The Challenges of Globalization The Process of Globalization The Globalization Debate Doing Business in a Diverse World Global Codes of Corporate Conduct Collaborative Partnerships for Global Problem Solving Chapter 7

The process of globalization Globalization Refers to the increasing movement of goods, services, and capital across national borders. Globalization is considered a process—an ongoing series of interrelated events. Transnational corporation A company that does business in more than one country.

The world’s top 10 nonfinancial transnational corporations, ranked by foreign assets Figure 7.1 CorporationHome EconomyIndustryForeign Assets (in $ millions) FiatItalyMotor Vehicles52, 803 VodafoneUnited KingdomTelecommunications$221,238 TelefonicaSpainTelecommunications55,968 General ElectricUnited StatesElectrical Equipment159,188 ExxonMobilUnited StatesPetroleum101,728 Vivendi UniversalFranceDiversified93,260 General MotorsUnited StatesMotor Vehicles75,150 Royal Dutch/ShellU.K./NetherlandsPetroleum74,807 BPUnited KingdomPetroleum57,451 Toyota MotorJapanMotor Vehicles55,974 Source: United Nations, World Investment Report 2002, Table IV-1, p.98. Data for the year 2000.

Acceleration of world trade, Figure 7.2 Years % of GDP Source: World Development Indicators 2003 (New York: World Bank, July 2003, and World Development Indicators 2002 (New York: World Bank, May 2002). 1990

The acceleration of globalization The factors that drive the acceleration of globalization: Improved communications Improved transportation systems The rise of major transnational corporations Social and political reforms The rise of international financial and trade institutions

International financial and trade institutions The World Bank Provides economic development loans to its member nations. Funds used mainly for roads, dams, power plants, pipelines, and other infrastructure projects. International Monetary Fund Purpose is to make currency exchange easier for member countries so that they can participate in global trade. Lends foreign exchange to member countries. World Trade Organization An international body that established the ground rules for trade among nations. Its major objective is to promote free trade.

Pros and cons of globalization Arguments for globalization Increases economic productivity. Reduces prices for consumers. Gives developing countries access to foreign investment funds to support economic development. Transfers technology. Spreads democracy and freedom, and reduces military conflict. Arguments against globalization Causes job insecurity. Weakens environmental and labor standards. Prevents individual nations from adopting policies promoting environmental or social objectives. Undermines cultural, linguistic, and religious diversity. Is just as compatible with despotism as it is with freedom. Figure 7.3

Comparative political and economic systems Democracy Refers broadly to the presence of political freedom. Four defining features of democracy (according to the U.N.) Fair elections An independent media Separation of powers among the executive, legislative, and judicial branches of government An open society where citizens have the right to form their own independent organizations to pursue social, religious, and cultural goals

Comparative political and economic systems Military dictatorships Repressive regimes ruled by dictators who exercise total power through control of the armed forces. Free enterprise systems Based on the principle of voluntary association and exchange. Members of society satisfy most of their economic needs through voluntary market transactions. Central state control Economic power is concentrated in the hands of government officials and political authorities. The central government owns the property that is used to produce goods and services.

Global codes of corporate conduct The United Nations Global Compact A values-based platform designed to promote institutional learning. Corporations are invited to voluntarily endorse core principles covering labor, human rights, and environmental standards. The OECD Guidelines for Multinational Enterprises Code of conduct for corporations developed by member nations of the OECD. The guidelines are voluntary, address employment relations, information disclosure, environmental stewardship, consumer interests, and the management of technology.

Global codes of corporate conduct The Global Sullivan Principles The objectives are to support economic, social, and political justice by companies where they do business. Calls on companies to support human rights and to encourage equal opportunity at all levels of employment. The Caux Principles Emphasizes working for the common good and respect for human rights.

A three-sector world Business Government Civil society Comprises nonprofit, educational, religious, community, family, and interest-group organizations. Nongovernmental organizations (NGOs) Concerned with such issues as environmental risk, labor practices, workers rights, community development, and human rights.

Distinctive attributes of the three major sectors: Business Figure 7.4a Organizational formFor-profit Goods producedPrivate Primary control agentOwners Primary power formMoney Primary goalsWealth creation Assessment frameProfitability ResourcesCapital assets, technical knowledge, production skills WeaknessesShort-term focus, lack of concern for external impacts Source: Adapted from Steven Waddell, “Core Competences: A Key Force in Business-Government-Civil Society Collaborations,” Journal of Corporate Citizenship, Autumn 2002, pp , Tables 1 and 2.

Distinctive attributes of the three major sectors: Government Figure 7.4b Organizational formGovernmental Goods producedPublic Primary control agentVoters/rulers Primary power formLaws, police, fines Primary goalsSocietal order Assessment frameLegality ResourcesTax revenue, policy knowledge, regulatory and enforcement power WeaknessesBureaucratic, slow-moving, poorly coordinated internally Source: Adapted from Steven Waddell, “Core Competences: A Key Force in Business-Government-Civil Society Collaborations,” Journal of Corporate Citizenship, Autumn 2002, pp , Tables 1 and 2.

Distinctive attributes of the three major sectors: Civil Society Figure 7.4c Organizational formNonprofit Goods producedGroup Primary control agentCommunities Primary power formTraditions, values Primary goalsExpression of values Assessment frameJustice ResourcesCommunity knowledge, inspirational leadership WeaknessesAmateurish, lack of financial resources, parochial perspective Source: Adapted from Steven Waddell, “Core Competences: A Key Force in Business-Government-Civil Society Collaborations,” Journal of Corporate Citizenship, Autumn 2002, pp , Tables 1 and 2.