2. Ethics and International Business
International Business Strategy
301REN
Unit: 9 Knowledgecast: 2

3. Module Learning Outcomes
Integrate and apply strategic approaches to practical situations in various types of organisations
Assess current developments in the organisational environment and alternative responses related to strategy
Resolve management problems in the area of strategic management by evaluating alternative outcomes

4. Ethics ?
Ethics
Are moral principles and values that govern the behavior of people, firms, and governments.
Ethics and appropriate behavior are essential in international business. Corruption and paying bribes are commonplace in many countries, particularly those that lack transparent business systems.
Simply obeying the law is usually insufficient to ensure against violating standards of ethical behavior. This results because ethical standards vary around the world, which makes ethics a complex issue in international business.
Most companies seek to ensure ethical practices in their international operations. The most advanced firms proactively emphasize not just ethical behavior, but also corporate social responsibility and sustainability.
ETHICS

5. The Value of Ethical Behavior
Ethical behavior is simply the right thing to do. It is often prescribed within laws and regulations.
Ethical behavior is demanded by customers, governments, and the news media. Unethical firms risk attracting unwanted attention.
Ethical behavior is good business, leading to enhanced corporate image and selling prospects. Firms with strong reputations have an advantage when hiring and motivating employees, partnering, and dealing with foreign governments.
Firms that behave unethically run the risk of criminal or civil prosecution, hurting their own reputations and harming employee morale and recruitment efforts.

6. Variation in Ethical Standards
Ethical standards vary from country to country.
Relativism
is the belief that ethical truths are not absolute but, rather, differ from group to group. This perspective is summarized by the phrase, “When in Rome, do as the Romans do.”
Bribery is common and can take the form of grease payments, small inducements intended to expedite decisions and transactions or gain favors.
There are two major approaches to ethical standards. The first is relativism, which asserts that values differ from country to country. Opposite to this belief is normativism, which believes in universal values and standards of behavior.
Corruption is the abuse of power to achieve illegitimate personal gain.
More than 30 percent of MNEs believe corruption is a major or severe concern in their global activities.

7. Variation in Ethical Standards
Normativism
is the belief that ethical behavioral standards are universal and that firms and individuals should seek to uphold them consistently around the world.
There are two major approaches to ethical standards. The first is relativism, which asserts that values differ from country to country. Opposite to this belief is normativism, which believes in universal values and standards of behavior.

8. What should you do? An Ethical Dilemma
Imagine you are a manager and, during a visit to a factory owned by an affiliate in Colombia, you discover the use of child labor in the plant.
You are told that without the children’s income, their families might go hungry. If the children are dismissed from the plant, they will likely turn to other income sources, including prostitution and street crime.
An ethical dilemma is a predicament with major conflicts among different interests and in which determining the most appropriate course of action is confounded by a set of solutions that are equally justifiable and often equally imperfect. Possible actions may be mutually exclusive: The choice of one automatically negates the other(s).
The example of child labor is typical of the type of ethical dilemmas that employees often encounter in international business.
Managers working abroad may be most exposed because they are caught between home country ethical norms and those encountered in the foreign country.
What should you do?
Make a fuss about the immorality of child labor or look the other way?

9. Corporate Social Responsibility
Corporate social responsibility: Manner of operating a business that meets or exceeds the ethical, legal, commercial, and public expectations of customers, shareholders, employees, and communities
A strong CSR can:
Help recruit and retain good employees
Help differentiate the firm and enhance its brands
Help cut costs, such as minimizing packaging, recycling, economizing on energy usage, and reducing waste in operations
Help the firm avoid increased taxation, regulation, or other legal actions by local government authorities
Corporate Social Responsibility (CSR) is a way of operating a business that exceeds what is legally and ethically required and thus frequently surpasses the expectations of customers and shareholders. Examples of core CSR values include:
•  Avoiding human rights abuses
• Upholding the right to join or form labor unions
• Eliminating compulsory and child labor
• Avoiding workplace discrimination
• Protecting the natural environment
• Guarding against corruption, and undertaking philanthropic efforts

10. The Pyramid of Ethical Behavior
After complying with local law (the bottom of the pyramid), management should ensure that company activities follow high ethical standards (the middle). As they expand abroad, most firms believe it is sufficient to comply with laws, regulations, and basic ethical standards. However, progressive MNEs now emphasize socially responsible behavior and sustainability (the top of the pyramid).

11. Sustainability
Sustainability: Meeting humanity’s needs without harming future generations
The sustainable firm pursues three types of interests:
1. Economic interests refer to the firm’s economic impact on the localities where it does business, such as job creation, wages, and public works.
2. Social interests refer to how the firm performs relative to social justice, such as avoiding the use of child labor, sweatshops, and providing employee benefits.
3. Environmental interests refer to the extent of the firm’s impact on and harm to the natural environment.
Sustainability, the meeting of humanity’s needs without hurting future generations, has three elements. A firm has economic interests, which means the jobs, wages, and public works that are involved in the firm’s business must not be harmed. Second, the social interests of the workers must be protected in areas such as benefits and work conditions. Finally, environmental interests must be considered in order that natural resources, such as clean water and air, be preserved.
Achieving sustainability often requires the firm to be flexible and creative. A good example is Coca-Cola, which had to deal with water sustainability challenges. As water resources dwindled in some countries, Coke began to experience conflicts with communities and other water users, especially in India. To address such challenges, Coke developed a water sustainability program that goes well beyond efficiency and legal compliance needs alone.

12. Sustainability Stages of sustainability strategy – the determinant 3 2
Completing Social, Economic and Environmental Integration 3
Achieving Competitive Advantage 2
Managing Regulatory Compliance 1
Sustainability, the meeting of humanity’s needs without hurting future generations, has three elements. A firm has economic interests, which means the jobs, wages, and public works that are involved in the firm’s business must not be harmed. Second, the social interests of the workers must be protected in areas such as benefits and work conditions. Finally, environmental interests must be considered in order that natural resources, such as clean water and air, be preserved.
Achieving sustainability often requires the firm to be flexible and creative. A good example is Coca-Cola, which had to deal with water sustainability challenges. As water resources dwindled in some countries, Coke began to experience conflicts with communities and other water users, especially in India. To address such challenges, Coke developed a water sustainability program that goes well beyond efficiency and legal compliance needs alone.

13. Sustainability Framework for implementing sustainability Strategy
The Triple Bottom Line
The triple bottom line exist currently as a kind balance score card that captures in number and words the degree to which any company is or is not creating value for its shareholders and for the society.
Economic viability
Corporate profitability & growth
Social economics
Company
Social responsibility
Employee
Customer
Community
Environmental Soundness
Biodiversity
Climate

14. Inappropriate Corporate Conduct Abroad
Examples:
Firms may:
▪ Falsify or misrepresent contracts or official documents
▪ Offer or accept bribes, kickbacks, or inappropriate gifts
▪ Tolerate sweatshop conditions or abuse employees
▪ Use false advertising or other deceptive marketing
▪ Engage in deceptive or discriminatory pricing
▪ Deceive or abuse intermediaries in the channel
▪ Undertake activities that harm the natural environment
Global sourcing raises concerns about ensuring human rights and protecting the environment. Some companies operate or use third-party suppliers where sweatshop factories employ children or have employees work long hours for very low wages, often in harsh conditions.
Deceptive marketing practices induce people to buy products when false claims have been made about the qualities or effectiveness of a product. Many of the victims are in foreign countries, but the transnational nature of such scams makes it difficult for law enforcers to catch and prosecute perpetrators.
Defective or harmful products or packaging affects public health, safety, and natural environments. Products that could be recycled, such as cell phones and computers, end up in landfills. Also, excessive product packaging generates pollution and consumes energy and natural resources.

15. Knowledgecast Summary
Integrate and apply strategic approaches to practical situations in various types of organisations
Assess current developments in the organisational environment and alternative responses related to strategy
Resolve management problems in the area of strategic management by evaluating alternative outcomes
MAXIMUM THREE LEARNING OUTCOMES TO REVIEW: ONE REVIEW SUB BULLET PER LEARNING OUTCOME

17. Seminar Lessons of global sourcing
Useful Video on Outsourcing (Benefits, costs, risk and impact of technology)

18. Group Activity
End of Module Assessment – Evaluating Internationalization
Strategy (Management Brief) (Unit 10)
Preparation – Preparing the Final Draft
This session will provide you with the opportunity to discuss your final draft
with your module tutor and ensure all your questions are answered as you
finalize your submission.
Although this is an independent piece of work giving and receiving feedback
from your peers is an essential skill, which will be of great value in the
workplace.
Be prepared to provide constructive feedback on other’s work and receive
feedback which can inform your progress.