Business In Society Globalization PDF

BUSINESS IN SOCIETY GLOBALIZATION Professor John R. Palmer  Globalization: What is it? 2  Globalization: the merging of previously domestic spaces and issues into one multifaceted and interconnected transnational global village. ...

BUSINESS IN SOCIETY GLOBALIZATION Professor John R. Palmer  Globalization: What is it? 2  Globalization: the merging of previously domestic spaces and issues into one multifaceted and interconnected transnational global village.  Globalization is not new… 3 Globalization  A term used to describe the growing interdependence of people around the world with regard to societal influence, economies, and cultural exchanges  Refers to the increasing economic integration and interdependence of countries  A global movement to increase the flow of goods, services, people, real capital, and money across national borders in order to create a more integrated and interdependent world economy 4  “Types” of Globalization 5  Globalization: a process of decreasing constraints on the interactions among the nations and peoples of the world.  Economic globalization: the integration of fragmented markets into a global economy.  Political globalization: the process by which world power relationships change, and there is a loss of sovereignty by the state.  Social or cultural globalization: the emergence of a worldwide cultural system.  Drivers for Globalization 6  Market  New markets  Strategic alliances  Demand for products  Cost  Source of inexpensive labour  Cheaper raw materials  New sources of capital  Competition  Competition is producing similar goods of equal or better quality at lower cost  Competition can come from anywhere  Government  Trade liberalization policies  Industry deregulation  Privatization  Participation in globalization institutions  Technology  Advances in information and communication technologies facilitate: ◼ Coordination of business activities from anywhere ◼ Cross-border banking  Homogenization of many enabling technologies  Globalization: Emerging Themes 7  Interconnectedness  Interdependence  Integration  Complexity  Competition  Risk  Ethical dilemmas  Civil society  Social Responsibility  Culture  Laws  Globalization and the Implications for Business 8  Damage to environment  Support for oppressive regimes  Criticism of marketing practices (e.g., tobacco, pharmaceutical, baby formula, etc.)  Arms trade  Complexity  Competition  Treatment of employees (e.g., sweatshops)  Treatment of Indigenous Peoples  Genetic modification of plants and animals  Laws and culture  Corruption and bribery  The Pros and Cons of Globalization 15- 9 Globalists’ Arguments Anti-globalists’ Arguments Trade is encouraged as it leads to the The expansion of global corporations is undesirable as decisions most efficient production of goods are based on profit-making or greed. and services from which all gain. Conspiracies exist between corporations and governments Private corporations and open resulting in any benefits being received by a few. markets provide better goods and Unemployment is created in developed economies. services to society. Poverty and inequality increases in the developing economies. Opportunities for employment and Periodic financial crises are caused disrupting the economies of higher incomes are enhanced in many countries. developing countries. There is destruction of local environments as standards are The standard of living has increased lowered to attract developments. in most developing countries. The cultures of societies are lost or changed. The transfer of capital, technology, Human rights are violated, in particular in relation to sweatshops. intellectual property, and even skilled Questionable payments are made to governments or their officials labour occurs. to facilitate business. Several stakeholders benefit, including Intellectual property is not respected. owners, consumers, suppliers, and The sovereignty of nations is undermined. employees. Worldwide organizations such as the World Bank, the Cost of living reduced in developed International Monetary Fund, and the World Trade Organization countries. have too much influence. © 2020 McGraw-Hill Education Ltd. TABLE 15.1  Country / Economic Corporate Power Region 10 Notes: 1) EU is an economic region, many of its constituent countries are listed for comparison purposes 2) Taiwan is not a country, but its economic power is listed separately for comparison purposes 3) Walmart is not a country, but if it was …. Globalization and Freer Trade  World economy increasing as a result of expanding global trade relationships  Various trade organizations have been formed:  World Trade Organization (WTO) → the only global international organization dealing with the rules of trade between nations  Canada has signed three major trade agreements:  North American Free Trade Agreement (NAFTA)  Comprehensive Economic and Trade Agreement (CETA)  Comprehensive and Progressive Agreement for Trans- Pacific Trade Partnership (CPTPP) 15- 11 © 2020 McGraw-Hill Education Ltd.  Institutions of Globalization 12  Supranational Institution: an international organization that transcends national boundaries where the member states share in decision making on particular issues pertaining to the members  Institutions of Globalization 13  The World Bank:  Provides financial and technological assistance to developing countries.  The International Monetary Fund (IMF):  Fosters financial stability, international trade, employment, and reduction of poverty.  International Labour Organization (ILO):  UN agency that seeks to promote social justice and internationally recognized human and labour rights.  World Trade Organization (WTO):  Coordinates agreements reducing trade barriers  Organization for Economic Cooperation and Development (OECD)  Promotes economic globalization with a view to achieve the highest sustainable economic growth and employment, sound economic expansion, and to expand world trade  World Economic Forum (WEF) → independent International Institution / think tank for Public-Private Cooperation  United Nations Environment Program (UNEP):  UN body responsible for environmental protection  United Nations Commission on Human Rights (UNCHR):  UN body for the promotion and protection of human rights worldwide  World Trade Organization 14  “The World Trade Organization (WTO) deals with the rules of trade between nations at a global or near- global level”  A negotiating forum ◼ “the WTO is not just about liberalizing trade, and in some circumstances its rules support maintaining trade barriers — for example to protect consumers or prevent the spread of disease”  A set of rules ◼ “the goal is to help producers of goods and services, exporters, and importers conduct their business, while allowing governments to meet social and environmental objectives”  Helps settle disputes ◼ “settle these differences is through some neutral procedure based on an agreed legal foundation”  World Bank 15  Founded at the Bretton Woods Conference in 1944 (post WW2) ◼ Note: John Maynard Keynes was the head of the UK delegation  “The economic health of every country is a proper matter of concern to all its neighbors, near and far” – Franklin D. Roosevelt”  Official goal is the reduction of poverty through open markets and the end of economic nationalism  Provides loans to developing countries specifically for capital programs  “Infrastructure is basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function”  WTO – Principles of trading 16  Trade without discrimination  No concept of “Most Favoured Nation” ◼ You can create a free-trade group that applies only to members of the group ◼ You can create barriers against products that you consider to be unfairly traded by some countries ◼ When you open a market or lower a barrier, it must apply to all trading partners  National Treatment ◼ Imported and local goods should be treated equally once those good have entered the market ◼ This does not mean you cannot charge import duties  Freer trade, gradually  Predictability ◼ Lack of arbitrary changes  Promoting competition ◼ Governments should not grant export subsidies / dumping  Encourage development and economic reform ◼ Specifically target the “least-developed” countries for assistance ◼ Both freer trade and technical assistance  Globalization’s effect on Government 17  Perceptions of loss of ability to govern  Changes in industrial policy and the instruments available  Changes in tax base and fiscal policies  Greater transparency in the activities of government  Increased number of stakeholders  Globalization’s effect on Civil Society 18  More available and accessible information  Larger receptive audience  Greater capacity to raise public awareness  New sources of resources  Greater network capacity  International Non-governmental Organizations 19  INGOs:  Groups that hold shared values and attitudes about the issues relating to globalization and advocate for changes to improve conditions in developing countries  Put pressure on corporations and governments  INGOs are also referred to as transnational non- government actors (TNGOs) or transnational social movement organization (TSMOs)  Examples:  Amnesty International  Greenpeace  Globalization’s effect on Canadian Business 20  Canadian business influenced by globalization:  Pressure to forge international links  Must meet the challenges of global market restructuring as new trading agreements are completed by governments  Must attract more investment in plants that further process our natural resources  Must be competitive with those from other countries in order to also behave as responsible corporate citizens  More direct investment abroad  The Acceptance of Global Capitalism 21  Bottom of the Pyramid: Corporations should not ignore as consumers the world’s population living in poverty (4 billion people)  Fair trade: Trading partnership which aims at sustainable development for excluded and disadvantaged producers (e.g., Fairtrade Foundation, Oxfam, and Traidcraft)  Microfinance: Provision of financial products such as micro- credit or micro-insurance to people living in poverty (e.g., Grameen Bank in Bangladesh)  The Big Mac Index 22  In the long run, exchange rates should adjust to equal the price of a basket of goods and services in different countries  The exchange rate that would equalise the price of a Swiss Big Mac with an American one is 1.55 francs to the dollar; the actual exchange rate is only 0.96  “Burgernomics” http://www.economist.com/node/21542808  Perception 23 How many people know French? What does this say? Pas de lieu Rhône que nous Paddle your own canoe  Perception – buying a car 24  Ford  Kia Soul  Chevrolet  Hyundai  Chrysler  Toyota  Dodge  Scion  GMC  Suzuki  Lincoln  Honda  Cadillac  Acura  Nissan  Porsche  Infinity  BMW  Volkswagen  Jaguar  Audi Where did all these other Black Kia Soul’s come from all of a sudden?  Ethical superiority 25  Perception that “our” business culture is significantly different – and better – than those in other countries  We vs Them is a Self-Reference Criteria  Unconscious references to one’s own cultural values and knowledge  Perception of corruption 26 Perceived as least corrupt Perceived as most corrupt 1. Iceland 1. Bangladesh, Chad 2. Finland, New Zealand 2. Haiti, Myanmar, Turkmenistan 3. Denmark 3. Cote d’Ivoire, Equatorial Guinea, Nigeria 4. Singapore 4. Angola 5. Sweden 6. Switzerland 5. Congo DR (fmr Zaire), Kenya, Pakistan, Paraguay, Somalia, Sudan, Tajikistan 7. Norway 8. Australia 6. Azerbaijan, Cameroon, Ethiopia, Indonesia, Iraq, Liberia, Uzbekistan 9. Austria 10. UK, Netherlands 7. Burundi, Cambodia, Congo Rep, Georgia, Kyrgyzstan, Papua New Guinea, Venezuela 11. Luxembourg 8. Albania, Niger, Russia, Sierra Leone 12. Canada 13. Hong Kong 9. Afghanistan, Bolivia, Ecuador, Guatemala, Guyana, Libya, Nepal, Philippines, Uganda 14. Germany 15. United States 10. Belarus, Eritrea, Honduras, Kazakhstan, Nicaragua, Palestine, Ukraine, Vietnam, Zambia, www.transparency.org, 2006 Zimbabwe  Is it perception? 27  Coca-Cola Corp. and PepsiCo Inc. are facing a serious challenge in India. A New Delhi environmental group, the Centre for Science and Environment (CSE), found that the soft drinks contained pesticides far exceeding India’s safety standards – the report received extensive coverage. Some Indian states have banned, or threaten to ban, the sales of Coke and Pepsi. Some politicians are calling for a country wide ban in newspapers and during debates.  CSE claims that it is not picking on the two American companies but instead is attempting to pressure the government into enacting stricter regulations. The soft drinks from Indian companies were not tested. It is suggested that the American companies were targeted as they are foreign owned. They are convenient targets as many Indians have a suspicion of globalization and multinational companies.  Pesticide contamination is common in India being present in water, manufactured drinks and foods, but government has ignored the problem. It is suspected that pesticide residues are much higher in Indian produced milk and boiled tea. The companies question the validity of the testing methods, and they are concerned about CSE’s influence on public opinion even with the unreliable results.  The campaign against Coke and Pepsi may discourage foreign investment in India. The country needs to invest heavily in manufacturing industries if it hopes to grow at China’s rate, and if it hopes to reduce poverty.  The two companies have invested over $2 billion in their Indian operations and have 12,500 employees. Through purchase of supplies along their supply chain, the companies indirectly support about 200,000 persons.  Analysis 28 1. What stakeholders are involved and what are their stakes or interests?  Soft drink companies: foreign—loss of sales and reputation. May result in adverse publicity at home.  Soft drink companies: domestic—gain sales.  Employees—of the foreign soft drink companies, may lose their jobs.  Consumers—may consume less. Unaware that they might be misled.  Suppliers (in India)—loss of business, and maybe lay off employees.  NGOs—believe they are representing a cause or issue in best interests citizens of India.  Government—appears to be paying minimum attention or avoiding. May suffer from reduced foreign investment in country.  Media—it’s a story!  Other foreign companies—may be threatened in similar way 2. What are the economic, social/ethical, and environmental issues?  Discrimination towards foreign ownership.  Misleading claims—not mentioning problem exists with other foods.  Unequal treatment of companies operating in soft drink industry.  Testing methods lack reliability.  Tactics of NGOs.  Economic well-being of the country. 3. What should the companies do in response to this problem?  Meet with government to clarify issue.  Not advisable to attack NGO or government.  Possible responses from Chapter 13: Capitulation or pre-emption.  Offer to cooperate with NGO, e.g. more elaborate testing program, financing of NGO.  Advertising to correct misinformation.  Cultural differences 29  Language  Product names and taglines ◼ Tropicana – “Jugo de China” – means “orange juice” most of the time … but “Chinese juice” in some areas ◼ Bacardi – “Pavian” – ok in France, but means “baboon” in German ◼ “Coke adds life!” = “Coke brings back your dead ancestors” in Chinese ◼ KFC’s “finger licking good” = “Eat your fingers off!” in Chinese  Body language ◼ Nodding head up-and-down means “yes” in North America, but means “no” in Albania, and simply means “I hear” in UK, not affirmative ◼ Pointing index finger is common in North America, but is rude in parts of Asia and Africa  Personal space  More distance in North America  Closer distance in Greece, South America and Japan  Perception of time  North Americans value promptness  Caribbean, Greece, others are more relaxed  Cultural Relativism 30  Concept that morality varies from one culture to another and therefore business practices are therefore defined differently from culture to culture Home country perception Ethical Unethical Ethical Ethical Ethical Foreign country perception Ethical Unethical Unethical Cultural relativists may adjust to the ethics of the foreign culture  Sexual and racial discrimination 31  Various North American laws prohibit discrimination on the basis of gender, race, religion on disabilities when it comes to hiring/firing/promoting  However:  In UK, “East” Indians have traditionally been relegated to lowest-paying/least desired jobs  In Germany, the gov’t will not grant citizenship to Turkish workers, even second- generation  In some Southeast Asian and Far Eastern countries, employees from certain backgrounds will not be promoted  In Russia, some job advertisements specify age and gender of who may apply  In Middle East, female businesswomen are a rarity ◼ May not deal with North American female salespeople  When companies hire a diverse workforce, not only to they benefit from skills and loyalty of the employees, but gain goodwill and support from community at large, and global enterprises  Human Rights 32  Came to the forefront in 1990’s due to opportunistic use of child labour, low wages, and abuses in foreign factories supplying North American companies  ILO estimates that 250 million children between 5 and 14 are working in developing countries  Tommy Hilfiger, Liz Claiborne, Nike … all have faced significant issues related to “sweatshops”  Companies should adopt the prevailing legal standard, but also work to improve and embrace a “best practices” approach  Internationally-accepted behaviour should be the goal  Price discrimination 33  Defined as charging different prices to different groups of customers  It is legal if it can be justified on the basis of cost, or if it does not substantially reduce competition  i.e. price increases due to import duties, shipping  EU has fined numerous companies for price-fixing:  European brewers (US$201m)  Hoffman-La Roche – a Swiss chemical company (€63m)  Archer Daniels Midland – a US company (€40m)  Trans-Shipping Alliance (US$240m)  Increasing beyond temporarily to take advantage of a shortage situation is “gouging”  Most countries have laws that protect “lifesaving” products from gouging  Dumping  Companies need to price products in a way to recover legitimate expenses, earn a reasonable profit, and still compete fairly  Bribery 34  A type of corruption  Also known as a “facilitating payment”  Can be requested or offered  When it’s requested/required, it may be considered to be an abuse of entrusted power for personal gain  “In the past 12 months, have you or anyone in your household paid a bribe in any form?  31-50% in Cameroon, Paraguay, Cambodia, Mexico  11-30% in Ethiopia, Ghana, Greece, India, Pakistan +others  5-10% in Argentina, Croatia, South Africa, Poland +others 