Lecture Business and society: Stakeholders, ethics, public policy (14/e): Chapter 6 - Anne Lawrence, James Weber

Chapter 6 - The challenges of globalization. In this chapter, you learned to: Defining globalization and classifying the major ways in which companies enter the global marketplace, recognizing the major drivers of the globalization process and the international financial and trade institutions that have shaped this process in recent decades, analyzing the benefits and costs of the globalization of business,…

Chapter 6

The Challenges of

Globalization

Ch 6 Key Learning Objectives

which companies enter the global marketplace

and the international financial and trade institutions that have shaped this process in recent decades

business

in which companies operate across the world, and the

special challenges posed by doing business in diverse

settings

governments and the civil sector to address global social

The Process of Globalization

services, and capital across national borders

interrelated events

 International trade and financial flows integrate the world economy, leading to the spread of technology, culture, and politics

 Globalization is not simply a trend or a fad but, rather, an international system

Entering and Competing in the

Global Marketplace

 First build a successful business in their home country, then

export products or services to buyers in other countries

 Locate manufacturing plants or service operations in other

countries as a way to cut costs

 Purchase raw materials, components, or other supplies from

sellers in other countries; work may also be subcontracted

Major Transnational Corporations (TNCs)

abroad

 104,000 TNCs operate in the modern global economy

 They, in turn, have nine times that number of affiliates (suppliers,

subcontractors, and other entities with which they have some

business relationship)

powerful firms

 Next slide lists top 10 non-financial transnational corporations,

ranked in order of the value of the foreign assets they control

The World’s Top 10 Nonfinancial Transnational Corporations

Figure 6.1

Foreign Direct Investment

worldwide flow of capital

individual, or fund invests money in another country, for

example, by buying shares of stock in or loaning money

to a foreign firm

The Acceleration of Globalization

integrated

 Higher share of output is being exported across national borders

 One-fifth of all goods and services produced worldwide is sold to

other nations, rather than domestically

 This is almost double the percentage of 1960

important recent trend is the globalization of services,

such as travel, insurance, financial, and information

services

The Acceleration of Globalization

 Technological innovation

• Easier to communicate with employees, partners, and suppliers all over the globe in real time

 Transportation systems

• Improvements enable the fast and cheap movement of goods

and services from one place to another

 The rise of major transnational corporations

• Bigger, well-capitalized, firms are better equipped to conduct

business across national boundaries than smaller firms

 Social and political reforms

• Rise of Pacific Rim growth economies, collapse of communism

in Central and Eastern Europe have opened new regions to world trade

International Financial

and Trade Institutions

commerce is transacted:

 World Bank (WB)

 International Monetary Fund (IMF)

 World Trade Organization (WTO)

without complying with rules set by the WTO

on WB and IMF loans to survive

The World Bank

nations

pipelines, and other infrastructure projects

international capital markets

countries it loans to

 Applies conditions on these countries

 Conditions are considered by critics to lead to unfair burden

on developing countries

International Monetary Fund

time

member countries so that they can participate in global

trade

loans

 Has begun to offer debt relief to some nations

World Trade Organization

Tariffs and Trade (GATT)

trade among nations

eliminate barriers to trade (e.g quotas, duties and tariffs)

cannot discriminate against foreign products for any reason

The Benefits and

Costs of Globalization

not

 What are some of the major arguments advanced by both side in

the debate over this important issue?

Benefits and Costs of Globalization

Figure 6.2

Comparative Political

and Economic Systems

economic systems

exercised and degree of democratic rights

rights to many nations for the first time

Comparative Political Systems

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 Systems

Repressive regimes ruled by dictators who exercise total

power through control of the armed forces

 Examples include Zimbabwe and Uzbekistan

freedoms is restricted in others

 Examples include Iran, Saudi Arabia

limit important civil and political freedoms

Comparative Political Systems

greatly among nations

 Most important one is United Nations Universal Declaration of

Human Rights of 1948

 Over half world’s nations have adopted these human rights

covenants

 Recent genocides in Rwanda, Sudan

 Systems where minority groups and indigenous peoples lack

basic human rights, example of Nepal

Comparative Economic Systems

 Based on the principle of voluntary association and

exchange

 Members of society satisfy most of their economic needs

through voluntary market transactions

 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

Challenges of Global Diversity

corporations face creates challenges

 If a company does business in a nation that does not grant

women equal rights, should that company hire and promote women at work, even if it violates local laws and customs?

 Should a company enter into a business venture with a

government-owned enterprise if that government has a reputation for violating its citizens’ human rights?

Meeting the Challenges

of Global Diversity

 By operating with strong moral principles, transnational

corporations can be a force for positive change in nations where they operate

extreme conditions, provoking dilemma

 At what point do violations of political, human, and economic

rights become so extreme that a company cannot morally justify doing business in that country?

Collaborative Partnerships for

Global Problem Solving

multi-sector partnerships focused on particular social issues

or problems in the global economy

Distinctive Attributes of the Three Major Sectors

Figure 6.3