Discussion board Questions

Reading Assignment Chapter 3: The Institutional Context of Multinational Management, pp. 60–78 Chapter 4: Managing Ethical and Social Responsibility Challenges in Multinational Companies, pp. 84–105 Unit Lesson Economic Systems An economic system can be defined as the method in which a nation chooses to distribute resources to the community or specific area (Cullen & Parboteeah, 2017). The economic system of a country may be structured as socialism, capitalism, or a mixed system. For example, the United States economic system is characterized as a mainly capitalist economic system. Capitalist economics take place when companies are privately owned and are able to carry out activities in a competitive market to make profits. In a socialist economy, the state owns companies or makes decisions about production and pricing in pursuit of a collective goal (Cullen & Parboteeah, 2017). The mixed economy is a combination of socialism and capitalism. An example of a mixed economy is India. The businesses in India are government and privately owned, producing a mixed economy. UNIT II STUDY GUIDE Institutional Context of Multinational Management and Managing Ethical and Social Responsibility MBA 6631, Intercultural Management 2 UNIT x STUDY GUIDE Title Social Institutions Industrialization refers to a country’s industrial development. It “refers to the cultural and economic changes that are brought about by fundamental changes in how production is organized and distributed in society” (Cullen & Parboteeah, 2017, p. 67). The authors categorize three specific industrializations—a preindustrial society, an industrial society, and a postindustrial society—which affect both organizations and individuals. The preindustrial society is dominated by agriculture. Whereas a preindustrial society can provide a company with cheap labor, it can cost the company more in the long run due to the lack of infrastructure and support. An industrial society is heavily focused on manufacturing and production. This type of society requires a vast range of skill levels for workers to handle production and technology. Lastly, the postindustrial society emphasizes services employing highly trained personnel that were trained for their job positions through formal education. All three levels of industrialization play a vital role in the success of strategic multinational management (Cullen & Parboteeah, 2017). Multinational companies (MNCs) can use the levels as a gauge to determine where to do business. How one chooses to worship and believe in a structure of faith is known as religion. In most societies, religion can be characterized as a formal method of worship. Religion can be reflected by dress, diet, behavior, and even holiday beliefs. Max Weber, a German sociologist, is best known for his Protestant work ethic theory. The theory argues that Protestant ethics are important as these result in hard work, success, and wealth (Cullen & Parboteeah, 2017). In today’s society in the United States, religion is not government imposed; it is diverse and respected in the workplace. Employees are free to practice the religion they choose, provided it does not conflict with their performance. How about education? In multinational corporations, education is viewed as one’s skills and productive ability. The more education a worker has, the more valuable he or she may be to the company. Well-educated individuals are also viewed as more likely to contribute to the enhancement of society. Multinational companies use education as a gauge to determine which countries would best suit their needs for skilled workers. Some even use test scores to determine performance eligibility, with math and science high on the list of needs. Many Asian countries place emphasis on research and design education, and multinational companies focusing on technology create facilities in these areas to take

advantage of the skilled workforce. Social Inequality Social inequality can be very damaging to a society as it impedes access to resources for members of society. This is especially apparent when there is a large disparity of wealth within a society. Social inequality gives power to a certain group, which impacts voting, housing, education, and more. Social inequality takes place when resources are unevenly allocated and preferences are given to those with privileged positions in society. For example, in the United States, there appears to be a social inequality in gender and salary. In this situation, men are paid more than women who are doing the same job. MNCs have been criticized for residing in and conducting business with countries that exhibit high social inequality. Companies are realizing that being socially active is beneficial when they work to eliminate social inequalities in the workforce. In addition, MNCs are making location decisions based on social inequality levels. Multinational companies find that it is in their best interest to avoid countries with high inequalities and focus on countries that are socially fair and active. National Context The national context has a great influence on company strategies and international management. It is defined as the “national culture and social institutions that influence how managers make decisions regarding the strategies of their organizations” (Cullen & Parboteeah, 2017, p. 438). The national context also creates a bond between workers and management. There is an influence of international management policies based Emerging markets word cloud (Ibreakstock, n.d.) MBA 6631, Intercultural Management 3 UNIT x STUDY GUIDE Title on the national context because it has a strong emphasis on the design of human resource management of multinational corporations. Ethics and Social Responsibility Scandalous behaviors in corporations such as Enron, MCI, WorldCom, and GlaxoSmithKline have brought much attention to how companies perform when conducting business internationally (Cullen & Parboteeah, 2017). Reputation and goodwill are at stake if unethical behavior is exposed; therefore, companies are expected to behave in an ethical and socially responsible manner. Even though ethical challenges may be more prevalent abroad due to politics and government regulations, businesses should remain ethical and socially responsible when doing business internationally. It is still expected that companies operate within appropriate guidelines; companies have a duty and obligation to act responsibly on behalf of the stakeholders. In addition, employees are motivated more when companies exhibit ethical behavior. Managers may face ethical issues when conducting business internationally due to the different manner in which issues are handled in other cultures. International business ethics are related to the issues faced by managers abroad, while corporate social responsibility extends to the company’s internal and external customers and stockholders. Product safety should be one of the corporate responsibilities that the company should oversee. It is expected that international companies will not forsake the safety of their employees or customers for the production of their product. Multinational managers are responsible for ethical decisions made within the multinational companies. Two approaches to ethical decision-making are the traditional ethical philosophy and contemporary philosophy. The traditional view includes the teleological ethical theory and the deontological system. According to the teleological ethical theory, one should do something only if good results from the act. In this case, in order to know what is right for all, management (the teleologist) must be able to recognize what is right. Utilitarianism is the most popular teleological theory, arguing what is good for the majority is the best decision. For example, a multinational corporation may choose a sick leave policy that is

the same for all employees with no deviations; everyone is given the same treatment as it relates to sick leave. This would be based on what would be best for the larger population (Cullen & Parboteeah, 2017). The deontological approach to ethics is focused on fulfilling one’s duties and obligations regardless of the consequences. The deontological ethical theory does not look at the fact that the company sick leave should be fair to all, and every employee should follow the same sick leave policy. This theory protects individual rights. The policy at this company may be that sick leave will be allocated based on performance. Therefore, those who perform best would receive more sick leave than others that may not perform as well. What roles do national culture and social institutions play? Business customs, cultures, and ethics are different throughout the world. For that reason, different societies perceive management differently; the multinational manager must be privy to the culture where his or her company’s business is operating. For example, the etiquette during a business luncheon in Japan would be completely different from one that takes place in Russia. One of the most prominent ethical issues that multinational managers face is bribery or accepting questionable payments. It may be easier to get a company started in a foreign market with the assistance of bribery or kickbacks to the decision-making officials of that country. The result of such is that the money paid out to such corruptive action is lost but is then made up by increasing product prices or using poor quality materials to produce the goods. “Furthermore, corruption can also result in collusion among firms, resulting in even higher prices” (Cullen & Parboteeah, 2017, p. 94). Being socially responsible requires ethical behavior; it is expected that multinational corporations and multinational managers display a high level of social responsibility in all aspects of making company decisions. According to Cullen and Parboteeah (2017), North Korea and Afghanistan rank highest in the corruption perception index (CPI) while Denmark and Finland have the lowest levels of perceived corruption. MBA 6631, Intercultural Management 4 UNIT x STUDY GUIDE Title A multinational company can also be viewed as having transnational business ethics. This means that the company does not simply follow ethical principles associated with countries where it operates. Instead, the company has an established ethical system that it uses a when operating across borders. This allows multinational companies to follow the same ethical policies and guidelines throughout their multinational locations. Nevertheless, ethical dilemmas in MNCs are bound to occur. When an ethical issue arises, the cliché, “When in Rome, do as the Romans do” becomes questionable. Managers have to decide whether to use the ethical model of the host country or the foreign country when a decision has to be made. The manager is bound by either ethical relativism or ethical universalism. One who believes in ethical relativism believes that right or wrong is dependent on the culture of a country. In this situation, the multinational manager follows the law of the land and makes decisions based on the local ethical behavior even if this act is illegal or immoral at home. On the other hand, the decision could be made utilizing ethical universalism. The decision would be one that is universal regardless of location; this is the complete opposite of ethical relativism. Ethical universalism implies that certain ethics apply to all people, no matter where they are located. The difficulty with this type of ethics as a guideline is that morals and values exist in all cultures and may be different from one country’s culture to the next. For example, if two countries agree that stealing is unethical and should be punished, one country’s punishment might be serving time in jail; whereas, the other country’s punishment is extreme,

resulting in the cutting off of a hand. Multinational managers have a difficult task because they must study countries, cultures, and people in order to make ethical decisions. References Cullen, J. B., & Parboteeah, K. P. (2017). Multinational management: A strategic approach (7th ed.) [VitalSource Bookshelf version]. Retrieved from https://online.vitalsource.com/#/books/9781337655736 Ibreakstock. (n.d.). Emerging markets word cloud concept on grey background, ID 90690560 [Image]. Retrieved from https://www.dreamstime.com/stock-photo-emerging-markets-word-cloud-conceptgrey-backgrou nd-image90690560resulting in the cutting off of a hand. Multinational managers have a difficult task because they must study countries, cultures, and people in order to make ethical decisions.