Ethics In International Business Scenario Business Essay

Ethics is an everyday occurrence in as ones personal life as well as in corporate world. Due to the globalization of markets and production processes, an ever increasing number of marketers and business organizations have to deal with ethical issues in cross-cultural settings.

“The ethical influence of globalization on different stakeholders like shareholders, employees, customers, suppliers, competitors, government and civil society has been studied. The ethical issues faced by organizations in international human resource management, international financial management, international marketing, production, and information and communication technology have been scrutinized. It comes out from the study that ethical business leadership is crucial for long term success of the organization. The organizations should endeavor to provide value-based leadership to prosper. Large prestigious corporations have made ​​decisions about ethical practices in every aspect of business, companies like Walmart, Coca-Cola, Nike, Texas Instruments, Infosys Technologies and Sony Corporation”. [1] 

It is important to pay attention to the different actors involved in business activities and how they can deal with ethical dilemmas according to their position. Some of the key players in the business ethics are as follows below with a brief description of their interests and what might influence their ethical decisions.

First of all, is “the Shareholders’ perspective of business ethics that focuses on making decisions for the best interest of the company’s investors. Ethical shareholders tend to take greater responsibility for the profitability of the company.” [2] Although the shareholders have their own interests, ethical decision makers always look after the welfare of the company as a whole and do those actions that lead to maximize the welfare of all stakeholders.

The other key actors are “the employees, especially with the Globalization which provides better opportunities to the employees. Ethical conduct enables them to integrate their personal goals with goals of organization.” [3] Employees must know clearly what the vision, mission and values ​​of the company where they work, so that their own values ​​are consistent. Employees must follow those values ​​in the choices they make in their workplace, and they should not put their interests at the expense of harming the welfare of others.

Another important stakeholder is “the customers. Particularly with the Globalization enables greater product variety to customers. They get cheaper products but learn to use them responsibly.” Customers also want to maximize their utility to satisfying their needs with the purchase of products and services. However, they must learn to be “responsible consumers” and be aware of those products which behind its production have unethical practices.

In addition, certain products, especially chemicals and with hard materials that could hurt themselves or others, they should place special emphasis on these products and realize what the ethical way of consuming these is.

Other stakeholder is the supplier. “The Globalization enables suppliers’ better connectivity with their customers. Ethical suppliers supply higher quality products and seek long term profitability.” [4] For this reason, providers also have a high involvement in ethical decisions. Not only are direct contact with the company that provides, but now that there is integration, both vertically and horizontally within the value chain, suppliers are faced with ethical dilemmas. Dealing with people from different cultures, social classes, ages, different beliefs, religion, different levels of study, should be aware of the importance of ethics in their actions.

Another key actor is the competitor. “All the competing companies get wider market. They can also engage in collaborations in mutually beneficial areas.” [5] It is true that every company wants to maximize their profits and to become more successful than their competitors. However, today that is not enough. It is important for companies to deal with important issues and engage in certain aspects. For example, they can be part of agreements to promote free competition, or to eradicate discrimination in the workplace. Any campaign, program or activity that promotes the good of the community, not only local and for their own countries, but worldwide, it could mean a very important ethical activity.

“The Government has a big key role in the Globalization. Because of that enables collaborations among governments across the globe. The government can provide better services to citizens, check corruption and enable transparency in processes.” [6] Governments have become a very important stakeholder in business. Especially for the implementation of laws, free trade agreements and all regulations between countries, directly affecting the way to do business in every part of the world. For this reason, governments should be aware that each of these actions must take a moral stand and make the best decisions. With the anti-corruption struggle and transparency, should ensure that it is enforced. Also, they have to be aware that any company does not take unethical actions.

Due to increasing connectivity caused by globalization, “civil society is better aware of the problems of the populace and can rapidly take up issues with the pertinent authorities.” [7] Civil society must be more committed to act responsibly. Firstly because civil society is every person, and we must be aware of unethical practices within business, whether in our workplaces, in well-known companies, etc. But even more, civil society must have the capability to strike against such unethical actions.

That is why there are many groups launching campaigns to eradicate abuse actions against child labor, workplace discrimination, use of animals for clothing manufacture, among other causes.

It has been observed that trend of civil society to participate more actively for a better world to live, more human and more exalts the dignity we have as people.

The ethics of international relations must not be limited to airing principles on the nature of international trade. It must engage all the multifarious manifestations of the globalization process, therein identifying innovative means to handle relations in addition to devising an overall development strategy for Third World countries (including all the aspects related to reforms, production innovations, technology transfer and the re-conversion of sectors).

Fair relations on a worldwide basis will generate connections between different value production systems, and draw them into a global network where material and intangible/cultural elements merge in order to produce a flow of international relations. The content of these relations will not be merely economic but will favor people and cultures meeting.

Ethical issues in international functional areas

“Globalization has presented complex challenges for international Human Resource Management. Due to cultural differences, the commitment between employer and employees has become diffuse. A significant challenge for management is to maintain objectivity in hiring, promotion, and compensation. Child labor has emerged as a complicated issue. Other important issues include discrimination, fraud, and sexual pestering.” [8] There are many ethical dilemmas in the area of ​​human resources. Many companies require skilled and specialized knowledge in certain areas. And the question arises, is this form of discrimination? Especially internationally, it is easier to import skilled labor. You can also think of child labor as unfair. However, many of these children have nothing to eat and survive. It is fair leave child stop working within these conditions? Obviously there are other much more comprehensive solutions to the problem. For example, child’s aid programs exist, but the reality in many countries is another.

“The primary goal of management is wealth maximization for the shareholders. There is little direct support that ethical behavior leads to shareholder’s wealth maximization. Indirect studies have also not found any substantial relationship between corporate financial performance and social responsibility. But for long term sustainability, organizations should engage in ethical practices. Fairness in trading practices, trading conditions, financial contracting, sales practices, consultancy services, tax payments, internal audit, external audit are the areas in which ethical financial practices need to be followed. Other important areas are creative accounting, earnings management, misleading financial analysis, insider trading, securities fraud, bucket shops, forex scams etc.” [9] 

“In international marketing, the needs and wants of various groups vary, which leads to ethical conflicts. Most ethical issues are related to marketing policies, communications, pricing approaches and distribution practices. The specific ethical issues are: prudence of targeting vulnerable sections for consumption of redundant or dangerous products/services, transparency about source of labor, fair treatment and fair pay to employees, product or service transparency, appropriate product labeling, product/service safety and liability, truthful and honest advertising, fair pricing and distribution, forthrightness in selling etc.” [10] 

“The production area of business ethics deals with the duties of a company to ensure that products and production processes do not cause harm. Defective, addictive and inherently dangerous products and services (tobacco, alcohol, weapons, motor vehicles, chemical manufacturing) are not ethical practices in production. The company should also maintain a harmonious relationship with the environment. It is important to deal with ethical issues caused by new technologies like genetically modified food, mobile phone radiation, health etc. Certain other ethical issues are use of animals and disadvantaged groups as test objects.” [11] 

“About the information and communication technology we can say that internet, private exchanges, global satellite linkages, some forms of new technology hold great promise in terms of allowing global supply chains to operate more efficiently and provide faster response to demand. However, these new technologies also present some cultural and ethical challenges to firms operating in the global environment. There may be varying views among countries on goals, decision-making approaches, information sharing and trust and many other cultural differences.” [12] 

The Internationalization of Value Chain

The Value Chain describes a “way of looking at a business as a chain of activities that transforms inputs into outputs that customers value” (Pearce & Robinson 2000: 206). Each value chain it depends on what the company want to offer to their customers and also because the needs to produce the final product. In the commerce world, The Value Chain could lead a competitive advantage in an industry.

Inquiring little deep more, the value chain refers of the full range of activities that firms and workers do to bring a product from its conception to its end use and beyond. This includes activities such as design, production, marketing, distribution and support to the final consumer. The activities that comprise a value chain can be contained within a single firm or divided among different firms. Value chain’s activities can produce goods or services, and can be contained within a single geographical location or spread over wider areas.

In other words, a value chain is the value added in the activities required to bring a product from its beginning to final consumers. It presents a “systemic perspective” that incorporates all key activities related to the production, exchange, distribution and after-sales support for a given product or service. Therefore a value chain describes the organization of production of particular products or services. [13] 

While many firms have had international operations and trading relationships for decades and a few for more than a century, global value chains now contain activities that are tightly integrated and often managed on a day-to-day basis. This means that firms and workers in widely separated locations affect one another more than they have in the past. Some of these effects are quite straightforward, as when a firm from one country establishes a new factory or engineering center in another country, and some are more complex, as when a firm in one country contracts with a firm in another country to coordinate production in plants owned by yet another firm in a third country, and so on.  That is that the production of any good or service may be represented as a sequence of linked functions, some involving tangible outputs, others intangible services.

A production network represents linkages within or among a group of firms in a particular global value chain for producing specific products such as particular types of computers, mobile phones and cars. It represents how lead firms such as Toyota, Cisco Systems Inc. and Nike Inc. organize their particular networks of subsidiaries, affiliates and suppliers to produce a given product. What distinguishes lead firms from non-lead firms in a network is that they control access to key resources and activities such as product design, international brands and access to final consumers. This generally gives them leverage over the other enterprises in the production network. [14] 

Production networks become “international” when the distribution and coordination of geographically dispersed activities within and/or among enterprises takes place across borders in multiple countries.

Deepening ethical issues in the value chain

When we talk about internationalization of the value chain, we can look at many aspects. One of the most important and has been discussed in many companies is about fair wages to employees, especially in third world countries. Or even more, China is well known for dealing with this dilemma. For example the average wage at a Chinese factory in 2009 was around $200 a month, 17 percent more than the year before. Even so the goods that are made are sold so cheaply profit margins can be dangerously thin. Bloomberg reported of an exporter of car covers and seat cushion, Zhejiang Mingfeng Car Accessories, whose profit margin in 2009 was only 2.5 percent.

The “China price” refers the fact that so many goods can be made so cheaply in China that China has cornered the market on many products. For Americans this has meant a lose of factory jobs but wealth of good deals at Wal-Mart and other discount retailers. By one count 9 percent of the good exported to the United States end up in Wal-mart.

By one estimate, cheap Chinese labor has added $1,000 a year to American household thanks to cheap goods. Ironically the goods that Chinese workers make are considerably more expensive in China than the U.S. An Apple computer sells for $2,750 in Beijing, about $500 more than in the U.S. Shoes purchased at an official Nike Store can cost $190. Sony large screen televisions cost 30 percent more in China than they do in Japan. The list goes on and includes everything from baby strollers to golf clubs. [15] 

Although, another form of unfair wage practice involves state and federally mandated wage and hour laws. Examples of this type of infraction by an employer include making certain non-exempt employees work more than 40 hours per week without paying them overtime wages, and the improper classifying of an employee’s job description in an effort to avoid having to pay them overtime wages.

Other examples includes: not allowing adequate meal or break periods; misclassifying hourly employees as management employees; misclassify and employee as an independent contractor; misclassifying technical support employees as exempt from overtime wages; failure to properly calculate wage compensation for sales employees and others.

One of those variables is enforcement. In most developing countries, non-compliance with labour regulations is common. Whether minimum wages affect the job market depends a lot on the extent to which legislation is enforced. This, in turn, is a function of the local political economy. Chronic shortages of labour inspectors and corruption can further subvert the best-intentioned law.

The issues are particularly relevant as emerging and developing countries strive to achieve rapid economic growth that is socially inclusive. This has renewed interest in minimum wages policies. On one hand, there are strident calls to make labour markets more flexible. On the other, there is increased recognition of minimum wages as a tool for reducing “unfair” pay practices and raising the incomes of the poor.  “In the policy arena, the debate on minimum wages is emblematic of the broader debate on labour regulations, and regulations in general. Intellectually, the issue of minimum wages and labour regulations generally raise a whole host of very interesting and intricate theoretical and empirical analytical problems,” says Ravi Kanbur, professor of economics at Cornell University who has been part of the IDRC research project.

When we read or hear value chain, creating value, internationalization, we may come to mind many examples of this, such as Apple and Nike. In addition to these examples, we are predisposed to think that multinationals outsource-internationalized-processes, parts of the value chain that are mechanical and that “create value”, besides paying insufficient salaries. It may seem like a kind of “modern” slavery. But let those stigmas aside and focus on the incentives of firms, industries, governments and people-to-outsource workers and incentives to behave ethically or not.

Before starting, think for a moment how the value chain. They are known that comprise fragments of the whole. There are some pieces that add more value and others that only allow move to another part of the process and do not add more weight to the final result. The prime example is the inscription with iPods and iPhones on its back, “Designed by Apple in California.” Yes, theyr’e designed in California, but all the scaffolding assembly is not in California. The obvious question is why not assembled in California? We can be less demanding and ask why not assembled in the United States. The answer may seem obvious that it is also cheaper in China. That leaves us as an incentive sight-and-greatest of all, money.

What matters in this are the ethical, internationalize-outsource-to where it is cheaper to produce there is nothing wrong in the meantime is legally and morally. Although talk of morality is a tricky issue, as we enter into the debate about what is moral? Can have different moral?

There are more questions than answers perhaps to this subject, since I have no first knowledge what happens. In my opinion, the ethical aspects of internationalizing the value chain come from how you treat the working labor force, not the designer, not the legal department, not the communications department, not the boardroom. In addition, they may have certain regulations that prohibit certain economic activity, there’s where the bribes. Also, do not forget the bureaucracy and known forms of transnational avoid it. Not to mention tax issues. Ethical issues are many. Rather, aspects regarding ethics there are many. How are addressed or how they are addressed is important.

We can go one by one to analyze every aspect. Consider for a moment the Chinese workers (Asian, actually), who live in small apartments, have demanding work schedules and earn a very low salary. They may not have another source of income and food-bearing in mind that some employers still pay in kind, but we must ask whether the shareholder deserves all that portion of the value created, if they can give a little to those who run much of the process. It is true that the investor faces the risk of volatility in the value of the shares, but seeing the numbers are dizzying. Think a bit in the textile industry of El Salvador, “maquilas”, which are Asian, by the way. A worker earns about two hundred dollars for working hours similar to those of the time of the Industrial Revolution. Their transportation and food expenses for the month are about half their salary or more. Their hours of rest and time to go to the bathroom are inhuman.

The ethical concerns accountability. Cannot be ethical in something that we are not responsible. Thinking as a shareholder, I would not be very ethical receiving annual profits if it had a slight view of everything that happens every day as workers in the world.

Now let’s talk about the legal, bureaucratic and tax. Natural resources have been very concerned with the internationalization of the value chain. Some advocate laws protect certain forest areas, rivers, lakes. However, when a crime does the “steps”, these laws may change. Always pay favors. However, I cannot give up sin and every single one of those favors, such bribes. Another issue is bureaucracy. In Latin America there are permissions that can take months, years. However, that does not apply generally to transnational companies.

The issue deserves a special prosecutor. Outsourcing opens doors to a whole engineering taxes not know. But I know that there is something that fails to add up. I do not know the progress of world income in that.

There is plenty to talk about this. Protests have been of many kinds. But in particular, I prefer something with a question, generate more value (stay with more room) at what cost? It has also been seen that ethics pays. Some consumers prefer products and services from socially responsible companies. Another world of possibilities.

But not everything is negative and many companies have already begun to take an important role in working on the ethical aspects of the internationalization of the value chain. Below is an example.