SUBJECT INTERNATIONAL BUSINESS

DANANG UNIVERSITY DA NANG UNIVERSITY OF ECONOMICS  SUBJECT: INTERNATIONAL BUSINESS Class: 44K02.1 Members: Tran Thi Phuong Anh Luong Thi Khanh Ly Nguyen Tran Thao My Nguyen Thi Thu Tham Hoang Nhu Khanh Linh Vu Thi Thuy Duyen Da Nang, November 20t, 2019 INTERNATIONAL BUSSINESS – 44K02.1 I/ POLITICAL SYSTEMS List of Diagrams Diagram Democracy Index .5 Diagram Freedom Trend Diagram Open Markets Diagram Rankings on Doing Bussiness topics 13 Diagram Ease of Doing Bussiness Score on Doing Bussiness topics .13 Diagram Intellectual property 15 Diagram International property right index (IPRI) in 2019 15 List of Contents I/ POLITICAL SYSTEMS ECONOMIC SYSTEM II/ LEGAL SYSTEMS 12 CONTRACT ENFORCEMENT 13 LEVEL OF PROPERTY PROTECTION .14 THE PROTECTION OF INTELLECTUAL PROPERTY 14 III/ CUTURE 16 POWER DISTANCE 17 INDIVIDUALISM VERSUS COLLECTIVISM: .17 MASCULINITY VERSUS FEMININTY: 18 UNCERTANINTY AVOIDANCE: .18 LONG-TERM ORIENTATION: 18 IV/ EVALUATE BENEFITS, COSTS AND RISKS .19 BENEFITS 19 COSTS 19 POLITICAL FACTORS 19 ECONOMIC FACTORS .19 LEGAL FACTORS 20 RISKS 20 POLITICAL RISK 20 INTERNATIONAL BUSSINESS – 44K02.1 I/ POLITICAL SYSTEMS ECONOMIC RISK .20 LEGAL RISK .20 INTERNATIONAL BUSSINESS – 44K02.1 I/ POLITICAL SYSTEMS I/ POLITICAL SYSTEMS The political system is the system of government of a country and it is assessed on two criteria: the degree which the government attaches importance to individuals or collectives and the degree of democracy and totalitarianism ( From International Business- Competing in the Global Marketplace, Charles W.L.Hill ) Individualism emphasizes personal goals and individual rights An individualist is motivated by personal rewards and interests Individualists set personal goals and goals based on themselves Collectiveism focuses on group goals, what is the best for collectives and personal relationships The collective is motivated by team goals A long- term relationship is very important Team members easily sacrifice their personal interests or praise to recognize and celebrate the success of the group Democracy is a form of government where the citizens of the nation have the power to vote in which the citizens exercise power directly or elect representatives from among themselfs to form a governing body such as a parliament INTERNATIONAL BUSSINESS – 44K02.1 I/ POLITICAL SYSTEMS Totalitarian countries are nations in which the government does not permit its people to partake in political decision making Instead of giving the people a voice, a totalitarian country is ruled either by a single dictator or a group that has not been collectively elected by the people Commonwealth of Australia has always maintained a stable liberal democratic political system which is clearly shown in the following index table: Diagram Democracy Index Democracy Index 12 10 ửc ầu Bầ n cô ng ằầ b g t vàự Q t nự ềầ y u d c oủ a d ng ần ạt Ho n độ nh hí c gc ần yề u q am Th gi nh hí c a trị n Vằ hó nh hí c a trị ểm Đi tru b ng h ìn n dầ ủ ch (https://worddisk.com/wiki/Democracy_Index/) Based on the chart of Australia's democracy index 2018, it can be seen that the two elements of fair, free elections and citizen's freedoms reach absolutely 10 points A democratic rating of 9.09 / 10 is a high number indicating that Australia is a full democracy In addition, Australia remains the 9th most democratic country in the world with indicators of election, government or majority Therefore, Australian citizens also enjoy many interests such as:  Freedom of election and being elected INTERNATIONAL BUSSINESS – 44K02.1 I/ POLITICAL SYSTEMS  To stand for parliament  To have the right to apply for Australian passport, free entry to Australia as well as visa-free countries for Australian citizens  To have opportunity to work in all positions of the Australian Defense Force and civil servants  Registration for children born overseas to acquire Australian citizenship under "Origin"  To get help from the Australian Diplomatic Office when you go abroad (https://www.immigration.com.vn) Moreover, the Australian government system is based on a tradition of liberal democracy including religious tolerance, freedom of speech and association  According to Reporters Without Borders, Australia is the 19th country in the world for the freedom of the press (2018) with a score of 15.46 Australia has good public media (https://rsf.org/en/ranking/2018) In fact, Australians must obey many laws that restrict free speech including libel laws, hate speech laws, sexual harassment laws, and laws against intimidation As a result, the INTERNATIONAL BUSSINESS – 44K02.1 I/ POLITICAL SYSTEMS space left to demand investigative journalism has also been reduced by the fact that independent investigative reporters and denunciators face harsh laws  The Government of Australia allows people to be free of belief and the Government generally still respects this in reality The relationship between religions has contributed to the freedom of this belief Australia is a country that focuses on collective socialism, which means that Australia focuses on the advantages of common goals rather than personal goals According to a report by the OECD 2015, Australia ranked 5th in the top 10 highest tax payers in the world Australia's tax system is organized in a stratistructured structure, which means the higher the income, the greater the tax Example, Your earnings are less than 600 AUD, you not have to pay taxes The highest tax rate is 47% applied to individuals earning over 62,500 AUD This level does not include an income deduction of Medicare of 1.5% This collection is mandatory and must be closed at the same time as the income tax In Australia, the overall demand of society is generally seen to be more important than freedom of each individual Therefore, citizens in Australia will benefit from access to good health systems, quality education and a wide range of community facilities (such as parks and playgrounds) are supported through this tax revenue (http://vinaservicesgroup.com/tin-tuc/thong-thue-cua-uc.html/) CONCLUSION: Australia is considered a relatively good country for foreign investment enterprises to invest in because Australia has a democratic political system, With the power of the east, most of the benefits of the population are secured The Australian political system focuses on collective socialism, the benefits of a collective group will be more advanced than the benefits of individual individuals However, the democratic political system of Australia still has rules that require businesses when choosing Australia as a market for development, which needs careful consideration before investing in INTERNATIONAL BUSSINESS – 44K02.1 I/ POLITICAL SYSTEMS II/ECONOMIC SYSTEM The economic system is the way in which resources are allocated and controlled in a country's market The economic system refers to the role of government in regulating and controlling economic activities For countries that value individual interests over collective interests, it is easy to see free market economic systems In contrast, when countries think that collective interest is more important, governments tend to have more control and tighter control than the others Understanding the economic system is necessary to assess the business in each country Australia's economic system is a mixed economy, with very high levels of market freedom Australia's efforts to harmonize the elements of the two forms of economy, the market economy and the command economy, help the government control the profits from business and provide the necessary policies to stabilize growth and distribute income evenly But Australia also tends to be a market economy to help the economy achieve high efficiency According to heritage.org, Australia’s economic freedom score is 80.9, making its economy the 5th freest in the 2019 Index Its overall score is unchanged from 2018, with higher scores for labor freedom, government integrity, fiscal health, and trade freedom offsetting a steep drop in judicial effectiveness Australia is ranked 4th among 43 countries in the Asia–Pacific region, and its overall score is well above the regional and world averages INTERNATIONAL BUSSINESS – 44K02.1 I/ POLITICAL SYSTEMS Diagram Freedom Trend In particular, the overall index of economic freedom has twelve components grouped into four broad categories: Rule of Law; Government Size; Regulatory Efficiency and Open Markets In the economic system section, we focus on analyzing three components proving that Australia is a country with high economic freedom score Three components are shown in the following chart: Diagram Open Markets INTERNATIONAL BUSSINESS – 44K02.1 I/ POLITICAL SYSTEMS 10 Chart analysis:  The Trade Freedom index measures the absence of tariffs and other barriers that affect the international trade of goods and services Australia's score is quite high, reaching 87.6 points, an increase of 1.4 points compared to 2018 Australia ranks 8th in the world for free trade The average applied tariff rate is 1.2 percent, which is quite low compared to other countries Australia has entered into 11 FTAs (Free Trade Agreements) with both individual countries and groups of countries such as China, Korea, Thailand, ASEAN, New Zealand and so on A number of other agreements are currently under negotiation Australia negotiates FTAs to benefit exporters, importers, producers and investors by reducing and eliminating certain barriers to international trade and investment Australia's trade and tax policies are quite transparent, but non-tariff barriers (regulations on quality, food safety, etc.) are quite strict All imported food items must comply with the food hygiene and safety regulations set by the Department of agriculture Industrial products should comply with technical barriers In general, imported products must comply with the regulations on packaging and labeling  The Investment Freedom index for Australia from The Heritage Foundation measures the restrictions to investment activity both within the country and across borders A higher score means fewer restrictions Australia's score were unchanged from the previous year, 80 points, which is the lowest among the three components At this score, Australia is on par with Canada and Germany in terms of investment freedom Government policies not significantly interfere with foreign investment Australia is one of the countries with significant tax incentives such as:  Tax incentives for scientific and technological projects 10 INTERNATIONAL BUSSINESS – 44K02.1 I/ POLITICAL SYSTEMS 11  Reduce capital costs for petroleum and mineral exploitation industries  Tax incentives for small and medium businesses Therefore, if investing in Australia, investors will have the opportunity to enjoy tax incentives and service incentives In some states, when becoming a permanent resident, the investor will be exempted from the tax on buying houses with small valuable real estate, investors are no longer limited in the right to buy residential real estate In addition, they will enjoy better credit, more incentives for personal loans, home loans, car purchases Australia has a foreign investment approval regime that regulates certain types of acquisitions by 'foreign persons' of equity securities in Australian companies and trusts, and of Australian businesses and Australian real property assets The Foreign Investment Review Board (FIRB) is a non-statutory body that advises the The Government monitors the foreign investment to ensure that the investment will benefit Australia In particular, foreign investors are limited to investing in "new" properties so that their investment adds to the existing housing stock in Australia This is to prevent speculation, which has little benefit for the Australian economy, and that could result in escalating housing prices The Financial Freedom index for Australia from The Heritage Foundation measures the efficiency of the banking system and the interventions of the government into the financial system A higher score means more efficient banking institutions and less government intervention Australia's financial freedom index remains the same as in 2018 and is equal to 90 points In this score, Australia ranked first in the financial freedom rankings Financial regulation in Australia is split mainly between the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulatory Authority (APRA) The Australian Securities Exchange has also played a role in regulating market conduct 11 INTERNATIONAL BUSSINESS – 44K02.1 I/ POLITICAL SYSTEMS 12 The Australian government's intervention in finance is very low, regulation of financial institutions is minimal but may extend beyond enforcing contractual obligations and preventing fraud In conclusion, all three of Australia's scores are higher than the world average, which proves that the Australian market is an open market With almost all industries open to foreign competition, Australia is an attractive and dynamic destination for investment III/ LEGAL SYSTEMS According to International Business – Competing in the Global Marketplace, 8th Edition Charles W L Hill, the legal system of a country refers to the rules, or laws, that regulate behavior along with the processes by which the laws are enforced and through which redress for grievances is obtained Each country has the different legal system so considering and researching differences will reflect the attractiveness and specific characteristics of each country to make a decision that “ In this countrym should we invest or not?” Therefor, the legal system of each coutry is very important for international business because it determines the business form, establishment of rights and obligations of related parties In different countries, goverments will have different ways to define the legal system, which specifies how companies can conduct business so that it is important and necessary to find out the legal system of a country before deciding to invest There are three main types of legal systems-or legal tradition-in use around the world: common law, civil law, and theocratic law The legal systems in Australia is common law, which is based on traditon, precedent and custom Tradition refers to a country's legal history,precedent to cases that have come before the courts in the past, and custom to the ways in which laws are applied in specific situations Generally, common law is more flexible than others In order to estimate the legal systems, investors need to identify and 12 INTERNATIONAL BUSSINESS – 44K02.1 I/ POLITICAL SYSTEMS 13 evaluate legal issues such as contract enforcement, taxition, property protection, intellectual property rights, product responsibilities and product safety CONTRACT ENFORCEMENT Diagram Rankings on Doing Bussiness topics The bar chart illustrates contract enforcement in Australia rank among the top five on the global, which showed quickness in solving legal issues Diagram Ease of Doing Bussiness Score on Doing Bussiness topics 13 INTERNATIONAL BUSSINESS – 44K02.1 I/ POLITICAL SYSTEMS 14 The assessment of the level of contract enforcement in Australia was rated 79 on a scale of 100 This is an ideal number for investors entering the Australian market LEVEL OF PROPERTY PROTECTION Property protection refers to the legal right to use under which an asset is exchanged in exchange for any collection related to that property.Assets include: land, housing, equipment, capital, mineral ownership, business and intellectual property (ideas protected through patents, copyright tables, and trademarks )Accordingly, Australia's property laws are a system of laws governing and prioritizing the rights, benefits and responsibilities of the property laws of individuals relating to property, title, or ownership wisdom.Australian law orders or prioritizes properties that are real and tangible (land) or intangible (copyrights to literary works)  Land law: Australia's property laws are allowing the creation of a system to prove, recognize and transfer land ownership, and facilitate the use of land law All Australian states and territories adopt the "Torrens Land Registration System" when granting new land and land has been studied in accordance with the relevant law This system aims to reduce the number of land-related frauds resulting from falsifying property rights Therefore, when you want to invest land in Australia, you must pay attention to the "land law": Land ownership is only confirmed when registering the property This gives investors "greater assurance, real certainty about ownership." THE PROTECTION OF INTELLECTUAL PROPERTY Intellectual property: is the product of intellectual activity Such as computer software, a screenplay, a music score, or the chemical formula for a new drug Patens, copyrights, and trademarks establish ownership rights over intellectual property 14 INTERNATIONAL BUSSINESS – 44K02.1 I/ POLITICAL SYSTEMS 15 Australia follows the British tradition of “Intellectual property”, operates an automatic copyright system and is a signatory to the “Berne Convention for the protection of literary and artistic work” Other areas of Austrlian intellectual property related to business include patents, designs and plant breeder’s rights, tradenames and trademarks, tradescrets, information and registered design Australia’s intellectual property law complies with trade obligation and international treaties ( by the general agreement on trade tariffs and the TRIPS agreement) Intellectual property rights in Australia are mainly regulated through the provisions of the following Act: Copyright Act, Patent Law, Trademarrk Law, Design Law, Breeder’s Rights Act… Australia’s property rights index in the Pacific region: ranked second in the world Diagram Intellectual property Diagram International property right index (IPRI) in 2019 15 INTERNATIONAL BUSSINESS – 44K02.1 I/ POLITICAL SYSTEMS 16 Global rank: of 129 Region rank: of 19 Australia’s IPRI score increased by 0.033 to 8.383 placing it 3nd in the Asia and Oceania region and 5th in the word Australia’s Intellectual property right index score increased by 0.066 to 8.656 with 8.018 in perception of intellectual property protection, 9.75 in Patent protection and 8.2 in Copyright protection (https://www.internationalpropertyrightsindex.org/country/australia ) These index are higher so the better protected in intellectual property rights, more secure Futhermore, the index is also evaluate that private property will be approprited and judged the independence of judiciary, the existence of judicial coruption and the ability of individuals and business to enforce contract in Australia Therefore, it is an important index that investors are interested in, affecting the decision to invest and business in that country In addition, Australia is also a country with a product safety law and product liability is quite strict For example, it is nececcary to have specific and strict in any product And there will be measures, law to treatment and recovery when there are product that not reach to targets before being sold on the market Therefore, the Australian government has product safety laws, establishing the Australian comsumer and competition commission (ACCC) to provide information about Australia’s product safety system standards and collection product So Australia is a country with the tightening in product safety and product responsibility Therefore, this is also a challenge for investors when they want to invest in the Australian market => need to have fair competition, always continously improve product with well-qualitied, reduce production costs to be profitable IV/ CUTURE Uderstanding and adapting to cultures of other countries have a important role in building competitive advantage of the business Managers not only need to understand 16 INTERNATIONAL BUSSINESS – 44K02.1 I/ POLITICAL SYSTEMS 17 and accept the differences between cultures but also need to have a deep understanding into the beliefs and cultural values of foreign partners so that company can devise appropriate development polices and strategies for business Hofstede’s study of culture is considered typical According to, He gave five aspects when he studied cuture of country such as: Power distance, Individualism, Masculinity, Uncertainty avoidance, Long-term orientation POWER DISTANCE Power Distance is defined as how a society deals with the fact people are unequal in physicl and intellectual capabilities Australia scores low on power distance is 38 It shows that the gap between the power people and less powerful is small So the Austrailian government had to bulid a tax and social welfare system to ensure that country retains relative equality in income and power Within Australian organization, hierarchy is established for convinience, superiors, less decentralization in the business, managers and their employees are more equal, working together to achive the overall goals of the organization INDIVIDUALISM VERSUS COLLECTIVISM: Individualism Versus Collectivism is the relationship between the individual and his fellows; the extent the society emphasize in the liberty and interest of individuals over group Australia with a score of 90 on Individualism, is a highly individualist cuture It showws that Australia is a country that prefers individuality to collective solidarity In Australia, the bond is often loose, each people tends to only care about their own interests They focus on the subject “me” rather than “We” Although Australian teamwork skills are extremely good, they are more concened with their individuality than the collective All achivements and results are focused on th individual rahter than the collecitve MASCULINITY VERSUS FEMININTY: 17 INTERNATIONAL BUSSINESS – 44K02.1 I/ POLITICAL SYSTEMS 18 Dimension looked at the relationship between gender and work roles In masculine cultures, sex roles were sharply differentianted and traditional “masculine value”, such as achivement and the effective exercise of power, determined cultural ideals In feminine cultures, sex roles were less sharply distinguished , and little diferrentiation was made between men and women in the same job Australia scores is quite highly( 61) and is considered a “Masculine” society This shows that Australian society is focused n career, earning money and rarely interest in other things Australian live independently and start earning money for living early, even leaving home It shows th effort, confidence, dynamism and action to assert themselves in Australian society Australians are proud of their successes and achivements in life, and it offers a basis for hiring and promotion decisions in the workplace Conflicts are resolved at the individual level and the goal is to win UNCERTANINTY AVOIDANCE: The extent to which different cultures socialize their members into accepting ambiguous situations and tolerating ambiguity When people accept or prevent something that is not expected, unclear and different from the normal situation High uncertainty avoidance level show low endurance and opposite Australia’s uncertaninty avoidance index is 51 This indicates that Australians tend to set up and plan before performing to reduce risks and ensure financial security At the same time, it reflects that organizations must also have clear rules to focus on creating stable jobs, minimizing ambiguity LONG-TERM ORIENTATION: This dimension describes how every society has to maintain some links with its own past while dealing with the challenges of the present and future 18 INTERNATIONAL BUSSINESS – 44K02.1 I/ POLITICAL SYSTEMS 19 Australia’s long-term orientation index is low, only 21 This show that Australian society is more concerned with immediate plans than long-term ones in the future, without tending to look fore long-term planning and life Generally, Australians are interested in short-term orientation, they often spend om preexisting things,focus on achieving quick results, satisfy themselves before saving for the future V/ EVALUATE BENEFITS, COSTS AND RISKS BENEFITS The long-run monetary benefits of doing business in a country are a function of the size of the market, the present wealth (purchasing power) of consumers in that market, and the likely future wealth of consumers The size of Australian market is large and the consumption of citizenship is high In addition, the level of property protection, intellectual property protection is also high The economic systems in Australia is evaluated to be free and has high stable growth This makes the long- term investment in this country much more advantageous and developed COSTS POLITICAL FACTORS A company may have to pay off politically powerful entities in a country before the government allows it to business there The need to pay what are essentially bribes is greater in closed totalitarian states than in open democratic societies where politicians are held accountable by the electorate Australia has open democratic societies so paying bribes to the government will be limited in this country ECONOMIC FACTORS Economic factors, one of the most important variables is the sophistication of a country's economy It may be more costly to business in relatively primitive or undeveloped economies because of the lack of infrastructure and supporting businesses At the 19 INTERNATIONAL BUSSINESS – 44K02.1 I/ POLITICAL SYSTEMS 20 extreme, an international firm may have to provide its own infrastructure and supporting business, which obviously raises costs Australia has the developed economies with full of infrastructure and supporting businesses so it may be less costly to business in this country LEGAL FACTORS As for legal factors, it can be more costly to business in a country where local laws and regulations set strict standards with regard to product safety, safety in the workplace, environmental pollution, and the like (since adhering to such regulations is costly) Australian laws and regulations are clear and detailed Product safety and resposibility is focused, which can be more costly to business in this country RISKS POLITICAL RISK A political risk has been defined as the likelihood that political forces will cause drastic changes in a country's business environment that adversely affect the profit and other goals of a business enterprise So defined, political risk tends to be greater in countries experiencing social unrest and disorder or in countries where the underlying nature of a society increases the likelihood of social unrest Social unrest typically finds expression in strikes, demonstrations, terrorism, and violent conflict Australia is a multi-ethnic country but political enviroment in here is stable In addition, Australia not have many demonstrations, violent conflict, strikes, terrorism ECONOMIC RISK An economic risk can be defined as the likelihood that economic mismanagement will cause drastic changes in a country's business environment that hurt the profit and other goals of a particular business enterprise LEGAL RISK A legal risk can be defined as the likelihood that a trading partner will opportunistically break a contract or expropriate property rights When legal risks in a country are high, an international business might hesitate entering into a long-term contract or joint-venture agreement with a firm in this country The level of property rights protection and 20 INTERNATIONAL BUSSINESS – 44K02.1 I/ POLITICAL SYSTEMS 21 intellectual property rights in Australia are very high (analyzed above) Therefor, legal risks in this country is low 21 ... or not?” Therefor, the legal system of each coutry is very important for international business because it determines the business form, establishment of rights and obligations of related parties... economy It may be more costly to business in relatively primitive or undeveloped economies because of the lack of infrastructure and supporting businesses At the 19 INTERNATIONAL BUSSINESS – 44K02.1... of infrastructure and supporting businesses so it may be less costly to business in this country LEGAL FACTORS As for legal factors, it can be more costly to business in a country where local