International Business Environments and Operations Chapter 5 Globalization

International Business Environments and Operations Chapter 5 Globalization and Society 5 -1

What MNEs Have To Offer 5 -2

Evaluating the Impact of FDI is Foreign Direct Investment p The large size of some MNEs causes concern for some countries p MNEs and countries need to understand the impact of FDI in home and host countries 5 -3

Considering the Logic of FDI p Areas to consider: n Stakeholder trade-offs (stakeholders: shareholders, employees, customers, suppliers, society at large) p Group aims often conflict: stockholders want additional sales and increased productivity; employees want safe workplace and high compensations; customers want high quality at low prices; society wants increased corporate taxes, more support for social services, and trustworthy corporate behavior p 5 -4

The Cultural Foundations of Ethical Behavior p Relativism: ethical truths depend on the values of the groups practicing them and that outside intervention is inherently unethical n p Normativism: there are universal standards of behavior, which although influenced by different cultural values, should be accepted by people everywhere. Non-intervention is unethical n p Every place has its own ‘truths’ and needs to be treated differently There are universally valid truths e. g. , if a manager from country where child labor is prohibited, refuses to hire child labor in a country where child labor is acceptable believes in Normativism 5 -5

Cultural Foundations p Respecting Cultural Identity n p International business should not undermine the longterm cultural identity of a host country (use of homecountry language or cultural artifacts and introduction of products and work methods that cause changes in social relationships Extraterritoriality n Strong home-country governments may impose domestic, legal, and ethical practices on the foreign subsidiaries of companies headquartered in their jurisdictions 1 -6

Ethics and Bribery p Bribes are payments or promises to pay cash or anything of value n Bribery is a facet of the much bigger issue of Corruption p Bribes are used to get government contracts or to get officials to do what they should be doing anyway p Problems with bribery: n n Affects performance of company & country Erodes government authority Damages reputations when disclosed Increases cost of doing business 5 -7

What’s Being Done About Corruption? The primary concern regarding anti-corruption measures is lack of uniform laws across countries Organizations that (prohibit) bribery payments p p p Cross-National Accords: The Organization for Economic Cooperation and Development (OECD), the International Chamber of Commerce (ICC), and the United Nations Transparency International: issues Business Principles for Countering Bribery (2003) The U. S. Foreign Corrupt Practices Act (FCPA): outlaws bribery payments by US firms to foreign officials 5 -8

Ethics and the Environment p Sustainability: meeting the needs of the present without compromising the ability of future generations to meet their own needs n p The Kyoto Protocol (an international treaty): Reduce greenhouse gas emissions to 5. 2% below 1990 levels Theory that global warming is a result of an increase in carbon dioxide and other gases that act like the roof of a greenhouse, trapping heat that would normally be radiated back into space and warming the planet. If CO 2 emissions are not reduced and controlled, rising temperatures could have disastrous 5 -9 consequences. n p Considers what is best for both people and environment

Ethical Dilemmas and the Industry p p Tiered pricing and other price-related issues n Tiered pricing: Consumers in industrial countries pay higher prices and those in developing countries, especially low-income countries, pay lower prices Some countries reverse engineer (imitate) products to lower the cost of certain products (e. g. , drugs) to the domestic market 5 -10

Ethical Dimensions of Labor Conditions p Ethical Trading Initiative (ETI) focuses on the ethical employment practices of MNEs n n p Includes a number of organizations (Gap, Levi Strauss, M&S) as well as trade union organizations, NGOs, and governments ETI identified issues: safe and hygienic working conditions, working hours, child labor, discrimination, harsh or inhumane treatment An ETI issue that received the highest attention is: The Problem of Child Labor 5 -11