1.1.Describe the basic principles of ethical philosophy as they relate to business ethics.200 words
2. 2.The gradual demise of communism has become obvious within the past two decades. Write a brief summary of the implications of transitions to capitalism that formerly communist countries may be experiencing. What kinds of socio-economic challenges do you think multinationals face in those countries? Your response should be at least 200 words in length.
3.3.When should you use ethical relativism, and when should you use ethical universalism? What are problems of each? As a multinational manager, what should you do to eliminate or reduce the problems? Your response should be at least 200 words in length.
4.4.What factors do you think are responsible for Africa’s slow economic development? What can the multinationals do to help? Your response should be at least 200 words in length.
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Chapter 3 Chapter © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3 The Institutional Context of Multinational Management © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objectives (1 of 3) • Understand the national context and how it affects the business environment. • Understand the influence of the institutional context of countries on individuals and organizations. • Define social institutions and understand their basic forms. • Explain how social institutions influence both people and organizations. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objectives (2 of 3) • Describe the basic economic systems and their influence on multinational operations. • Understand the basic stages of industrialization and their implications for multinationals. • Discuss the world’s basic religions and how they shape the local business environment. • Develop an understanding of education and its effects on multinational operations. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objectives (3 of 3) • Define social inequality and its implications for multinationals. • Understand the importance of the national context and its connection with other international management areas. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Institutional Context (1 of 2) • Institutional Context: Includes other elements of society besides national culture such as: • Education • The government • The legal system • These can affect important business-related differences among societies. • May encourage adoption of values inconsistent with national cultures. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Institutional Context (2 of 2) • It is important to understand the dominant institutional context of any society, and appreciate its influence on individuals and organizations. • Understanding the institutional context is critical to effective multinational management. • At a basic level, a manager cannot completely understand any society without examining its national culture and institutional context. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. National Context • National Context: The national context is composed of the respective national cultures and social institutions of a society. • Intertwined with national cultural forces are social institutions such as: • The economic system • Religion • Education © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 3.1: The National Context and Multinational Companies © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Social Institutions • Social Institutions: may be defined as: • a complex of positions, roles, norms, and values lodged in particular types of social structures, and • organizing stable patterns of human resources regarding fundamental problems in sustaining viable societal structures within a given environment. • Social institutions have profound effects on people’s life conditions, and provide context for psychological differences among people. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Key Social Institutions that Influence Organizations • Three key social institutions that influence business environment: • The economic system • The level of industrialization • Types of religions Additionally, • Education • Level of social inequality © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Economic Systems (1 of 3) • Economic systems: network or system of beliefs, activities, organizations and relationships that provide the goods and services of a society • Typified by extremes of capitalism, socialism and a mix of both • Important implications based on • Dominant market type • Market transitions © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Economic Systems (2 of 3) • Capitalist/market economy: production is decentralized to private property rights owners who act to make profits in competitive market • Socialist/command economy: production resources are owned by the state, and production decisions are centrally coordinated • Mixed economy: combines aspects of capitalist and socialist economies • E.g., Sweden, France, Denmark, Italy and India © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Economic Systems (3 of 3) • Economic systems have two major implications for strategic multinational management: • Dominant market type • Market transitions © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Dominant Market Type • Dominant Market Type: Whether the market and economic system of a country are predominantly capitalist, socialist or mixed. • The decision whether to operate in another country may depend on the dominant market type. • In mixed economies, MNCs should subordinate their economic goals and respect social objectives • Multinational managers may want to consider the Index of Economic Freedom. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Index of Economic Freedom • Index of Economic Freedom: Defines economic freedom as: • The absence of government coercion or constraint on the production, distribution, or consumption of goods and services beyond the extent necessary for citizens to protect and maintain liberty itself • The index includes 10 indicators ranging from trade and taxation policies, to property rights and regulation, including government intervention in the economy. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 3.2: Index of Economic Freedom © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Market Transitions • Market Transitions: Changes societies experience as they move from socialism to a market based economy • Multinational implications: • Need to turn around inefficient formerly state-owned companies to become cost effective • Motivational issues with workers • Interpersonal trust, teams, meritocracy © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Industrialization (1 of 2) • Industrialization: Cultural and economic changes that occur because of how production is organized and distributed in society • Stages of industrialization • Pre-industrial • Industrial • Postindustrial © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Industrialization (2 of 2) • Pre-industrial society: • Agriculture dominates the economic environment • Religious norms, tradition emphasized • Industrial society: • Dominance of manufacturing or secondary sector • Technological development • Postindustrial society: • Emphasis on the service sectors • Need highly skilled workers with specialized skills © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 3.3: Selected countries and the distribution of employment by primary, secondary and tertiary sectors © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Managerial Implications: Industrialization (1 of 2) • Direct correspondence between industrialization and economic development • Pre-industrial countries provide cheap labor and untapped markets • But poor infrastructure for business • Traditional and communal values • Industrial societies favor innovation and individualism • Governments provide favorable environment • Educated labor force © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Managerial Implications: Industrialization (2 of 2) • Postindustrial societies • Dominance of service sector; knowledge based • Almost complete demise of agricultural sector • Significant decline in manufacturing sector • Increasing emphasis on quality-of-life • Non economic incentives favored • Post-materialist values, individual expression, and movement toward more a humane society © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 3.4: Materialist Values for Selected Countries © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 3.5: Postmaterialist Values for Selected Countries © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Religion • Religion: A shared set of beliefs, activities, and institutions based on faith in supernatural forces. • Religion is an important aspect of most societies. • Together, Christianity, Islam, Hinduism and Buddhism are followed by almost 71% of the world’s population. • 20% of world’s population are nonreligious. • Different religions shape how people do business in different parts of the world. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 3.6: Religion by Percentage of World Population & Number of Followers © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or