The Major Legal and Ethical Issues Facing International Business in the World Today - Essay Example

Globalization today is gaining prominence as borders are disappearing and countries are entering into treaties with each other which favour free trade. This has made companies expand its reach. Companies are benefitting greatly from the global markets as it is giving them a wide market to cater to and at the same time helping to improve the bottom line. (Ellis, 2001) Today “businesses which are global are a force for good”. (Ellis, 2001) This is because it gives them ample opportunities to grow. Despite the opportunities the global market presents it also raises concern regarding the ethical and legal issues which multinational companies has to face. The paper presents the different legal and ethical issues surrounding companies and steps which will help to improve those. One of the major issue surrounding multinationals is to have a support system which understands the rules and regulations required in the country. (Wild, Wild & Han, 2010) Multinationals if they want to be successful it is important that “they have the appropriate structure and support system”. (Aharoni, 1996, p. 28) They along with it need flexibility so that they can grasp the strategic options which might arise due to environmental changes. (Aharoni, 1996, p. 28) This is all possible when the company adapts to the local responsiveness by understamding the legal requirements. A company which want to be in a global arena has to ensure that they understand these factors clearly. To put is multinationals need “to achieve local responsiveness, global efficiency and create more knowledge”. (Aharoni, 1996, p. 30) Companies working in the global climate faces issues regarding being ethical and ensuring that the labourers are paid fairly. (Wild, Wild & Han, 2010) This creates dicrepancies in the working condition prevalent in different countries leading towards over exploitation of labourers. For example, it was seen in 1998 that Chinese manufacturers who were producing goods for companies like Ralph Lauren, Nike and Adidas paid wages at 13 cents per hour where as the same labour in the US was paid $10 per hour. (Klein, 2001) This was a case where labourers who were abundant in China were exploited and used to become a market leader. This is an important consideration that multinational companies need to look at and ensure that labourers are faid fairly to ensure proper governance. Multinational companies also need to understand the local conditions and adhere to it to be ethical in its working enviornment. (Wild, Wild & Han, 2010) Multinational companies while entering a new country ensures that “their subsidiaries understand the typologies prevalent in the local condition by creating subsidiaries”. (Enright & Subramanian, 2008, p. 148) This is very important that multinational companies understand the local condition. It helps them to build their strategies and helps in capacity creation and proper utilization of that capacity. (Enright & Subramanian, 2008, p. 150) This ensures that companies get acclimatised to the local environment. A case which highlights multinationals being unethical in their proceddings is seen in Chile. Employees were mad to work in the toughest conditions and were paid poorly. The employee had to stand in a cold refrigerated room and crack chickens at the rate of 41 each minute. The workers were also paid poorly and resulted in an average salary of $200 and were fined $30 for being absent from work each day. (Globalization, 2002) This is a case were multinationals exploit the poor and developing countries which is creating a situation where companies are benefitting at the cost of the poor. Another issue which multinational companies have to face is to ensure that they look into the cultural and regional requirements. Government of different companies have laws to ensure that this aspect is looked into. (Wild, Wild & Han, 2010) Multinational companies need to be more active by moulding themselves to the local conditions. Multinational companies need “to look into more cultural sensitive factors to be able to win consumers”. (Slawomir, 2010, p. 13) This is a very vital point for any company. This helps them to win the hearts of consumers and as a result get loyal customers. Multinational companies need to ensure that they bring about a change in the perspective so that they can enter a new market. This can be seen from the case of McDonalds in India. India being a culture sensitive country and high on religious favour companies which have this fundamentals. McDonalds when it entered the country came with beef in its products. It even used oil which contained animal fats. The religious custom didn’t allow those. McDonalds was not able to gain its market share. The company understood the culture and came again with a variant. They launched the vegetarian variety and removed beef from its menu. It even stopped using oil which contained animal fat. This resulted in the company gaining market share. Consumers started liking the product and McDonalds was able to capture a good chunk of the Indian market. This is also seen from a study conducted in this field. It shows that multinational companies have a different understanding when it comes to labour laws as compared to the local requirements. (Edwards & Ferner, 2008, p. 97) This is further substatiated by a study carried out in this field show that US business system is shaped by anti-unionism but the US local subsidiaries are shaped in the UK by the conditions there. (Ferner, Almond & Colling, 2005, p. 715) This study highlights the importance of adapting to the local laws. Multinationals that follow a similar path are able to understand the requirements better. They are in a better position and their policies are determined by “the sector they are prevalent in, subsidiary policy and this leads to determine their behaviour towards the union which is influenced by the complex interaction of the forces”. (Ferner, Almond & Colling, 2005) The paper thus highlights the importance of legal and ethical issues that multinationals need to adhere to. It also presents the fact that rules and laws needs to be framed on a global arena which governs all companies working on the global arena. This will help to bring consistency in law and ensure that the countries are not exploited. This will thereby help to build a law governing all and will ensure that the legal and ethical conditions are adhered to. This will thus help to create a better and conducive enviornment to work and help economies prosper and grow. References Aharoni, Y., (1996). The organisation of global service of MNC International Studies of Management & Organisation, 26 (5), 23-45 Ellis, V., (2001). Enterprise or exploitation: Can global business be a force for good. The New Statesman. Retrieved on March 17, 2011 from Read More