Question

6-10. Distinguish between totalitarianism, socialism, and democracy. What are the implications of each for internationalizing firms? (6 points)

6-11. What are the specific characteristics of democracy? How do these characteristics facilitate international business? (2 points)

6-14. Describe proactive actions that firms can take to minimize country risk. (2 points)

Answer 1

Ans :- A totalitarian government is the one who seek to take control upon all economic and political matters as well as values , believes and attitudes of the people. As the name suggest it wants a ' total ' control over every aspect of people's actions.

Where as socialism is based on collective ideology where collective welfare of people is given more importance than their welfare on individual level.

In democracy the government is for the people ,to the people and by the people. Here people are free to take their own actions.

For internationalizing the firms totalitarianism is not favourable because this type of government does not tolerate any out action. Whereas in socialist government believes in the internal investment for production rather than profits. In democratic form of government people option is the matter of fact.

6-11 The specific characteristics of democracy are private Property Rights and limited government interruption. And due to this limited authority over business organization firms are free to make their own business policies and can invest wherever they wish which leads to increase in their contribution to FDI and foreign investment.

6 - 14 It was observed before that companies / organizations often make serious mistake by ignoring or not taking into consideration the political risks. But the reality is they cantcbe avoided but can be managed by taking certain steps . The firm or company has to recognize the risks and have to 1 - Identify it 2 - Take certain measures to minimize it's consequences 3 - Once the risk identified and measured it has to take certain steps to manage the problem