Globalization and Business Ethics Chapter4 TABLE OF CONTENT

Globalization and Business Ethics Chapter-4

TABLE OF CONTENT PARTICULARS SERIAL NO 1. INTRODUCTION (MEANING/DEFINITIONS OF GLOBALIZATION) 2. IMPACT OF GLOBALIZATION 3. BUSINESS ETHICS AND GLOBALIZATION 4. CHALLENGES/ISSUES/PROBLEMS IN GLOBALIZATION 5. ETHICAL CONSIDERATIONS IN GLOBALIZATION/RECOMMENDATIONS FOR MNC’S TO OPERATE GLOBALLY 6. NEGATIVE IMPACT OF UNETHICAL BEHAVIOUR/PRACTICES IN A GLOBAL ECONOMY 7. CASE STUDY

INTRODUCTION ● Ethics is a subject of social science that is related with moral principles and social values. Business ethics is the study of business situations, activities and decisions where issues of right and wrong are addressed. ● The ethics of business is the ethics of responsibility. The business man must promise that he will not harm knowingly. ● Business ethics is the study of the standards of business behaviour which promote human welfare and the good. ● It helps us to develop the rules and principles(norms)by which we judge and guide meaningful decision-making. Page no: 1

MEANING OF GLOBALIZATION Globalization of business is the change in a business from a company associated with a single country to one that operates in multiple countries. Globalization is the process of interaction and integration among people, companies and governments worldwide. Globalization has grown due to advance in transportation and communication technology. with increased global interactions comes the growth of international trade, ideas and culture. Page no: 2

DEFINITIONS OF GLOBALIZATION According to Dr. Cairo ”Globalization is a complex web of social processes that intensify and expand worldwide economic, cultural, political and technological exchanges and connections. ” According to Albrow 1990 ”Globalization refers to all those processes by which the people of the world are incorporated into a single world society, global society. ”

TOP 10 PRODUCTS EXPORTED FROM INDIA (2017 -18) APRIL-NOVEMBER SECTOR SHARE IN EXPORT(%) GROWTH RATE(%) 1. Engineering goods 25. 9 22. 4 2. Gems and jewellery 14. 4 -3. 8 3. Chemical and related products 14. 5 11. 9 4. Textile and allied products 11. 8 3. 8 5. Petroleum crude and products 11. 8 17. 6

6. Agriculture and allied products 9. 7 15. 0 7. Electronic goods 2. 0 4. 5 8. Marine products 2. 7 29. 5 9. ores and minerals 1. 0 12. 9 10. Leather and leather products 1. 9 0. 9 Total 100. 0 11. 2

IMPACT OF GLOBALIZATION 1. Market globalization is the decline in barriers to selling the goods in countries other than the home country. This change will make it easier for the company to sell products internationally, since lower tariffs keep consumer prices lower and fewer restrictions makes it easier for a company to enter a foreign market. 2. Production globalization is the sourcing of materials and services from other countries to gain advantage from price differences in different nations. Page no: 6

POSITIVE EFFECTS OF GLOBALIZATION 1. Globalization can create new opportunities, new ideas and open new markets that an entrepreneur may have not had in their home country. 2. It creates greater opportunities for firms in less industrialized countries to tap more and larger markets around the world. 3. This can lead to more access to capital flows, technology, human capital, cheaper imports and larger exports markets. Page no: 7

4. Globalization leads to increased competition. consumers have more options to choose from the different suppliers of the product. 5. It helps to create more wealth equality throughout the world. 6. Globalization also allows for specialization. For example: allowing different parts of the product to be manufactured in different regions of the world depending on the expertise in a particular field. 7. Globalization creates international awareness. For example: the opportunity for nations and organizations to address human rights injustices committed across the globe. Page no: 8

NEGATIVE EFFECTS OF GLOBALIZATION 1. The growth of globalization trade is creating income inequalities, both between and within industrialized and less industrialized nations. 2. Global commerce is increasingly dominated by multinational corporations which seek to maximize profits without regard for the development needs of individual countries or the local populations. 3. The volume and volatility of capital flows increases the risks of banking and currency crises, especially in countries with weak financial institutions. Page no: 9

4. Competition among developing countries to attract foreign investment leads to a “race to the bottom”in which countries dangerously lower environmental standards. 5. Cultural uniqueness is lost in favour of homogenization and a “universal culture”that draws heavily from american culture. Page no: 10

BUSINESS ETHICS AND GLOBALIZATION There is a need for the application of basic moral codes in the conduct of the different aspects of business. As such, the relationship between business ethics and globalization refers to the manner in which the concept of globalization and its application to business operations can benefits from the practice of proper business ethics. For example: if a company wants to open a branch in a country where women do not have the same freedoms like women in other parts of the world have, then that company must adjust its ethical code to reflect the culture in that area. Page no: 11

PROBLEMS/ISSUES/CHALLENGES IN GLOBALIZATION 1. CUSTOMERS 4. MANAGING ACCOUNTING AND CONTROL ISSUES 2. COMPETITION 5. MANAGING RISKS AND CHALLENGES TO GOING GLOBAL 3. HUMAN RESOURCE MANAGEMENT ISSUES 6. UNCERTAINTY 9. LANGUAGE 7. SUPPLY CHAINS 8. LEGAL ISSUES 11. SUPERVISORY 10. CULTURAL OVERSIGHT BARRIERS

UNETHICAL ISSUES 1. RISK IN JOBS 2. BRAIN DRAIN 3. NATURAL RESOURCES 4. HEALTH ISSUES 5. FINANCIAL INTERDEPENDENCY 6. CULTURE DIFFERENCES 7. MISINTERPRETATION 8. GIFTS

RECOMMENDATIONS FOR MNCS TO OPERATE GLOBALLY 1. The MNC’S headquarter should take greater lead in coordinating, integrating and communicating the overall ethical and social responsibility values. In arriving at them, it should in a participative approach so that there is a clear partnership between the MNC headquarter and foreign subsidiaries. 2. The MNC’S need to maintain higher standards with regard to ethical conduct. This is particularly relevant with issues such as integrity, honesty, truthfulness, fairness, worker safety, fair employment practices and ecologically responsible practices. Page no: 14

3. The MNC has to address the needs, concerns and expectations of the society of the host country in order to flourish there. MNC managers should try to protect the environment of the host country. 4. The MNC’s should comply with the various federal, state and local laws of the host country. The rules and regulations in different countries must be communicated to the concerned managers and officers.

5. The MNC’s should follow the guidelines of various international agreements and general principles for business practices framed by various international organizations like OECD guidelines, ILO(international labour organization)declaration of principles, UN code of conduct on transnational corporations. etc 6. The MNC’s must issues corporate responsibility reports with a view to improve their public image, brand name, increase employee loyalty and promote various policies and labour rights. Page no: 16

NEGATIVE IMPACT OF UNETHICAL BEHAVIOUR/PRACTICES IN A GLOBAL ECONOMY 1. An employee working for an employer or company with unethical and dishonest conduct will be directly affected physically and mentally, and may even face emotional and health related problems because of it. 2. Worker involved in unethical practices are almost always directly or indirectly held accountable for their actions.

3. They may have to face physiological impact of which can lead to intense mental and physical stress. they may be imposed heavy fines and penalties. 4. when a company is found guilty of financial frauds, the workers involved in the fraud may be blacklisted or their professional license may be revoked. Page no: 17

5. Unethical behaviour in a company can also harm sales of goods as customers may boycott goods purchased by a company known for unethical behaviour. 6. It can lead to a drop in stock price. Investors will be unwilling to buy shares from companies known to transact business dishonestly. Investing in dishonest firms will result in poor returns. 7. Immoral dealings amongst individuals or in a company builds a work atmosphere of distrust. this leads to lower productivity, promote conflict. 8. Unethical practices adopted by the companies lead to their negative image and negative customer perception about the company. Page no: 18

9. The employees are sometimes reluctant to work with such companies who do not care about ethical values. It can lead to higher labour turnover. 10. The Companies following unethical practices face a lowered corporate rating in the global market. Page no: 19

CASE STUDY PEPSI IN BURMA -A GLOBALIZATION CATASTROPHE The mid-1990 s were a period of turmoil for pepsi, the US-based multi-billion dollar cola company. Thousands of customers in the US and canada were boycotting the company’s products as well as those of its affiliate companies such as taco bell, fritolay, KFC and pizza hut. In addition, pepsi was under attack from a host of human rights organizations as well as its own shareholders and various other stakeholders. The reason for this opposition was pepsi’s presence in the south-asian country, burma. In april 1996, one of pepsi’s major institutional customers in the US, harvard university(cambridge, MA), decided not to allow pepsi to sell its products on its campus. This move Page no: 20

Came in the wake of protests by students against the company for conducting business in burma, a country ruled by military dictators. The company lost its business in US, harvard university around $1 million. soon after, pepsi lost contracts at other leading universities such as stanford, colgate, and. U. C. berkeley. stanford university even refused to let pepsi open a taco bell fast food outlet, the company had been planning for. The ‘Boycott pepsi’ movement spread to many other colleges and schools across the US(over 100 in number)with students asking pepsi to discontinue operations in burma. Even before pepsi could react to these developments, it received another blow-this time from the municipalities of various cities in the US. By the end of april Page no: 21

1996, the municipalities of berkeley, oakland, san francisco and santa monica(california), madison(wisconsin)and ann arbor(michigan)had agreed to stop taking food product supplies from pepsi and decided to stop conducting business with it. many more municipalities were expected to pass similar ‘Restrictive purchasing’ orders against pepsi. Page no: 22