What pertinent aspects of U.S. law should the company be aware of in its goal to do business internationally?
There are strict laws that govern the conduct of companies that decide to take their operations to other countries. Businesses must be aware of these legislations to avoid conflicts with the US government. Some of the important laws governing how companies operate abroad include:
Foreign Corrupt Practices Act
This law prohibits any forms of bribery or coercion that is done to foreign officials to gain business favors. Giving money, or any other gifts, for preferential treatment in a foreign country is a contradiction of this law.
According to the Export Administration Act, it is illegal for American companies to participate in boycotts that are not sanctioned by the state. Any boycott activities must be legally approved by the authorities in a specific country.
Statutes on Export Control
These laws regulate the exportation of any materials related to research and development. Shipping items and information to other countries is controlled by the state. These elements are monitored since they will affect the company operations abroad.
Office of Foreign Assets Control
This law preserves our national security by enforcing trade and economic sanctions in countries that present a treat. When a country is under a US embargo, it is illegal for American countries to conduct business with them.
Reporting on Currency and Foreign Bank Accounts
Companies operating outside of the US are required to hand in a report to the Treasury whenever they have amounts more than $10,000.
Industry and Security Bureau
It is a list of individuals and organizations that are banned from conducting business with American entities.
Assess the legal implications of moving business abroad specific to the chosen country. What are the advantages and disadvantages of moving to the chosen country?
If a company chooses to do business in Mexico, they must understand the laws in that country. The legal implications and directions differ from one country to another.
American companies looking to go to Mexico must get in-country attorneys. According to NAFTA regulations, US based attorneys are prohibited from practicing law in Mexico.
Mexican lawyers will have a better knowledge of their country and administration than the Americans.
Companies will incur extra fees to get new lawyers, over and above the Americans.
The American system is based on common law while civil law is practiced in Mexico. It is crucial to observe the civil laws to avoid any penalties that may arise.
The company can hire local attorneys who are conversant with the nuances of the local laws.
There is plenty of uncertainty on the company due to the fundamental legal differences.
Companies moving to Mexico must observe the rights and standards of their employees. The Federal Labor Law outlines the acceptable labor practices that companies ought to follow.
Employers dont pay for some employee benefits that are necessary if operating in the US.
Workers are free to unionize, and this may be detrimental to the company's bottom line.
There are strict restrictions that face foreign investors in Mexico depending on the industry. The percentage of ownership in the company will vary depending on the industry. Local citizens or interests must have a significant stake in every foreign company in the country.
The company can share the risks with other investors.
Bureaucracy in decision making increases with new members.
What are the ethical implications involved in this business decision?
Ethics are the moral principles that guide companies, and individuals in their operations.
Outsourcing to Mexico is aimed at increasing the profit margins of the company by driving down the cost of operations. It is okay to outsource since they cannot achieve the same margins in America, leading the company to fall short of its target.
Protecting the rights of employees is crucial. American and Mexican labor laws are keen on a time limit for workers. A working day of about 8 hours ensures that sweat shop conditions are avoided.
There are strict American laws are against bribery or coercion of any kind. Bribing is an unethical business practice that is also discouraged by the Mexican government. However, there is widespread corruption and bribery in Mexico.
Racial, age, sexist or any other kind of discrimination is highly discouraged in America. These tendencies are also discouraged in Mexico, but the system is riddled with cases of discriminated groups. Women are tested for pregnancy before entering a new job unlike in America.
Explain how other domestic companies have managed to comply with the U.S. laws related to this business decision in the past. How did these companies address potential compliance issues?
Domestic companies have managed to comply with the laws that govern outsourcing. It is necessary to comply with the laws that govern outsourcing to avoid the exorbitant levies.
McDonalds is one of the American corporations that have set up shop in Mexico. They have been there for a long time now, but the company is keen on adhering to US laws. The company annually trains the employees on adherence to anti-bribery laws and the expected code of conduct. The employees have to sign up on compliance with these laws. It is a company policy for all branches outside of the US to comply with the FCPA recommendations. They have adopted a global policy against corruption which complies with anti-bribery regulations in the host countries.
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