Unit VI Article Critique

DBA 7632, Business Ethics and Corporate Responsibility 1

Course Learning Outcomes for Unit VI Upon completion of this unit, students should be able to:

2. Examine ethical issues in international business. 2.1 Explain international business ethical issues found in a journal article. 2.2 Analyze the purpose of research focusing on ethical issues in international business.

Course/Unit Learning Outcomes

Learning Activity

2.1

Unit Lesson Chapter 12, pp. 355–377 Unit VI REM Case Study Scenario Unit VI Article Critique

2.2

Unit Lesson Chapter 12, pp. 355–377 Unit VI REM Case Study Scenario Unit VI Article Critique

Reading Assignment Chapter 12: Ethics in a Global Society, pp. 355–377 Click here to access the Unit VI REM Case Study Scenario.

Unit Lesson This unit builds upon the previous units and begins to bring us to a close as we discuss more application- based issues. The foundation is laid; it is important that you have a solid understanding of the concepts, theories, and practices to this point. Ethics in research as well as ethics in organizations carry a high cost. To develop and implement an ethical standard, there must be a solid foundation upon which to build. Past units discussed different aspects within an organization itself and the organization’s reach to vendors and customers. The last unit addressed the issue of intellectual property. When addressing ethical concerns in regard to intellectual property, working internationally must be discussed. An organization choosing to operate internationally is not necessarily a large conglomerate. The organization that has global reach may only sell products or services in different countries, regions, and territories. The organization may contract out components such as computer parts or automobile parts made in China to be assembled within a larger unit that are installed in the United States. Businesses continue to grow globally, whether it be through the Internet and other means of technology or through the manufacturing, production, and harvesting of raw materials. Cultural Acceptance Global business is a growing field, and the barriers are shrinking. Ethical behavior takes on a new face because what is acceptable in one country is not always acceptable in another country. Johnson (2019) explains how a company that enters into a contract with a German organization will find that the contract is highly detailed and specific as to what precisely will be expected. This approach is very different than a company that is based in South America. According to Johnson (2019), nations in South America are far more relaxed about the constraints of a contract as there is an expectation that the contract will be continually renegotiated. The contract serves as more of a guideline rather than as a strict regulation of

UNIT VI STUDY GUIDE

International Business

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agreement. Breaking an element of a contract in South America is not given much concern, but breaking an element of the contract in Germany will have a far greater negative impact (King County Bar Association [KCBA], n.d.). Johnson (2019) discusses that the validity of a contract in Mexico is based on individual reputation. If one party is not known to maintain its integrity as to completing what it says it is going to do, there is a greater likelihood that another individual or organization with high expectations would not conduct business with this party. Integrity, along with individual accountability, is significant. How an organization behaves and conducts business in one country may have to be adjusted in another country. For example, for a large organization such as General Motors, which has interests all around the world, the types of contracts that they enter will be handled very differently in the respective countries. The company will have expectations; however, the company will have to adjust to the culture of the individual and the nation in which it is conducting business Understanding the culture of the nation as well as the business practices proves to be valuable. Determination of what is needed to develop a successful relationship with a host company requires comprehensive research about the organization as well as business practices and organizational culture. This research decreases risk associated with appropriateness of action and deliverables between the contracted organizations. The previous unit talked about the use of intellectual property and how it is respected in the United States. Intellectual property is protected. Several Asian countries do not have the same perspective on how intellectual property should be protected or used. Two companies from different countries should have a clear understanding about what is reasonable regarding the use of common knowledge, collective intelligence, design, and production or manufacturing. The previous unit discussed the example of RCA and how their design and intellectual property was used outside of the United States, forming significant competitors that were using the company's own designs. The value of protecting the information may be a point of disparity between the companies. Such issues have also been addressed in the way of Internet technologies as to whether applications or software should be open source or proprietary. In the research realm, an example of this might be IBM's ownership of SPSS software versus open-source data analysis using R, which is a free analysis software that can be downloaded and perform similarly to the proprietary SPSS software. Business Practices How business is conducted across national borders will vary. Walmart chose to open retail business units in Mexico in 2012 (Reuters, 2017). The individuals that prepared the way for the company to come in and begin building did not gain a solid understanding of how business practices were done in Mexico. The company decided that by paying special fees to government officials, the development process could be sped up, but the company learned that these practices were unacceptable to the Mexican government. Walmart was delayed in opening up this market, but the company did eventually open stores in Mexico in 2014 (Reuters, 2017). Understanding how organizations and governments work together, whether they are in the same country or in different countries, plays a vital role. In countries such as Malaysia, a government official accepting a bribe will lead to execution (Johnson, 2019). In other countries, added supplemental payments are often how merchandise is moved around the country, which is the case for South America (Johnson, 2019). Culture Understanding the culture plays a central role in what business practices look like in the host country. The organization that chooses not to study these practices before choosing to invest is selling itself short and increasing risk. Ethical behavior as we understand it is subject to the individual, the organization, and the culture in which the standard is held. While taking bribes in one country is seen as unethical, such actions could be acceptable practices in another country. Making these determinations is important to how a business is established and perceived. A company that holds a more stringent standard of ethics may not choose to take part in the perceived less-stringent ethical standards of the host nation. A different area of ethics within international business is the use of slang terms. It is important to understand the vernacular of a given country, organization, and industry. A term of endearment in one country may be a

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term of discrimination or offense in another. This addresses the labeling of products and services that may be effective in one country but may have a highly negative connotation in another. The use of slang terms or practices is also an ethical issue in how these actions and practices are implemented and enforced throughout the organization. How an individual of a certain class, position, or culture is perceived in one country can be very different than how the individual is viewed in another country. For example, a male of dark skin color in an entry- level, blue-collar position in Seattle, Washington, may be treated very differently within the same company if he is working in a suburb of Johannesburg, South Africa. A light-skinned female in middle management who is working in Huntsville, Alabama, will be treated very differently in Riyadh, Saudi Arabia, because the culture is different. Business Practices The expectations for individuals and business practices will vary in different countries. Along these lines, understanding how culture, nationality, and practices play a role in the code of conduct or an ethical standard within an organization also depends on what the traditions are within the host country or the home country. An organization that is based in China and headquartered in Beijing will have certain expectations about how they expect operations to be carried out in Western Europe and the United States. Many of these expectations may entail using similar practices used in China, which might be illegal in the other countries or considered unethical by those who live in Western countries. The same is true with respect to how employees and clients are treated by an organization that is based in their home country versus how they treat their customers and employees in a host country. A French company may treat certain individuals better than a company from the host country. Understanding these practices and knowing what is considered to be acceptable behavior can be valuable. How we share personal and professional information varies from country to country as well. This plays into international business practices from an ethical standpoint. In the United States, two executives are not likely to talk a lot about their personal lives unless they are good friends or long-time colleagues. In some Middle-Eastern countries, there is a very fine line between personal and professional discussions (“Seven Tips for Doing Business,” n.d.). Such questions about family speaks to character and integrity. A business associate may want to know how you treat your family as well as your role within the family, as this will also speak to how you operate in your professional life. As we mentioned above, what would be considered an ethical violation in one country would be perfectly acceptable in another (“Seven Tips for Doing Business,” n.d.). Outsourcing and Giving Back When we talk about conducting business across international borders, we think of outsourcing to lower the cost of labor or manufacturing. We hear advocacy groups talk about employees in developing nations being paid a few dollars per day for the work that they do in what we consider to be sweatshop conditions. As an international business, working ethically within different nations means knowing the operations and standards in each country or region. The first step is knowing what standard business practices in the host country are. If the normal rate of pay is equivalent to $2 per day in U.S. currency, and the U.S.-based organization were to pay $10 per hour, this would cause upheaval in the local economy. The organization is going to conduct its contracted operations at a similar rate of pay and conditions as what is acceptable in the host country and culture. Yes, the company can raise the quality of life by offering jobs that would not otherwise be available. Oftentimes, this can be done by setting up a compound-type environment that provides food, clothing, shelter, education, and health services through value-added benefits that might not be available through other organizations in the community.

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Organizations will be assessed by their footprint on the host country and the culture. The perspective of one country will be very different from the perspectives of other countries. Is the company operating unethically if they do not pay the same rate of pay in the host country as they would in the United States? The company would be operating unethically as it would create far more issues in the host country and the host community if they paid the same labor rates as they did in the United States or if the roles were reversed. A similar issue occurs here in the United States if a position pays $25 per hour in California, New York, Chicago, or Washington, yet it pays $10 an hour in Alabama, Mississippi, and rural Arizona. Are the employees worth less? No, but the cost of living is very different in these areas. There is an ethical standard to pay the rate of pay associated with business practices and commonly accepted standards in these areas. The same principle carries through across national borders throughout industries. As a global society, ethical practices are taking on an ever-changing face as organizations become increasingly global in their suppliers, vendors, clients, and employees.

References Johnson, C. E. (2019). Organizational ethics: A practical approach (4th ed.). Thousand Oaks, CA: Sage. King County Bar Association. (n.d.). Business etiquette in Latin America. Retrieved from

https://www.kcba.org/streaming/Documents/COLLABORATIVE-Handout_1.pdf Nasir1164. (n.d.). ID 25322936 [Image]. Retrieved from www.dreamstime.com Reuters. (2017, May). Walmart is reportedly getting ready to settle a bribery probe for $300 million. Fortune.

Retrieved from http://fortune.com/2017/05/10/walmart-bribery-investigation-settlement/ Seven tips for doing business in the Middle East. (n.d.). Arab Business Review. Retrieved from

http://www.arabbusinessreview.com/en/article/seven-tips-doing-business-middle-east have questions, contact your instructor for further guidance and information.

Figure 1. Wordcloud of outsourcing issues (Nasir1164, n.d.)