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