An Australian MNC has subsidiaries in China, Indonesia and South Africa. Examine and discuss key aspects of the legal, political, economic and cultural environments in each of these locations. Explain the international business implications.
The political system of a country shapes its economic and legal systems. For this reason and for an Australian MNC operating in China, Indonesia and South Africa we need a clear understanding of the different economic and legal systems in these countries. The social norms and values that prescribe acceptable behaviour in different nations vary greatly, and as well as the economic and legal aspects, this cultural environment also has important implications for international business organisations. I will discuss from a profit perspective, using the implication of international trade theory, the competitive advantage an Australian MNC would gain through setting up subsidiaries in China, South Africa and Indonesia. The different aspects of the legal, political, economic and cultural environments in each of the three countries will be examined, and how they affect business transactions and operations.
Political and Legal Systems
Political systems can be assessed according to 2 dimensions, - collectivism and individualism. In theory, 'collectivists insist that the claims of groups, associations, or the state must normally supersede the claims of individuals'. - (Stephen,A, Grabill,D, and Gregory M. A. Gronbacher, p52) while individualism holds that the individual is the primary unit of reality and the ultimate standard of value. In modern times, the collectivism ideology has been replaced by socialism which in the early 20th Century was divided into two camps, - communism and social democrats.
The People's Republic of China has been a communist country since 1949. Governments in the past did play a strong role in economic activities, including controlling the market entirely. Today however, China is firmly committed to economic...