Business Ethich and Global Dimension
Business and Management
Submitted By Rubaiyat
Business Ethics and Global Dimension of Business
Business Ethics and Global Dimension of Business
October 19, 2014
Ethical issues have been around for a long time and its association with globalization has been documented. The effects on the association with globalization are similar and closely related to that of international marketing. As a result, the increased globalization over the years has brought an increase in many problems associated with global trading including ethical ones. (WTO, 2011). As indicated by World Trade organization in 2011, there was significant expansion in world trade from 1950 to 2000. This increase was documented to be over twenty-fold with foreign direct investment and exports playing a significant role.
This increase in world trade in the middle to late 20th century also saw small businesses increasing their investments in cross border trading. This resulted in an increase in the average yearly outflow of Foreign Direct Investment (FDI) from about $25 billion in 1975 to a record $1.3 trillion in 2000. (UN, 2001). This means that there were a great number of business people with different social and cultural backgrounds doing business in other areas of different geographical, political, legal, social and cultural environments. The challenges that confronted these business people working in these different environments with its associated social and cultural problems created a platform for indulgence in ethical problems and other issues. (Dagdelen, Elibol & Yucel, 2009).
Cross border trade experienced a great change and increase getting to the end of the cold war and this resulted in significant changes in the rules and conditions “governing the conduct of international business and this brought about several ethical issues with respect to the conduct of cross border trade and pursuit of profit” (Kimura, 2005). Many corporations and organizations focusing on cross-border trade and global supply chains in their attempt to pursue growth within the global market are faced with numerous challenges that tend to impact their growth and profit potentials. Some of the organizations lack the capacity and competence to deal with these challenges and this could lead to some of the organizations indulging in practices that raise ethical concerns in order to maintain growth and keep their profit potentials. (United Nations, 2010). Several conditions challenged business operations in the global marketplace; including non-tariff barriers, environmental restrictions, food standards, safety and varying understandings of labour exploitation and hygienic risks. These conditions were realized as consumers increasingly demanded for higher standards of product quality (UN, 2010). Organizations sought to satisfy the culturally learned needs of the targeted customers of a host country of their business operations. Therefore it was obviously important to these organizations to understand clearly what the habits, customs and inherent ethical differences of the host countries were. The ability for one to respect and understand the culture of others and put aside their own cultural mores is generally a distinguishing factor for successful international businesses.
Conducting business in this century has place a burden on the organizations pursuing international business. These organizations are not able to restrict their activities to the productions and marketing of products and services but have to consider the potential impact of their business activities on society. Failure to adhere to this may cost the company economically since almost all organizations place a huge emphasis on earning the trust of the customers, employees and the entire public in the host countries. (Andjelković, Barac & Milovanović, 2009). With all the awareness created by available technologies, the consumers and general public have become very conscious of what factors impact their societies. This increased knowledge of the public of their societies due to the technology advancement has increased their sensitivity to social and environmental issues. Corporations and organizations planning to pursue cross border trade should seriously consider their role within the countries they internd to invest in and have a genuine expectation of expanding roles. (Andjelković, Barac & Milovanović, 2009).
There governmental and legal systems at companies’ home countries differ from those of the host countries involved in global trading. It is very important to spend time and a resource to understand all the differences in these legal and governmental systems before major investment is made. (Custom Edition, 2010). Typical examples are the Asian countries like Bangladesh where their governmental and legal systems differ drastically from that of the western world, it is crucial for the participating organizations to obtain a thorough knowledge of the systems in the host countries where they are planning to invest and intend to operate. This will make it a little easier to adapt and hopefully bring about a smooth transition and also help the adaptation process quickly and to apprise themselves of potential ethical and cultural issues that they may face. (Custom Edition, 2010). This is very important to any organization’s operations because not any single company or entity can change the prevailing systems and infrastructure in the host country (Custom Edition, 2010).
There is significant effect of host countries legal systems on the operations of the companies involved in international trading and have raised legitimate concerns and debates on which of the legal systems work best, most ethical and also which one is better at inspiring more social-friendly commerce. (Custom Edition, 2010). An example is how some political figures have been known to circumvent or openly disregard government regulations and laws due to lack of enforcement of anticorruption laws in some Asian countries. Some of the legal systems also lag behind market mechanisms. (Kelleher, Martens, 2004). In comparison, in the United States, where government laws and regulations are followed and the existence of Federal Sentencing Guidelines and the touchy nature of the society, companies here in the U.S. implement programs to formalize their business practices. There has been an appreciable improvement in the regulatory and law enforcement sectors in most Asian countries but the legislative drive to promote these business programs is not at a level compared to other countries. This contributes to the growing concern about ethical issues in these countries. (Kelleher, Martens 2004).
The end of the Cold War in the early 1990’s brought about relative importance on economic activities in the homogeneously cultural environment in Asia more than in the heterogeneously cultural environments. For example, during the years of 1950 and 1990, trading recorded among the Association of Southeast Asian Nations (ASEAN) countries, Hong Kong, Taiwan, South Korea and Mainland China increased from about 10% to more than 30% of total trade. It must be noted that almost all these areas fall within or closely related to the Chinese cultural circle. (Guo, 2004). The familiarity in cultures played a significant role in the increase in trade in these areas.
It has been documented that social issues have a huge impact on trade in the south-eastern Asia area like Bangladesh, India Sri-Lanka, Nepal, Pakistan etc. This effect was so profound that it was argued to be the most is any other region in the world. However, later in the 1900’s, the majority of the citizens in the region were not affected by the influence of trade. The coastal areas and the regions adjoining them were rather heavily affected. Faming and other related business in the main areas continued normally without any care for the world outside their immediate areas. (Dean, 1999). With that knowledge, it is prudent for organizations intending to pursue international business in this region to exercise their due diligence in order not to underestimate the potential effect the prevailing conditions in the area could have on their business.
The cultures of the world are rapidly changing due to the impact of international trade. This is the same for the Asian cultures where citizens are caught in the middle of economic and transnational dealings. In order for the host countries to capitalize on the opportunities presented by the foreign investors, the host countries sought to improve on their national infrastructure including travel, health care, technology, communications, etc. This action by the governments introduced new ethical problems. Typical example was in India where the middle class of about one hundred million people have experience a steady growth in economic power and a healthy appetite for consumer goods. This more skilful among them benefited even more in the spread of new capital. A lot of jobs were created and salaries rose for millions of people in the country. (Busak, 2011)
The gap between the poor and the rich widened as a resultant effect of globalization in most of these Asian countries. This has become a serious problem for the nations to deal with. It was later revealed that millions of citizens of the host countries without adequate technological skills could not participate in the dynamism of globalization. The effect is evidenced by the fact that the citizens of most of the villages in the host countries enjoying access to internet, phones and cable TV but they don’t have same opportunities with improving their economic status. (Busak, 2011).
With the current growth rate experienced by international business, the profiles and ethical values of consumers of various cultures in most host countries can be used an ingredient for strategic decision making and choices by most organizations involved in international trading. National cultures and ethical differences should be treated with all seriousness in order to meet the cultural expectations of consumers in the host countries (Rawwas, 2001)
In conclusion, as indicated by several references in the texts, it is imperative to XYZ Construction to undertake a thorough due diligence exercise to ascertain the potential profitability of the engagement and also to manage their expectations properly to avoid unwelcome uncertainties. The cultural and ethical issues in these regions of the world are real and the effect on business operations should be taken seriously and planned for accordingly. The plan for engagement should be thorough and should include a protocol to possibly setup shop to investigate the dealings of the land before making the final decision to begin normal operations. Also, there was no revelation of global success and its relations to Initial Public Offering (IPO), so XYZ’s executives should study the market well and make sure their plan to IPO is not only dependent on their investment in Asia but should also consider other domestic investments as the conditions here are more predictable and easily managed. The cultural and ethical concerns that others have studied and revealed should be highly considered and properly plan against because if those are not dealt with from the onset, it may become a problem that may affect company’s bottom line.
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