D270 Unit 5

Building AI Data Centers

Not illegal but faces backlash in other countries

“Love-Hate” relationship between home and host countries

Foreign managers may be impacted by country of origin

The subsidiary (the business being planted in a different country) has to balance home and local culture, and corporate objectives with foreign policy

4 MNC choices toward international business

Exploitive: View differences like low wage as exploitable opportunity (small percentage of MNCs do this)

Transactional: Engage in law-abiding commercial interactions (MOST MNCs do this)

Responsive: Acts in accordance or responds to stakeholder demands (ALDI gives more benefits to Bloomington staff because cost of living is higher in Indiana than other places)

Transformative: Tries to bring vast change to broader society (Northface → Patagonia) (Bill Gates foundation → Polio) ASK ABOUT THIS

Stakeholders

The colleciton of constituencies that an organiziaotn must satsify to survive in the long run

Balance of Payment Effect Equation

B = (m-m1) + (x-x1) + (c-c1)

Where m is imports, x is exports, and c is capital

Its literally just comapring imports and exports, that’s it

Net import effect (m-m1)

m = import displacement (how many imported goods are getting replaced with local goods)

m1= import stimulus

Positive result means more imported goods are being substituted for goods at home

Negative result means increase in imports

Net Export effect (x-x1)

x = export stimlus (how many goods are being exported)

x1 = export reduction (how many goods aren;t being exported anymore

Positive result means more exports

Negative result means less exports

Net Capital (c-c1)

c = capital inflow

c1 = capital outflow

Positive means we have inflows to build plants and capacity

Negatives means we are sending profits back home

Net capital is difficult to assess because of time lag between

• When we get money from investment funds

• When we send money from earnings from that investment

Basically, inflow and outflow form the same investment will happen at different periods of time

Capital Flow Effect in the long run

Even though capital flows might start positive, they can become negative if outflows exceed the value of the initial investment

Basically we invested 50 (inflow) but turned that into 200 (outflow) so the net is -150

When MNE’s move factories what happens to home countries

Loss of jobs in home countries

New jobs open up to manage international operations

When MNE’s move factories what happens to host countries

Gains:

New Jobs

Transfer of knowledge and technology from home

Losses:

Lock out local firms

Destroy local entrepreneurship

Bid for labor and reosurces

Ethical Behavior

Preconventional: Children learning rigth from wrong but don’t udnerstand why yet

Conventional: Conforming to peers and social laws

Autonomous/Postconventional: Internalized what is right and wrong

If there is a conflict between home country and host country

Which country’s laws take precedence ASK ABOUT THIS

What is right and wrong will

Differ from country to country

Relativism vs Normatviism

Corporations can either change for each country or set universal standards

Law is not always a good indictaor of what is ethical

155 Goods from 77 countries are produced by child labor or forced labor, but this is protected by law

China Basketball Video

The manager of the Houston rockets expressed support for Hong Kong protestors

The effects were drastic, with China cutting ties with the rockets and not streaming NBA games

The NBA is facing a dilemma with trying to appease China and American consumers

Wells Fargo Scandal

To elevate stock price, the company kept opening accounts for people without them knowing

Chipotle scandal

They locally sourced their ingredients per store instead of bringing ingredients to one course, so when there were E coli breakouts, they weren’t sure which source was contaminated

Volkswagen emissions scandal

Three students decided to test if the emission stickers on diesel cars were accurate

Volkswagen turned out to have way more emissions than the sticker claimed, and they were rigged to cheat tests

They had to pay large sums of money to customers and are still resolving lawsuits

Starbucks issue

Starbucks in Saudi denied women access to certain entrances because of religious law

People started throwing in their own issues like Black History Month or Apartheid

Brazil Corruption

Money would be siphoned from transactions and given to politicians

Mainly siphoend from oil company

Effects of corruption

Higher levels of corruption takes away from economic growth

How to avoid corruption

Follow the laws of the home and host countries

USA Foreign Corrupt Practices act

US companies are required to follow US law ebywhere

Social Initiatives of Global Enterprises

MNEs are beginning to team up with locals and other stakeholders to promote environmental sustainability

Alibaba made programs increasing digital literacy in rural Chinese villages

Ikea is supporting local communities by promoting businesses

Unilever is helping women become “micro-entrepreneurs” and it focuses on makign eco-friendly products

BASICALLY, Alibaba, Ikea, and Unilever are focusing on sustainability and social responsbility

MNE’s as a force for good

They reduce global poverty

They improve education and life expectancy

MNe’s Dark Side

They worsen income inequality through wage disparity

They often utilize labor exploitation

They cause environmental degradation

They erode cultural traditions

MNEs must maintain legitimacy and avoid rgeualtory constriants

Transparency helps hold them accountable

Supporting communities helps adhere to fair labor practices, environmental standards, and human rights principles

Financial Stakeholders

Typically, people who own stocks or shares in a company

• They monitor financial performance

Lenders and credtiros also count

• They prioritize timely repayments

• They prioritize risk management

Operational Stakeholders

Employees

• Want compensation, job security, safe work conditions, and opportunities to grow

Customers

• Want value, quality, affordability, and reliability in goods and services

Suppliers and business partners

• Want stable order flows, timely payments, and working relationships

Societal and Regualtroy Stakehodlers

Local communities

• Want companies to invest in school, healthcare, and infrastructure

• Want companies to provide jobs and pay taxes

• Want companies to focus on environmental sustainability

Governments

• Will focus on protecting national interest

• Use Taxation, labor, and environmental regulations to encourage MNEs to improve societal and environmental performance'

The media

• Positively covering MNEs will help with image and market position

• Negative coverage of MNEs will cause consumer backlash and financial losses, as well as regulatory issues if legal stuff is involved

Nongovernmental organizations

• Focus on social, labor, environmental, and humanitarian issues

• They can be critics and allies of MNEs

• They can influence public opinion

Shareholder primacy vs stake holder equity

A company’s primary duty should be its shareholders interests

A company should focus on the needs of ALL stakehodlers like employees, suppliers, customers, etc.

Ethics

The rules and standards that govern the behavior of individuals and organizations

Codes of Conduct for Global Companies

Cultural Sensitivity and Respect - Employees, Governments, Locals

Legal and regulatory compliance - Investors, governments

Supply Chain Responsibility - Employees, Suppliers, consumers, NGOs

Global citizenship - Local communities, future generations, Local communities

Ethical Codes

Can seem like fluff and nice words, but are very effective when companies actually follow them

Ethical Relatavism

Norms are not universal ideals and can be unqiue to cultural groups

We need to be flexible instead of adopting a single ethical framework

• Be careful though, you can find yourself justifying bribery or discrimination simply because other countries have those practices

Normative Ethics

We should follow universally valid ethics like honesty and fairness, regardless of local codes

• This can be complicated though as there are so many different cultural perspectives

Because of technology, we are working towards universal normativism

Legal Compliance

Follow the law

Ethical Integirity

Consider the broader consequences of your actions

• Bypassing certain taxes is legal, but it can have ethical considerations for local communities

Stakeholder Appeal Across Legal Systems

Civil Law - Protects shareholders but considers social and environmental stuff

Common Law - Flexible and considers various stakeholders

Theocraic Law - Mainly priortizes stakehoders aliged with religious values

Customary Law - Prioritzies local customs and traditions for stakehodlers

Mixed law - Depends on the legal frameworks being mixed

Stakeholder appeal for rule of law and rule of man

For rule of law, stakehodlers will want you to be transaprents and adopt their laws

For rule of man, stakehodlers will want you to buld connections with

Harmonizaton of legal systems

Globalizaiton is causing legal practcies across countries ot standardize

AI is also causing standardization

Corporate Social Responsibility

How managers integrate social concerns into business operations

Hinges on:

• Profit

• People

• Planet

Should balance all three

Should be adjusted based on cultural and legal norms of each region

Zones of Balance

Livable: Links People and Planet

Viable: Links planet with profit

Equitable: Links people with pofit

Phases of Managing CSR in Global enterprises

Cultural and Legal Analysis: Learn the cultural and legal foundations of your environment

Operational alignment: Align you practices with local cultures and law

Managing stkeholders: Categorize your stakeholders and develop strtagies to build relaitonshps with them

Impact Assessment: Measure and evaluate your company’s impact on society and the environment

Corruption

The abuse of power for personal gain; erodes trust and undermines fairness

In corrupt environments, expect to pay higher costs, political instability, and reduced foreign investments

Forms of corruption

Bribery

Conflict of interest - Letting personal wants bias your decisions

Facilitation Payments - Paying certain entities to speed up a process

Gift giving - Can be seen as bribery but does not have a direct influenced action

Nepotism and Cronyism - Favoring or hiring family and friends

Cultural Sensitivity mapping with Corruption

Managers need to know the itnersection between clutral expectations and ethics

Collectivist cultures love gift giving

Legal Framework Mapping

Have a map that tracks local laws and enforcement to ensure practices are consistent with global anti-corruption

Even advanced economies

have growing labor issues, such as job insecurity or lack of benefits

AI is threatening to take jobs

Green Business PRactices

Biodiversity Conservation - Protect natural habitats and species

Water management - don’t use too much water

Pollution control

Sustainable supply chains - Make sure environmental concerns integrate into operations

Climate resilience - adapt to climate change

Green innovation - make stuff that is sustainable

Triple Bottom Line Principles

Balance Finance, social, and environemntal goals

Systemic checks to make sure managers are socially responsible and ethically sound

Legal risks

Consumer expectations

Employee impact

Publicity risks

Investor Pressure

Regualtory changes

Supply chain accountability - violations can cause consuemr backlash and reupation damage

Global code of conduct

Global policy complicance

Broad communication: Codes of conduct are all expected to be clealry commuicated to all stakehodlers

Enforcent and training: All codes of conduct will have enforcement and training so employees actually apply it

Transparency in reporting:

Bridging the Digital Divide: Stakeholders in a Wired World

There is a large amoutn of the world with no access to technology or the itnernet (the digital divide)

Tech giants are using corporate social responsibility to bridge the divide by providing digital literacy training, using technology for environmental conservation, and helping make more entrepreneurs in poor areas

China changing your internet video

CHina’s internet is walled off liek an intranet

China just has a bunch of copycat apps

• Western apps are starting to copy them

WeChat does literally everything as one app

• Wechat is making normal things viral because eevrything is connected to a single app

• WeChat is collecting a ridiculous amount of data

Syrian children working in Turkey video

many Syrian refugee children are working in Turkish factories

They work instead of going to shcool

They are using dangerous machines

Brazil Scandal

At the heart of the scandal is Petrobras (Brazil’s state controlled oil company) and Odebrecht (Latin America’s largets engineering firm)

Pterobras would give conracts for work, and Odebrehct would overcharge for the work

• Petrobras would turn a blind eye to the overcharge, and siphon off some money from every deal to continue allowing the overcharge

• This Siphoned money would be used to bribe or fund politicians at the top of Brazil

• More than 80 sitting Brazilian politicians, and OTHER COUNTRIES are guilty of taking money form Odebrecht and Petrobras scandal

Drugs in the US

Drug companies sell directly to citizens instead of having the government negotiate for prices

US has better availability of drugs, but they are very expensive

Other countries have less availability but better prices

Plastic in Oceans

Gyres are causing the great pacific garbage patch (a swirling circle of plastic)