Exam summary block 2 - International Business Awareness (IBA)

Exam summary – International Business Awareness (IBA)

Contents
Chapter 1 – The Political Environment...................................................................................................2
Chapter 2 – The Macroeconomic Environment....................................................................................10
Chapter 3 – The Market System...........................................................................................................20
Chapter 4 – The Demographic, Social and Cultural Context of Business..............................................27
Chapter 5 – The Resource Context: People, Technology and Natural Resources.................................32
Chapter 6 – The Ethical and Ecological Environment............................................................................35




1

,Chapter 1 – The Political Environment
Politics  Concerned with those processes that help to determine how conflicts are contained,
modified, postponed or settled, can be seen as a universal social activity. Politics:
 Is a universal activity that affects business of all types and sizes.
 Occurs at a variety of spatial levels from the local to the global.
 International activities and actions.

Government  Concerned with the pursuit and exercise of power – the power to make decisions
which affect the lives of substantial numbers of people, be it local, regional, national and
international.

Authoritarian political system  Enforcement of rules, regulations and orders.

Democratic political system:
 Voluntary decision-making & acceptance on rules, regulations and orders.
 Direct or indirect democracy.
 Aspects of democratic political systems.
 Referendums or Plebiscites  Where individuals have equal influence over the final
outcome.
 Direct (or pure) democracy  Form of democracy in which people decide on policy
initiatives directly.

- Political systems, structures and processes reflect underlying social values and philosophies and
these influence the ways in which major decisions are taken.

- In any democratic systems of government, the key political systems/institutions likely include:
 Electoral system  Links the people (the electorate) with government; Through elections
where country’s citizen periodically chooses who will exercise power to make decisions
which shape the lives of individuals.
o Representative democracy:




o Elections are a vital
o To operate as democratic  Need to exhibit number of features where wishes of
individual citizen are reflected in choice of government:
 System of regular elections (every 4/5 years) based on universal adult
suffrage (all adults equal right to vote).
 Freedom of speech, movement, assembly.
 Freedom of coercion and absence of illegal electoral practises.
 Secret ballot.
 Free media.



2

, o In First-past-the-post system  Simple majority sufficient to ensure victory;
consequence some winning candidates may be elected with less than half votes cast.
o Proportional representation  Operates a redistribution of votes, occurs when
there is no outright winner, resulting in a final decision that can be said to represent
more closely to the wishes of the whole electorate.
o Coalition government  Made up of different parties, which may hold significantly
or even radically different views from the largest party within the coalition.
 Party system
o Political parties  Organized group who have the same ideology, political positions,
and field candidates for elections, in an attempt to get them elected and implement
their agenda.
o Manifesto  Form of politic statement by a political party.
 Representative assembly
o Political executive  key decision maker  Implement the laws that have been
framed by the legislature and the policies of a government.
o Political accountability  When a politician makes choices on behalf of the people
and the people have the ability to reward or sanction the politician.
o Federal system of government:
 Sovereignty  Legitimate power to make decisions.
 Sovereignty is divided between two or more levels of government, each with
independent powers that are usually laid down in a written constitution
which is interpreted by the courts.
o Unity system of government:
 Authority rests with the national government and any powers granted to
subnational levels by the central sovereign authority can ultimately be
rescinded including the right of government at subnational level to exist.
 Constitution  Body of fundamental principles or established precedents
according to which a state or other organization is acknowledged to be
governed.
o Parliament
 A system for articulating sectional interests
o Pressure groups or lobbying groups  Collections of like-minded people who have
voluntarily joined together to try to influence government thinking and behaviour
and to represent the interests of their members.
o Functions of pressure groups in democratic system:
 Helping to defend minority interests.
 Assisting in the implementation of government policy and legislation.
 Providing for continuity in communication and consultation between the
governors and the governed between elections.
o Professional lobbyist  Often former politician or bureaucrat familiar with the
structure of decision-making in government and with access to key decision-makers.

- The three branches or functions of government:
 Legislative function
o Make, amend or replace laws.
o If bill gets approved – becomes a law.
o The Legislature  Assembly with the authority to make laws for a political entity
such as a country or city.


3

, o Common features that apply to legislatures and legislative function in democratic
states:
 Bicameral legislature  Legislature with two chambers, an upper house and
lower house, each with specific powers and roles in the legislative process.
 Checks and balances  Counterbalancing influences by which an
organization or system is regulated, ensuring that political power is
not concentrated in the hands of individuals or groups.
 Multi-stage legislative process  Involves drafting of a legislative proposal,
its discussion and consideration, and if necessary, amendment, further
debate and consideration and ultimate acceptance or rejection by either or
both legislative chambers.
 Executive-led process  Where most major legislative proposals emanate
from executive branch of government.
 Presidential system of government  Chief executive (president)
elected separately by the people, not part of legislature.  There is
separation of power.
 Parliamentary system of government  Members of executive may
be members of legislative body and may be in position to control
legislative process.
 Opportunities of legislative initiatives by ordinary representatives 
Arrangements that permit ordinary members of legislative assembly to
propose new laws or changes to existing laws.
 Opportunities to criticise and censure the government and, in some cases,
remove it from office  Vital function within democratic system of
government, it forces decision-makers to defend their proposals, explain
logic of their actions and account for mistakes they have made.
 Control of the purse strings  Power to grant or deny government the
money required to carry out its policies and legislative programme.
 Executive function
o Ensuring decisions are put into effect in order to achieve government’s objectives.
o Implement governmental decisions.
o Cabinet  Individuals, chosen by head of government, to head different government
departments/ministries, and are part of collective decision-making body.
 Meets to sanction policy proposals put forward through a system of
executive committees and subcommittees.
o Civil servants/bureaucrats  Non-elected government officials.
 Carry out day-to-day administration of government policy, who work in
complex bureaucratic organisations within state bureaucracy.
 Help to advise ministers ( head of a government department) on different
policy options and on political and administrative aspects of particular
courses of action.
 Judicial function
o Judiciary/System of courts  Third arm of government.
o Ensure laws are applied and enforced.
o Supreme Court  Arbitrate in event of a dispute.




4