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Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall
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International Business Environments & Operations
Chapter 2
The Cultural Environments
Facing Business
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Learning Objectives p To understand methods for learning about
cultural environments p To analyze the major causes of cultural
difference and change p To discuss behavioral factors influencing
countries business practices p To understand guidelines for cultural
adjustment
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Introduction p Culture refers to the learned norms based
on values, attitudes, and beliefs of a group of people
p Culture is an integral part of a nations operating environment n every business function is subject to potential
cultural differences
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Introduction Cultural Factors Affecting International Business Operations
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Introduction p Companies need to decide when to make
cultural adjustments p Fostering cultural diversity can allow a
company to gain a global competitive advantage by bringing together people of diverse backgrounds and experience
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Culture and the Nation-State p The nation is a useful definition of society
because similarity among people is a cause and an effect of national boundaries n laws apply primarily along national lines n language and values are shared within borders n rites and symbols are shared along national
lines
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How Cultures Form and Change Learning Objective 2: To analyze the major causes of cultural difference and change
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How Cultures Form and Change p Cultural value systems are established
early in life but may change through n choice or imposition
pcultural imperialism n contact with other cultures
pcultural diffusion pcreolization
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Language: Cultural Diffuser and Stabilizer p A common language within a country is a
unifying force p A shared language between nations
facilitates international business n Native English speaking countries account for a
third of the worlds production n English is the international language of
business
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Language: Cultural Diffuser and Stabilizer
Distribution Of The Worlds Major Languages
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Language: Cultural Diffuser and Stabilizer
Major Language Groups: Population and Output
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Religion: Cultural Stabilizer p Religion impacts almost every business
function p Centuries of profound religious influence
continue to play a major role in shaping cultural values and behavior n many strong values are the result of a
dominant religion
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Religion: Cultural Stabilizer Distribution Of The Worlds Major Religions
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Behavioral Practices Affecting Business
Learning Objective 3: To discuss behavioral factors influencing countries business practices
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Social Stratification p Social ranking is determined by
n an individuals achievements and qualifications
n an individuals affiliation with, or membership in, certain groups
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Work Motivation p The motivation to work differs across
cultures p Studies show
n the desire for material wealth is a prime motivation to work ppromotes economic development
n people are more eager to work when the rewards for success are high
n masculinity-femininity index phigh masculinity score prefers to live to
work than to work to live
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Work Motivation p Hierarchy of needs theory
n fill lower-level needs before moving to higher level needs
p The ranking of needs differs among cultures
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Relationship Preferences p Relationship preferences differ by culture p Power distance
n high power distance implies little superior-subordinate interaction pautocratic or paternalistic management style
n low power distance implies consultative style p Individualism versus collectivism
n high individualism welcome challenges n high collectivism prefer safe work
environment
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Risk Taking Behavior p Risk taking behavior differs across cultures
n Uncertainty avoidance phandling uncertainty
n Trust pdegree of trust among people
n Future orientation pdelaying gratification
n Fatalism pattitudes of self-determination
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Communications p Cross border communications do not
always translate as intended p Spoken and written language p Silent language
n Color n Distance n Time and punctuality n Body language n Prestige
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Communications Body Language Is Not A Universal Language
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Dealing with Cultural Differences
Learning Objective 4: To understand guidelines for cultural adjustment
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Dealing with Cultural Differences
p Do managers have to alter their customary practices to succeed in countries with different cultures?
p Must consider n Host society acceptance n Degree of cultural differences
pcultural distance n Ability to adjust
pculture shock and reverse culture shock n Company and management orientation
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Dealing with Cultural Differences
p Three company and management orientations n Polycentrism
pbusiness units abroad should act like local companies
n Ethnocentism phome culture is superior to local culture poverlook national differences
n Geocentrism pintegrate home and host practices
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Strategies for Instituting Change p Value Systems p Cost-Benefit Analysis of change p Resistance to too much change p Participation p Reward Sharing p Opinion Leadership p Timing p Learning Abroad
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The Future of National Cultures p Scenario 1:
n New hybrid cultures will develop and personal horizons will broaden
p Scenario 2: n Outward expressions of national culture will continue to
become homogeneous while distinct values will remain stable
p Scenario 3: n Nationalism will continue to reinforce cultural identity
p Scenario 4: n Existing national borders will shift to accommodate
ethnic differences
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Chapter 3
The Political and Legal Environments
Facing Business
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Learning Objectives p To discuss the philosophy and practices of the
political environment p To profile trends in contemporary political
systems p To explain the idea of political risk and
approaches to managing it p To discuss the philosophy and practices of the
legal system p To describe trends in contemporary legal systems p To explain legal issues facing international
companies
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Introduction Learning Objective 1: To discuss the philosophy and practices of the political environment
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Introduction p Every country has its own political and
legal environment p Companies must determine where, when,
and how to adjust their business practices without undermining the basis for success
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Introduction Political and Legal Factors Influencing International Business Operations
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The Political Environment p Managers evaluate, monitor, and forecast
political environments p A countrys political system refers to the
structural dimensions and power dynamics of its government that specify institutions, organizations, and interest groups, and define the norms that govern political activities
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Individualism vs. Collectivism p Individualism
n primacy of the rights and role of the individual
p Collectivism n primacy of the rights and role of the
community
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Political Ideology p A political ideology stipulates how
society ought to function and outlines the methods by which it will do so
p Most modern societies are pluralistic n different groups champion competing political
ideologies pDemocrats vs. Republicans in the United
States pDemocratic Party vs. Liberal Party in Japan
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Spectrum Analysis p A political spectrum outlines the various
forms of political ideology p Political freedom measures
n the degree to which fair and competitive elections occur
n the extent to which individual and group freedoms are guaranteed
n the legitimacy ascribed to the general rule of law
n the freedom of the press
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Spectrum Analysis The Political Spectrum
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The Standard of Freedom p Freedom House assesses political and civil
freedom around the world p Freedom House recognizes three types of
political systems n Free n Partly free n Not free
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The Standard of Freedom Map of Political Freedom, 2010
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Trends in Political Ideologies Learning Objective 2: To profile trends in contemporary political systems
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Third Wave of Democratization p Third Wave of Democratization
n number of democracies doubled in two decades
p Engines of Democracy 1. The failure of totalitarian regimes to deliver
economic progress!2. Improved communications technology!3. Economic dividends of increasing political freedom
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Democracy: Recession and Retreat
p Democracys retreat n just 26 of the worlds democracies are full
democracies p Engines of totalitarianism
n Economic development n Inconsistencies n Economics problems n Standards of democracy
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Democracy: Recession and Retreat
Freedom in the World: Gains and Declines
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Political Ideology and the MNE p What will the political map look like in the
future? n The Washington Consensus n The Beijing Consensus n The Clash of Civilizations
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Political Risk Learning Objective 3: To explain the idea of political risk and approaches to managing it
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The Legal Environment Learning Objective 4: To discuss the philosophy and practices of the legal system
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The Legal Environment p The legal system is the mechanism for
creating, interpreting, and enforcing the laws in a specified jurisdiction
p Types: n Common law n Civil law n Theocratic law n Customary law n Mixed systems
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The Legal Environment The Wide World of Legal Systems
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Trends in Legal Systems Learning Objective 5: To describe trends in contemporary legal systems
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Trends in Legal Systems p What is the basis of rule in a country?
n The rule of man plegal rights derive from the individual who
commands the power to impose them passociated with a totalitarian system
n The rule of law psystematic and objective laws applied by
public officials who are held accountable for their administration
passociated with a democratic system
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Trends in Legal Systems The Worldwide Distribution of the Rule of Law
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Legal Issues in IB Learning Objective 6: To explain legal issues facing international companies
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Strategic Concerns p Strategic issues p Country of origin and local content p Marketplace behavior p Product safety and liability p Legal jurisdiction p Intellectual property
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Intellectual Property: Rights and Protection
p Intellectual property refers to creative ideas, expertise, or intangible insights that grant its owner a competitive advantage
p Intellectual property rights refer to the right to control and derive the benefits from writing, inventions, processes, and identifiers n no global patent, trademark or copyright
exists
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Intellectual Property: Rights and Protection
p Attitudes towards intellectual property n Legal legacies
prule of man versus rule of law n Wealth, poverty, and protection
plevels of economic development n Cultural orientation
pindividualism versus collectivism
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Chapter 4
The Economic Environments Facing
Business
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Learning Objectives p To communicate the importance of
economic analysis p To discuss the idea of economic freedom p To profile the characteristics of the types
of economic systems p To introduce the notion of state capitalism p To profile indicators of economic
development, performance, and potential
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Introduction Learning Objective 1: To communicate the importance of economic analysis
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Introduction p Managers assess a countrys economic
environment knowing n Countries differ in different ways n Economic and political changes alter market
circumstances n It is important to understand connections,
change, and consequences n The challenges of the comeback n Choices of citizens, policymakers, and
institutions
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International Economic Analysis
Economic Factors Affecting International Business Operations
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Economic Freedom Learning Objective 2: To discuss the idea of economic freedom
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Economic Freedom p Economic freedom people have the
right to work, produce, consume, save, and invest the way they prefer n measured across business freedom, monetary
freedom, fiscal freedom, investment freedom, freedom from corruption, property rights, trade freedom, government size, financial freedom, and labor freedom
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Economic Freedom Global Distribution of Economic Freedom
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Value of Economic Freedom p Economic freedom affects
n Growth rates n Productivity n Income levels n Inflation n Employment n Life expectancy n Literacy n Political openness n Environmental sustainability
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Types of Economic Systems Learning Objective 3: To profile the characteristics of the types of economic systems
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Types of Economic Systems p An economic system refers to the
mechanism that deals with the production, distribution, and consumption of goods and services
p Types n Market economy n Command economy n Mixed economy
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Types of Economic Systems Types of Economic Systems
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State Capitalism: Detour or Destination?
p State capitalism refers to a system in which the government explicitly manipulates market outcomes for political purposes n promote certain industries to encourage
economic development n develop national companies into global leaders n foreign companies restricted from strategic
industries
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Economic Development, Performance, and Potential
Learning Objective 5: To profile indicators of economic development, performance, and potential
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Economic Development, Performance, and Potential
p Broad classes of countries include n developing countries
plargest number of countries plow per capita income
n emerging economies pfast growing, relatively prosperous pBRICs Brazil, Russia, India, and China
n developed countries phigh per capita income and standard of
living plike the U.S., Japan, France, Australia
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Broader Conceptions of Performance and Potential
p Green economics n gauge economic performance in terms of the
effect of current choices on long-term sustainability
p Sustainable development n meet the needs of the present without
compromising the ability of future generations to meet their own needs
p Happynomics n importance of emotional prosperity in addition
to financial prosperity
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Features of an Economy p Managers should also consider
n Inflation n Unemployment n Debt n Income distribution n Poverty n Balance of payments
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Inflation p Inflation
n a measure of the increase in the cost of living p Deflation
n when prices for products go down not up p Reflation
n increase the money supply and reduce taxes to accelerate economic activity
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Unemployment p Unemployment rate
n share of unemployed workers seeking employment for pay relative to the total civilian labor force
p Misery index n the sum of a countrys inflation and
unemployment rates
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Debt p Debt
n the total of a governments financial obligations pinternal debt pexternal debt
p Growing public debt signals n tax increases n reduced growth n rising inflation n increasing austerity
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Income Distribution p Income distribution
n estimates the proportion of the population that earns various levels of income
p Gini coefficient n measures the extent to which the distribution
of resources deviates from a perfectly equal distribution
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Poverty p Poverty the state of having little or no
money and few or no material possessions n extreme poverty
pless than $1.25 per day n moderate poverty
pless than $2.00 per day p Today the world population is 80% poor,
10% middle income, and 10% rich p Base of the Pyramid
n Frugal engineering
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Chapter 5
Globalization and Society
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Learning Objectives p To examine the broad foundation of ethical
behavior p To demonstrate the cultural and legal foundations
of ethical behavior p To discuss the importance of social responsibility
when operating internationally, especially in the areas of sustainability
p To discuss some key issues in the social activities and consequences of globalized business
p To examine corporate responses to globalization in the form of codes of conduct, among other things
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Introduction p Companies must satisfy stakeholders
n Shareholders n Employees n Customers n Society
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Foundations of Ethical Behavior Learning Objective 1: To examine the broad foundation of ethical behavior.
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Foundations of Ethical Behavior p Three levels of moral development
1. Preconventional 2. Conventional 3. Postconventional, autonomous,
principled
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Foundations of Ethical Behavior p Teleological approach
n decisions are based on the consequences of the action
p Utilitarianism n an action is right if it produces the
greatest amount of good p Deontological approach
n moral judgments are made and moral reasoning occurs independently of consequences
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Why Do Companies Care? p Ethical behavior can help a company
n develop a competitive advantage n avoid being perceived as irresponsible
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The Cultural and Legal Foundations of Ethical Behavior Learning Objective 2: To demonstrate the cultural and legal foundations of ethical behavior
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Legal Justification: Pro and Con p The law is inadequate because
n Some things that are unethical are not illegal n Laws are slow to develop in emerging areas of
concern n Laws may be based on imprecisely defined
moral concepts n The law often needs to undergo scrutiny by the
courts n The law is not very efficient
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Legal Justification: Pro and Con p Legal justification is appropriate because
n The law embodies many of a countrys moral principles
n The law provides a clearly defined set of rules n The law contains enforceable rules that apply
to everyone n The law reflects careful and wide-ranging
discussions
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Ethics and Corporate Bribery p Regardless of the reasons for not using
the law as a starting point for ethical behavior, it remains a good starting point
p Countries looking for solutions to common problems take similar legal steps n Consider
pactivities that affect the well-being of people pactivities that affect the environment
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Corruption and Bribery p Corruption
n the misuse of entrusted power for private gain p Bribes
n payments or promises to pay cash or anything of value
n Occurs pto obtain government contracts pto get public officials to do what they should
be doing anyway
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Corruption and Bribery Where Bribes Are Business As Usual
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Corruption and Bribery p International accords to stop bribery
n OECD Anti-Bribery Convention n ICC code of rules n UN Convention against Corruption
p Regional initiatives include n EU efforts n U.S. Foreign Corrupt Practices Act and
Sarbanes-Oxley legislation p Industry initiatives include
n 2005 World Economic Forum zero tolerance pact
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Ethics and the Environment Learning Objective 3: To discuss the importance of social responsibility when operating internationally, especially in the areas of sustainability
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Ethics and the Environment p Companies compromise the environment
n contamination of air, soil, or water during manufacturing
n producing products that emit fossil-fuel contaminants
p Effect of natural resource extraction n renewable versus non-renewable
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What is Sustainability? p Sustainability
n meeting the needs of the present without compromising the ability of future generations to meet their own needs
p Is sustainability good business practice? n yes
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Global Warming, Kyoto Protocol p Kyoto Protocol (1997)
n signed to require countries to cut greenhouse gas emissions to 5.2% below 1990 levels between 2008 and 2012
p Some countries have adopted stricter requirements n others have not ratified the agreement
including pthe U.S., China, India
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Ethical Dilemmas and Other Business Practices
Learning Objective 4: To discuss some key issues in the social activities and consequences of globalized business
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Ethical Dilemmas in the Pharmaceutical Industry
p Tiered pricing and other price-related issues n reverse engineering
p WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) n generic drugs
p R&D and the Bottom Line n India
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Ethical Dimensions of Labor Conditions
p Labor issues include n Wages n Child labor n Working conditions n Working hours n Freedom of association
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Ethical Dimensions of Labor Conditions
Sources of Worker-Related Pressures in the Global Supply Chain
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Ethical Dimensions of Labor Conditions
p Child labor ILO estimates 250 million children aged 517 years work
p Some companies avoid operating in countries where child labor is common n or establish responsible policies in those
countries - IKEA p Some companies refuse to hire individuals
who want to work long hours n concerned about exploitation
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Corporate Codes of Ethics Learning Objective 5: To examine corporate responses to globalization in the form of codes of conduct, among other things
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Corporate Codes of Ethics p How should companies behave? p The UN Global Compact establishes
guidelines for appropriate behavior in human rights n labor n the environment n anti-corruption
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Motivations for Corporate Responsibility
p Unethical and irresponsible behavior could n result in legal sanctions n result in consumer boycotts n lower employee morale n cost sales because of bad publicity
p A code of conduct n sets global policy that must be complied with n communicates the code to employees,
suppliers, and subcontractors n ensures that policies are carried out n reports results to external stakeholders
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Corporate Ethics in The Future p Two trends:
n There will be greater convergence of proper ethical conduct
n Individuals will develop skills to address ethical issues
p Impact of social media p Impact of future business and government
leaders
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Activities p Comparative Environmental
Frameworks
p Chapter 2: The Cultural Environments Facing Business (ACTIVITIES: p. 24)
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Activities p Comparative Environmental
Frameworks p Chapter 3: The Political and Legal
Environments Facing Business p (ACTIVITIES: p. 33)
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