Copyright © 2003 by South- Western, a division of Thomson Learning1 Chapter Seven The Global Environment, Stakeholder Management, And Multinational Corporations

Copyright © 2003 by South-Western, a division of Thomson Learning2 Chapter Topics 1.The connected global economy and globalization 2.Capitalism: One system with different faces 3.Multinational enterprises as stakeholders 4.MNE guidelines for managing morality 5.Stakeholder management: Ethical decision-making methods

Copyright © 2003 by South-Western, a division of Thomson Learning3 The Connected Global Economy And Globalization The global economy consists of a dynamic set of relationships among companies, financial markets, culture, political ideologies, government policies, laws, technologies, and numerous stakeholder interests. Globalization involves the integration of technology, markets, politics, cultures, labor, production, and commerce. The most recent threat to economic stability and growth is global terrorism.

Copyright © 2003 by South-Western, a division of Thomson Learning4 The Connected Global Economy And Globalization Some of the forces that have accelerated globalization include: The end of communism Information technologies Entrepreneurships and entrepreneurs Free-trade and trading agreements The IMF and World Bank Growth of transnational firms A shift to service economies Global political forces

Copyright © 2003 by South-Western, a division of Thomson Learning5 The Connected Global Economy And Globalization Some of the major competitive success factors driving firms in the global economy include: The best talent is recruited High-quality, innovative products Just-in-time manufacturing Web-based technologies New product patents and innovation Mergers, acquisition, and strategic alliances

Copyright © 2003 by South-Western, a division of Thomson Learning6 The Connected Global Economy And Globalization Survey results showed that the most admired companies: Set more challenging goals Link executive compensation more closely to the completion of goals More oriented toward long-term performance Broader return-based methods of measurement Senior leaders are more involved Charts the progress of its people

Copyright © 2003 by South-Western, a division of Thomson Learning7 The Connected Global Economy And Globalization The “dark side” of globalization includes: Crime and corruption Drug consumption Massive layoffs Decreases in wages Erosion of individual nations’ sovereignty Westernization

Copyright © 2003 by South-Western, a division of Thomson Learning8 Capitalism: One System With Many Faces Capitalism can be defined as an economic system whose major portion of production and distribution is in private hands, operating under what is termed a profit or market system. Components and features of capitalism include: Companies Profit motive Competition

Copyright © 2003 by South-Western, a division of Thomson Learning9 Capitalism: One System With Many Faces The “four faces of capitalism” include: Consumer capitalism Frontier capitalism Producer capitalism Family capitalism Metacapitalism is a concept that applies to the massive business and economic transformation resulting from the exponential growth of several factors: Business-to-consumer E-business Use of the Internet Globalization of the world economy Reliance on technology Restructuring of companies

Copyright © 2003 by South-Western, a division of Thomson Learning10 Capitalism: One System With Many Faces American capitalism and management involves and includes: Cultural context Sociopolitical and government context U.S. capitalism U.S. management practices Competitive practices have changed and been accelerated by the following: Information technologies Communities of creation Alliances

Copyright © 2003 by South-Western, a division of Thomson Learning11 Multinational Enterprises As Stakeholders Multinational enterprises (MNEs) are corporations that “own or control production or service facilities outside the country in which they are based.” Common characteristics of MNEs include: Operating in at least two countries Earning an estimated 25 to 45 percent of revenue from foreign markets

Copyright © 2003 by South-Western, a division of Thomson Learning12 Multinational Enterprises As Stakeholders Critics have raised international concern over the ethical conduct of MNEs in host countries: Not being forthright Not fulfilling their part of the implicit social contract Not paying taxes Harm to physical environment

Copyright © 2003 by South-Western, a division of Thomson Learning13 Multinational Enterprises As Stakeholders The companies benefit their host countries by: Hire local labor Create new jobs Co-venture with local entrepreneurs and companies Attract local capital to projects Technology transfer Provide business skills and learning Increase industrial output Intensify competition Help decrease debt and improve standard of living

Copyright © 2003 by South-Western, a division of Thomson Learning14 Multinational Enterprises As Stakeholders Six criticisms of the presence and practices of MNEs in host and other foreign locations include: Dominate and protect their core technology Destabilize national sovereignty Create a “brain drain” Create an imbalance of capital outflows over inflows Disturb local government economic planning Destroy, pollute, and endanger host-country and LDC environments

Copyright © 2003 by South-Western, a division of Thomson Learning15 MNE Guidelines For Managing Morality The following categories have summaries of guidelines for MNEs: Employment practices and policies Consumer protection Environmental protection Political payments and involvement Basic human rights and fundamental freedoms

Copyright © 2003 by South-Western, a division of Thomson Learning16 Stakeholder Management: Ethical International Decision- Making Methods DeGeorge offers five broad “lessons” about business ethics: Business ethics is here to stay Ethical people are necessary but not sufficient Ethical structures count Ethical problems are industry wide Industry and company legal and ethical self-regulation is necessary

Copyright © 2003 by South-Western, a division of Thomson Learning17 Stakeholder Management: Ethical International Decision- Making Methods Numerous international groups that work with and monitor MNEs regarding human rights include: Amnesty International OECD International Labor Organization NGOs Transparency International Apparel Industry Partnership The Round Table

Copyright © 2003 by South-Western, a division of Thomson Learning18 Stakeholder Management: Ethical International Decision- Making Methods George Enderle identified four distinctive international ethical decision making styles that companies often use when making decisions abroad: Foreign country style Empire style Interconnection style Global style Hypernorms are principles so fundamental that they serve to evaluate lower-order norms, reaching to the root of what is ethical for humanity.