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Chapter 5 Globalization and Society

International Business Environments and Operations. Chapter 5 Globalization and Society. What MNEs Have To Offer. Evaluating the Impact of FDI. FDI is Foreign Direct Investment The large size of some MNEs causes concern for some countries

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Chapter 5 Globalization and Society

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  1. International BusinessEnvironments and Operations Chapter 5 Globalization and Society

  2. What MNEs Have To Offer

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

  4. Considering the Logic of FDI • Areas to consider: • Stakeholder trade-offs • (stakeholders: shareholders, employees, customers, suppliers, society at large) • 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

  5. The Cultural Foundations of Ethical Behavior • Relativism: ethical truths depend on the values of the groups practicing them and that outside intervention is inherently unethical • Every place has its own ‘truths’ and needs to be treated differently • Normativism: there are universal standards of behavior, which although influenced by different cultural values, should be accepted by people everywhere. Non-intervention is unethical • 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

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

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

  8. 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 • 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

  9. Ethics and the Environment • Sustainability: meeting the needs of the present without compromising the ability of future generations to meet their own needs • Considers what is best for both people and environment • 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 CO2 emissions are not reduced and controlled, rising temperatures could have disastrous consequences.

  10. Ethical Dilemmas and the Industry • Tiered pricing and other price-related issues • 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

  11. Ethical Dimensions of Labor Conditions • Ethical Trading Initiative (ETI) focuses on the ethical employment practices of MNEs • 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

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