This essay discusses the growing need for business ethics in the current business world. It recognizes and analyses the issue the multinational organizations are facing and the benchmarks and principles they need to apply when facing these situations. It also recognizes what sort of company's code of conduct can make it to accomplish its ethical standards in its global market and create a graphic of a responsible company providing fair working environment and high ethical standards. Furthermore, It critically discusses the role and responsbilities that how an MNC can encourage moral business practice in today's complicated and competitive business environment.
The business community is becoming a worldwide village. Various countries' market segments are becoming open to foreign shareholders and companies, this enables companies to move across the international borders to conduct business. It also leads to higher competition and opportunities. Many companies become multinational corporations in this technique. Multinational businesses are productive and important players in the current international business. MNC refers to firms which may have extensive and intensive engagement in global market, it also identifies firms that engage in foreign direct investment and own or control resources and activities in several country
MNC generally organize their activities from a central head office, but could also allow their affiliate marketers or subsidiaries in overseas markets extensive latitude in changing their procedures to local circumstances.
Businessmen nowadays are not merely content with their home country's markets and can go overseas to gain a market share in its global business. This causes globalisation. Globalisation is thought as the development and deepening of ties across nationwide borders, has gained surface in all respects of the business environment. (Morrison, J 2006, p448) It permits individuals, businesses and organisations to reach about the world further, faster, deeper and cheaper than ever before. It's the product of a specific form of governance rooted in the domestic political economies of the first industrialisers. (Prakash, A & Hart, J 2000, p32)
Some people dispute that globalisation enables businesses from developed countries to increase unemployment rate from their house countries by transferring job opportunities to a overseas country with low labour cost and serious environmental cover issue. According to the rules of comparative advantage, the citizens of every region can gain by spending more of their time and resources doing those things where they may have a relative edge. (Carbaugh, R, 2007, p14)
Success in international trade comes from the conversation of four country-and firm-specific elements.
Porter's national competitive advantage
- Factors conditions
Includes not only land, labour, capital factors, likewise incorporate factors such as educational degree of workforces and infrastructure of the county
A large and complicated domestic consumer demand would allow the country and companies to compete more effective and even more competitively advantaged with other countries.
-Related and supporting industries
This includes companies supporting the main industry of the united states. For instance, Sweden's strong newspaper industry allows its country to have a strong truck processing industry such as Scania.
-Firm strategy, structure, rivalry
This factor recognises the positive facet of competition. Thus federal government might establish an environment that fosters such factors.
The issue of international resource allocation, determinants of the routine of world trade, and profits from trade, all relate to trade, profits and benefits. (Meier, G 1998, p417)
However, when a MNC explores its foreign marketplaces, there are ethnic and ethical barriers. A MNC will have to encounter a number of business methods, moral behaviour, honest benchmarks and cultures which are very different from their house country. .
The main dilemma is MNC must use more than their commercial code of do, they are also encouraged to apply an increased standard level of moral business practice.
Ethics are defined as the procedure of distinguishing the right and good from the wrong and bad, plus they imply a moral obligation to pursue the good and the right.
Business ethics is the nice or bad behaviour companies keep on in their business. It implies that business should work responsible rather than just seeking income and economic gains. It forces the firms to change themselves in a more ethical and morally appropriate behaviour and allow companies not only consider profits also have to take the complete society into consideration such as environmental concern.
A company's code of carry out sets out what a company can do and just what a company cannot do. It establishes a level of business ethics when it operates both in sponsor and home country. A MNC's ethical behavior should be regular in its global market.
MNC should apply regulations and ethical standards at home country and international market segments where they operate. It ought to be followed consistently anywhere the MNC has its international business. A common business ethics standard should be enforced for a MNC to the all the counties where it performs. Its ethical prices and integrity should not be changed or broken to pursue an economical gain or revenue.
The most significant thing is that right ethical vales must be employed in anywhere in the world where the corporate functions its business irrespective of where it is.
A good commercial code of do should have the following characteristics:
a homogeneous standard of ethics in its global market
set it as high so when sensible as possible
apply the code of conduct purely and consistently
employees should be totally alert to the code
A strong code of do would assist a business to gain value and support from its customers, local authorities even its competitors. To achieve success in the current competitive environment, a MNC should take up a global requirements and a typical set of values which it can apply to everywhere it operates business.
Besides building an moral culture of an company, a good conduct code will also help the company to create a graphic of in charge and fairness in its global market.
Moral concepts might turn into a minor issue when a company explores its opportunities in a country where laws aren't strong enforced and a fragile legal system prevails. MNC might take up a lesser standard of moral behaviour in international countries where laws and regulations are not restrictive just as their house countries. The questions for MNC might be:
- Are we still heading to remain into our guidelines?
- Are we going to accept and adjust ourselves to rules and expectations that are less than ours?
A recent case is the fact Levi Jeans. It exited China's jean market a couple of years ago because of its notorious human rights records. The violation of real human protection under the law in China makes Levi in a issue whether it persists to operate in China or not. However, its global high standard of business ethics make it exited this major market because they cannot lower their moral criteria so as to gain pure economical revenue in China.
In the business world ethics today, the impact of ethical requirements on MNC activities is becoming increasingly more important.
As business ethics becomes more integrated into activities, we must pay attention to the chance of applying honest standards from the house country to web host country where MNC performs.
For example, should an American company apply the same ethical behavior and standard to a expanding country such as Thailand?
MNC also have to consider how to value the neighborhood culture and connect with the ethical benchmarks of the variety country.
An important problem for organizations is how to identify honest and unethical behaviour in a variety of countries. In today's world, the behaviour seems difficult to specify and recognize. If MNC apply right behaviour, it would increase its image and trustworthiness of good commercial governance, otherwise they'll ruin their reputations in its global market. As variations in the nature, methods, and scope of regulation high light variations in models of economic business, these can tighten trade tensions (Pollack, M & Shaffer, G 2001p179)
The more MNC interacts in a foreign market and country, the more they are going to testify whether their own worth and moral wisdom are right and utter since the requirements varies from one country to another. However, MNC should be aware that cultural differences and local traditions can be so different they are contrary to MNC standard in their home country to a sizable extent.
An MNC is usually expected to find itself unprepared in working with ethical behaviour in a foreign country. Even though the problems will be the same in a international country, the ways to solve it could be different.
A typical example here is gift-giving. In lots of countries and cultures, gift providing is allowed and tolerated. For example, in Japan, give providing is not unethical and frequently encouraged. It signifies some sort of relationship between business and business or business and governments. That is quite different from the perspective of western contemporary society or ethical criteria.
This evidently illustrates the value of characteristics of dissimilarities between different counties and ethnicities when analyzing different practices, while MNC have to consider whether it complies with its global ethical benchmarks and rules.
The main moral dilemma here's what kind of honest behaviour should MNC adopts when values conflict with another. Should an organization invest in a country where vulnerable labour laws can be found or environmental issues are not considered really? Or should a corporation choose country where bribery is a common practice?
Business ethics can help employees to be averted from exploitation by profit seeking companies. It really is quite clear that some activities are unethical and wouldn't normally be tolerated irrespective of where it happens. For instance, forced labour should not be allowed in all over the world. A recent case is the fact that in Thailand, almost 200 people were killed within an international toy developing factory. The reason for the deaths not only directed to the ineffective sprinkler system, it also because the management level the facotory locked staff in the manufacturing plant and eventually triggered 200 deaths. This kind of behaviour shouldn't be allowed and tolerated in any ethical expectations and norms.
Responsibilities of MNS to encourage honest business practice
There are two varieties of corruptions:
Individuals, organizations, firms exercise their power to influence the forming of regulations and procedures to benefit themselves somewhat, usually attained by bribing government officials
Government public use their electricity and influence to push companies, individuals, teams to pay certain fees by distorting laws and regulations.
MNC will most likely encounter different techniques, criteria of business behavior and cultures. They could face the situation that whether to bride a local government official in order to obtain a business agreement or offer.
A major and universal problem in today's international business is how MNC can package with bribery. Theoretically, there is absolutely no any country upon this planet allows businessmen to bribe administration officials and officials aren't allowed to take bribe made available from a businessman. However, in practice, this happens quite often. Corruption is a mutual mechanism. Corruption will never happen without demand and supply.
Many MNC said that they would not recognize and tolerate almost any bribery. They might prefer never to compete for the business contracts if bribery needs to be taken in the complete process.
In many producing and less developed countries (LDC), a main problem is that the increasing of corruption and bribery in local governmental systems is leading to both politital and public instability. This issue is more prevalent and serious in these developing or less developed countries rules enforcements aren't so strong or undeveloped.
- Child labour issue
Another main unethical practice facing MNC is the utilization of child labour. The labour market issues in developed countries are essential and deserve full consideration (Michie, J 2003, p194)
In most developed countries, use of child labour morally prohibited and moreover it is prohibited by legislation. Hence, MNC performs in growing and LDC countries are expected to use the same expectations and rules.
However in a few countries on earth, use of child labour tend to be allowed and sometimes urged. Children tend to be expected to help their parents to maintain financial problem. This has been a culture or traditions in those countries. This is mainly because of the poor education provided by the local government and insufficient cash to help those children to be well informed. In this instance, children would not be able to survive if they do not work. MNC have to handle these situations when they operate in these countries. In these countries, child labour is encouraged to have cost-effective gains. Further, because these societies often do not have the fund, facilities and manpower to provide necessary and appropriate education, children wouldn't normally have the ability to survive if indeed they do not work. In European countries, it can be involved with the 'upheaval' caused by globalisation. It must determine 'how better to use education and training to commit European countries to an activity of job creation, whilst taking control of the globalisation and current economic climate. (Prakash, A & Hart, J 2000 p90)
However, for MNC, they should not make use of children without examining the consequences. A detailed analysis should be conducted by MNC to determine whether children are suited to conduct work for them. Furthermore, they should also provide a good and safe working environment for those children. Another effective way is to work and cooperate with the local administration to provide necessary education and ensure children have necessary education and training before they can begin in the workforce.
Multinational corporations have grown to be an important and energetic role in the current globalisation. They have got strong electricity and influences on the foreign country's procedures, regulations even legalities. The way the way they perform in a international market is becoming quite very important to both home country and number country it operates. The moral and honest standards and ideas MNC applies overseas should be regular with those requirements in their home countries. They may have a strong responsibility to encourage, promote and apply a internationally consistent ethical standards and key points.