part Ferrell Hirt Ferrell A CHANGING WORLD EIGHTH EDITION 1 FHF Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
part
Ferrell Hirt Ferrell
A CHANGING WORLD EIGHTH EDITION
1
FHF
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
part
CHAPTER 3 Business in a Borderless World
CHAPTER 2 Business Ethics and Social Responsibility
1
CHAPTER 1 The Dynamics of Business and Economics
FHF
Business in a
Changing World
FHF
Business Ethics
] [ An identifiable problem, situation, or opportunity
that requires a person to choose from among several actions that may be evaluated as right or
wrong, ethical or unethical
2-3
Social Responsibility Social Responsibility
FHF
Business’s obligation is to maximize its positive
impact and minimize its negative impact on society
2-4
Laws and Regulations Laws and Regulations
FHF
Laws and regulations encourage businesses to
conform to society’s basic standards, values, and
attitudes.
Sarbanes-Oxley Act, 2002
Troubled Assets Relief Program
2-5
The Role of Ethics in
Business
The Role of Ethics in
Business
FHF
Growing concerns about legal and ethical
issues in business
Antitrust violations
Accounting fraud
Cybercrimes
Unfair competitive practices
Tax fraud
2-6
Ethical Issues Ethical Issues
FHF
Involve all organizational activities
• For profit businesses
• Non-profits
• Government
• Schools and universities
Learning to recognize and resolve ethical issues are
important in maintaining an ethical business climate
2-8
Ethical Conduct Helps To: Ethical Conduct Helps To:
FHF
Build Trust
Promote confidence
Validate relationships
2-9
FHF
Examine the situation from your stakeholders’
position, including customers and competitors
People often need years of experience to
accurately recognize and react to ethical situations
Ethical situations vary by culture
How to Judge the Ethics
of a Situation
2-10
Unethical Behavior in
Business
Unethical Behavior in
Business
FHF
Misuse of company resources
Abusive & intimidating behavior
Conflict of interest
Fairness & honesty
Communications
Business relationships
2-11
Sources of Unethical
Behavior
Sources of Unethical
Behavior
FHF
Misuse of Company Resources
The most commonly observed misconduct
Time theft
Use of personal email and social networking sites at work is a
growing problem
Stealing office supplies
Unauthorized use of equipment and software
2-12
Sources of Unethical Behavior
in Organizations
Sources of Unethical Behavior
in Organizations
FHF
Conflict of interest
Advance personal interest over others’ interests
Benefit self at the expense of the company
Bribes represent a conflict of interest because they benefit an individual at
the expense of an organization or society
2-14
Fairness & Honesty Fairness & Honesty
FHF
Are at the heart of business ethics
How employees use resources
No deceit, coercion, or misrepresentations
Fair competition
Disclosure of potential harm caused by products
2-15
Ethical Concerns in
Communications
Ethical Concerns in
Communications
FHF
False/misleading advertising
Deceptive personal selling tactics
Truthfulness in product safety and quality
Unsubstantiated claims
Product labeling
2-16
Ethical Concerns in
Business Relationships
Ethical Concerns in
Business Relationships
FHF
Relationships with customers, suppliers and
co-workers
Ethical behavior within a business is important
Keeping company secrets
Meeting obligations and responsibilities
Avoiding undue pressure
Managers’ responsibility to create ethical work environment and
provide a positive example
2-17
Plagiarism Plagiarism
FHF
The act of taking someone else’s work and
presenting it as your own without mentioning
the source
A major problem in schools and business
Students copying others’ work
A manager taking credit for a subordinate’s work
Employees copying reports and passing the work off as
their own
2-18
FHF
Ethical Decisions in an Organization are
Influenced by Three Key Factors
2-19
FHF
Code of Ethics
] [ Formalized rules and standards
that describe what a company expects of its employees
2-20
Whistleblowing Whistleblowing
FHF
Occurs when an employee exposes an employer’s
wrongdoing to outsiders
Many companies have internal reporting mechanisms in place
• Avoid legal action
• Negative publicity
Whistleblowers often treated negatively and have a difficult time finding
other work
2-21
Four Dimensions to
Social Responsibility
Four Dimensions to
Social Responsibility
FHF
1. Economic
2. Legal
3. Ethical
4. Voluntary
2-22
The Pyramid of
Social Responsibility
The Pyramid of
Social Responsibility
FHF
2-23
Corporate Social Responsibility (CSR)
Program in Indonesia
Corporate Social Responsibility (CSR)
Program in Indonesia
FHF
2-23
FHF
Corporate Citizenship
] [ The extent to which businesses meet the
legal, ethical, economic, and voluntary responsibilities placed on them by
their stakeholders
2-24
Stakeholder Relationships:
Shareholders
Stakeholder Relationships:
Shareholders
FHF
Primarily concerned with profit or ROI
Financial community at large
Proper accounting procedures
Protecting owner’s rights and investments
2-25
Stakeholder Relationships:
Employees
Stakeholder Relationships:
Employees
FHF
Provide a safe workplace
Adequate compensation
Listen to grievances
Fair treatment
2-26
Stakeholder Relationships:
Consumers
Stakeholder Relationships:
Consumers
FHF
Consumerism
Activities that independent individuals, groups and
organizations undertake to protect their rights as consumers
Critical issue is business’s responsibility to customers to provide
satisfying, safe products and to protect their rights as consumers.
2-27
Kennedy’s Consumer
Bill of Rights
Kennedy’s Consumer
Bill of Rights
FHF
The right to safety
The right to be informed
The right to choose
The right to be heard
2-28
Stakeholder Relationships: The Environment & Sustainability Issues
Stakeholder Relationships: The Environment & Sustainability Issues
FHF
Sustainability means conducting activities
with the long-term well-being of the natural
environment in mind.
Involves interaction between
Nature
Individuals
Organizations
Business strategies
2-29
FHF
Pollution
• Land
• Water
• Air
Waste disposal
Future of energy
• Alternative energy
Stakeholder Relationships: The Environment & Sustainability Issues
Stakeholder Relationships: The Environment & Sustainability Issues
2-30
Copyright 2009 Utopian Empire Creativeworks | Biomass Energy Plant in Cadillac Michigan
part
CHAPTER 3 Business in a Borderless World
CHAPTER 2 Business Ethics and Social Responsibility
1
CHAPTER 1 The Dynamics of Business and Economics
FHF
Business in a
Changing World
FHF
The buying, selling and trading of
goods and services across national
boundaries
Global marketing requires balancing
global brands with the needs of local
consumers
International Business
3-3
[ ]
FHF
Why Nations Trade
International trade allows for the acquisition of raw materials and
goods at favorable prices
3-4
FHF
Absolute Advantage
A monopoly that exists when a country is the
only source of an item, the only producer of an item, or
the most efficient producer of an item.
Comparative Advantage
The basis of the most international trade, when a country
specializes in products that it can supply more efficiently
or at a lower cost than it can produce other items
Absolute vs.
Comparative Advantages
3-5
FHF
The transferring of
manufacturing or other tasks,
such as data processing, to
countries where labor and
supplies are less expensive
Outsourcing
3-6
FHF
Exporting
The sale of goods and services to foreign markets
The US exports over $1.5 trillion in goods and services annually
Importing
The purchase of goods and services from foreign sources
The U.S. imports around $2 trillion in goods and services annually
Exporting & Importing
3-7
FHF
The difference in the value between what a
nation exports and imports
• A trade deficit is also called a negative balance of trade
• The U.S. usually has a negative balance of trade
Balance of Trade
3-8
FHF
Balance of Payments
The difference between the flow of money
in and out of a country
A nation’s balance of trade, foreign investments,
foreign aid, loans, tourists dollars and military
expenditures comprise its balance of payments
3-9
FHF
Barriers to International Trade
Completely free trade seldom exists.
Barriers to international trade:
• Social
• Cultural
• Technological
• Economic
• Legal
• Political
3-10
FHF
Economic development
Infrastructure
Exchange rates
Less-Developed Countries (LCDs)
• Low per-capita income
• Less economically advantaged
• Potentially huge & profitable markets
• Largely located in Africa, Asia and Latin America
Economic Barriers to Trade
3-11
FHF
Infrastructure
The physical facilities that support economic activities, including railroads, highways, ports,
airfields, utilities, power plants, schools, hospitals and commercial distribution systems
[ ]
3-12
FHF
Exchange Rates
The ratio at which one nation’s currency can be exchanged for another nation’s currency [ ]
3-13
FHF
Complex relationships between nations
Different laws
Differing intellectual property protections
Trade restrictions
Political barriers and volatility
Cultural differences
Different ethical values
Ethical, Legal & Political Barriers in
International Trade
3-14
FHF
Legal Barriers to Trade
Tariff and Trade Restrictions
• Part of a nation’s legal structure
• May be established or removed for political reasons
Import Tariff
• A tax levied by a nation on goods imported into the country
Exchange Controls
• Regulations that restrict the amount of currency that can be
bought or sold
…continued on the next page
3-15
FHF
Quota
• A restriction on the number of units of a particular
product that can be imported into a country
Embargo
• A prohibition on trade for a particular product
Dumping
• The act of a country or business selling products at less than
what it costs to produce them
Legal Barriers to Trade
3-16
FHF
Seldom in writing & change rapidly
Relative stability of countries is a factor
Cartel
A group of firms or nations that agrees to act as a monopoly and
not compete with each other, in order to generate a competitive
advantage in world markets
Political Barriers to Trade
3-17
FHF
Technological advances are
creating global
marketing opportunities
At least 10 nations outrank the U.S.
in terms of subscribers to
broadband Internet access
China and India are rapidly
advancing and represent huge
markets
Technological Barriers
3-18
FHF
General Agreement on Tariffs and Trade (GATT)
Signed by 23 nations in 1947
Forum for tariff negotiations
Place for international trade issue discussion and resolution
Replaced by the World Trade Organization (WTO) in 1995
Trade Agreements, Alliances
& Organizations
…continued on the next page
3-19
FHF
World Trade Organization (WTO)
International organization dealing with the rules of trade between
nations
Officially founded in 1995
Successor to GATT
153 members representing 95% of global trade
Trade Agreements, Alliances
& Organizations
3-20
…continued on the next page
FHF
North American Free Trade Agreement (NAFTA)
Agreement that eliminates most tariffs and trade restrictions
on agricultural and manufactured products to encourage trade
among Canada, the U.S. and Mexico
Has been controversial, but has created new business opportunities
with fewer barriers than before
Trade Agreements, Alliances &
Organizations
3-21
…continued on the next page
FHF
Trade Agreements, Alliances &
Organizations European Union (EU)
A union of European nations established in
1958 to promote trade among its members
One of the largest single markets today
Asia-Pacific Economic Cooperation (APEC)
An international trade alliance that promotes open trade
and economic and technical cooperation among member
nations
Asean Free Trade Area (AFTA)
China-Asean Free Trade Area (CAFTA)
…continued on the next page
3-22
FHF
Trade Agreements, Alliances &
Organizations
World Bank (International Bank for
Reconstruction and Development)
Organization established in 1946 by industrialized nations
to loan money to underdeveloped and developing
countries
International Monetary Fund (IMF)
Organization established in 1947 to promote
trade among member nations by eliminating
trade barriers and fostering financial cooperation
3-23
FHF
Exporting & importing
Trading companies
Licensing and franchising
Contract manufacturing
Joint ventures
Direct investment
Multinational corporations
Many companies’ involvement in international trade begins with
importing goods for resale
Getting Involved in
International Business
3-24
FHF
A form of licensing where a company (franchiser) agrees
to provide a franchisee a name, logo, operational guidelines,
products, etc., in return for a financial commitment and the
agreement to conduct business in accord with the franchiser’s
standard of operation
McDonald’s is the world’s largest franchise in terms of
revenues
Franchising
3-27
FHF
The highest level of international business involvement
Operates on a worldwide scale without significant ties to a
single nation or region
Largest MNCs are wealthier than most countries
Antiglobalization activists contend that MNCs are
responsible for growing wealth disparity and misusing
scarce resources
Multinational Corporations
3-31
FHF
Foreign Ownership on
Indonesian Firms
3-31
Company Foreign Shareholders % Ownership
Astra Internasional Jardine Cycle & Carriage Ltd. 50.09
HM Sampoerna PT Philip Morris Indonesia 98.18
Bank Danamon Asia Financial (Indonesia) Pte Ltd
JPMB-Franklin Templeton Inv
67.37
6.38
Bank Niaga CIMB Group Sdn Bhd 96.92
Indosat Qatar telecom (Qtel Asia)
The Bank of New York Mellon
55.79
13.11
XL Axiata Axiata Investments (Indonesia)
Etisalat Internasional Indonesia
66.55
13.28
Multi Bintang Indonesia Asia Pacific Breweries Ltd
Hollandsch Administratiekantoor
75.10
7.43
Source: Kontan, August 27, 2012
FHF
Multinational Strategy
A plan used by international companies that involves
customizing products, promotion and distribution according to
cultural technological, regional and national differences
Global Strategy (Globalization)
A strategy that involves standardizing products (promotion and
distribution) for the whole world as if it were a single entity.
International Business Strategies
3-32
FHF
Many political barriers to trade have fallen in
recent decades
Navigating international business remains complicated
Technology and improved standards of living globally are creating
tremendous new marketing opportunities
Governments and business organizations exist to help businesses
looking to go international
Managing the Challenges of
Global Business
3-33