Legal Environment of Business - Assignment Example

Running Head: International business International business Customer’s Name: Institution: Customer’s Course Tutor’s Name March 7, 2013. Q: Identify and discuss the major legal and ethical issues facing international business in the world today. In your answer, discuss whether multinational corporations should be bound by an international ethical standard or should domestic considerations be the guiding principle? With the increased urge for businesses to cut production costs and increase revenue, there has been an interdependence of different economies. This is the result of technology exchanges leading to what is called globalisation. This has made countries not entirely produce a given product, but rather given other countries the task of making the product complete so it can be delivered to the consumer. This has further lead to businesses going international, making their products globally recognised (Latham, 2000). Such advances have been attributed to international businesses that use low-cost labour. This further helps marketing strategies in that products now have competitive prices; with increased technology, large quantities are produced to serve many consumers. This leads to revenue increases and better services being offered to a larger number of consumers. In today’s international business, there are major legal and ethical issues that affect a corporation’s growth. Legal systems are said to be laws and regulations that have been set by a country and, in this case, courts are given the responsibility to rule on how business parties must conduct their transactions. Although there is no exact definition as to which international body is responsible for making laws, many countries are coming up with ways to standardise their laws so that they can be applicable in international business in different countries (Cross & Miller, 2004). Ethics is the standard to which a country adheres in delivering its products to other countries. This essay will take a look at both legal and ethical issues that will lead to answering whether countries should use international or domestic ethical standards as their guiding principles in conducting international business. Among the key ethical and legal issues facing a country are how countries should be socially responsible. Ethically, this has been a major challenge in multinational corporations, where decision makers are given the responsibility to ensure that society is protected and improved, without neglecting their own business interests. A company that practices social responsibility does well in the environment, as it is morally responsible due to its balance of power and responsibility towards society. In fact, most companies practising social responsibility are better placed to involve themselves in global marketing, as they tap the best employees in the market (Bukics, 1999). When it comes to international business, this becomes a major challenge, as different types of governments have different rules to be followed. This becomes an issue as to the right methods for embracing social responsibility and reducing ethical dilemmas. On the other hand, the relationship of the host country and the business’ home country will determine how ethically a business will be conducted. When it comes to ethical issues, multinational standards must be used in order to equalize consumer treatment and best practices. Another issue that may affect international businesses is the attitudes embraced by different governments towards foreign investment. Not much is said in international law regarding the attitudes that a country should have; hence, domestic considerations should be accommodated before allowing foreign investment. An ethical issue that has affected many multinational companies has been the corruption that seems to be inevitable in all areas of life (Waddell, 2003). It is through corruption and the offering of bribes that countries are limiting globalisation, due to the fact that honesty is not practiced in business dealings. It is through corruption that many companies are illegally in some countries, and those who cannot afford to bribe are restricted from making any investments. Workplace practices and worker remuneration is another ethical challenge, in that there has to be the right amount of money for quality work to be done. Although international standards are followed in such applications, it highly depends on a country’s individual considerations towards multinational corporations’ activities. Several legal issues have been mentioned that affect international business. Two of these are property rights protection and intellectual rights. It can be exciting for a business to engage itself in international business due to having a wider customer base, but, at the same time, this may be a threat due to intellectual property issues. When talking about intellectual property, this includes rights in terms of trademarks and copyrights, which are prone to being duplicated. This thus becomes a legal issue to be considered as a business goes multinational. Foreign markets have the ability to protect patents and trademarks only if they are registered. Registration will ensure that piracy is neither practiced nor products counterfeited. A country’s individual considerations can handle this issue in that governments appoint different agencies that help with international marketing and business (Pava & Primeaux, 1999). With this kind of protection from the government of the home country, any business can have confidence in participating in international trade with no fear of counterfeit activity. Although this has not been an easy issue to tackle due to the presence of black markets, technological devices have been implemented in different countries’ foreign products that ensure that goods are inspected before they are released to the market. Another legal issue is who is to be accountable for product liability standards. This comes in to play when a product harms a consumer, resulting in death or other serious health hazards. This has become an issue after manufacturers sold products that have had adverse effects on consumers. It is therefore the duty of the manufacturer or producer to ensure that safety standards are followed. Businesses are therefore liable for any death, injury, or damage that a consumer suffers upon consumption of such products or services (Halbert & Ingulli, 2003). International standards in such cases are used to judge if a tainted product reached a consumer as the result of negligence, or if it was simply a mistake. Many countries use tort law to judge such incidences. If producers do not take enough caution, they can be sued by an individual country or made to pay damages as compensation to victims. Taxation policies are another aspect to be considered as a legal issue. There are three challenges that face the taxation system. One is the rules governing different countries; most countries tax based on risk and pays no attention to assets, which are the major determinants in international tax revenues. Another aspect under taxation policy is rules that define a corporation. This is used to determine the rates used and purposes of taxes in any product brought into a country. Finally, transfer pricing rules between firms is a determinant of how much tax is to be fixed to a product. In international businesses, three tax-based approaches are used to determine tax rates. One is corporate shareholder taxation, which looks at the number of shareholders in a company (Jeffers, Burgess, & Hughes, 2008); their income is used to determine the amount of tax to be charged. Residence and source taxation is another base used; it looks at a corporation or resident’s income. International taxation will prevent double taxation on products imported to different countries. Transfer pricing is another base of taxation; the value of a product is the main determinant of tax rates. In conclusion, ethical and legal issues are the main issues affecting international relations and how successful a business can be as a multinational corporation. Individual government policies have been seen to play a great role in international business, as they foster the financing of individual corporations in the outside world. With free-trade agreements in place between or among countries, investment rates have increased as gross domestic products have increased, meaning that they are economically stable. It is government’s job to ensure sufficient training and information for all stakeholders involved in international business, in order to ensure that legal and ethical factors are maintained in international trading. Ethically, it has been said that a company that practices social responsibility does well in the environment, as it is morally responsible due to its balance of power and responsibility towards society. In fact, most companies that have been practising social responsibility are better placed to involve themselves in global marketing, as they tap the best employees in the market. Legally, a major issue has been the protection of rights, in that international standardisation has to be applied; along with a country’s individual considerations, this issue can be easily handled when governments appoint different agencies to help with international marketing and business. References Bukics, R. M. (1999). Exploring ethical decisions. (Review). Internal Auditor, 1, 15–80. Cross, F. B., & Miller, R. L. (2004). West’s legal environment of business: Text, cases, ethical, regulatory, international, and e-commerce issues (5th Ed).Mason, OH: Thomson/South-Western. Halbert, T., & Ingulli, E. (2003). Law and ethics in the business environment (4th Ed). Mason, Ohio: Thomson/South-Western. Jeffers, A. E., Burgess, D., & Hughes, P.A. (2008). Ethical issues associated with international transfer pricing practices. International Journal of Business Research, 18(5).Latham, M. (2000). Globalisation: Ending the tyranny of distance. Quadrant, 44(12), 48–53. Pava, M. L., & Primeaux, P. (1999). Research in ethical issues in organizations. Stamford, CT: JAI Press. Waddell, S. (2003). Global action networks: A global invention helping business make globalisation work for all. Journal of Corporate Citizenship, 12, 27–42. Read More