International ManagementCh. 2 & 3

Alyssa Munk, Hailey Hinshaw, Alex Kenworthy

Yahoo China has suffered many management missteps which has brought the company to a downward spiral in China.

FLAWS:

~President Xie Wen stepped down “for personal reasons” after 42 days on the job.

~ A dissident was recently arrested, he had a China Yahoo account. US politicians were up in arms over this.

~Major errors in programming. Spyware Zaps it from your downloads.

Chapter 2The Political, Legal and Technical

Environment

“Effective management occurs when philosophies are recognized.”

What does this mean?How can it be applied to International Management?

Individualism – Political philosophy that people should be free to pursue economic and political endeavors without constraint. Capitalism and Free-market economies

Believe individualism increase competition, innovation, and innovation

Example – Margaret Thatcher She privatized much of the UK, more than had been ever been before

Collectivism – Political Philosophy that the goal of society as a whole is more important than individual desires. Instead of competing, people become more unified Originated in Germany and Italy with national socialism or

fascism.

Socialism – A moderate form of collectivism in which there is government ownership of institutions, and profit is not the ultimate goal. Two extremes: Communism and Social Democracy

Extremes of Socialism

Communism – in China, Russia and much of Europe during 1970’s China is still communist in social rules but NOT in business rules Russia is in transition, but it’s CORRUPT

In Russia, businesses require bribes before a deal can be made.

Is this ethical? It’s just Russia’s normal way of doing things.

Would you open a business in Russia of required to bribe?Would you support a business in Russia if you knew it

required bribes to operate profitably?How does this corruption change the way MNCs will look

to Russia as a potential candidate?

Social Democracy – non-violent socialist movement This system has not been well received anywhere Since it offers less privatization, the government has to increase

taxes and raise prices.

Democracy – A political system in which the government is controlled by the citizens either directly or through elections. America was built on a democracy, but do you think it’s the

best form of government? What are it’s advantages? Does it have any disadvantages? http://www.youtube.com/watch?v=woBC5b3Ti0M

Totalitarianism – A political system in which there is only one representative party which exhibits control over every facet of political and human life. Any opposition leads to imprisonment or worse.

Examples of Totalitarianism:

Nazi Germany

Soviet UnionFascist Italy

China Celebrates 60 Years of Communist Rule

“Today, a socialist China geared to modernization, the world and the future has stood rock-firm in the east of the world,” Mr. Hu said in a brief speech speckled with boilerplate references to Chinese-style socialism. The Chinese people, he said, “cannot be prouder of the development and progress of our great motherland.”

In what ways do different ideologies and political systems influence the environment in which MNCs operate?

Would these challenges be greater for Russia and China over those operating in the EU?

Why or Why not?

Foreign Corrupt Practices Act – an act that makes it illegal to influence foreign officials through personal payment or political contributions; made into U.S. law in 1977 because of concerns over bribes in international business areas. Critics were afraid FCPA regulations would decrease business

and cause bad relations between the countries BUT…

MNCs operated successfully under FCPA laws AND foreign governments applauded FCPA investigations (helped

reduce all corruption in their countries)

One example of international regulations includes: The Principle of Sovereign Immunity – an international

principle of law which holds that governments have the right to rule themselves as they see fit.

Amanda Knox

International Regulatory Practices

Successes in Privatization:BanksCitiesFire-FightingHistoric LandmarksJudiciaryLandLibrariesNational DefenseParking MetersParksPolicePostal ServicesRadio SpectrumRailroadsRivers and Oceans (Fish and Whales)RoadsSocial SecurityTelecommunicationsWilderness and WildlifeZoos

Privatization Yields enduring benefits & is good for the country as a whole.

•More than 8,500 state-owned enterprises in over 80 countries have been privatized in the past 12 years

•41 firms privatized by public offerings in 15 countries. among them•--increased returns on… sales, assets, and equity, raised internal efficiency, improved their capital structure, and increased capital expenditures.

• The Chilean telephone company doubled its capacity in the four years after sale. The privatized telephone company in Mexico reduced its per-unit labor costs sharply.

The United States Goes to the Mat (pg.47)

The United States accumulated a $233 billion deficit with China.This is due to an extremely undervalued Yuan, and government subsidies and regulations that favor Chinese Multinational Corporations.

US Tactics:•Threats to impose tariffs on Chinese imports.•In 2006 the US partnered with the European Union to file a complaint on China unfairly blocking foreign-made auto parts and U.S. imports.•Case against Chenming Paper Holdings and Gold East Paper of China over glossy paper exports. NewPage claimed the Government subsidies not only boosted exports but also made the goods inexpensive. China’s “non-market” economy gave them loop holes.

China’s Response:

•China will rewrite their tax Code and eventually eliminate tax breaks to Chinese businesses.•Draft a plan to buy 12.5 billion of U.S. goods, from mechanical to agricultural.

Worst Scenario could result in china abandoning the U.S. market… However,In 2007 The U.S. and China reached agreement to cooperate more closely in areas of financial services, aviation, energy and environment.The United States recognizes that China is an economic powerhouse and that an excess of tariffs could result in a trade war. The U.S. government believes full success in this area will require it to “Go to the mat” with China.

TechnologyAdvantages and Disadvantages of technology in

global business?

How it’s affecting international management:Biotechnology is revolutionizing agriculture, medicine,

and industryNanomachines will eventually be able to remake the

whole physical universe.Satellites connect even the most remote parts of the

world… can collect data, receive imagesAutomatically translating phones, allowing people to

communicate in their own language (but tone of voice cannot be understood, which can be important)

Artificial intelligence that can think on its own like a human

Biotechnology – The integration of science and technology to create agriculture or medical products through industrial use and manipulation of living organisms. Is this Ethical? Consider: Laser eye surgery vs. Animal cloning

DID YOU KNOW: The US is the only country that allows cloned animal products to be incorporated into the food supply.

Articles on Biotechnology

Genetically modified organism:A genetically modified organism (GMO) is an organism whose genetic material has been altered using techniques in genetics generally known as recombinant DNA technology.

http://www.youtube.com/watch?v=WrBH5IWwmGM

New cancer vaccines:

University of Georgia researchers created a vaccine that dramatically reduces the size of 90% of tumors caused by breast cancer. “Biotechnology is a key industry in Georgia, and this year Boons founded Athens-based company Viamune to help develop and commercialize the vaccine and the technologies used to create it.”

“Companies like these have the potential to create stable, high-paying jobs that have a significant social and economic impact,”

E-Business – Businesses that run totally online. Mostly good for B-2-B (Business to Business), not to

customers Do you think E-Business will be profitable? How will it affect the globalization process if companies are only

online?

E-Cash – country-less, boarder-less, paperless money that can easily be transferred online. How would this work (where does the money come from)? Do we have a dual system? Would it be profitable? Who would run it in the system?

Telecommunication – phones are going everywhere. Easy to use and easy to set up Phones connect everyone in the world, even in the most

remote places. What does this mean for international business?

Technology, Outsourcing, and Offshoring Technology decreases the amount of jobs available for people

Do you think Technology benefits or hinders the job market?

With outsourcing, we lose jobs in the homeland With technology, we lose jobs to computers and machines

Will machines be as smart and productive as people? Example: automated responders over the phone

How will advances in technology and telecommunications affect developing countries?

Beyond the Green Corporation•Embracing sustainability can avert costly setbacks from environmental disasters, political protests, and human rights or workplace abuses.

•Wal-Mart has made a series of high profile promises to slash energy use overall, from its stores to its trucking fleets, and purchasing more renewable sources.•Innovest studies 120 different factors, such as energy use, health and safety records, litigation, employee practices, regulatory history ect…

The purpose of this article is to show how current day corporations have much more to consider when selling a product. Taking care of the environment, people, and energy is a large important task.

Going Green to Get the Green

Toyota – Prius hybrid

Makes phones for handicapped and low-income consumers. They are phasing out toxic materials.

Takes hardware back and recycles it for free

Ch. 3 Ethics and Social Responsibility

Ethics- study of morality and codes of conductVaries from country to country “When in Rome, do as the Romans do”Dilemmas arise from conflicts between ethical

standards

Ethical Business PracticesChinese counterfeiting

no clear laws against it

Japanese banks bankruptcy What lessons can U.S. multinationals learn from the

political and bribery scandals in Japan that can be of value to them in doing business in this country?

Human RightsNo universally adopted standard

of acceptable behavior

Human Rights Issues Japanese sexual harassment

problems with equal employment opportunities

only offered lower level jobsdon’t understand moral issues

Human RightsWomen’s rights

“glass ceiling”

How do ethical practices differ in the U.S. and in European countries such as France and Germany? What implications does this have for U.S. multinationals operating in Europe?

Who is abusing Human Rights??

http://www.youtube.com/watch?v=WtzYe1S9AAc

CorruptionOECD – Organization for Cooperation and

Development Treaty that outlaws foreign bribery among 29

nationsAlthough the treaty has narrow provisions, it did

create a more ethical and level playing field in global business.

Corporate Social Responsibility and Sustainability

Corporate Social Responsibility- actions of a firm to benefit society beyond the requirements of the law and the direct interests of the firm increasing pressure

NGOs- private, not-for-profit organizations that serve society’s interests

Sustainability- development that meets humanity’s needs without harming future generations

“We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services. In meeting their needs everything we do must be of high quality.”

http://www.youtube.com/watch?v=GZRfPAvNClI

NGOs, MNCs, and Ethical Balance

Dramatically altered business environment globally

NGOs have grown in number, power, and influence

MNCs may have positive impacts in countries they do business

MNC and NGO collaborationsocial and environmental projects

Response to Social Obligations

MNCs maintain social and environmental standards in workplaces and communities

Individual companies incorporate social responsibility and ethics with help of NGOs

Companies actively responding to pressures

Corporate GovernanceCorporate governance- system by which

business corporations are directed and controlledspecifies delegation of rights within the

corporationprovides structurerelated to governance rules and regulations which

differ between countries

International AssistanceIncreasing global assistance

Focus on countries that have not benefited from globalization and economic integration

Cost benefit analysis

Global agenda goalsReducing poverty, hunger, illiteracy, etc.

Sovereignty and Sovereign Immunity:

The principle of Sovereignty holds that governments have the right to rule themselves as they see fit.

Amanda Knox

http://www.youtube.com/watch?v=cEXzvaFnTA4

Colgate’s Distasteful Toothpaste

In 1985 Colgate bought 50% of Hawley and Hazel group who produced “Darkie” Toothpaste. It had been sold in Taiwan, Hong Kong, Singapore Malaysia, China and Thailand. US civil rights groups were up in arms about the name claiming the toothpaste to be racist. Congress got involved and urged Colgate to change the name. Colgate placed a plan to change the logo within 3 years. Now the Colgate name cannot be found on what is today known as Darlie Toothpaste.

Colgate Questions1. Identify the major strategic and ethical issues

faced by Colgate in its partnership with Hawley and Hazel.

2. What do you think Colgate should have done to handle the situation?

3. Is it possible for Colgate and Hawley and Hazel to change the toothpaste’s advertising without sacrificing consumer brand loyalty? Is that a possible reason for Colgate’s not responding quickly to domestic complaints?

4. In the end, was a “no management rights” clause good for Colgate? What could have happened during the negotiations process to get around this problem?