D270 Chapter 5
Net Import Effect- BOP
(M=M1) M = import displacement M1 = import stimulus Positive When: FDI results in substitution of local production for imported products Negative When: results in an increase of imports
Net Export Effect- BOP
(m1-m) M1 = export stimulus M = export displacement Positive When: FDI results in generation of exports Negative When: results in decline
VW Emission Scandal
-Cheated on emissions test -Software made it seem that the emissions were clean even though they weren't -VW admitted they cheated -Offices were raided for investigation -Cars with emission issues lost value -Cost them $250 Million or had to buy back cars from customers -Lesson: Corruption and shortcuts like this is not a good option
Host Country Negative
-Drive labor costs -Displace domestic investment -Destroy local entrepreneurship
VIDEO: "Does Europe Hate US?"
-Ever since WWII we were keeping a democratic relationship with Europe to prevent tyranny and communism -French Soldier said they should be grateful to the states for liberating Europe *French Opinion* Takes French students to McDonald's Future is going to change on American Foreign Policy Bush makes decisions without everyone's approval *American Opinion (Study Abroad)* Americans in London Students feel that they have to defend themselves and America "Your gov't affects my everyday life"
3 actors of IB:
-Government -MNC -Society
VIDEO: Pizza for Pesos
-Immigration Marketing tool to sell more Pizza -Illegal immigration debate at the cash register -Letting customers pay with pesos in Dallas -It is being done for Mexican visitors from a weekend to spend their leftover pesos -The whole chain is doing it now -Walmarts near the border are taking pesos
Ways to Control Corruption
-International Organizations created to limit corruption(OECD, United Nations, etc.) -Foreign Corrupt Practices Act (FCPA): outlaws bribery payments by U.S. firms to foreign officials, political parties, party officials, and political candidates. -Sarbanes-Oxley -Company regulations
Difficult to Assess Net Capital because of:
-Inward flow of investment funds -Subsequent outward flow of remitted earnings from investment
Consequences of Corruption
-Lower growth rate -Lower levels of per capita income -Ruin authority of governments -Very expensive
4 MNC Choices Towards Business Abroad
1. Exploitive: exploitable opportunities 2. Transactional: law-abiding, non-exploitive 3. Responsive: sensitive and responsive to stakeholders 4. Transformative: leading initiatives, changes to the broader society
Social Issues
1.Environmental sustainability 2. Paris Agreement Meant to slow down global warming; contains 2 parts private/public sectors 3. Ethical dilemmas of labor conditions 4. Problem of child labor 5. Company Code of conduct/ethics
Relativism:
Ethical truths depend on the groups holding them. "When in Rome, do as the Romans do" Do things the way that people do there.
Balance of Payments equation
B=(M-M1)+(X-X1)+(C-C1)
What MNE's have to offer
Investment Human Resources Technology Trade Environment
Home countries
Loss of Jobs at home to increase those abroad (Negative) New jobs to manage international operations (Positive)
Deontological approach to ethics
Moral judgments are made and moral reasoning occurs independent of consequences
Utilitarianism approach to ethics
action is right if it produces right amount of work for the good reason which affects greatest number of people
Host Country Positive
Transfer of Capital Creation of new jobs
Ethical Behavior: Level 2 Conventional
role conformity/societal laws
Companies care about ethical behavior:
-develop competitive advantage -avoid being perceived as irresponsible
Corruption and Bribery
Abuse of entrusted power for private gain Ex in Brazil: Petrobras, the Brazilian national oil company, which has resulted in the disclosure of at least $2 billion in bribes, kickbacks, and money laundering, involving payments to company executives, the ruling Brazilian Workers Party, and more than 50 sitting politicians
Extraterritoriality
Country created a law that applies to them at home and abroad. Ford obeying labor laws at home and abroad
Normativism:
Holds that there are indeed universal standards of behavior that, although influenced by different cultural values, should be accepted by people everywhere.
Balance of Payments +/-
Net Capital Positive When: Capital Inflows to build plants and capacity Net Capital Negative When: Outflows to repatriate profits back to home country
Teleological approach to ethics
decisions are based on on the consequences of that action
Ethical Behavior: Level 1 Preconventional
difference between what is right and wrong, why things are right and wrong
Ethical Behavior: Level 3 Postconventional
internalize moral behavior