relevant to the Opening Case: Putin’s Russia. To take the
discussion into greater depth, ask students read the pertinent selections in the additional readings
section below. The exercise also works well at the beginning of the implications for managers
section.
globalEDGE Exercises
The resources for each exercise can be easily located by using the search box at the top of the
globalEDGE website at http://globalEDGE.msu.edu
Exercise 1
Search phrase: Freedom in the World or Freedom House
Resource Name: Freedom House Surveys
Website: http://www.freedomhouse.org/reports
Global Business Today Ninth Edition Chapter 2
Published annually since 1972, the survey ratings and narrative reports on 195 countries provide
insight into an assessment of global political rights and civil liberties in each country. Political
rights ratings are based on an evaluation of three subcategories: electoral process, political
pluralism and participation, and functioning of government. Civil liberties ratings are based on an
evaluation of four subcategories: freedom of expression and belief, associational and
organizational rights, rule of law, and personal autonomy and individual rights.
Exercise 2
Search phrase: World Bank Doing Business Indicators
Resource Name: World Bank: Doing Business Indicators
Website: http://www.doingbusiness.org/
globalEDGE Category: Statistical Data Sources
Additional Info:
The World Bank’s Doing Business Project provides objective measures of business regulations
and their enforcement across 189 economies and selected cities at the subnational and regional
level. To construct the indicators, two types of data are utilized: First, the relevant laws and
regulations in each country are reviewed in detail. Second, official fee schedules and expert
respondents’ estimated of time each procedure takes is taken into account.
Additional Readings and Sources of Information
IMF Says Ghana, Zambia Most at Risk as Deficits in Africa Widen
http://www.businessweek.com/news/2014-04-24/imf-says-ghana-zambia-most-at-risk-as-deficits-
in-africa-widen
Ghana Cocoa Board Says 2013-2014 Output to Beat Target on Weather
http://www.businessweek.com/news/2014-01-20/ghana-cocoa-board-says-2013-14-output-to-beat-
target-on-weather
U.S. Ambassador to Ghana on Business Opportunities
http://www.businessweek.com/videos/2014-03-12/u-dot-s-dot-ambassador-to-ghana-on-business-
opportunities
Profile: Valdimir Putin
http://www.bbc.com/news/world-europe-15047823
Vladimir Putin: The Rebuilding of “Soviet” Russia
http://www.bbc.com/news/magazine-26769481
Global Business Today Ninth Edition Chapter 2
Why U.S.-Russia Trade Is Stuck in the Cold War
http://www.businessweek.com/articles/2012-07-12/why-u-dot-s-dot-russia-trade-is-stuck-in-the-
cold-war
Grounds Zero: A Starbucks-Free Italy
http://www.businessweek.com/magazine/grounds-zero-a-starbucksfree-italy-02092012.html
Columbians Keep Sipping Juan Valdez as Starbucks Arrives
http://www.businessweek.com/news/2014-10-03/colombians-keep-sipping-juan-valdez-as-
starbucks-arrives
Chavez: Rival trying to destabilize Venezuela
http://www.businessweek.com/ap/2012-07-09/chavez-rival-trying-to-destabilize-venezuela
Oil Slump Rings Alarm Bell for Nigeria as Elections Loom
http://www.businessweek.com/news/2014-10-21/oil-slump-rings-alarm-bells-for-nigeria-as-
elections-loom
Why Wal-Mart Hasn’t Conquered Brazil
http://www.businessweek.com/articles/2014-05-08/why-wal-mart-hasnt-conquered-brazil#p1
To Stop the Coffee Apocalypse, Starbucks Buys a Farm
http://www.businessweek.com/articles/2014-02-13/to-stop-the-coffee-apocalypse-starbucks-buys-
a-farm
