Mike Perez Cole Underwood Sarah Torp Chapters 2 & 3
Chapter 2-The Political Legal and Technological EnvironmentSummary Individualism -People should be free to pursue economic and political endeavors without constraints - Synonym with capitalism and is connected to a free market society -Encourage diversity or competition, combined with private ownership will stimulate productivity -Following the status quo will stunt progress but competing with increase creativity and progress -David Hume, Adam Smith and Aristotle are supporters of this philosophy-Research shows that team performance is negatively influenced by those who consider themselves individualistic but competition stimulates motivation and encourages efforts to achieve goals Collectivism - Views the needs or goals of society at large as more important than individual desires. -Plato believed that individual rights should be sacrificed and property should be community owned. - Emerged in Germany and Italy as “national socialism” or fascism -Authoritarian ideology that considers the individual inferior to the needs of the state and seeks to forge a type of national unity based on religion, cultural, race or ethnicity
Socialism -There is government ownership but profit is not the ultimate goal -Based on the philosophies of Karl Marx, Friedrich Engles, and Vladimir IIyich Lenin -Classless society when everything was essentially communal -Broken down into two extremes: Communist & Social Democracy -Communist: Limited individual freedom, everything is government regulated. Former countries under communist control include Soviet Union, Nicaragua, Cambodia, Laos and Vietnam. -Although many countries are no longer under communist rule, China is still communist to this day -Social Democracy: Achieved it's goal through a non violent movement -Australia, France, Germany, Great Britain, Norway, Spain and Sweden are examples - Problems: businesses that were nationalized were inefficient due to the guarantee of funding and the monopolistic structure. Citizens noticed an increase in taxes and prices
>The political system or system of government in a country greatly influences how it manages and conducts business. - Legal and regulatory environments can be extremely confusing. - In result, slower time to market and greater costs occur. - MNCs must take time to evaluate legal framework of every different market. > There are four foundations on which laws are based - Islamic Law - Socialist Law - Common Law - Civil or Code Law > MNCs must understand that there are certain rules that one must follow when interacting with another MCN. These are called International Law.
> International Law can mostly be summed up by a few basic broad principles. > The International law examples demonstrate the framework of operation for MNCs, but there are also many specific laws that impact businesses as well. - Foreign Corrupt Practices Act is a major example that is easily seen from American history. - Other examples include; Bureaucratization and privatization
Advancements in technology:
increase the quality of products
aid in information gathering
improve research and development
International connections and interdependence due to technological advancements is referred to as "flattening the world"
Internet and cell phones are the most significant technological advances that provide people with instant communication and information
Technology is constantly evolving and shaping international business
Satellites will enable people in very remote areas to communicate and receive information with their phones
Automatic translation telephones
Artificial intelligence and embedded learning technology will allow machines to "think" like humans
Advances in biotechnology, e-business, and telecommunications create a shift toward high-tech, knowledge-based economies
MNCs may take advantage of these and prosper
Advances in technology have already eliminated middle management and white- and blue-collar jobs
outsourcing and offshoring to lower costs
What are the costs and benefits of technological advancements that impact international management?
Advancements in Technology Costs
employees' jobs are eliminated
salaries are reduced because workers' skills are not in demand & have been replaced by machines
job loss is especially devastating in developing countries
allows for more opportunities to conduct business internationally
cost of doing business globally declines
productivity will increase
prices will eventually decrease
Chapter 2 Questions
Question #1 The government system greatly impacts how a country does business. As political polocies continue to change, MNC's must adapt their strategies and practices to accommodate their partners. For example, Chinese government would experience greater challenges when working with EU countries because they are communist. MNC's would need to understand how the communist system of government works and be able to meet the requirements in order to work together successfully with an EU country. "Effective management occurs when the philosophies are recognized." - Agree or disagree? Discussion.
Most positive effects of technological advancements and telecommunications should be seen in developing countries where inefficiencies in labor and production impede growth
Digitization, higher-speed telecommunication, and advancements in biotechnology give developing countries the opportunity to jump into the 21st century
Are there any negative effects?
People in South America and Eastern Europe used to wait years to get a telephone installed, and now it is relatively inexpensive and fast with cell phones
will improve quality of life
big market for telecommunications in developing economies
In India, the recent high-tech boom has created jobs for a growing number of people and will continue to do so the future
Chapter 3-Ethics & Social Responsibility -Ethics: the study of morality and standards of conduct Working conditions, work hours, and labor regulations create challenges for employers and employees. -Human Rights- There is no universally adopted standard Women in the workforce--in Japan they are only offered secretarial or dead end jobs even with college degrees. It's believed they will marry early and leave the job. There are also no sexual harassment laws and managers see women as assistants, therefore not understanding the problem with it. Discussion- Is it even worth going to college if you are only going to get a low paying job and risk sexual harassment? Despite equal opportunity initiatives in the U.S., France, Germany, and Great Britain, women do not receive the same treatment or pay as men in the workforce. Will women ever be able to break through the glass ceiling?
Summary Continued -The Foreign Corrupt Practices Act (FCPA) makes it illegal for US companies & their managers to attempt to influence foreign officials through personal payments. IRS continually audits books of MNC's. Those involved are subject to high penalties and jail time. -Passing of this act has paid off because many US multinational companies have increased amount of business in countries they use to pay bribes and made it clear they will not buy stock in companies that use unethical practices. - Look at page 66 at the corruption graph and discuss. -Discussion: Do you think ethnics typically comes into play during a business deal?
Corporate social responsibility - the actions of a firm to benefit society beyond the requirements of the law and the direct interests of the firm
Nongovernmental organizations (NGOs) - private, not-for-profit organizations that seek to serve society's interests by focusing on social, political, and economic issues
poverty, social justice, education, health, and environment
examples: Save the Children and World Wildlife Fund
sharp criticism of Nike, Levi's, Chiquita
NGOs recognize that MNCs can have positive impacts on countries where they do business
adhering to higher social and environmental standards
Sustainability - development that meets humanity's needs without harming future generations
Corporate governance - the system by which business corporations are directed and controlled
provides structure of how company objectives are set, how to obtain the objectives, and monitors performance
U.S. and U.K. are "outsider" systems due to dispersed ownership of corporate equity among many outside investors
Governments, MNCs, and NGOs are now working together to contribute to international development assistance and ensure that corporate governance practices are sound and effective
while keeping corporate social responsibility and sustainability in mind
New corporate ethics guidelines passed in the United States have forced MNCs to examine their own ethical practices and make changes to comply
This continuing trend toward globalization and free trade appears to encourage the development of a set of global ethical, social responsibility, and anti-corruption standards
Shifting from traditional business conduct to new ethical standards
What motivates MNCs to implement ethical and socially responsible business practices? page 59
Japan's Ethical Issues -Japan cabinet members have accepted questionable payments and favors. -The bank system has failed to take action when distributing loans and continued to operate despite being technically bankrupt. -Japanese firms have concealed consumer complaints for over 20 years -Women paid dramatically less for the same job as men and as mentioned before, big problem with sexual harassment
Chapter #3 Questions 1. What lessons can US MNC's learn from the political and bribery scandals in Japan that can be value to them in doing business in this country? Discuss 2. 2. How do ethical practices differ in the US and the European countries such as France and Germany? What implications does your answer have for the US multinationals operating in Europe?
Colgate's Distasteful Toothpaste ... -Please read pages 78 - 80 and answer the review questions. You may work with a partner.
Colgate's Distasteful Toothpaste ... 1) - First strategic error, gave H&H complete control of the product. - Second, waited too long to address the issue - Ethics - The study of morality and standards of conduct - Ethics demands us to do what is deemed right by society, Colgate should have known that the racial slur of "Darkie" was something that needed to be addressed. Colgate needed to take control of H&H sooner rather than later.
Colgate's Distasteful Toothpaste ... 2) - In our opinion Colgate needed to address the issue sooner and with more force. Colgate thought that by not responding to the issue it would eventually go away, but in fact, by trying to suppress the issue for so long, it actually did more harm than good. A complete name and label change, though possibly dropping total sales, was necessary. Both could have been slowly brought into the market and made public over time so that consumers would find the new H&H product just as good as before.
Colgate's Distasteful Toothpaste ... 3) - After a name change, there is almost no way to keep all consumer loyalty, this is why Colgate did not want to change the name. It is definitely a big issue when deciding on a something such as a change in name or image. - Almost fully the reason why Colgate did not respond very quickly to name change.
Colgate's Distasteful Toothpaste ... 4) - No, the "no management rights" clause was not a good thing for the company. - In the negotiation process Colgate could have set up an equal rights clause and therefore had more say in the decision making process. If Colgate had more say, they could have caught the problem long before if became such a national issue.