Proactive globally oriented firms maintain an up-to-date profile of the political and economic environment of the countries in which they maintain operations (or have plans for future investment). In the early 1990s, the formerly rigid ideological systems of capitalism, communism, and socialism underwent profound changes, and the lines of demarcation between those systems increasingly blurred. It is now best to measure such systems along a continuum of economic systems-from those that operate primarily according to market forces (such as the United States) to those that use central planning for resource allocation (such as the Peoples Republic of China). Near the center of the continuum lie the industrialized Western European countries and Japan. Some countries in Africa, Asia, an4 Latin America are continuing to develop their market mechanisms and economic systems to improve their economic health.
An important aspect of the political environment is the phenomenon of ethnicity-a driving force behind political instability around the world. In fact, many uprisings and conflicts which are thought to be political in nature are actually expressions of differences among ethnic groupings. Often, it is religious disputes which lie at the heart of those differences. Uprisings based on religion operate both in conjunction with ethnic differences (as probably was the case in the former Yugoslavia), or separate from them (as in Northern Ireland). Many terrorist activities are also based on religious differences, as in the Middle East. Managers must understand the ethnic and religious composition of the host country to anticipate how problems of general instability will affect operations:
your workforce, production and access to raw materials, and your market.26 For example:
In Pakistan one must understand the differences between Punjabi and Sindi. In Malaysia it is essential to recognize the special economic relationship between Chinese and Malay. In the Philippines it is important to understand the significant and lead financial role played by the
Filipino-Chinese.
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