Chapter 10 Flashcards
Global Business
A practice that brings together people from countries with different cultures, values, laws, and ethical standards
National Culture
Is a much broader concept than organizational culture and includes everything in our surroundings made by people
Hofstede’s Four Cultural Dimensions
1) Individualism/ collectivism
2) Power distance
3) Uncertainty avoidance
4) Masculinity/femininity
Individualism/collectivism Dimension of Culture
Refers to how self-oriented members of a culture are in their behavior
Individualism
Individualist cultures place high value on individual achievement and self-interest.
EX: The United States
Collectivism
Collectivist cultures value working toward collective goals and group harmony. Tend to avoid disagreements
EX: Mexico and several countries in Asia
Power distance Dimension
Refers to the power inequality between superiors and subordinates
Cultures with high power distance tend to be more hierarchal
Uncertainty avoidance
Refers to how members of a society respond to uncertainty or ambiguity.
Organizations within these cultures may have more rules in place to ensure employees do not deviate from accepted standards
Self-reference Criterion (SRC)
In business, it is the idea that “we” differ from “them”
The SRC is an unconscious reference to one’s own cultural values, experiences, and knowledge
Cultural Relativism
The concept that morality varies from one culture to another and that “right” and “wrong” are defined differently
Global Common Values
Values broadly accepted worldwide
Desirable Common Values include:
Integrity, family, community, equality, honesty, fidelity, sharing, and unselfishness
Undesirable Common Values include:
Ignorance, egoism, selfish desires, lust, greed, adultery, theft, lying, murder, hypocrisy, slander, and addiction
Risk Compartmentalization
Occurs when profit centers within corporations are unaware of the overall consequences of their actions on the firm as a whole
What reasons caused the United Kingdom to leave the EU?
*Event referred to as Brexit
The United Kingdom voted to leave the EU due in large part to increased immigration and the feeling of lost identity
The Trans-Pacific Partnership
A trade agreement between the United States and 11 Pacific Rim countries including China that is losing momentum due to politics
North American Free Trade Agreement (NAFTA)
Agreement between the United States, Canada, and Mexico which is also unraveling
Adam Smith
Late eighteenth century professor
Smith observed the supply and demand, contractual efficiency, and division of labor of various companies within England
Laissez-Faire (“Invisible Hand”)
Critical to capitalism because it assumes the market, through its own inherent mechanisms, keeps commerce in equilibrium
John Maynard Keynes
Argued that the state could stimulate economic growth and improve stability in the private sector through controlling interest rates, taxation, and public projects
Milton Friedman
He believed deregulation could reach equilibrium without government intervention
Both Keynes and Friedman agreed that:
1) People have rational preferences among outcomes that can be identified and associated with a value
2) Individuals maximize utility and firms maximize profits
3) People act independently on the basis of full and relevant information
Socialism
Refers to economic theories advocating the creation of a society when wealth and power are shared and distributed evenly based on the amount of work expended in production
Social Democracy
Allows private ownership of property and also features a large government equipped to offer such services as education and health care to its citizens
Examples of Social Democracies
Denmark, Sweden, and Norway
Bimodal Wealth Distribution
Occurs when the middle class shrinks, resulting in highly concentrated wealth among the rich and increased numbers of poor people with few resources
Examples of trade blocs
- NAFTA = North American Free Trade Agreement
- EU = European Union
- ASEAN =Association of Southeast Asian Nations
Trade Blocs
Give economic leverage to country groups and use the same economic principles as multinationals
Rational Economics
Based on the assumption that people are predictable and will maximize the utility of their choices relative to their needs and wants
Second Assumption of Rational Economics
People act independently on the basis of full and relevant information
Behavioral Economics
Assumes humans act irrationally because of genetics, emotions, learned behavior, and heuristics, or rules of thumb
Heuristics
Are based upon past experiences and do not always yield the most rational response
Ex: Rules of Thumb, trial and error, an educated guess
Multinational Corporations (MNCs)
Public companies that operate on a global scale without significant ties to any one nation or region
Gross Domestic Product (GDP)
The sum of all the goods and services produced in a country during one year
Organization of Petroleum Exporting Countries (OPEC)
Oil Producing Countries formed this group to gain control over the revenues produced in those lands
The 4 roles of Business for Social Responsibility (BSR)
- Tracks emerging issues and trends
- Provides information on leadership and best practices
- Conducts workshops and training
- Assists organizations in developing practical business ethics tools
International Monetary Fund (IMF)
Originated from the Bretton Woods Agreement of July 1944 when a group of international leaders decided the primary responsibility for the regulation of monetary relationships among national economies should rest in an international body
IMF Roles
- Makes short-term loans to member countries with deficits
- Provides foreign currencies for its members
- Provides information about countries that might default on their debts
IMF Main Function
Regulate monetary relationships between national economies
United Nations
Its goals are to promote worldwide peace, establish beneficial relationships between countries, and support the creation of better standards and human rights on a global scale
Number of countries in the UN
193
United Nations Global Compact
A set of 10 principles that promote human rights, sustainability, and the eradication of corruption
Global Compact: Human Rights
Principle 1 and 2
Global Compact Principle 1
Businesses should support and respect the protection of internationally proclaimed human rights
Global Compact Principle 2
Make sure that they are not complicit in human rights abuses
Global Compact: Labor
Principles 3,4,5, and 6
Global Compact Principle 3
Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining
Global Compact Principle 4
The elimination of all forms of forced and compulsory labour
Global Compact Principle 5
The effective abolition of child labour
Global Compact Principle 6
The elimination of discrimination in respect of employment and occupation
Global Compact Environment
Principles 7, 8, and 9
Global Compact Principle 7
Businesses should support a precautionary approach to environmental challenges
Global Compact Principle 8
Undertake initiatives to promote greater environmental responsibility
Global Compact Principle 9
Encourage the development and diffusion of environmentally friendly technologies
Global Compact Anticorruption
Principle 10
Global Compact Principle 10
Businesses should work against corruption in all its forms, including extortion and bribery
The Association to Advance Collegiate Schools of Business (AACSB)
An organization that represents about 1,200 members, joined with groups such as the UN Global Compact to inspire a set of six principles for business schools
First Principle of Responsible Management Education
Encourages students to become future leaders in creating sustainable value for business, society, and the global economy
World Trade Organization (WTO)
The group administers its own trade agreements, facilitates trade negotiations, settles trade disputes, and monitors the trade policies of member nations
Dumping
The practice of charging high prices for products in domestic markets while selling the same products in foreign markets at low prices, often at below cost
Ranked # 1 in both US and Europe regarding global business ethics and legal issues
Code of Conduct
U.S. Foreign Corrupt Practices Act
Prohibits American companies from making payments to foreign officials for the purpose of obtaining or retaining business
Grease Payments
Payments made to facilitate routine government actions
U.K.’s Bribery Act
Under the law British residents and businesses, as well as foreign companies with operations in the United Kingdom, can be held liable for bribery, no matter where the offense is committed or who in the company commits the act, even if the bribe itself has no connection with the United Kingdom
Calculation of the Harm Penalty under the UK Bribery Act
Harm penalty = harm figure x culpability multiplier
Calculation of the Financial Penalty under the UK Bribery Act
Financial Penalty = Harm penalty - equivalent guilty plea discount - discount for cooperation
Serious Fraud Office (SF))
States that acts of hospitality and promotional expenditures are a normal part of doing business and will not be considered as bribes
Vertical System
Is created when a channel member (manufacturer, wholesaler, distributor, or retailer) has control of the entire business system, via ownership or contract, or through its purchasing ability
Human rights
An inherent dignity with equal and inalienable rights and the foundation of freedom, justice, and peace in the world
Article 18 of UN Human rights Declaration
Freedom of religion
Article 23 of UN Human rights Declaration
Right to work; safe work conditions and fair compensation; join trade unions
Article 25 of UN Human rights Declaration
Right to a standard of living adequate for the health and well-being
A Living Wage
Refers to the minimum wage workers require to meet basic needs
Consumerism
The belief that the interests of consumers, rather than those of producers, should dictate the economic structure of a society
Made-to-break
“Planned obsolescence”, products are better for business since they keep consumers returning to buy more
ISO 19600
Ethical Compliance Systems
ISO 14000
Sustainability
ISO 26000
Social Responsibility
Global Sullivan Principles
Reverend Sullivan worked with UN Secretary General to revise the principles to meet global needs and encourage social responsibility throughout the world
