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.IntroductionThe 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 import ...view middle of the document...
Today however, China is firmly committed to economic reform and opening to the outside world. The Chinese government has established a friendly diplomatic relationship to other countries in order to show the willing to cooperate through many policies and developing diplomatic relations with other countries. The Chinese leadership has identified reform of state industries as a government priority. Government strategies for achieving that goal include large-scale privatization of unprofitable state-owned enterprises. The leadership has also downsized the government bureaucracy of the transportation and communications systems. Joining the World Trade Organisation in 2001 improved further the conditions of MNC competition in China. For an Australian MNC, this means the protection according to 'GATT' rules, including reduction on tariffs for industrial, agricultural and manufactured goods. The fair trade and market access rules that apply for members of the WTO have enhanced the protection of business rights for an Australian MNC in China.The gradual move from communist to democratic ways initiated by the ''Great leap forward' (started by the Communist Party in 1958) has not been a smooth transition. 'China has suffered years of political turmoil catalysed by the business aspirations of western civilizations', and for an Australian organisation operating in China, a number of legal and government policies need to be followed to be successful. A further complication for Australian organisation is that state government policies vary from North to South, and representatives need to understand the different state owned enterprises they are dealing with. Siva Yam who is President of the U.S.-China Chamber of Commerce explains, "the South is not the same as the North," he said. "The way you do business in Beijing or Shanghai or Shenzhen is all different." So, "the McDonald's theory does not work." The theory holds a company can sell the same thing across the entire country and expect success overnight. "Companies that source from China make more money than companies that try to sell into China," he added'. ("Background Notes: China." U.S. Department of State. Nov. 2000) Despite the communist and'corrupt' style of rule governing China, the tide is gradually favouring a 'democratic business style,' making the potential gains in such a densely populated country for an Australian or foreign organisation enormous.IndonesiaGiven that 88% of Indonesians are muslim, it is interesting that a theocratic totalitarianism or political power monopolized and governed according to religious political islam is not dominant. Instead, Indonesia's transition to democracy in 1998 opened the door to foreign investors in-particularly its 'neighbor' Australia, although the inadequacy of the country's corrupt legal system which is supposed to protect property rights has made it difficult. According to J.F Law a columnist from Journey magazine, the Indonesian legal system...
