Four Paradigms of Global Business - Case Study Example

Four paradigms of global business Ethics Ethics can be broadly defined as a set of rules for interaction amongst people in a society. The predefined and predetermined code of conduct is often interpreted differently under different situations. But what is universally accepted as right or what is wrong becomes the major element in decision making and actions taken. Indeed, in the contemporary global business environment, the controversies regarding the moral responsibilities and ethical considerations are the inherent challenges that must be understood in the wider perspectives of business’ vision and mission. Ethics in global business become highly critical factors because of diverse socio-economic and political ideologies of the workforce. According to Act Utilitarian of Jeremy Bentham, an action that results in the happiness of one and all is a good act (Bentham from Rosenstand p.176). The actions, which result in maximum happiness for maximum number of people, are invariable good and therefore morally and ethically right. In the contemporary times, it becomes highly difficult because of the diverse ideologies and differing value system to satisfy large populace. Manual Velasquez’s theory (2005) of ethics is very relevant to the current times because it emphasizes that morality is relative. The wide diversity of socio-cultural and religious paradigms also promotes diverse ethical and moral practices within different societies. For example, while polygamy may be held correct in some culture, others may consider it to be morally wrong. Hence, Velasquez has maintained that morality of action is relative to one’s socio-cultural and religious background. Thus, cross cultural understanding promotes ethical decisions in global business. Ethically correct practices encourage dissemination of correct information to the public and other stakeholders. The code of conduct help the individuals and the organizations to adjust and influence the working environment within the prescribed parameters, which not only comprise of the long term mission of the company but also include harmonious interactions within the workforce diversity where people may be coming from different cultures, race, ethnicity and nationality. The value based conduct plays vital role in the actions and reactions of the people in the work place. In the highly competitive global business, ethical considerations have become crucial elements of success. Factors like accountability, responsibility and reliability have become important pre-requisites for business to create a credible environment for their trade and investment. Enron’s debacle is a case in point where unethical practices and lack of necessary control mechanisms, not only corroded the trust of the investors but they have long term repercussion on their market credibility and performance outcome. Effective mechanisms of internal controls of the company could have prevented what happened at Enron. Thus, modules of effective corporate governance that rely on ethically correct decision making and practices help ensure that scandals like Enron and WorldCom do not get repeated and violate public trust and credibility. Indeed, business ethics promote correct facts and interpretation on issues and topics that are socially, economically and politically relevant in the context of global business. They not only help resolve workplace conflicts but encourage mutual respect and thereby create congenial work environment for improved productivity. (507) Leadership The fast changing socio economic paradigms have created a fiercely competitive business environment. Managerial leadership has become important facilitating agent for evolving accommodating approach to the changing dynamics of the organizational culture and management. The leadership within the organization is able to exploit the personality traits of the workforce to maximize performance outcome. It assumes special meaning because it motivates and encourages others to strive towards common goals. Thus, three types of leadership become major facilitators of change and can be described as: directive; participative; and delegative (US Army handbook, 1973). Directive leadership is prevalent in organizations where the locus of control is external. This type of leadership promotes target based behaviour and helps facilitate psychological and predefined organizational structure for predetermined targets. Examples: Leadership in the Army and defence departments of the governments. Participative leadership encourages collective decision and mutual trust building to improve and improvise outcome. The leadership ensures effective communication with the employees with shared vision of the new strategy. It thus, promotes better understanding among the employees for easy adaptability to change (Tannenbaum & Schmidt, 1973). It is mainly focused on knowledge and skills of the employees and exploits them to achieve organizational goals. Examples: IT industries, tourism industries. Delegative leadership is hugely popular in organizations that thrive on hierarchical structure of delegation of authority. In this type of leadership, employees have the freedom to make decision about the way the target is to be achieved and complete the work without any interference from the leadership. Examples: Design of show-windows and show-cases where the designers are given free hand to display the articles to maximize attraction of the public to the shop. Nutt (1990) believes that initiative in decision making and flexibility of approach are vital part of leadership as a manager’s decision styles significantly impacts strategic choices. The different contextual factors vis-à-vis size, technology, environment, diversification and globalization are vital elements that have significant impact on the managerial decision making. Hence, leadership facilitates easy adaptability to changing equations thereby, recognize the wide scope of emerging opportunities. Scholars argue that countries which have been under totalitarian regime have huge problems with managerial leadership and are significantly impacted by wide ranging issues like socio-political paradigm, historical aspects, geographical boundaries etc (Luthans and Riolli, 1997; Iankova, 1998; Littrell & Valentin, 2004). The organizational leadership lacks effective decision making and hesitates in promoting collective decision making that thrives on creative inputs. Thus, central and eastern European countries like Germany find it difficult to convert fully into market driven economies which are supported by public sector companies. At the same time, Prince, CEO of Citigroup is an exemplary leader. When he took over the stewardship of Citigroup, it was under tremendous pressure from the Federal Regulation Authority and had huge demoralizing repercussions from the event of Japan and MTS. Under his leadership, he created visions and goals and inspired the workforce to work towards achieving them. By introducing unique Citigroup culture of shared responsibility and improving communication, Prince, not only provided an intangible stability among the employees and facilitate integration with the system, but his leadership style also encouraged collective vision of the organization and provided the necessary impetus to the employees to strive towards it. (536) Negotiation Business negotiation is intrinsic part of market strategy. They are broadly defined as dialogues between two business partners/ union to resolve differences in opinion and perspectives regarding various issues, vis-à-vis financial outcome, HR, terms and conditions, scope etc. so that each comes out to be the winner. Negotiations primarily involve four major steps: Preparation; exchange task related information; persuasion; and concession and agreement. 4.1 Preparation Preparation involves major three steps: profile development of target countries; identification of main variables; and negotiation issues and interests. 4.1.1 Profile development Profile development of business partners from different countries helps to determine the variables and factors which need to be understood and addressed accordingly for fruitful negotiations. 4.1.2 Variables in negotiations Various scholars agree that various factors influence business negotiation. Usunier (1996) found that factors like language, value system, communication, institutional and legal system etc. have strong impact on success or failure of business negotiations. National cultures are important variables to determine the negotiator’s assumptions and thoughts which help to form business strategy and behavioural pattern (Cohen, 1993). Hofstede (1984) says that culture is important aspect that defines one’s values and beliefs that are carried through generations and distinctly characterize one’s nationality, ethnicity, behaviour etc. Indeed, awareness of socio-political paradigms and legal system also greatly impact negotiation modalities and facilitate setting up of realistic goals. 4.1.3 Negotiation Issues and Interests Apart from financial considerations as major interest, the international business negotiations are also greatly influenced by socio-political stability. Mutual trust, cultural noise constituting diversity issues, translation and interpretation and national character act as vital factors that give distinct identity to the business proposal (Fisher, 1980). The awareness of host country’s legal framework therefore, greatly helps to understand and exploit business imperatives in promoting mutual interests. 4.2 Exchange task related information Strategic goals and objectives are important business paradigms which promote expansion of business interests across the globe. Thus, business proposal and exchange of related information becomes integral part of business negotiations. These are important business documents or information that state well defined business goals and objectives to exploit business potential of the region. Exchange of information regarding business interests provides the partners with business details and each party then, tries to get maximum leverage for its benefits and interests through negotiations. 4.3 Persuasion This is important part of negotiation skills and mainly involves diplomacy and understanding of mutual values. Understanding of socio-psychological needs and requirements of the prospective business partner is an important aspect of business negotiations. Kublin (1995) asserts that globalization has forced the global players to incorporate the modules of international business negotiations as integral part of the corporate policy and lack of knowledge regarding ‘culture and cultural competencies’ have remained the biggest hindrance to successful international business negotiation. Through effective communication, differences are resolved and common goals are achieved. 4.4 Concession and Agreement Emerging markets can be defined as the new area with high income and where the demand for the product can be created with relative success. Understanding of cross cultural values facilitates exploitation of huge business opportunities in emerging markets like India, China etc.. Awareness of legal constraints help to sort out hurdles which could adversely impact the running of the business in the host country. Once the negotiations are finalized, the finer points of concessions and agreement should be drafted and contract signed. China China offers to be a goldmine of opportunities for the West and the wide scope of business interests, not only make it a strategic business partner but the diversity of culture makes it a highly interesting study. While on one hand, it offers business opportunities, the path to successful business alliance is not so smooth. The socio-cultural value systems are vastly different and business practices are very sensitive to behavioural pattern and intrinsically linked to their socio-cultural value system. America Americans are very professional in their business deals and money and punctuality are their priority. Building personal relationship in business environment is strictly not promoted. They like to adhere to schedules and go through legally defined business contracts in toto. (675) Issue in global management - Work force diversity The globalization has ushered in a huge database of human capital whose potential needs to be exploited to realize one’s own vision and mission. The contemporary times have redefined the business processes and business houses are becoming less rigid and changing their business and market strategy as per the socio- economic compulsions of the region. The workforce is increasingly being looked as resource that can be tapped to improve and improvise the performance of the organization in the fiercely competitive business setting. Indeed, changing values necessitate development of a new social order which would not only embrace multi cultural values but help forge a universal bond that would transcend race and religious boundaries. Thus, managing diversity has become a crucial issue with the businesses which needs to be addressed urgently if they want to maintain competitive edge over their rivals. It is, therefore, important that HR leaders look beyond the criteria of race, nationality and colour of their employees and include diversity in their core strategy so as to exploit their vast potential. Another important factor in international business is the socio-political paradigm and the federal legislation with regard to employment and employees’ rights. The organizations need to conform to the state laws of employment and corporate governance gives them an opportunity to promote transparency in their work culture and look after the welfare of their workforce through affirmative actions. The currents times have made it imperative for managerial leadership to promote diversity in their workforce and incorporate dynamic HR strategy that would be able to adapt to the changing equations of the business compulsions and help give the organization a competitive advantage. If the employers do not meet the goals of the affirmative actions and create conducive environment for diversity, they are liable to be sued by the affected party and stringent actions may also be taken by the state against the management. A&F1 is a major American lifestyle clothing store with a history of more than 100 years but had earned lots of notoriety for its racist outlook and derogatory and often sexist comments on its apparels. In 2005, González v. Abercrombie & Fitch, was the most widely publicized lawsuit that had exposed the worst discriminatory practices of A&F in its employment and work environment (A&F lawsuit, 2005). The court had awarded $40 million settlement for to the people who had suffered discrimination. The beneficiaries were African-Americans, Asian immigrants, Latinos and women applicants or workers who were blatantly humiliated and discriminated in the workplace because of their colour, race or gender. But some countries like New Zealand, managing diversity is not ethically correct. Their assertion is primarily based on the fact that the American concept of diversity and affirmative actions promote extinction of culturally rich minorities like American Indians in America and Maori and Pakeha in New Zealand (Jones, 2000). Indeed, the concept of managing diversity is modelled on leadership of the dominant class. ‘The danger for both Maori and Pakeha women is that they end up imitating them’. 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