International Management

Ch. 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 XieWen 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 increases competition 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:Banks

Cities

Fire-Fighting

Historic Landmarks

Judiciary

Land

Libraries

National Defense

Parking Meters

Parks

Police

Postal Services

Radio Spectrum

Railroads

Rivers and Oceans (Fish and

Whales)

Roads

Social Security

Telecommunications

Wilderness and Wildlife

Zoos

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.

Technology

Advantages and Disadvantages of technology in global

business?

How it’s affecting international management:

Biotechnology is revolutionizing agriculture, medicine, and

industry

Nanomachines will eventually be able to remake the whole

physical universe.

Satellites connect even the most remote parts of the world…

can collect data, receive images

Automatically 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=WrBH5I

WwmGM

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

hybridMakes 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 conduct

Varies from country to country

“When in Rome, do as the Romans do”

Dilemmas arise from conflicts between ethical standards

Ethical Business Practices

Chinese 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 Rights No universally adopted standard of

acceptable behavior

Human Rights Issues

Japanese sexual harassment

problems with equal employment

opportunities

only offered lower level jobs

don’t understand moral issues

Human Rights Women’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=WtzYe1

S9AAc

Corruption OECD – Organization for Cooperation and

Development

Treaty that outlaws foreign bribery among 29 nations

Although 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 collaboration

social 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 Governance Corporate governance- system by which business

corporations are directed and controlled

specifies delegation of rights within the corporation

provides structure

related to governance rules and regulations which differ

between countries

International Assistance

Increasing global assistance

Focus on countries that have not benefited from

globalization and economic integration

Cost benefit analysis

Global agenda goals

Reducing 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=cEXzvaF

nTA4

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?