International Business Management

Lecture 4th
Week 4th
BBA 8th Section(A&B)

Delivered by: Wajid Hussain

Southern Business School

Institute of Southern Punjab.
Lecture 4

Ethics in International Business

 Table of content

 Learning objectives
 Learning outcomes. Culture and work place. Cultural
Change
 Cross-Cultural Literacy
 Introduction
 Ethical Issues In International Business
 Employment Practices
 Human Rights
 Environmental Pollution
 Corruption
 Moral Obligations
 Classroom Performance System
 Assignment
 Learning objectives

 Explain what is meant by Ethics

 Explain how managers can incorporate ethical
 considerations into their decision making.
 The Roots Of Unethical Behavior
 Learning outcomes

 Understand the ethical issues faces by international

 businesses.
 Recognize an ethical dilemma
 Identify the causes of unethical behavior by manager
 Describe the different philosophical approaches to ethics
 Culture And The Workplace

It is important for companies to understand how a society’s

culture affects workplace values
Management processes and practices must be adapted to
culturally-determined work-related values
Geert Hofstede identified four dimensions of culture: power
distance, uncertainty avoidance, individualism versus
collectivism, and masculinity versus femininity

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 Culture And The Workplace

Power distance focuses on how a society deals with the

fact that people are unequal in physical and intellectual
capabilities
Individualism versus collectivism focuses on the
relationship between the individual and his or her
fellows
Uncertainty avoidance measures the extent to which
different cultures socialize their members into accepting
ambiguous situations and tolerating ambiguity
Masculinity versus femininity looks at the relationship
between gender and work roles

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 Cultural Change

Culture evolves over time, although changes in value

systems can be slow and painful for a society
 Social turmoil is an inevitable outcome of cultural
change
As countries become economically stronger, cultural
change is particularly common

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 Implications For Managers

 Societies differ because their cultures vary

Cultures vary because of profound differences in social
structure, religion, language, education, economic
philosophy, and political philosophy

There are three important implications that flow from

these differences:
1. There is a need to develop cross-cultural literacy
2.There is a connection between culture and national
competitive advantage
3.There is a connection between culture and ethics in
decision making

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 Cross-Cultural Literacy

Cross-cultural literacy is critical to the success

of international businesses
Companies that are ill informed about the practices of
another culture are unlikely to succeed in that culture
Managers must also beware of ethnocentric behavior, or a
belief in the superiority of one's own culture

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 Culture And Competitive Advantage

The connection between culture and competitive

advantage is important because:
it suggests which countries are likely to produce the most
viable competitors
it has implications for the choice of countries in which
to locate production facilities and do business

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 Introduction

Ethics refers to accepted principles of right or wrong

that govern the conduct of a person, the members of a
profession, or the actions of an organization
Business ethics are the accepted principles of right
or wrong governing the conduct of business people
Ethical strategy is a strategy, or course of action, that does
not violate these accepted principles

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 Ethical Issues In
International Business

The most common ethical issues in business

involve:
 employment practices
 human rights
 environmental regulations
 corruption
 the moral obligation of multinational companies

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 Employment Practices

If work conditions in a host nation are clearly inferior to

those in a multinational’s home nation, should companies
apply:
 home country standards
 host country standards
 something in between
Home country refers to the country where the headquarters is.  
Host country refers to the foreign countries where the company
invests
parent-country national is a person working in a country other
than their country of origin. Such a person is also referred to as
an expatriate.
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 Parent Country
National
• A parent-country national (PCN) is a person
working in a country other than his/her country
of origin (Home / Native Country).
• Such a person is also referred to as an
expatriate.
 Host Country
National
• A host country national (HCN) is an
employee of an organization who is the
citizen of the country in which the
foreign subsidiary is located.
 Third Country
National
• Third Country National (TCN) describes and
individuals of other nationalities hired by a
government or government sanctioned
contractor who represent neither the
contracting government (Home Country) nor
the host country or area of operations.
 Human Rights

In developed countries, basic human rights such as

freedom of association, freedom of speech, freedom of
assembly, and freedom of movement, are taken for granted
 In other countries, these rights may not exist

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 Environmental Pollution

Ethical issues arise when environmental regulations in

host nations are far inferior to those in the home nation
Environmental questions take on added importance
because some parts of the environment are a public good
that no one owns, but anyone can despoil
The tragedy of the commons occurs when a resource held
in common by all, but owned by no one, is overused by
individuals, resulting in its degradation

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 Corruptio
n
The U.S. Foreign Corrupt Practices Act outlawed the
practice of paying bribes to foreign government officials in
order to gain business
The Convention on Combating Bribery of Foreign Public
Officials in International Business Transactions adopted by
the Organization for Economic Cooperation and
Development (OECD), obliges member states to make the
bribery of foreign public officials a criminal offense

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 Corruptio
n
Some economists believe that in a country where
preexisting political structures distort or limit the workings of
the market mechanism, corruption in the form of black-
marketeering, smuggling, and side payments to government
bureaucrats to “speed up” approval for business investments
may actually enhance welfare
Other economists have argued that corruption reduces the
returns on business investment and leads to low economic
growth

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 Moral Obligations

Social responsibility refers to the idea that business people

should take the social consequences of economic actions
into account when making business decisions, and that
there should be a presumption in favor of decisions that
have both good economic and good social consequences
Social responsibility can be supported for its own sake
simply because it is the right way for a business to
behave
Advocates argue that businesses need to recognize their
noblesse oblige (honorable and benevolent behavior that
is the responsibility of successful companies) and give
something back to the societies that have made their
success possible

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 Classroom Performance System

Which is not an area where multinational firms

are concerned about ethics?

a) Human rights
b) Trade regulations
c) Environmental regulations
d) Corruption

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 Ethical Dilemmas

Ethical dilemmas are situations in which none of the

available alternatives seems ethically acceptable
The ethical obligations of a multinational corporation
toward employment conditions, human rights, corruption,
environmental pollution, and the use of power are not
always clear cut

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 The Roots Of Unethical
Behavior
There is no clear cut reason why managers
behave unethically

The causes of unethical behavior are complex and

reflect:
 Personal ethics
 Decision-making processes
 Leadership
 Unrealistic performance expectations
 Organizational culture

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The Roots Of Unethical Behavior
Figure 4.1: Determinants of Ethical
Behavior

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 Classroom Performance System

All of the following except contribute to unethical

behavior by international managers.

a) Decision-making processes
b) Leadership
c) Personal ethics
d) National culture

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 Personal Ethics

Personal ethics (the generally accepted principles of right

and wrong governing the conduct of individuals) influence
business ethics
Expatriates may face pressure to violate their personal
ethics because they are away from their ordinary social
context and supporting culture, and they are psychologically
and geographically distant from the parent company

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 Decision Making
Processes
People may behave unethically because they rely on
economic analysis when making decisions and fail to ask the
relevant question:
 Is this decision or action ethical?

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 Organizational Culture

Organization culture refers to the values and norms that

are shared among employees of an organization
In firms with an organization culture that does not
emphasize business culture, unethical behavior may
exist

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 Unrealistic Performance Expectations

When the parent company sets unrealistic performance

goals, managers may cut corners or act in an unethical
manner
Organizational culture can legitimize unethical behavior or
reinforce the need for ethical behavior

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 Leadershi
p
Leaders help to establish the culture of an organization,
and set the example that others follow
When leaders act unethically, subordinates may act
unethically, too

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 Assignment

What are Ethical Issues In International Business? Explain

each issue.