Copyright © 2011 Pearson Education Part Two Comparative Environmental Frameworks International Business Environments and Operations, 13/e Global Edition 5-1

Copyright © 2011 Pearson Education 5-2 Chapter Five Globalization and Society

Copyright © 2011 Pearson Education 5-3 Chapter Objectives To identify problems in evaluating the activities of multinational enterprises (MNEs) To evaluate the major economic effects of MNEs on home and host countries To understand the foundations of responsible corporate behavior in the international sphere To discuss some key issues in the social activities and consequences of globalized business To examine corporate responses to globalization

Copyright © 2011 Pearson Education 5-4 Evaluating the Impact of FDI FDI is Foreign Direct Investment The large size of some MNEs causes concern for some countries MNEs and countries need to understand the impact of FDI in home and host countries

Copyright © 2011 Pearson Education 5-5 What MNEs Have To Offer

Copyright © 2011 Pearson Education 5-6 Considering the Logic of FDI Need to consider relationship between those who make foreign investments (MNEs) and possible effects on receiving countries Areas to consider:  Stakeholder trade-offs  Cause-and-effect relationships  Individual and aggregate effects

Copyright © 2011 Pearson Education 5-7 The Economic Impact of the MNE Balance-of-Payments effects:  Net import effect  Net capital flow Growth and Employment effects:  Home-country losses  Host-country gains  Host-country losses

Copyright © 2011 Pearson Education 5-8 Why Companies Care About Ethical Behavior Instrumental in achieving two objectives:  To develop competitive advantage  To avoid being perceived as irresponsible

Copyright © 2011 Pearson Education 5-9 The Cultural Foundations of Ethical Behavior Relativism vs. Normativism: do truths depend on the values of the groups or are there universal standards Negotiating between evils

Copyright © 2011 Pearson Education 5-10 The Legal Foundations of Ethical Behavior Legal justification for ethical behavior may not be sufficient because not everything that is unethical is illegal. The law is a good basis because it embodies local cultural values. As countries tackle similar ethical issues, laws will become more similar.

Copyright © 2011 Pearson Education 5-11 Ethics and Bribery Bribes are payments or promises to pay cash or anything of value Bribes are used to get government contracts or to get officials to do what they should be doing anyway Problems with bribery:  Affects performance of company & country  Erodes government authority  Damages reputations when disclosed  Increases cost of doing business

Copyright © 2011 Pearson Education 5-12 Where Bribes Are (and Are Not) Business as Usual

Copyright © 2011 Pearson Education 5-13 What’s Being Done About Corruption? Cross-National Accords: The OECD, the ICC, and the UN The U.S. Foreign Corrupt Properties Act Industry Initiatives Relativism, the Rule of Law, and Responsibility

Copyright © 2011 Pearson Education 5-14 Ethics and the Environment Sustainability Global Warming and The Kyoto Protocol  National and Regional Initiatives  Company-Specific Initiatives

Copyright © 2011 Pearson Education 5-15 Future: How to See the Trees in the Rain Forest The Amazon rain forest accounts for 1/3 of the world’s remaining tropical forest Kyoto Protocol proposes reforestation to reduce greenhouse emissions Major Challenge: protect global environment while preserving Brazil’s sovereignty over resources

Copyright © 2011 Pearson Education 5-16 Ethical Dilemmas and the Pharmaceutical Industry Tiered pricing and other price-related issues WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) R&D and the Bottom Line

Copyright © 2011 Pearson Education 5-17 Ethical Dimensions of Labor Conditions Ethical Trading Initiative The Problem of Child Labor What MNEs Can and Can’t Do

Copyright © 2011 Pearson Education 5-18 Sources of Worker-Related Pressures in the Global Supply Chain

Copyright © 2011 Pearson Education 5-19 Corporate Codes of Ethics Motivations for Corporate Responsibility Developing a Good Code of Conduct

Copyright © 2011 Pearson Education 5-20 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.