Chapter 5-Globalization and Society
1. Which stakeholders must companies satisfy? Why is this process more difficult for companies operating abroad?
Stakeholders include stockholders, employees, customers, and society at large. In the short term, the aims of these groups conflict. Stockholders want additional sales and increased productivity, which result in higher profits and larger returns going to them. Employees want additional compensation. Customers want lower prices. And society at large would like to see increased corporate taxes or corporate involvement in social functions. In the long term, all of these aims must be achieved adequately, or none ...view middle of the document...
The argument that both the home and the host countries may gain from FDI assumes that resources are not necessarily fully employed and that capital and technology cannot be easily transferred from use in one industry to another.
b) Home-country losses—The United States is the home country for the largest amounts of foreign licensing and direct investment. Therefore, its policies understandably invite criticism. One of its critics is organized labor, which argues that foreign production often displaces what would otherwise be U.S. production. Critics also cite many examples of highly advanced technology that has been at least partially developed through governmental contracts and then transferred abroad. In fact, some MNEs are moving their most advanced technologies abroad and in some cases producing abroad before they do so in the United States.
c) Host-country gains—Most observers agree that an inflow of investment from MNEs can initiate greater local development through the employment of unused labor and other resources. A company will want to move resources such as capital and technology abroad when the potential return is high—especially in an area where they are in short supply. Most observers also agree that an inflow of investment from MNEs can initiate an upgrading of resources by educating local personnel to use equipment, technology, and modern production methods.
d) Host-country losses—So me critics have claimed that there are examples of MNEs making investments that domestic companies otherwise would have undertaken. The result may be the displacement of local entrepreneurs and entrepreneurial drive. Or they may bid up prices by competing with local companies for labor and other resources. Critics also contend that FDI destroys local entrepreneurial drive, which has an important effect on development. Another argument is that investors learn abroad by observing foreign companies closely. This may give them earlier access to technology abroad that they may copy in their home countries. Critics also say that MNEs absorb local capital, either by borrowing locally or by receiving investment incentives.
3. Discuss the difference between relativism and normativism.
a) Relativism affirms that ethical truths depend on the groups holding them. This makes intervention by outsiders unethical. The idea of relativism can be expressed by the statement "When in Rome, do as the Romans do."
b) Normativism holds that there are universal standards of behavior (based on people's own values) that all cultures should follow, making nonintervention unethical. Managers thus struggle with implementing a "universal" set of truths versus adapting to local conditions on the assumption that every place is different and should be treated differently.
4. Explain why the argument that "anything that is legal is ethical" is insufficient.
a) The law is not appropriate for regulating all business activity...