Assignment I

What are some of the darker sides of globalization (e.g., costs, etc.)? How can business leaders make sure that the benefits of their various actions (such as outsourcing) outweigh their drawbacks (such as job losses in developing countries)?  

Although globalization has lots of benefits in present world, it has its own darker sides. Some of them are listed below:

·         As companies are going global it has caused a lot of resentment among the people of developed countries, and companies have been accused of taking their jobs away.

·         Another problem is that many Americans are not satisfied with the level of customer service that they are subjected to, and this has caused a lot of animosity among people and has added to the dissent that people already have against outsourcing.

·         Globalization has led to an increase in activities such as child labor and slavery. In countries with little or no accountability, corporations employing children can work smoothly by bribing the officials, which may result in an increase in illegal activities.

·         Critics opine that globalization has resulted in a fiercely-competitive global market, and unethical practices in business is a by-product of this.

·         Globalization may have inadvertently helped terrorists and criminals. At the heart of globalization is an idea that humans, materials, food etc. be allowed to travel freely across borders.

·         Franchise has caused the health problems as consumption of junk food are increasing day by day

·         Pollution and Environmental degradation in emerging nations
We have reached a stage since our evolution that discarding the concept of globalization may not be possible at all, therefore, the strategy should be to find solutions to the threats it poses to us so that we can work towards a better, fulfilling future. When a company goes global, it should not ignore its own native people. Definitely when company starts another plant in foreign country as it proves to be more beneficial, it will cause employment in the emerging nation but the people are losing their jobs in developed nation. So, in this case the companies have to think very carefully about their own native economy as well.

Some argue that aggressively investing in emerging economies is not only economically beneficial but also highly ethical because it may potentially lift many people out of poverty. However, others caution that in the absence of reasonable hopes of decent profits, rushing to emerging economies is reckless. How would you participate in this debate?

Yes, I agree that there has been debate about whether companies should invest in emerging economies and boost it up or should take caution as there is absence of reasonable hopes of profits in the investment in emerging economies. Well, what I think is that when companies invest in emerging economies they are penetrating in separate economy which totally differs

from their own native economy. The economic policies differ from nation to nation. When a multinational company invests in an emerging company, it will automatically boost up its economy directly or indirectly. It provides employment opportunities for the people of that country directly contributing to country’s GDP. It will also increase the purchasing power of the people. But there is always a question mark, how can it benefit the company? Surely, when a company wants to go global, it seeks profit. Before investing in any economy, it has to measure the overall costs and benefits which include the government policies, FDI and all that tariffs. If the benefits exceed the costs then it should probably invest in that economy. And definitely the rate of return is generally high in emerging nations even though risk is there. But certainly there is high return where there is high risk. So, what we have here is a win- win situation which benefits both the company and the emerging economy.

As a manager, you discover that your multinational firm’s products are counterfeited by small family firms that employ child labor in rural Bangladesh. You are aware of the corporate plan to phase out the products soon. You also realize that once you report to the authorities, these firms will be shut down, employees will be out of work, and families and children will be starving. How do you proceed?

If I find out that my company’s products are counterfeited by small family firms which also employ child labor in rural Bangladesh, I will definitely be not the cause of the unemployment it will cause. What we have here is the ethical dilemma. Firstly, my company’s products are imitated by another company which is the violation of the intellectual property. But definitely the laws concerning violation of intellectual property differ from country to country. Secondly, the company is also employing child labor which is also not ethical thing to do. This will affect the company’s brand adversely. So, what can be done? If my company sues the small firm it can cause the unemployment and starvation but we definitely cannot ignore the harm it will cause the company in coming days. Therefore, we can take over that company and establish our new operations in Bangladesh. It will be a CSR opportunity for the company which do not employs the child labor instead we can also provide them good opportunity to build up their career. For the employees we can train them and make them competent. In this way, employee won’t be out of work and the company will also benefit.

What do institutions do? How do they reduce uncertainty? Explain the two core propositions underpinning an institution-based view of global business.

Institutions are commonly defined as the rules of game. There are two types of institutions. They are: Formal Institutions and Informal institutions.

Formal institutions include laws, regulations, and rules which are underpinned by the regulatory pillar whereas informal institutions include norms, cultures and ethics, which are supported by the normative and cognitive pillars. These two types of institutions combine together to govern the firm behavior.

Informal constrains play a larger role in reducing uncertainty by providing constancy for managers and firms in situations where formal constraints are unclear or fail.

For example: When the former Soviet Union collapsed and with it the formal regime, the growth of many entrepreneurial firms was facilitated by informal constraints based on personal relationships and connections among managers and officials.

An institution- based view of global business focuses on the dynamic interaction between institutions and firms and considers firm behavior as the outcome of such an interaction. Firm behavior is often a reflection of the formal and informal constraints of a particular institutional framework.

The institution-based view suggests two core propositions:

1.      Managers and firms pursue their interests and make choices rationally within the formal and informal constraints in a given institutional framework.

2.      Although formal and informal institutions combine to govern firm behavior, in situations where formal constraints are unclear or fail, informal constraints will play a larger role in reducing uncertainty and providing constancy to managers and firms.