2 What is globalization?Globalization refers to the shift toward a more integrated and interdependent world economyGlobalization involves the integration of technology, markets, politics, cultures, labor, production, and commerce. Globalization is both the process and the result of this integration.
3 Our focus at this stage… We are concerned with globalization as the expansion of international trade to a point where national markets have been overtaken by regional trade blocs, leading eventually to a global marketplace.
4 Globalization has 2 main components: Globalization of markets: the merging of historically distinct and separate national markets into 1 huge global marketplace lead to creating of global products e.g. McDonald’s , Coca-Cola, Starbucks, etc.Globalization of production: the sourcing of goods and services from locations around the globe to take advantage of national differences in cost and quality of factors of production e.g. customer service call center in India for US firms
6 Drivers of Globalization Decline trade and investment barriersTechnological changes
7 What is MNE(or MNC)?Multinational enterprises (MNEs) are corporations that “own or control production or service facilities outside the country in which they are based.”MNEs also are referred to as global, transnational, and international companies.
8 Multinational corporation A multinational corporation (MNC) or transnational corporation (TNC), also called multinational enterprise (MNE), is a corporation or enterprise that manages production or delivers services in more than one country. It can also be referred to as an international corporation.
9 Common Characteristics of Multinational Enterprises (MNE) Operating a sales organization, manufacturing plant, distribution center, licensed business, or subsidiary in at least two countriesEarning an estimated 25 to 45% of revenue from foreign marketsHaving common ownership, resources, and global strategies
10 Figure 7.3: World’s Largest Companies Source: Fortune.com/Global 500, “World’s largest corporations.” Also reference Hjelt, P. (July 26, 2004). The Fortune Global 500, Fortune, 179.
11 MNE Benefits for Host Country Hire local laborCreate new jobsCo-venture with local entrepreneurs and companiesAttract local capital to projectsProvide for and enhance technology transferDevelop particular industry sectorsProvide business learning and skillsIncrease industrial output and productivityHelp decrease the country’s debt and improve its balance of payments and standard of living
12 Host Country Benefits for MNE Low costs of production that enable MNE sell its products in the lower prices and get higher income.Less stringent laws and regulations in host country compared with the home one and make it more easier to operate.
13 MNE Perspective on Unethical Practices by Local Government Limit repatriation of MNE assets and earnings.Pressure and require MNEs to buy component parts and other materials from local suppliers.Require MNEs to use local nationals in upper-level management positions. Require MNEs to produce and sell selected products in order to enter the country.Limit imports and pressure exports. Require a certain amount or percentage of profit to remain in or be invested in the country.
14 Host-country Perspective towards MNE MNEs can dominate and protect their core technology and research and development, thus keeping the host country a consumer, not a partner or producer. MNEs can destabilize national sovereignty by limiting a country’s access to critical capital and resources, thereby creating a host-country dependency on the MNE’s governments and politics. MNEs can create a “brain drain” by attracting scientists, expertise, and talent from the host country.
15 Host-country Perspective towards MNE (cont) MNEs can create an imbalance of capital outflows over inflows. MNEs can disturb local government economic planning and business practices by exerting control over the development and capitalization of a country’s infrastructure.MNEs can destroy, pollute, and endanger host-country and LDC environment and the health of local populations.
16 Dark Sides of Globalization Crime and corruption: Narcotics trafficking , sex slave business , black market business, and estimated high corruption costsEconomic poverty and child slave labor: Child labor in developing and industrialized countries .African countries are being ignored by globalization and are not in the global economy because of high illiteracy rates, lack of modern infrastructure, and social chaos.
17 Dark Sides of Globalization The global digital divide: World continues to have different levels of access to technology, first and third world countries. Technology revolution and the internet integration increased child pornography business.Westernization (Americanization) of cultures: “McDonaldization” and also education, work, the criminal justice system, health care, travel, leisure, dieting, politics, the family, religion, and every other aspect of society.
18 Dark Sides of Globalization Loss of Nation-State Sovereignty: Globalization gradually destroys the ability of governments to protect the interests of their citizens against more powerful multinationalcorporations.
19 MNE Guidelines in dealing with LDCs by DeGeorge Do no intentional harmProduce more good than harm for the host countryContribute to the host country’s developmentRespect human rights, local culturePay fair share of taxesCooperate with local government as partnersAttend to actions, consequences, and failures of the firmMaintain high safety standards and controlsProtect the natural environment
20 UN Global CompactA voluntary corporate citizenship initiative endorsing 10 key principles that focus on four key areas of concern: the environment, anticorruption, the welfare of workers around the world, and global human rights.Consists of more than 2,000 companies in over 80 countries
21 UN Global Compact Human Rights Businesses should support & respect the protection of internationally proclaimed human right.Businesses should make sure they are not complicit in human rights abuses.
22 UN Global Compact Labor Standards Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining.Businesses should uphold the elimination of all forms of forced & compulsory labor.Business should uphold the effective abolition of child labor.Businesses should uphold the elimination of discrimination in employment & occupation.
23 UN Global Compact Environment Businesses should support a precautionary approach to environmental challenges.Businesses should undertake initiatives to promote greater environmental responsibility.Business should encourage the development & diffusion of environmentally friendly technologies.
24 UN Global Compact Anticorruption Businesses should work against all forms of corruption, including extortion and bribery.
25 The OECD Guidelines for Multinational Enterprises Governmental initiative endorsed by 30 members of Organization for Economic Cooperation and Development (OECD) and 9 nonmembers, promoting principles and standards of behavior in the following areas: human rights, information disclosure, anticorruption, taxation, labor relations, environment, competition, and consumer protection.
26 Final exam guideline: Corporate governance Code of conduct Changing workforce trendsWhistle blowingDiscriminationSexual harassmentGlobalization vs. Business ethics4 Cases of in-class group presentation*
27 Developed CountryThe term developed country is used to describe countries that have a high level of development according to some criteria. Which criteria, and which countries are classified as being developed, is a contentious issue and there is fierce debate about this. Economic criteria have tended to dominate discussions. One such criteria is income per capita and countries with high gross domestic product (GDP) per capita being described as developed countries. Another economic criteria is industrialization. Countries in which the tertiary and quaternary sectors of industry dominate being described as developed. More recently another measure, the Human Development Index, which combines with an economic measure, national income, with other measures, indices for life expectancy and education has become prominent. Developed countries being those with a high (HDI) rating. However, many anomalies exist when determining "developed" status by whichever measure is used.Countries not fitting such definitions may be referred to as developing countries.
28 Developed Country The UN also notes In common practice, Japan in Asia, Canada and the United States in northern America, Australia and New Zealand in Oceania, and Europe are considered "developed" regions or areas. In international trade statistics, the Southern African Union is also treated as a developed region and Israel as a developed country; countries emerging from the former Yugoslavia are treated as developing countries; and countries of eastern Europe and of the Commonwealth of Independent States (code 172) in Europe are not included under either developed or developing regions