Chap002

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


FHF

1. Economic

2. Legal

3. Ethical

4. Voluntary

2-22

The Pyramid of


The Pyramid of


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


Shareholders

FHF

Primarily concerned with profit or ROI

Financial community at large

Proper accounting procedures

Protecting owner’s rights and investments

2-25


Employees


Employees

FHF

Provide a safe workplace

Adequate compensation

Listen to grievances

Fair treatment

2-26


Consumers


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


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



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


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


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


FHF


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)


3-22

FHF


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

Education

Chap002