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International Business

International Business. Chapter Five Globalization and Society. Multinational Enterprises. Definition of MNE: a company with a worldwide approach to markets and production or one with operations in more than one country.

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International Business

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  1. International Business Chapter Five Globalization and Society

  2. Multinational Enterprises • Definition of MNE: a company with a worldwide approach to markets and production or one with operations in more than one country. • Like animals in the zoo, multinationals come in various shapes and sizes, perform distinctive functions, behave differently, and make their individual impacts on environment. • What MNEs Offer • Why FDI? Rationale, economic and non-economic • The GOOD and the BAD of the MNEs

  3. Foundations of Ethical Behavior • Cultural Foundations • Cultural relativism holds that ethical truths depend upon the groups subscribing to them; thus, intervention by outsiders is unethical. • Cultural normativism holds that there are universal standards of behavior; thus, global standards should be considered ethical. • Legal Foundations • Law is a good basis for ethical behavior as it embodies local cultural values.

  4. Legal and Ethical Issues • Legal vs. Ethical Issues: Everything that is legal is not necessarily ethical. • Extraterritoriality:the extension by a government of the application of its laws to the foreign operations of its domestic firms • Corruption issues: How to prevent it? Or, work with it? • Transparency International-their role and activities • Environment and Global Warming

  5. Legal and Ethical Issues • Ethics and Environment: the notion of sustainability • Global Warming • Ethical Dilemmas • Pricing • Labor conditions • Corporate Social Responsibility

  6. Confronting bribery, globally • Bribery consists of payments, or promises to pay cash or something else of value, to public officials and/or other people of influence. • The U.S. Foreign Corrupt Practices Act of 1977 • Transparency International’s Business Principles for Confronting Bribery (2003) • The OECD’s Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (1997) • The revised OECD Guidelines for Multinationals • The International Chamber of Commerce Rules of Combat to Combat Extortion and Bribery (1999) • The UN Convention Against Corruption (2003)

  7. What MNEs Offer

  8. Economic Impact of MNE:Home Country Gains and Losses • Home Country Gains: Home country gains in jobs, profit repatriation, expansion of business. • Home Country Losses: FDI outflows may create jobs abroad at the expense of jobs in the home country.

  9. Economic Impact of MNE: Host Country Gains and Losses • Host Country Gains—FDI inflows may result in the transfer of capital, technology, and/or managerial expertise, and well as the creation of new jobs. • Host Country Losses—FDI inflows may: cream off premium resources drive up local labor costs displace domestic investment disadvantage local competitors destroy local entrepreneurship

  10. BOP Effects of MNEs • One country’s surplus is another country’s deficit • BOP effects on • Current account (especially trade) • Capital account • International reserve • Measuring Net Effect • Consider both inflow and outflow

  11. Chapter 5: Discussion Questions • Define MNE. Explain the economic impact of MNEs, both in home and host country. • Define MNE. Explain the BOP effects of MNEs. • Define cultural relativism and normativism. Explain how a company can use the concepts in a foreign country. • What is corruption? What can we do to combat corruption? Explain. • Explain the notion of sustainability and Corporate Social Responsibility of the multinationals.

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