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

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I/ POLITICAL SYSTEMS 2

List of Diagrams
Diagram 1. Democracy Index.......................................................................................................................5
Diagram 2. Freedom Trend..........................................................................................................................9
Diagram 3. Open Markets............................................................................................................................9
Diagram 4. Rankings on Doing Bussiness topics........................................................................................13
Diagram 5. Ease of Doing Bussiness Score on Doing Bussiness topics.......................................................13
Diagram 6. Intellectual property................................................................................................................15
Diagram 7. International property right index (IPRI) in 2019.....................................................................15

List of Contents
I/ POLITICAL SYSTEMS..................................................................................................................................4
ECONOMIC SYSTEM.....................................................................................................................................8
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

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ECONOMIC RISK.................................................................................................................................20
LEGAL RISK.........................................................................................................................................20

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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.

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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 1. Democracy Index

Democracy Index
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( />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.

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 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.
()
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.

( />
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

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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 do 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
( />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.

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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.

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Diagram 2. 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 3. Open Markets

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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 do 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.

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 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.

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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
của 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

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evaluate legal issues such as contract enforcement, taxition, property protection,

intellectual property rights, product responsibilities and product safety.
CONTRACT ENFORCEMENT
Diagram 4. 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 5. Ease of Doing Bussiness Score on Doing Bussiness topics

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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.

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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 2 second in the world.
Diagram 6. Intellectual property

Diagram 7. International property right index (IPRI) in 2019

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Global rank: 5 of 129
Region rank: 3 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
( )
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 do 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 do
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

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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:

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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

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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 do 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 do business in relatively primitive or undeveloped
economies because of the lack of infrastructure and supporting businesses. At the

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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 do business in this country.
LEGAL FACTORS

As for legal factors, it can be more costly to do 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 do 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 do 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

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intellectual property rights in Australia are very high (analyzed above). Therefor, legal
risks in this country is low.

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