INBU 3301-002 Globalization Course Outline PDF

Course Outline: - Risk assignment (presentation)- feb 12th (which country is less risk management to invest) - - - - Final exam: cumulative 50 to 60 multiple choice, 2-3 cases - Course project: a team. **Chapter 1- Globalization** **Learning objectives** 1\. Define the terms...

Course Outline: - Risk assignment (presentation)- feb 12th (which country is less risk management to invest) - - - - Final exam: cumulative 50 to 60 multiple choice, 2-3 cases - Course project: a team. **Chapter 1- Globalization** **Learning objectives** 1\. Define the terms globalization, globalization of markets, and globalization of production. 2\. Examine the rise and functions of global institutions. 3\. Examine Drivers of Globalization. 4\. Illustrate the changing demographics of the global economy. 5\. Globalization debate: Impact of globalization on job security, income levels, labour and environmental policies, and national sovereignty. 6\. Understand opportunities and challenges that business managers must confront in Canada and beyond. 7\. Understand how establishing and committing to a global supply chain code of conduct can result in sustainable international operations. Labour is not cheap but some sources exist in certain countries and its way cheaper than making it in Canada. - **Opening Case**: [Globalization of Production at Bombardier] Designated Metal Connection (DMC) from the United States, Kobe Steel LTD from Japan, Chengdu Sigma Precision Components from China, Chemetall GMBH from Germany, Cheltenham Tool Co. Ltd. from the U.K., Centro Tratamientos from Spain, Castle Metals from Mexico. **Lack of Barriers to Trade and Investment** Transportation -- sold to Alstom SA (France) Commercial Line -- sold to Airbus (multinational -- France, Spain, Netherlands) **What Is Globalization?** Globalization refers to the shift toward a more integrated and interdependent world economy. - Globalization has several different facets, including: Globalization of Markets Globalization of Production Globalization of Consumers Globalization of Markets and Consumers - - Refers to the merging of historically distinct and separate national markets into one huge global marketplace. Falling barriers to cross-border trade have made it easier to sell internationally. Tastes and preferences of consumers in different nations converge on some global norm, thereby helping to create a global market Consumer products such as Citicorp credit cards, Apple iPhones, offer a standardized product worldwide, helping create a global market. Globalization of Production Refers to the sourcing of goods and services from locations around the world to take advantage of national differences in costs and quality of factors of production(labor, energy, land and capital). Companies lower overall cost structure and/or improve quality or functionality of product offering, thereby allowing them to compete more effectively. **Global institutions** Global institutions help manage, regulate, and police the global marketplace; Promote the establishment of multinational treaties to govern the global business system. Including the following organizations: United Nations (1945) World Trade Organization (WTO) preceded by the GATT International Monetary Fund (IMF) World Bank **World Trade Organization (WTO)** www.wto.org Responsible for policing the world trading system and making sure nation-states adhere to the rules laid down in trade treaties signed by WTO member states - **International Monetary Fund and World Bank (created in 1944)** - - IMF was to maintain order in the international monetary system Lender of last resort to nation-states whose economies are in turmoil and whose currencies are losing value World Bank was to promote economic development Provides low interest rate loans to cash-strapped governments that wish to undertake infrastructure investments (building dams or road systems,..). **International Monetary Fund** The IMF loans come with strings attached: Countries are required to adopt specific policies aimed at returning their troubled economies to stability and growth. Some critics charge that the IMF's policy recommendations are often inappropriate; We will look at the debate over the role of the IMF in Chapter 10. **The World Bank (WB)** - - WB is a group comprised of the following: IBRD- the Int'l Bank for Reconstruction and Development IDA- International Development Association IFC- International Finance Corporation MIGA- Multilateral Investment Guarantee Agency ICSID- International Centre for Settlement of Investment Disputes - - **Drivers of Globalization (1)** Two macro factors seem to underlie the trend toward greater globalization: - services, and capital, since the end of World War II - processing, and transportation Declining Trade and Investment Barriers Lowering barriers to international trade enables firms to view the world, rather than a single country, as their market. Reducing and eliminating trade and investment barriers allows firms to base production at the optimal location, serving the world market from that location. A firm might design a product in one country, produce component parts in two other countries, assemble the product in yet another country, and then export the finished product around the world. Technological Change Technological change has made globalization of markets and production a tangible reality. Since the end of World War II, the world has seen major advances in: Communication, Information processing, Transportation technology and Explosive emergence of the Internet and World Wide Web. Technological Change Microprocessors and Telecommunications Development of the microprocessor enabled the explosive growth of high-power, low-cost computing, vastly increasing the amount of information that can be processed. Satellite, Optical fiber, wireless and Internet technologies rely on microprocessor to encode, transmit, and decode the vast amount of information that flows along these electronic highways. Technological Change Internet In 1990, fewer than 1 million users were connected to the Internet. By 2019, approximately 4 billion Internet users. The Web makes it much easier for buyers and sellers to find each other, wherever they may be located and whatever their size. It enables enterprises to coordinate and control a globally dispersed production system in a way that was not possible 25 years ago Technological Change Transportation Technology Several major innovations in transportation technology have occurred since World War II: Development of commercial jet aircraft and superfreighters reducing time needed to get from one location to another; has effectively shrunk the globe Introduction of containerization has revolutionized the transportation business, significantly lowering the costs of shipping goods over long distances **The Changing Demographics of the Global Economy** The Changing World Output and World Trade Picture - - - Changes in Foreign Direct Investment (FDI) - been China (received between 2004 and 2012 between \$60B to \$100B a year, followed by Brazil, Mexico, and India. - important stimulus for economic growth in these countries The Changing Nature of the Multinational Enterprise A multinational enterprise (MNE) is any business that has productive activities in two or more countries. Since the 1960s, there have been two notable trends in the demographics of the multinational enterprise: The rise of non-U.S. multinationals, particularly Japanese multinationals, and The growth of mini-multinationals Non-U.S. multinationals (japan) - The large number of U.S. multinationals reflected U.S. economic dominance in the three decades after World War II while, The large number of British multinationals reflected that country's industrial dominance in the early decades of the twentieth century Globalization of the world economy and Japan's rise to the top rank of economic powers has resulted in a relative decline in the dominance of U.S. and British firms in the global marketplace If we look at smaller firms, we see significant growth in the number of multinationals from developing economies. The Rise of Mini-Multinationals Most Int'l trade and investment still conducted by large firms but, Many medium-sized and small businesses are becoming increasingly involved in international trade and investment. Example: International Road Dynamics (IRD) of Saskatchewan has subsidiaries in the United States, Chile, China, Belgium. Iceculture Inc., based in Ontario with a staff of 15 export to Britain, Europe, South Africa, Iceland, etc. The Changing World Order - The economies of most of the former communist states are in very poor condition, and their continued commitment to democracy and free market economics cannot be taken for granted. More quiet revolutions have been occurring in India, China, and Latin America. Their implications for international businesses may be just as profound as the collapse of communism in Eastern Europe China continues to move progressively toward greater free market reforms. (nobody was expecting of the speed of china, they kept the money in their country and they started buying manufacture, company in the U.S to keep expanding) If what is occurring in China continues for two more decades, China may move from developing economy to industrial superpower status even more rapidly than Japan did. Throughout most of Latin America debt and inflation are down; Governments are selling state-owned enterprises to private investors; FDI(foreign direct investment) is welcomed and the region's economies are growing; These changes have increased the attractiveness of Latin America, both as a market for exports and as a site for FDI. - - - - **The Globalization Debate** Is the shift toward a more integrated and interdependent global economy a good thing? - Anti-globalization arguments: Harmful effects on jobs and income Labor policies Environmental impact National sovereignty World's poor Globalization, Jobs and Income Outsourcing of Canadian jobs to developing countries: fears of a long-term harmful effects on Canada's well- being. (Example: Gildan Activewear Inc. Montreal). Technological change has had a bigger impact than globalization on the declining share of national income enjoyed by labour. The solution is not in limiting free trade and globalization, but in increasing society's investment in education to reduce the supply of unskilled workers Globalization, Labour Policies A second source of concern is less developed countries lack adequate regulations to protect labour and the environment from abuse by the unscrupulous. Globalization critics often argue that adhering to labour and environmental regulations significantly increases the costs of manufacturing enterprises and puts them at a competitive disadvantage in the global marketplace Globalization and National Sovereignty Another concern is increasingly interdependent global economy shifts economic power away from national governments toward organizations such as WTO, EU and UN. The WTO is a favourite target of those who attack the headlong rush toward a global economy Globalization and the World's Poor Critics of globalization argue that despite the supposed benefits associated with free trade and investment, the gap between the rich and poor is widening. While some of the world's poorer nations are capable of rapid periods of economic, there is stagnation among the world's poorest nations\' economies. Managing in the Global Marketplace The task of managing an international business Differences between countries require that an international business vary its practices country by country; Cross-border transactions also require that money be converted from the firm's home currency into a foreign currency and vice versa. **Sustainability in Practice** **[ADIDAS GROUP:]** APPROACH to SUSTAINABILITY and SUPPLY-CHAIN MANAGEMENT APPROACH to LABOUR STANDARDS **What has been the result and benefit to Adidas Group?** **Implications for Business** **International Organizations** -- Open Environment for goods and services **The North** -- South Divide **The Role** of **Technology** in **International Trade** **Chapter 2- Country Differences in Political Economy** **Learning objectives** 1\. Examples of how the political systems of countries differ. 2\. Distinguish how the economic systems of countries differ. 3\. Explain how the legal systems of countries differ and how corruption affects economic development. 4\. Determines the level of economic development of a nation. 5\. Summarize the main changes that are currently reshaping political, economic, and legal systems worldwide. 6\. Describe how transition economies are moving toward market-based systems. 7\. Explain the implications of changes in political economies. **Country Differences** Opening Case: **Hong Kong Protests** In 2019, Hong Kong's Security Bureau, proposed amendments that allowed to extradite criminal suspects to mainland China Hong Kong civil society reacted with mass protests demanding the repeal of the law and the resignation of the executive chief The beginning of 2020 marked another wave or protests, focused on wider democratic reforms, culminating with the dismissal of; Wang Zhimin, Beijing\'s liaison officer for the territory, and the appointment of a provincial Communist Party secretary. **Political Systems** Collectivism and Individualism Collectivism Political system that stresses the primacy of collective goals over individuals goals. Plato (427-347 BC) - Individual rights should be sacrificed for the good of society. Socialism 1\. Communism -- revolution and totalitarian dictatorships 2\. Social Democrats -- socialism by democratic means Individualism - Aristotle (384 -- 322 BC) -- Private property is more highly productive than communal property and will thus stimulate progress - 1. 2. Democracy and Totalitarianism Democracy Political system in which the people elect representatives to form the government. Democracy demands: 1\. Freedom of expression (we feel safe) 2\. Free media 3\. Regular elections - 4\. Limited terms for representatives 5\. Fair court system: being rich won't help you. 6\. Non political -- police and army Totalitarianism All the constitutional guarantees on which representative democracies are built---such as an individual's right to freedom of expression and organization, a free media, and regular elections---are denied to the citizens. In most totalitarian states, political repression is widespread and those who question the right of the rulers to rule, find themselves imprisoned or worse. There are four major forms of totalitarianism: **Communist totalitarianism**: north korea, russia and cuba **Theocratic totalitarianism**: based on religion like in iran **Tribal totalitarianism**: a big family owning the country, president to the minister are from the same family. (royal families like in africa, dubai) **Right-wing totalitarianism**: dictatorship, people believe that they have the right like the zimbabwe president using jesus to say he has the right. **Economic Systems** Market Economy All productive activities are privately owned; Supply and demand determines price and production Command Economy The government determines the allocation of resources including the determination of production and prices - Mixed Economy Some sectors are left to private ownership and free market mechanism; Others have significant government ownership and government planning. **Legal Systems** Legal systems refers to a system of rules that regulates behavior and the processes by which the laws of a country are enforced and through which redress of grievances is obtained. Example: you speed, you get a ticket. You steal, you go to jail. Different Legal Systems Common Law - System of law based on tradition, precedent, and custom. When law courts interpret common law, they do so with regard to these characteristics. Civil Law Law based on a very detailed set of written laws and codes. Theocratic Law System of law based on religious teachings. - Different in Contract Law Definition of Contract Contract is a document that specifies the conditions under which an exchange is to occur and details the rights and obligations of the parties involved. Contract Law Contract law is the body of law that governs contract creation and enforcement Parties to an agreement invoke contract law when there is belief there was violation of the agreement International Trade and Contract Disputes - - United Nations Convention of Contacts for the International Sale of Goods (CISG); By adopting the CISG, a nation accepts to treat the convention rules as part of its law. CISG applies automatically to all contracts for the sale of goods between different firms based in countries that have ratified the convention, unless the parties to the contract explicitly opt out - Property rights Property Refers to a resource over which an individual or business holds a legal title, meaning it owns the resource. - Resources include: Land & real estate; Equipment; Capital Mineral rights; Businesses; Intellectual property(patents, copyrights and trademarks) Property rights Bundle of legal rights over the use to which a resource is put and over the use made of any income that may be derived from that resource. Essentially, "people own stuff and can use it" Actions Against Property Rights Private Action Private Action is an action by private individuals or groups against property holders including actions such as: Theft Piracy Blackmail Any criminal activity against property rights Public Action and Corruption **Public Action** violates property rights when public officials extort income from property holders, including - actions such as: Bribes Levying excessive taxation Requiring expensive licenses or permits from property holders or taking assets into state ownership without compensating the owners Table 2.1 Corruption Perceptions Index (2018) In the table, Canada had corruption so they introduced Bill S-21. - **Canada's Bill S-21** Otherwise known as the Corruption of Foreign Public Officials Act that entered into force in1999 It has long been illegal to bribe officials in Canada Now it is illegal for Canadian officials to bribe officials in another country Does have "loophole" provisions to cover for those instances in which a bribe might be solely a perception, due to cultural considerations of gift giving, in other countries Sets out a lawful exception that an accused could use as a defence. Namely, that the payment was lawful in the foreign state or public international organization for which the foreign public official performs duties or functions. The Protection of Intellectual Property Intellectual Property refers to property that is the product of intellectual activity such as computer software, music, formulas etc. Ownership rights are established through: 1\. Patents 2\. Copyrights 3\. Trademarks [Paris Convention] for the Protection of Industrial Property : International agreement signed by 96 nations to protect intellectual property Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement (1995) Agreement amongst member states of the World Trade Organization (WTO) to oversee the enforcement of stricter intellectual property regulations. Table 2.2 Corruption Perceptions Index (2018) Product Safety and Product Liability **Product Safety Laws** set safety standards to which products must adhere, where it is going to be commercialized. - - **Product Liability** involves holding a firm and its officers responsible when a product causes injury, death or damage **Determinants of Economic Development** The political, economic, and legal systems can have a profound impact on a country's economic development. Gross National Income (GNI) Total income of all citizens of a country. - Purchasing Power Parity (PPP) Adjustment in gross domestic product per capita for a comparison of living standards in different countries. Differences in Economic Development Table 2.3 GNI per Capita for Select Countries Most rich people in U.S, Ireland, Canada Broader Conceptions of Development: Amartya Sen Human Development Index (HDI) Human Development Index (HDI) measures the quality of human life in different countries The Nobel prize-winning economist Amartya Sen has argued that development should be assessed less by material output measures, such as GNP per capita, and more by the capabilities and opportunities that people enjoy. According to Sen, development should be seen as a process of expanding the real freedoms that people experience. In Sen's view, development is not just an economic process, but it is a political one too, and to succeed requires the "democratization" of political communities. [Measures quality of human life in different countries in terms of:] 1\. Life expectancy at birth (which is a function of health care) 2\. Education attainment (which is measured by a combination of the adult literacy rate and enrolment in primary, secondary, and tertiary education), 3\. Average incomes, based on PPP estimates, are sufficient to meet the basic needs of life in a country (adequate food, shelter, and health care). Political Economy and Economic Progress Innovation and Entrepreneurship: The engines of growth - Innovation and entrepreneurial activity are the engines of long- run economic growth. Innovation definition broadly to include not just new products, but also new processes, new organizations, new management practices, and new strategies. Innovation and Entrepreneurship require a Market Economy Economic freedom associated with a market economy creates greater incentives for innovation and entrepreneurship than either a planned or a mixed economy. In a planned economy, the state owns all means of production: Entrepreneurial individuals have little economic incentive to develop valuable new innovations, since it is the state, rather than the individual, that captures most of the gains. Innovation and Entrepreneurship require strong property rights: - - Both individuals and businesses must be given the opportunity to profit from innovative ideas Without strong property rights protection, businesses and individuals run the risk that the profits from their innovative efforts will be expropriated, either by criminal elements or by the state. The Required Political System There is a great deal of debate as to the kind of political system that best achieves a functioning market economy with strong protection for property rights. Four of the fastest-growing economies of the past 30 years--- South Korea, Taiwan, Singapore, and Hong Kong---had one thing in common at the start of their economic growth: undemocratic governments. Economic Progress Begets Democracy - While it is possible to argue that democracy is not a necessary precondition for a free market economy in which property rights are protected, subsequent economic growth often leads to establishment of a democratic regime. Several of the fastest-growing Asian economies adopted more democratic governments during the past two decades, including South Korea and Taiwan. Geography, Education, and Economic Development While a country's political and economic system is probably the big locomotive driving its rate of economic development, other factors are also important: - Harvard's Jeff Sachs: by virtue of favourable geography, certain societies were more likely to engage in trade than others and were thus more likely to be open to and to develop market-based economic systems The general assertion is that nations that invest more in education will have higher growth rates because an educated population is a more productive population. **States in Transition** The political economy of many of the world's nation-states has changed radically since the late 1980s. Two trends have been evident. 1. - - Totalitarian governments collapsed and were replaced by democratically elected governments 2. The Spread of Democracy Map 2.1. Freedom in the World 2018 - - The New Order? The end of the Cold War and the "new world order" that followed the collapse of communism in Eastern Europe and the former Soviet Union, taken together with the collapse of many authoritarian regimes in Latin America, have given rise to intense speculation about the future shape of global geopolitics: Author Francis Fukuyama has argued that "we may be witnessing... the end of history as such: that is, the end point of mankind's ideological evolution and the universalization of Western liberal democracy as the final form of human government. Huntington theorizes that modernization in non-Western societies can result in a retreat toward the traditional, such as the resurgence of Islam in many traditionally Muslim societies: The Islamic resurgence is both a product of and an effort to come to grips with modernization In contrast to Fukuyama, Huntington sees a world that is split into different civilizations, each of which has its own value systems and ideology. The Spread of Market-Based Systems In general, command and mixed economies failed to deliver the kind of sustained economic performance achieved by countries adopting market-based systems, such as the United States, Switzerland, Hong Kong, and Taiwan. **The Nature of Economic Transformation** Deregulation Deregulation involves removing legal restrictions to the free play of markets, to the establishment of private enterprises, and to the manner in which private enterprises operate Privatization Transfers the ownership of state property into the hands of private individuals, frequently by the sale of state assets through an auction. Legal Systems Without a legal system that protects property rights, and without the machinery to enforce that system, the incentive to engage in economic activity can be reduced substantially by private and public entities, including organized crime, that expropriate the profits generated by the efforts of private-sector entrepreneurs **Implications of the Changing Political Economy** In practice, the road that must be travelled to reach a market-based economic system has often been rocky. This has been particularly true for the states of Eastern Europe in the post-communist era. In this region, the move toward greater political and economic freedom has sometimes been accompanied by economic and political chaos Implications for business The implications for business are enormous. For the best part of 50 years, half of the world was off-limits to Western businesses. Now all that is changing. Many of the national markets of Eastern Europe, Latin America, Africa, and Asia may still be undeveloped and impoverished, but they are potentially enormous Attractiveness Benefits In the most general sense, the long-run monetary benefits of doing business in a country are a function of: the size of the market, the present wealth (purchasing power) of consumers in that market, and the likely future wealth of consumers First-mover advantages are the advantages that accrue to early entrants into a market. Late-mover disadvantages are the handicap that late entrants might suffer Costs A number of political, economic, and legal factors determine the costs of doing business in a country. With regard to political factors, the costs of doing business in a country can be increased by a need to pay off the politically powerful to be allowed by the government to do business. One of the most important variables is the sophistication of a country's economy. It may be more costly to do business in relatively primitive or undeveloped economies because of the lack of infrastructure and supporting businesses. Risks Risks of doing business in a country are determined by a number of: political, economic, and legal factors. Political risk has been defined as the likelihood that political forces will cause drastic changes in a country's business environment that adversely affect the profit and other goals of a particular business enterprise. Economic risk can be defined as the likelihood that economic mismanagement will cause drastic changes in a country's business environment that adversely affect the profit and other goals of a particular business enterprise Legal risk might be defined as the likelihood that a trading partner will opportunistically break a contract or expropriate property rights The overall attractiveness of a country as a potential market and/or investment site for an international business depends on balancing the benefits, costs, and risks associated with doing business in that country. Overall attractiveness The overall attractiveness of a country as a potential market and/or investment site for an international business depends on balancing the benefits, costs, and risks associated with doing business in that country Ethics and Regulations Ethics and Human rights One major ethical dilemma facing firms from democratic nations is whether they should do business in totalitarian countries, such as China, that routinely violate the human rights of their citizens. Some argue that investing in totalitarian countries provides comfort to dictators and can help prop up repressive regimes that abuse basic human rights. A second important ethical issue is whether an international firm should adhere to the same standards of product safety, work safety, and environmental protection that are required in its home country. This is of particular concern to many firms based in Western nations, where product safety, worker safety, and environmental protection laws are among the toughest in the world. Ethics and Corruption - - **Group B** - **Midterm** - **Chapter 3 (the cultural environment)** **Learning objectives** 1\. Explain what is meant by the culture of a society. 2\. Identify the forces that lead to differences in social culture and explain the business and economic implications of differences in culture. 3\. Recognize how differences in social culture influence values in the workplace. 4\. Demonstrate an appreciation for the economic and business implications of cultural change **What Is Culture?** - Follow both Hofstede, and Namenwirth and Weber a culture is seen as a system of values and norms that are shared among a group of people, and that when taken together constitute a design for living. Values and Norms [Values] form the bedrock of a culture. They provide the context within which a society's norms are established and justified. Norms are the social rules that govern people's actions toward one another. [Norms] can be subdivided further into two major categories: folkways and mores Culture, Society, and the Nation-State - There is not a strict one-to-one correspondence between a society and a nation-state Nation-states are political creations. They may contain a single culture or several cultures: France is embodiment of French culture Canada has at least 3 cultures---an Anglo culture, a French-speaking "Quebecois" culture, and Indigenous culture (encompasses hundreds of different cultures). - **Determinants of Culture** Culture, norms and value system(don't need interpreter)= Social Culture Individual and Groups individual [Group] Definition: Group is the association of two or more individuals who have a shared sense of identity and who interact with each other in structured ways on the basis of a common set of expectations about each other's behavior. Example: One central value of some Asian cultures is the importance attached to group membership. [Individual] (western society is all individual because they leave their families) Definition: In Western societies, the individual is the basic building block of social organization. Example :In the United States and Canada the emphasis on individual performance finds expression in an admiration of "rugged individualism" and entrepreneurship. Social Culture [Social Stratification] **Social Strata** : Hierarchical social categories often based on family background, occupation, and income. - - Defined on the basis of characteristics such as family background, occupation, and income. Individuals are born into a particular stratum. [Social Mobility] - **Caste system**: is a closed system of stratification in which social position is determined by the family into which a person is born and change in that position is usually not possible during an individual's lifetime. Religious and Ethical systems [Religion]: a system of shared beliefs and rituals that are concerned with the realm of the sacred. [Ethical systems]: refer to a set of moral principles, or values, that are used to guide and shape behaviour. Religious and Ethical Systems Major Religions 1. Christianity **Protestant Denomination** Ethics emphasize the importance of hard work and wealth creation. Direct communication with God Catholic Denomination Promise of salvation in the next world, and how the poor would reach heaven. Communication with God through the priesthood **Catholic Denomination** Promise of salvation in the next world, and how the poor would reach heaven. Communication with God through the priesthood Islam Economic principles of Islam favour free enterprise and of earning legitimate profit through trade and commerce. - In the Islamic view of the world, humans are part of a collective in which the wealthy and successful have obligations to help the disadvantaged. - - Hinduism Hindu values emphasize that individuals should be judged not by their material achievements, but by their spiritual achievements. Hinduism also supported India's caste system. - Modern India is a very entrepreneurial society, with millions of hard working entrepreneurs, many of whom are educated in the Western World. - - Confucianism The Confucian system of ethics are of particular interest ---loyalty, reciprocal obligations, and honesty. In Confucian cultures, the loyalty that binds employees to the heads of their organization can reduce the conflict between management and labor Guanxi refers to relationship networks supported by reciprocal obligations Language Spoken Language - - - Language does far more than just enable people to communicate with each other. The nature of language also structures the way we perceive the world. It also helps define culture. In countries with more than one language, one also often finds more than one culture Unspoken Language Unspoken language refers to nonverbal communication. Many nonverbal cues, however, are culturally bound. A failure to understand the nonverbal cues of another culture can lead to a failure of communication - Education From an international business perspective, one important aspect of education is its role as a determinant of national competitive advantage - The availability of skilled and educated workers seems to be a major determinant of the likely economic success of a country **Culture and the Workplace** - How a society's culture affects the values found in the workplace is of considerable importance to an international business with operations in different countries. Hofstede isolated five dimensions that he claimed summarized different cultures: Power distance Individualism versus Collectivism Uncertainty avoidance Masculinity versus femininity Long-term versus short-term orientation Power distance Focused on how a society deals with the fact that people are unequal in physical and intellectual capabilities Individualism versus Collectivism Focused on the relationship between the individual and his or her fellows. Uncertainty avoidance measured the extent to which different cultures socialized their members into accepting ambiguous situations and tolerating uncertainty Masculinity versus femininity - In masculine cultures, sex roles were sharply differentiated and traditional "masculine values," such as achievement and the effective exercise of power, determined cultural ideals. Long-term versus short-term orientation Deals with virtue regardless of truth. Values associated with long-term orientation are thrift and perseverance; values associated with short-term orientation are respect for tradition, fulfilling social obligations, and protecting one's "face **Table 3.2. Work-Related Values for 10 Selected Countries** 1. 2. 3. 4. 5. 6. - **Cultural Change** Culture is not a constant; it evolves over time. Several studies have suggested that economics may be an important factor in societal change. The cultures of societies may also change as they become richer because economic progress affects a number of other factors, which in turn influence culture. - Cross-Cultural Literacy Doing business in different cultures requires adaptation to conform with the value systems and norms of that culture. Adaptation embraces all aspects of an international firm's operations in a foreign country, including: The way deals are negotiated The appropriate incentive and pay systems for salespeople The structure of the organization The name of a product The tenor of relations between management and the workforce The manner in which the product is promoted Cultural and Competitive Advantage The value systems and norms of a country influence the costs of doing business Attitudes toward cooperation between management and labour, toward work, and toward the payment of interest are influenced by social structure and religion. The connection between culture and competitive advantage has important implications for the choice of countries in which to locate production facilities and do business Cultural and Business Ethics Although many ethical principles are universal, some are culturally bound When faced with conflicting ethical principles, international businesses may be confronted with difficult dilemmas. For example, guanxi networks are often supported by the idea of reciprocal gift giving. One response to such a dilemma is to argue that because customs vary from country to country, businesses should adopt the customs (and by extension, ethical practices) of the country in which they are currently doing business. **Chapter 4- ethics in international business (country differences)** **Learning objectives** 1.Explain the source and nature of ethical issues and dilemmas in international business. 2.Show how important it is for managers to consider ethical issues when making strategic and operating decisions. 3.Identify the causes of poor ethical decision making in international business organizations. 4\. Explain why the Internet and social media are having such a large influence on ethics. 5\. Discuss the steps that managers can take to promote an awareness of ethical issues throughout the organization and to make sure that ethical considerations enter into strategic and operational decisions. **Ethics in International Business** Opening Case: The most corrupt industry sectors? OECD report on bribery and corruption: Extraction (mining, oil and gas, logging, etc.) Construction (building) Transportation (highways, bridges, railroads, airports, etc.) IT (information technology and telecommunications) Why the extraction, construction, transportation and IT industries are vulnerable to corruption **Ethics as Affected by Different Environments** The circumstances that affect ethical considerations Political environment (regional, national and international), and the consequent laws and regulations Social-cultural environment, which has been influenced by immigration worldwide, and a continued movement of populations from rural to urban areas. Technological environment, which has affected communications regionally and globally and has also affected the work environment and productivity. Economic environment, which sees currency fluctuations and international organizations like the IMF and World Bank playing a more significant role in national and regional economies. The need for corporations to remain economically competitive influences corporate objectives and also has consequences for consumer priorities. The competitive environment which is causing companies to make decisions in a global context, resulting in actions that affect their employees or customers. **Ethical Issues in International Business** Ethics in the Changing Political Environment Corruption International businesses can still gain economic advantages by making payments to corrupt officials. Convention on Combating Bribery of Foreign Public Officials in International Business Transactions The convention obliges member states to make the bribery of foreign public officials a criminal offence. Perceptions of corrupt politicians in Canada Corruption in government and businesses in Quebec and federal government money from taxpayers Toronto Mayor Rob Ford scandal Political scandals based on unethical dealings that are played out daily in the international news raise concerns of international business people dealing with Canada. Human Rights In 2011 and 2012, Canada was caught up in human rights issues through its participation in a coalition of countries operating in Afghanistan. Ethics in the Changing Sociocultural Environment What is considered normal practice in one culture may be considered unethical in others. Examples of these "ranges" of ethical/unethical behaviour may include things such as: how gift giving might be considered bribery; - how you interact with law enforcement officers; - - whether companies only concern themselves with obeying precise regulations In 2011 and 2012, Canada was caught up in human rights issues through its participation in a coalition of countries operating in Afghanistan - Ethics in the Changing Technological Environment Developments and applications of sophisticated technology can create ethical nightmares reaching far across the globe and touching many governments and organizations. Fake news" is information sourced from opinion sites. Stories lack research and, therefore, journalistic integrity The growing popularity of social media has affected how employees connect with one another and the world. Ethics in the Changing Economic Environment The economic environment sees currency fluctuations and international NGOs playing a more significant role in national and regional economies Panama Papers scandal and wealthy Canadians Ethics in the Changing Competitive Environment Employment practices Competitive environment increases in intensity, and continued advances in the technological environment conspire to challenge companies to increase employee productivity. how whistle-blowers are treated. Canadian Amazon Web Services VP case. Outsourcing When outsourced firms provide products and services at a lower cost, one of the most obvious considerations is discovering how the provider of the outsourced activity is "doing it cheaper. Are they using cheaper materials than what you would have used? Do they get away with bypassing pollution and environmental considerations? Environmental Pollution Ethical issues arise when environmental regulations in host nations are far inferior to those in the home nation. Should a multinational feel free to pollute in a developing nation? (To do so hardly seems ethical.) Is there a danger that amoral management might move production to a developing nation precisely because costly pollution controls are not required. A Corporate Right to Pollute? Some parts of the environment are a public good that no one owns, but anyone can despoil. No one owns the atmosphere or the oceans, but polluting both, no matter where the pollution originates, harms all The tragedy of the commons occurs when a resource held in common by all, but owned by no one, is overused by individuals, resulting in its degradation. The Power of Multinationals By 1985, South Africa faced economic and political sanctions, and many multinational companies began to pull out of the country. After several bloody uprisings, the existing government was forced to dismantle the system Some regimes are so repressive that investment cannot be justified on ethical grounds. A current example would be Myanmar (formally known as Burma). **Ethical Dilemmas** Managers must confront very real ethical dilemmas There are situations in which none of the available alternatives seems ethically acceptable Ethical dilemmas exist because many real-world decisions are complex, difficult to frame, and involve first-, second-, and third-order consequences that are hard to quantify. **The Roots of Unethical Behaviour** 2020, COVID-19 business ethics garner stories on businesses unethically describing their products as having certain capabilities that are unproven (such as a well-known brand of hand sanitizer that claimed to kill 99 percent of all germs, even though it did not). French doctors proposing testing a new COVID-19 vaccine in certain African countries before launching it in Europe and North America **Determinants Of Ethical Behaviour** **Ethical behaviour** → personal ethics, decision-making process, leadership, unrealistic performance goal, organization culture. Business ethics are not divorced from personal ethics, which are the generally accepted principles of right and wrong governing the conduct of individuals An individual with a strong sense of personal ethics is less likely to behave in an unethical manner in a business setting **Ethics and the Internet and Social Media** Why Does the Internet Have Such a Big Influence on Ethics? Quantity Variety Speed Impact The answer is magnitude. A large amount of content can be created on a large scale in a short period of time. Web content is being created in larger volumes because there are more devices being used by more people. The global population continues to increase, and most of the increase is in urban areas with high-speed Internet connectivity. **Ethical Decision Making** For many of the most vexing ethical problems arise because there are very real dilemmas inherent in them and no obvious correct action. Managers can and should do many things to make sure that basic ethical principles are adhered to and that ethical issues are routinely inserted into international business decisions. - make sure ethical issues are considered in business decisions: 1\. Favor hiring and promoting people with a well-grounded sense of personal ethics. 2\. Build an organizational culture that places a high value on ethical behavior. 3\. Make sure that leaders within the business not only articulate the rhetoric of ethical behavior, but also act in a manner that is consistent with that rhetoric. 4\. Put decision-making processes in place that require people to consider the ethical dimension of business decisions. 5\. Develop moral courage. **Ethical Decisions and Approaches to Corporate Social Responsibility** Corporate social responsibility refers to the idea that business people should consider the social consequences of economic actions when making business decisions, and that there should be a presumption in favor of decisions that have both good economic and social consequences. CSR Moral Obligations Multinational corporations have power that comes from their control over resources and their ability to move production from country to country. Some moral philosophers argue that with power comes the social responsibility for multinationals to give something back to the societies that enable them to prosper and grow Businesses, particularly large successful businesses, need to recognize their noblesse oblige and give something back to the societies that have made their success possible Noblesse oblige is a French term that refers to honourable and benevolent behaviour considered the responsibility of people of high (noble) birth. Four common terms used to describe corporates CSR behavior: 1\. Obstructionist stance: Companies taking this stance create barriers that make it difficult for customers to address their concerns. 2\. Defensive stance: Companies taking this stance deny responsibility for the cause of concern. 3\. Accommodative stance: In taking this stance, a company exceeds its customers' expectations. 4\. Proactive stance: In taking this stance, companies respond to issues as soon as they arise and inform their customers of how they will be proceeding.