Multinational Corporations & Globalization WILLIAM SIN 2014 © HE ET AL.

globalization What is globalization? © HE ET AL.

Beginning Quote “Globalization is the inexorable integration of markets, transportation systems, and communication systems to a degree never witnessed before -- in a way that is enabling corporations, countries, and individuals to reach around the world farther, faster, deeper, and cheaper than ever before...” ◦ Thomas Friedman, The World is Flat (2005)

Globalization’s Potential Impacts on Business Firms Expands target markets where companies sell products and services. ◦consumer goods ◦industrial goods, and ◦financial services

McDonalds operates in 118 countries. - 66% of 2008 sales were from international operations. - 42% of 2008 sales were from Europe.

Starbucks in 2008, had 5,115 international retail coffee stores, operating in 34 countries. - International operations accounted for about 20% of Starbucks 2008 earnings (compared to 16% in 2005). - Major markets included Japan, U.K. and Canada

Globalization’s Potential Impacts on Business Firms Expands the possible countries where companies produce and/or source the factors of production for their enterprises: ◦capital (where firms raise money), ◦technology, ◦labor

Producing Offshore Nike: 99% of all its brand apparel is produced outside the United States, in 35 different countries. The 2008 footwear breakdown is as follows: Country Percent China 36% Vietnam33 Indonesia 21 Thailand 9 Note: 52% of Nike 2008 revenues from outside U.S.

Words versus Acts In a group of two, please do the following: 1.Select two global companies and locate their corporate Websites. 2.Find their codes of conduct or ethics statements. 3.Discuss whether these statements serve any practical purposes or help meet the companies’ social responsibility goals. © HE ET AL.

What is an MNC A Multinational Corporation (MNC) is any business that owns and controls production or service facilities in two or more countries. Examples include Starbuck, Apple, Sony, Microsoft, Nike, etc. © HE ET AL.

What do companies seek from abroad? Natural Resources: Petroleum, mineral ores, timber Markets: Consumer electronics, personal computers, cameras, automobiles, televisions Soft drinks, shoes, luxury goods, pharmaceuticals, movie production Accounting services Household services, education © HE ET AL.

Top MNCs in the World Fortune Global Most Profitable Companies 2013 Chevron Gasprom World's largest companies China National Petroleum Corporation 中國石油天然氣集團公司China National Petroleum Corporation 中國石油天然氣集團公司 Patagonia Cadbury © HE ET AL.

The Growth in Foreign Direct Investment © HE ET AL.

Income Disparity © HE ET AL. U.S. CEO’s Pay versus Worker’s Pay (Average hourly worker to CEO pay ratios)

Workers Pay vs. Productivity © HE ET AL.

An Increasing Gap Between Rich Vs. Poor Countries © HE ET AL.

Market Seeking MNCs: Globalization of the Good Life or Cultural Imperialism and Environmental Disaster? 1.Are MNC marketing practices and sustainable development compatible or are they mutually exclusive? 2.What are the consequences of global consumerism and materialism on our natural environment? 3.What risks, dangers and benefits arise when MNCs from advanced economies market an identical range of products in the developed world and in less developed markets? 4.What are the cultural impacts of global marketing? © HE ET AL.

Disposable diapers? Alcoholic beverages ? Milk? Fruits? Films? Google? Facebook? iPad and Smart Phones? Clothes? © HE ET AL. MNC Marketing: How are these products affect people’s culture and values?

Three Types of Views About The MNCs (1) MNCs should be held responsible: Undesirable outcomes are the consequences of their own activities. (2) MNCs should not be targeted for criticism for issues that are beyond their control. Indeed, market dysfunctions and its resulting problems are due to external factors and inadequate policies, social institutions, the immaturity of civic values, and the business environment. (3) MNCs are neither culprits nor victims, but are important players that have responsibilities commensurate with their role in the spreading of technology. © HE ET AL.

Criticisms against MNCs 1.Threaten national sovereignty and democratic accountability 2.Neutralize anything that stands in the way of profits 3.Accentuate social inequalities 4.Destroy jobs © HE ET AL.

MNCs and Cultural Differences © HE ET AL. The Rate of Software Piracy: US 35%, Germany 57%, Italy & Japan 80%, in many Asian countries nearly 100%. Sex Discrimination: E.g. Saudi Arabia does not allow women to serve as corporate managers. Child Labor: E.g. Conservatively, more than 350,000 children are producing silk thread and helping to weave saris in India. Low wages: E.g. A US oil company hires Angolans to work on an offshore Angolan oil rig, can the company pay lower wages than it pays US workers in the Gulf of Mexico?

Donaldson’s Three Guiding Principles ◦Respect for core human values, which determine the absolute moral threshold for all business activities. ◦Respect for local traditions. ◦The belief that context matters when deciding what is right and what is wrong.” Thomas Donaldson “Values in Tension: Ethics Away from Home” in Harvard Business Review, September/ October, © HE ET AL.

De George’s Five Principles 1.MNCs should do no intentional harm 2.MNCs should produce more good than bad for the host country 3.MNCs should contribute by their activities to the host country’s development 4.MNCs should respect the human rights of its employees 5.MNCs should respect local culture and work with it, not against it “Ethical Dilemmas for Multinational Enterprise” in Business Ethics: Critical Perspectives on Business and Management, ed. Alan Malachowski, Routledge, © HE ET AL.

Check out this story Stealing Africa 1.The CEO: Marc Rich (Who is he? What is his life story?) 2.The Company: Glencore (What did it do? How much money does it make?) 3.The Mine: Mopani copper mine (How does it affect the local people?) 4.The Country: Zambia (Where is it in Africa? What are its natural resources? What are its trade?) © HE ET AL.