1. CH 2
THE POLITICAL, LEGAL, AND
TECHNOLOGICAL ENVIRONMENT
JJ Danis, Mary Mackie, Drew
Kayle
2. POLITICAL ENVIRONMENT
As government changes, so must the
companies strategies
Two evaluations of a political system
Ideology
Collectivism
3. POLITICAL ENVIRONMENT:
IDEOLOGIES
Individualism: people have the freedom to
pursue any political or economic goal without
constraint (Capitalism)
Adam Smith and Aristotle
Private property: maintenance, competition
Margaret Thatcher and individual ownership
4. POLITICAL ENVIRONMENT:
IDEOLOGIES
Collectivism: the needs and goals of society take
greater importance than those of individuals
Plato: classless society and the most fit should rule
Best seen in Germany and Italy during WWII as
Fascism
Fascism: individual needs are inferior to that of
the state and tries to form national unity based
on ethnicity, religion, culture, or race
5. POLITICAL ENVIRONMENT:
IDEOLOGIES
Socialism: form of collectivism with government control
of companies but not for profit
Karl Marx
Communism
China: limit individuals’ political freedom but
realized government control of businesses stunts
progression
Russia: strict government and acceptance of
bribes makes it unappealing for investors since
high risk
6. POLITICAL ENVIRONMENT:
IDEOLOGIES
Social Democracy: nationalization of
businesses so that the government can
profit
Reliance on government funding caused
inefficiency
Nationalization of business vs
Nationalism
9. POLITICAL ENVIRONMENT: POLITICAL
SYSTEMS
Totalitarianism: one political party that controls everything in the
government
Power kept by suppression
Religion: Middle East bases laws off Islam
Usually a good place for business but now a warzone
Most common: communist totalitarianism
China attempt at trade liberalization but still favors
domestic making it difficult for MNCs
“Right-wing” totalitarianism: some economic but no political
freedom; used with military leadership
11. LEGAL AND REGULATORY
ENVIRONMENT: BASIC PRINCIPLES OF
INTERNATIONAL LAW
Sovereignty and Sovereign Immunity
Government rules as they see fit
Country’s laws don’t apply in other countries
International Justice
Nationality principle
Territoriality principle
Protective Principle
12. LEGAL AND REGULATORY
ENVIRONMENT: BASIC PRINCIPLES OF
INTERNATIONAL LAW
Doctrine of Comity
Act of State Doctrine
Treatment and Rights of Aliens
What do you see as some of the benefits and
consequences of allowing more immigrants in?
Should the US be more or less strict with their
immigration laws?
Forum for Hearing and Settling Disputes
13. LEGAL AND REGULATORY
ENVIRONMENT: EXAMPLES OF LEGAL
AND REGULATORY ISSUES
Foreign Corrupt Practices Act (1977)
Watergate bribes
Made bribery illegal for influence
Increased business
Cracked down on corruption
14. FOREIGN CORRUPT PRACTICES
ACT
Johnson and Johnson was accused of violating
the act because of bribes given to European
doctors and Iraqi officials to gain more business in
the area (2011)
Has anyone else seen their company in the news
for issues of bribery?
http://foreign-corrupt-practices-act.org/foreign-corrupt-practices-act-news/110-
johnson-and-johnson-jaj-charged-with-violating-the-foreign-corrupt-practices-act-
fcpa.html
15. LEGAL AND REGULATORY
ENVIRONMENT: EXAMPLES OF LEGAL
AND REGULATORY ISSUES
Bureaucratization
Difficult for MNCs when governments are inefficient
or uncorrected
Issues within Japan
Privatization
Germany: telecommunications
China: military
16. LEGAL AND REGULATORY
ENVIRONMENT: REGULATION OF
TRADE AND INVESTMENT
Is there really fair trade?
Criticism of regional trade agreements
17. TECHNOLOGICAL ENVIRONMENT:
TRENDS IN
TECHNOLOGY, COMMUNICATIONS, AN
D INNOVATION
Need for instant communication
The World is Flat by Thomas Friedman
Microprocessor
Difficulty integrating technology: China
Open-source model: India
18. TECHNOLOGICAL ENVIRONMENT:
TRENDS IN TECHNOLOGY,
COMMUNICATIONS, AND INNOVATION
Problems with dependency on technology
Wireless
Other changes in technology
19. TECHNOLOGICAL ENVIRONMENT:
BIOTECHNOLOGY
Mix of science and technology
Stem cell research in China
US and Japanese team’s discover with cells
Pharmaceutical drugs
Agriculture
Cloning
Ethanol
21. TECHNOLOGICAL ENVIRONMENT: E-
BUSINESS
Consumers
Retail
Automobiles
Banking
Business (B2B)
Largest use of e-business
E-cash
World wide currency
Problems
26. SOCIAL RESPONSIBILITY
What are some of the major ethical issues and
problems confronting Multinational
Corporations in foreign countries?
Target goal for MNCs : socially and
environmentally responsible
27. MNC’S AND SUSTAINABILITY
What does it mean for a company to say its products and
processes are “sustainable?”
Energy efficient products
Toyota, Volkswagen, Honda
Recyclable products
Support of local businesses
Commitment to third world countries
Support of minorities, women, and veterans
Walmart
28. ETHICS AND SOCIAL RESPONSIBILITY
IN INTERNATIONAL MANAGEMENT
Ethics: the study of morality and standards of
conduct
Cultural Relativism: the belief that the ethical
standard of a country is based on the culture
that created it and that moral concepts lack
universal application
“When in Rome, do as the Romans do”
29. EMPLOYMENT AND BUSINESS
PRACTICES
Political, Economic, and Cultural differences make it
difficult to instill a universal foundation of employment
practices
Labor Conditions in China and Africa
Forced to work 12 hour days, 7 days a week
Children work to help support families
44.6 million or 13% of children ages 10-14 are
employed in Asia and 26.3 million children in
Africa are employed
30. EMPLOYMENT AND BUSINESS
PRACTICES
How much responsibility do MNCs have in
changing the practices of child labor and poor
business management?
Should they adopt the regulations in the
country of origin or yield to those in the country
of operation?
Levi Strauss’s business contract with children
31. HUMAN RIGHTS
Challenge for Multinational Corporations
Basic Rights
Life, freedom from slavery or
torture, freedom of opinion and
expression, and nondiscriminatory practices
32. WOMEN’S RIGHTS
Considered a subset of Human Rights
Glass ceiling
It is difficult if not impossible for women reach upper
management positions
Glass ceiling and sexual harassment are very present in
the Japanese workplace
Japanese managers do not understand why sexual
harassment is a moral issue
Equal employment opportunities do not exist in
Japan
Not as significant in US, France, Germany, and Great
Britain
33. CORRUPTION
Foreign Corruption Practices Act (FCPA): makes it illegal for
U.S. companies and their managers to attempt to influence
foreign officials through personal payment or political
contributions
Very positive effect on multinational corporations
U.S. is ranked 19th on the corruption index
http://cpi.transparency.org/cpi2012/results/
U.S. multinationals and corruption
Will not buy stock in companies that engage in unethical
practices
34. CORRUPTION
Organization for Economic Cooperation and Development
(OECD)
Formal agreement by 29 nations to outlaw the practice
of bribing foreign government officials
Argentina, Brazil, Chile and Slovak Republic have just
signed on to the OECD
Does not outlaw most payments to political party leaders
Transparent Agents Against Contracting Entities (TRACE)
Ensures that no party within supply chain has
participated in corruption
35. CORPORATE SOCIAL RESPONSIBILITY
(CSR)
The actions of a firm to benefit society beyond the
requirements of the law and the direct interests of
the firm
Based on voluntary actions
CSR differs from ethics because it involves taking
action
Stakeholders determine the company’s CSR path
Why are MNCs getting involved in Corporate Social
Responsibility?
36. NONGOVERNMENTAL ORGANIZATIONS
(NGO)
Private, not-for-profit organizations that seek to
serve society’s interests by focusing on
social, political, and economic issues such as
poverty, social justice, education, health, and
the environment
Leaders of NGOs are trusted more than
than any leaders of U.N., spiritual
leaders, executives of MNCs, or Leaders of
the U.S.A.
37. SUSTAINABILITY
Development that meets humanity’s needs without harming
future generations
World Economic Forum in Switzerland
Profit
Global warming
Environmentally damaging practices
“Green movement”
United Nations Environment Programme (UNEP)
Dedicated to education, promotion, facilitation and
advocacy of sustainable practices and
environmentally sound concerns
38. SUSTAINABILITY
Walmart
“Think globally, act locally”
Discovered that changes in production and
supply chain practices could reduce waste and
pollution and eventually costs
Could save an estimated $2.4 million a
year, 3,800 trees, and 1 million barrels of oil by
cutting back on packaging
39. NGOS, MNCS, AND ETHICAL BALANCE
NGOs became very prominent in 1984
NGOs, church and community
groups, human rights organizations raised
awareness of the apartheid in South Africa
which eventually led to its collapse
Pressed U.S. cities and states to divest
public pension funds of companies
doing business in South Africa
40. NGOS, MNCS, AND ETHICAL BALANCE
NGO activism has been responsible for major
changes in corporate behavior and
governance
Save the Children, Oxfam, Care, World
Wildlife Fund, and Conservation
International
41. NGOS, MNCS, AND ETHICAL BALANCE
Citigroup
Announced they would no longer finance certain
projects in emerging markets identified by the
Rainforest Action Network (RAN) as damaging to
the environment
RAN’s powerful lobbying strategy
MNCs and NGOs collaborate on social and
environmental projects in order to contribute to the
well-being of communities and the reputation of the
MNC
42. RESPONSE TO SOCIAL
OBLIGATIONS
Principles of the U.N. Global Compact
Human Rights
Principle 1: Support and respect the protection of
international human rights with their sphere of
influence
Principle 2: Make sure their own corporations are
not complicit in human rights abuses
43. RESPONSE TO SOCIAL
OBLIGATIONS
Labor
Principle 3: Freedom of association and the
effective recognition of the right to collective
bargaining
Principle 4: The elimination of all forms of forced
and compulsory labor
Principle 5: The effective abolition of child labor
Principle 6: The elimination of discrimination with
respect to employment and occupation
44. RESPONSE TO SOCIAL
OBLIGATIONS
Environment
Principle 7: Support a precautionary approach to
environmental challenges
Principle 8: Undertake initiatives to promote greater
environmental responsibility
Principle 9: Encourage the development and diffusion of
environmentally friendly technologies
Anticorruption
Principle 10: business should work against all forms of
corruption, including extortion and bribery
45. RESPONSE TO SOCIAL
OBLIGATIONS
Hewlett Packard’s “i-communities” in economically
deprived areas
gave HP a positive reputation and valuable
knowledge about how to identify and negotiate
with rural customers and positions to improve its
ability to do business in rural markets
46. CORPORATE GOVERNANCE
The system by which business corporations are
directed and controlled
Specifies the distribution of rights and
responsibilities among different participants in the
corporation
Spells out the rules and procedures for making
decisions on corporate affairs
Governance rules and regulations differ among
countries and regions around the world
U.S. and U.K. considered “outsider” systems
47. INTERNATIONAL ASSISTANCE
Governments and corporations are increasingly
collaborating to provide assistance to communities
around the world through global partnerships
Best assistance investments determined by the
Copenhagen Consensus Center
AIDS prevention
Fighting malnutrition
Reducing subsidies
Trade restrictions
Controlling malaria
48. INTERNATIONAL ASSISTANCE
U.N. Millennium Development Goals
Constitute an ambitions agenda to significantly improve the
human condition by 2015
Goal 1: Eradicate extreme poverty and hunger
Goal 2: Achieve universal primary education
Goal 3: Produce gender equality and empower women
Goal 4: Reduce child morality
Goal 5: Improve maternal health
Goal 6: Combat HIV/AIDS, malaria, and other diseases
Goal 7: Ensure environmental sustainability
Goal 8: Develop a Global Partnership for Development
