Managerial Ethics and Social Responsibility-2
Chapter 4
Business in a Globalized World
Copyright ©2020 McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education.
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Copyright ©2020 McGraw-Hill Education.
Chapter 4
Ch. 4: Key Learning Objectives
4-1 Defining globalization and classifying the major ways in which companies enter the global marketplace.
4-2 Identifying the international financial and trade institutions that have shaped the globalization process in recent decades.
4-3 Analyzing the benefits and costs of the globalization of business.
4-4 Identifying the major types of political and economic systems in which companies operate across the world.
4-5 Understanding global inequalities of wealth and income and analyzing the special challenges of serving those at the “bottom of the pyramid.”
4-6 Assessing how businesses can work collaboratively with governments and the civil sector to address global social issues.
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
2
The Process of Globalization
Globalization: the increasing movement of goods, services, and capital across national borders.
A process – an ongoing series of interrelated events:
International trade and financial flows integrate the world economy, leading to the spread of technology, culture, and politics.
Globalization is not simply a trend or a fad but, rather, an international system.
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
Entering and Competing in the Global Marketplace1
Develop global market channels:
First build a successful business in their home country, then export products or services to buyers in other countries.
Example: Nestlé, PayPal.
Establish global operations:
Locate manufacturing plants or service operations in other countries as a way to cut costs.
Example: BMW.
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
Entering and Competing in the Global Marketplace2
Develop global supply chains:
Purchase raw materials, components, or other supplies from sellers in other countries; work may also be subcontracted.
Example: Nike, Gap.
Summarized in 3 words:
Sell.
Make.
Source.
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
Major Multinational Enterprises (MNEs)
Defined by the United Nations as firms that control assets abroad.
Most global commerce is carried out by a small number of powerful firms.
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
The World’s Top 10 Nonfinancial Multinational Enterprises
Figure 4.1
Copyright © McGraw-Hill Education. Permission required for reproduction or display.
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
7
Foreign Direct Investment (FDI)
Another important aspect of globalization is the worldwide flow of capital.
FDI occurs when a company, individual, or fund invests money in another country, for example, by buying shares of stock in or loaning money to a foreign firm.
In 2016, FDI was $1.75 trillion.
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
8
Inversion
Companies avoid taxes in their home countries:
by merging with companies located in other countries and shifting their headquarters there.
A strategy of acquiring or merging with a foreign firm in order to reduce corporate tax obligations at home.
Example: Burger King.
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
International Financial and Trade Institutions
Three institutions that set the rules by which international commerce is transacted:
World Bank (WB).
International Monetary Fund (IMF).
World Trade Organization (WTO).
No business can operate across national boundaries without complying with rules set by the WTO.
Many businesses in developing countries are dependent on WB and IMF loans to survive.
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
The World Bank
Established in 1944.
Provides economic development loans to its member nations.
Funds used mainly for roads, dams, power plants, and other infrastructure projects, as well as for education, health and social services.
Funding provided by member countries and international capital markets.
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
11
International Monetary Fund1
“Sister” organization to World Bank, created at same time.
Purpose: to stabilize the system of currency exchange rates and international payments to enable member countries to participate in global trade.
Lends foreign exchange to member countries.
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
12
International Monetary Fund2
Imposes conditions on governments that receive its loans.
These conditions often lead to hardship:
Demands that governments cut spending.
Devalue their currencies.
Increase exports.
Liberalize financial markets and reduce wages.
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
13
World Trade Organization
Founded in 1995, successor to General Agreement on Tariffs and Trade (GATT).
International body that establishes the ground rules for trade among nations.
Its major objective is to promote free trade; attempts to eliminate barriers to trade (e.g. quotas, duties and tariffs).
Conducts “rounds” of negotiations on various topics.
“Most favored nation” rule means members countries cannot discriminate against foreign products for any reason.
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
The Benefits and Costs of Globalization1
Globalization is highly controversial.
Clearly, some benefit from globalization, while others do not.
What are some of the major arguments advanced by both sides in the debate over this important issue?
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
The Benefits and Costs of Globalization2
Figure 4.2
Copyright © McGraw-Hill Education. Permission required for reproduction or display.
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
16
Comparative Political Systems1
Democracy – The presence of political freedom.
Four defining features of democracy (according to the U.N.):
Fair elections
Independent media
Separation of powers
among the executive, legislative, and judicial branches of government
An open society where citizens have the right to form their own independent organization
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
Comparative Political Systems2
Democracy has declined in the 21st century.
According to Freedom House estimates:
25 percent of countries are "not free.“
another 30 percent are only "partly free“.
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
18
Comparative Political Systems3
Degree to which human rights are protected differs greatly among nations.
Several international codes of human rights exist.
United Nations Universal Declaration of Human Rights of 1948.
Over half world’s nations have adopted these human rights covenants.
Still, many violations of human rights continue to occur:
More than 5 million children die each year before their fifth birthday due to pneumonia, diarrhea, malaria, and other.
Systems where minority groups and indigenous peoples lack basic human rights, e.g., the status of “untouchables” in Nepal.
In 2017 25 million people worldwide were victims of forced labor, trafficking, and human slavery.
Genocide, the mass murder of innocent civilians, e.g., in Syria, Rwanda.
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
Comparative Economic Systems
Free enterprise systems
Based on the principle of voluntary association and exchange.
Members of society satisfy most of their economic needs through voluntary market transactions.
Central state control
Economic power is concentrated in the hands of government officials and political authorities.
The central government owns the property that is used to produce goods and services.
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
The Heritage Foundation
Has scored the nations of the world according to an Index of Economic Freedom: the fundamental rights of every human being to control his or her own labor and property.
Among the freest nations in 2018: Hong Kong, Singapore, and Canada.
Among the most repressed were Iran, Venezuela, and—the least free in the world—North Korea. The United States ranked 48th out of 183 countries.
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
21
Global Inequality and the Bottom of the Pyramid1
Inequality may be measured in two ways: by wealth and income.
Wealth refers to assets that a person accumulates and he or she owns at a point in time.
Income represents how much a person earns in a day or a year.
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
Global Inequality and the Bottom of the Pyramid2
Global Wealth Pyramid
Figure 4.3
Copyright © McGraw-Hill Education. Permission required for reproduction or display.
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
23
Global Inequality and the Bottom of the Pyramid3
Bottom of the pyramid refers to individuals earning below $3000 a year in local purchasing power.
Focusing on the bottom of the pyramid can foster:
Social development.
Provide employment in underserved communities.
Reap profits.
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
Microfinance
Microfinance: This occurs when financial organizations provide loans to low-income clients or solidarity lending groups (a community of borrowers) who traditionally lack access to banking or related services.
Examples:
Grameen Bank in Bangladesh.
Indonesia, a midsized bank called BTPN.
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
Collaborative Partnerships for Global Problem Solving
Emerging trend for development of collaborative, multi-sector partnerships focused on particular social issues or problems in the global economy.
These partnerships have been termed global action networks, or GANs.
Involves 3 sectors:
Business
Government
Civil Society
Civil society comprises nonprofit, educational, religious, community, family, and interest-group organizations.
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
26
Distinctive Attributes of the Three Major Sectors
Figure 4.4
Copyright © McGraw-Hill Education. Permission required for reproduction or display.
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
27
End of Main Content
Because learning changes everything.®
www.mheducation.com
Copyright ©2020 McGraw-Hill Education.
Chapter 4
Closing slide.
28
Accessibility Content: Text Alternatives for Images
Copyright ©2020 McGraw-Hill Education.
Chapter 4
The World’s Top 10 Nonfinancial Multinational Enterprises Text Alternative
It contains four columns and eleven rows.
The first row is a heading and reads as follows:
Column 1 is titled corporation, column 2 is titled home economy, column 3 is titled industry, and column 4 is titled foreign assets (in million dollars).
In row 2, column 1 reads Royal Dutch Shell, column 2 reads United Kingdom, column 3 reads petroleum, and column 4 reads 349,720 dollars.
In row 3, column 1 reads Toyota Motor, column 2 reads Japan, column 3 reads motor vehicles, and column 4 reads 303,678 dollars.
In row 4, column 1 reads BP, column 2 reads United Kingdom, column 3 reads petroleum, and column 4 reads 235,124 dollars.
In row 5, column 1 reads Total, column 2 reads France, column 3 reads petroleum, and column 4 reads dollar 233,217.
In row 6, column 1 reads Anheuser-Busch InBev, column 2 reads Belgium, column 3 reads food and beverages, and column 4 reads 208,012 dollars.
In row 7, column 1 reads Volkswagen Group, column 2 reads Germany, column 3 reads Motor vehicles, and column 4 reads 197,254 dollars.
In row 8, column 1 reads Chevron, column 2 reads United States, column 3 reads petroleum, and column 4 reads 189,116 dollars.
In row 9, column 1 reads General Electric, column 2 reads United States, column 3 reads industrial and commercial machinery, and column 4 reads 178,525 dollars.
In row 10, column 1 reads Exxon Mobile Corporation, column 2 reads United States, column 3 reads petroleum, and column 4 reads 165,969 dollars.
In row 11, column 1 reads Softbank Corp, column 2 reads Japan, column 3 reads telecommunications; and column 4 reads 145,611 dollars.
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
30
The Benefits and Costs of Globalization2 Text Alternative
It contains two columns and six rows. Column 1 is titled benefits of globalization, and column 2 is titled costs of globalization.
The benefits of globalization are listed in column 1 in rows 2 through six as follows:
Row 2 reads increases economic productivity.
Row 3 reads reduces prices for consumers.
Row 4 reads gives developing countries access to foreign investment funds to support economic development.
Row 5 reads transfers technology.
Row 6 reads spreads democracy and freedom, and reduces military conflict.
The costs of globalization are listed in column 2 in rows 2 through six as follows:
Row 2 reads causes job insecurity.
Row 3 reads weakens environmental and labor standards.
Row 4 reads prevents individual nations from adopting policies promoting environmental or social objectives, if these discriminate against products from another country.
Row 5 reads erodes regional and national cultures and undermines cultural, linguistic, and religious diversity.
Row 6 reads is compatible with despotism.
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
31
Global Inequality and the Bottom of the Pyramid2 Text Alternative
The pyramid contains four sections. From the bottom to the top, the sections are as follows:
The fourth section is labeled base of the pyramid. There are two points under this heading that read as follows:
3,282 million people (70%)
Assets less than 10,000 dollars
The third section is labeled middle class. There are two points under this heading that read as follows:
1,054 million people (21 percent)
Assets from 10,000 dollars to 100,000 dollars.
The second section is labeled high wealth. There are two points under this heading that read as follows:
391 million people (8 percent)
100,000 dollars to 1 million dollars.
The first and top section is labeled top of the pyramid. There are two points under this heading that read as follows:
36 million people (less than 1%)
More than I million dollars.
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
32
Distinctive Attributes of the Three Major Sectors Text Alternative
The pyramid contains four sections. From the bottom to the top, the sections are as follows:
The fourth section is labeled base of the pyramid. There are two points under this heading that read as follows:
3,282 million people (70%)
Assets less than 10,000 dollars
The third section is labeled middle class. There are two points under this heading that read as follows:
1,054 million people (21 percent)
Assets from 10,000 dollars to 100,000 dollars.
The second section is labeled high wealth. There are two points under this heading that read as follows:
391 million people (8 percent)
100,000 dollars to 1 million dollars.
The first and top section is labeled top of the pyramid. There are two points under this heading that read as follows:
36 million people (less than 1%)
More than I million dollars.
Copyright ©2020 McGraw-Hill Education.
Chapter 4 - Business in the Globalized World
4-‹#›
Copyright ©2020 McGraw-Hill Education.
Chapter 4
33