Business Question 5: International Business
As citizens of the world, multinational corporations have an obligation to abide by the local laws of the host culture and meet or exceed overall ethical standards. As an international consultant you have thirty minutes to talk to the CEO of a company preparing to do business in developing countries. Outline the most important facts-of-life you would explain to the CEO and the rationale for your selection of the specific facts you decided to emphasize.
Succeeding as a corporation in a new country or market has never been easy. This is mainly because of several differences regarding laws, culture, environment, and language. However, while going international an organization has to brace up for all these challenges as they are inevitable. Normally, issues such as language barrier can be a major consideration especially in marketing but these are minor issues that can be overcome easily with appropriate marketing strategies over time. The most important things to give attention as a multination company is adherence to ethics and local laws such as labour issues, environment and human rights issues, freedom of association, collective bargaining, and security of employment , socio-economic, community-based issues, bribery/corruption, and political contributions. This contribution determines a multinations ability to protect the locals rights and freedom as well as the environment while at the same time generating profit (Brookes, and Palmer, 2014). Health and safety standards, non-discrimination, and forced labor prohibition determines how ethical an organization is internationally. Multinational companies have the mandate to protect locals by creating sustainable working schedules and avoiding discriminatory instances in employment and product or service offering. It is multinationals companys responsibility to prohibit any forms of corruption and bribery at the expense of locals as well as the local laws. The multinational companies just like other companies are mandated to carry out its activities with total adherence to laws regarding environmental and human rights protection. In essence, for smooth operation, there are essential factors to consider while doing business internationally and will be discussed in this paper.
Important points to explain to the CEO regarding the International business
With your intentions to go global it is important to note that the UN global compact has set ten principles that multinationals must adhere to when they set foot in new markets. These principles are derived solely from the United Nations convention against corruption, the Universal decaration of human rights, and the international labor organizations declaration on fundamental principles and rights at work. The principles fall in the following categories: human rights, labor, environment, and anti-corruption (Chell, Spence, Perrini, and Harris, 2016). The principle under human rights demand that multinations should support and respect overall protection of human rights(principle 1) and are supposed not to be involved in an human rights abuses in the local market(principle 2). With reference to labor multinations ought to uphold the freedom of association and as well as recognizing the right to collective bargaining(principle 3). They should also eliminate any kind of forced or compulsory labor(principle 4). More so they should abolish child labour( principle 5) and ensure that they do not engage in any discrimination in respect to occupation and employment of personnel(principle 6). Under the envionemental responsibility multinationals have a responsibility to support a precautionary approach to environmental challenges(principle 7), take part in responsibilities that promote environmental responsibility (principle 8) and encourage diffusion of environmental friendly tech in local market(9) (Joyner and Payne,2002). the tenth principle on anti-corruption states that multinations ought to work against corruption entirely, including bribery and extortion.
Multinational companies have a big duty to adhere not only to local standards but international standards. In respect to employment laws, multinational companies have to understand that the working conditions in different markets are different and when hiring locals it is important to strategize on the most appropriate pay levels (Brookes, and Palmer, 2014). The company has to restructure its standards and protect local employees as well as the local market. The set wages have to fully guarantee safety of workers, stand within countries living wage, and more so set appropriate working hours for employees.
In the recent past several multinational companies have been found guilty in several unethical standards. Wal-Mart and MacDonald have in the past broken some ethical standards in poor product supply, low wages, poor working condition, and employee discrimination and is important to use their example and improve on the above key areas. Local employees need security and equality. The inability to meet their standards has the ability to jeopardize the overall business in the long run. Everyone deserves appropriate pay especially in developing nations whereby employees can work at any set wage as long as they can sustain their livings. Normally, employees should know their rights but on the contrary the employer should create a working envionemnt that protects the employees financially and promises utmost safety (Tai, and Chuang, 2014).
Corruption is a major issue that faces several international companies. While several companies know that corruption is illegal they have gone an extra mile to commit this unethical practice. Gifts and financial enticement in order to do business jeopardizes the local economy and exposes many locals to inappropriate working standards. More so, while going international as a company it is important to evaluate yourself and find out if your presence in the local market supports an oppressive regime or serves as a catalyst to enhance human rights (Amone, 2013).
Multinational companies that work with regimes that have suppressed human rights, discrimination, and citizen oppression normally do not succeed in the long run. Multinational companies that have the aspect of human rights at hand have the capacity to remain responsible in the new market in several areas including environmental protection. Such companies will adhere to local laws regarding international investment and ensure that its activities do not affect economic state, safety and health of the local peoples (Brookes, and Palmer, 2014).
Multinational companies have a role to play in as far as corporate social responsibility is concerned. these activities incude offering socio-economic programs such as roads, employment, housing, education and health-care (Maignan and Ralston, 2002). More participatory forms of governance at the local market makes ensures that the organization adheres to the set ethical principles appropriately. Multinationals (MNC) presence in fragile states and nations ought to play a positive role in global governenace, political stability, and overall economic growth. Some MNC have failed in the recent past and in process distratcted overall welfare of the local people. Some other factors to consider when going international include:
Societal factors within the foreign country
The success or failure of business in the global trade is influenced by social, behavioral, economic factors, geographical influences, and legal policies. These factors are detectors of the longevity of a company in its endeavors to go global and must be respected at all cost. Transaction as an economic factor determines currency rates and values, the size of the market, cost differentiation, exchange rates, etc. Other factors such as legal policies through trade laws and regulations can also interfere with trade, social factors, e.g., political policies; feuds can intercept trading activities among others. In international trading, financial options are necessary, as financial capability is the threshold for remaining relevant in business. Domestic and international financial options for a company include banks, financial institutions, Trade Credit Insurance, documentary collection and Factoring who fund a company's trade (Brookes & Palmer, 2014).
The global market today, is very competitive, with the rise of various consumer brands that are accepted worldwide. Any organization dreams that it be able to create productive international brands that are safe for usage and consumption cross-continents. For global organizations to stand, social, political, legislative, economic, or technology factors must be given an upper outlook. For instance, starting up an international brand in a foreign country is a tedious step that involves many legislative processes, some countries are rigid and therefore not ready to accept certain investors and product manufacturers to tap into their local market, this limits the ability of global organizations to expand. Moreover, the entire process of registration and starting up a global enterprise in a locality takes a lot of time and is expensive. A company must, therefore, analyze the corporate policies and legislations that govern global business, the social and economic prowess of the prospective business base to limit cases of premature closure due to debts, high employee, and consumer turnover among others (Amone, 2013).
Dealing with employees
Additionally, to create flexibility in its workforce, a global enterprise must be susceptible to change. It must reorganize its DNA in such a manner that its employees are innovative and are ready to tap into new opportunities present in the market to make the company scale higher; their professional competencies must thus be challenged through employee development programs. Additionally, companies must marry their efficiency DNA with adaptability DNA, become well versed with the market trends and even learn from resilient enterprises that have taken over the market for years without collapsing. Technology should also be a tool that any company gearing towards succeeding in the global market must use. A company must identify its customer base, reach out to them through social media, and learn new entrepreneurial tactics on the internet as well as management skills (Kolk, and Van Tulder, 2010).
Rationale for the selection of the facts emphasized
The facts selected enable the CEO to develop effective policies that encourage the development and expansion of the firm in the host nation while at the same time adhering to set laws and international standards. The facts enable a firm enter a foreign market to acquire low labor costs, to acquire mineral rights or to acquire political control. The facts also ensure the CEO develops measures to ensure the firm maintains the high ethical standards of the business as required in the host nation. The primary reason for conducting business in the host nation is to expand the customer and profit base. The selected factors will thus enable the CEO to ensure the attain such goals in the market (Kolk, 2016). Every firm operates in the international market with an aim to attain competitive advantage in the market. The selected factors thus ensure the CEO develops marketing strategies that facilitate the attainment of the competitive advantage in the host market. The factors are thus fundamental for the development and growth of the organization.
How to abide by the local laws of the host culture and meet the ethical standards
Ethical standards are the basic requirements from every business in the international market. Ethical standards differ from one state to the other. Every country has stipulated legislation that controls the operation of firms within co...
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