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"What are some of the critical ethical challenges to firms competing in the global

economy?"

Name: Aniket Ashok Gawande

Roll Number: 2021PGP197

Section: D

Indian Institute of Management, Shillong

Course number: Strategic Management

Instructor: Veeresh Sharma

Due Date: 03-02-2022

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Abstract

All aspects of business management and operations in a business organization are

covered by the concept of ethics in business decisions. There is always the question of

what an organization's ultimate structure will be; this is important since it will aid in the

smooth production of goods and services. In a global marketplace, ethical challenges are

bound to occur, and multinational corporations are no exception. On the contrary, an

organization's positive practices are extremely significant (Etzioni, 1988, Kotter and

Heskett, 1992). This would generally improve the image of such a firm because they have

an advantage over competitors in a highly competitive market. Here are some of the

critical issues which a global firm generally faces and how it impacted their business.
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  Critical ethical challenges to firms competing in the global economy

Encouragement of cross-border movement of goods in form of products, technology,

information, and jobs is termed globalization [1]. Globalization permeates not just

national boundaries but also cultures in search of business opportunities. While we may

argue that globalization is a strategy for seeking opportunities everywhere in the world,

companies optimize their business activities in the nations where it operates so these

global enterprises have to make specific decisions in order to stay ahead of their

competitors. A global company competing in a worldwide business must be responsive to

local market requirements to some extent. Similarly, a global corporation competing in a

multi-domestic industry cannot overlook possibilities to use resources at its disposal to its

very advantage, and hence each firm must select which of its cooperative functional

activities should be performed were to what extent and at what cost. The twenty-first

century has brought in changes that have made it unescapable for businesses to run their

operations in a socially responsible manner for the benefit of all stakeholders, and at the

same time, decision-makers should act ‘ethically’. What exactly is ethics? How do we

define the dimension of ethics? What is business-related ethical behavior? Standard

definitions of ethics have typically included phrases such as 'the science of the ideal

human character' or 'the science of moral duty” (Rushworth Kidder). It can also be

defined as the moral standards that represent society's views on what constitutes right and

wrong behavior by a person or a community. It is also true that the values of one

individual group or society may differ from those of another individual group, group, or

society. Ethical standards are thus the result of a process of defining and clarifying the

nature and content of human relationships, rather than a universally accepted norm.
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Ethics is becoming a more important component of corporate business organizations

around the world. The term "business ethics" refers to a set of moral ideals, norms, and

codes of behavior that apply to businesses. The ethical difficulties that may develop in

the corporate context are numerous, and they can be understood in any way that

organizations wish. As previously stated, there is no internationally recognized code, and

it varies by country as a result it becomes a little difficult to pinpoint unethical behavior

of companies. The purpose of this paper is to define some basic dimensions which are

generally accepted elements of ethical behavior. Ethical Challenges Following are the

critical challenges that a firm faces while operating globally

1. Workplace diversity Workplace diversity refers to the wide range of variances that

exist among employees in a company.Not only does diversity refer to how people

identify themselves, but it also refers to how they are viewed by others. Diversity in the

workplace includes race, gender, ethnic groups, age, religion, sexual orientation,

citizenship status, military service, mental and physical disorders, and other important

differences amongst people. Zinnov, a global management consulting firm, released the

findings of an in-depth study titled "Zinnov-Intel India Gender Diversity Benchmark" in

collaboration with Intel India as part of an industry initiative called Be-WISE (women

innovators, social leaders, and entrepreneurs), which aims to accelerate women's

inclusion in the workplace. The study looked at 60 organizations from India's business

ecosystem, including Global Capability Centers (GCCs), technology service providers,

and others. entrepreneurs and Indian companies to have a better understanding of the

present diversity landscape and to establish critical practices for improving diversity. It

also examined gender diversity statistics as well as other organizational policies and
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practices to provide a full picture of women in corporate India. In corporate India, women

make up 30% of the workforce, with non-technical occupations accounting for 31% and

technical roles accounting for 26%, respectively. While only 11% of senior female

executives are members of the ecosystem, junior and mid-level executives perform

slightly better at 38% and 20%, respectively. When it comes to gender diversity, the

study discovered that geography counts. With 34 percent of female employees,

Bengaluru has the most gender diversity in the workplace, followed by Mumbai with

34%, which has 33% variety, and Pune, which has 32%. Tier I cities have a gender

diversity of 31%, whereas Tier II and Tier III cities have a gender diversity of 25% [2]

2. Sustainability in Business A sustainable business plan aims to have a positive impact

on one or both of these areas, thereby helping to solve some of the world's most pressing

problems. The worldwide concerns that sustainable business is as follows: • Changes in

the climate • Inequality of income • Depletion of natural resources • Concerns about

human rights • Working conditions that are fair Pollution, racial injustice, and gender

inequality are all issues that need to be addressed. Although it may appear so, business

sustainability is not solely altruistic. You can't use business to accomplish good in the

world if you're not doing well financially, as Harvard Business School Professor Rebecca

Henderson points out in the online course Sustainable Business Strategy. Doing well and

doing well are inextricably linked, and effective business strategies combine the two

Sustainability initiatives can contribute to an organization's overall success in addition to

achieving social and environmental change. Spending more money on sustainable

business practices may seem contradictory in terms of increasing a company's

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profitability, yet studies show that the most sustainable organizations are also the most

successful.

Nike and Long-Term Transformation

The garment industry is a sophisticated one, with many different supply chains. Each link

in the chain necessitates massive consumption and puts a strain on our carbon footprint.

The industry is responsible for 10% of worldwide carbon emissions and 25% of global

chemical usage. Toxic substances are released into our air, water, and soil as a result of

the accumulated pollution.

Nike is accountable for the well-being of its employees and the communities in which

they live, as it operates 566 factories and employs over a million people [3]. The

corporation faced negative charges about hard labor and industrial conditions in the late

1990s. Since then, Nike has undergone one of the most significant image transformations

in the last decade. And an emphasis on sustainability has been one of the ways to get

there. The Sourcing & Manufacturing Sustainability Index (SMSI), a tool used to

evaluate factories on health, safety, and environmental dimensions, is one example of

how the corporation overhauled its management tools. Nike hopes to have all of its

factories achieve the highest needed SMSI scores by 2020 [4].

Nike has reconfigured its supply chain to embrace sustainability as a strategic growth

engine by reducing its environmental footprint, boosting product innovation, and

modernizing production.

Nike turned 54 million pounds of manufacturing garbage into premium material in 2015

to reduce waste. In addition, the company lowered the amount of water used per unit in
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footwear by 43%. Nike's Closed Loop Ecosystem, a revolutionary technique for

developing, finishing, and processing materials, was launched through these projects.[5]

3.Work force exploitation

Many a time when a Global company is working in some third world country, it keeps

poor working condition to cut costs and gain advantage in the market. Global companies

such as Ralph Lauren has been alleged to have exploited worker from India where

women were forced to work until 3 am in night to complete orders and wake up at 5 am

for another full day of work [8]. Human rights perspective defines exploitation as actions

which violate principles of human rights, dignity, and fairness, which hold regardless of

what would have occurred otherwise [9]. Many such cases were brought to light in

operation of Tesco supermarket chain where basic human needs of toilet break to lunch

breaks were not given to workers. While competing globally companies do not comply

with standard to cut cost which make the life of workers miserable.

4.Bribery and corruption

Global companies comply with corruption rules and law in home country but in countries

where bribery and corruptions are widespread, they indulge in such practices. Companies

pay money to government officials, influential people involved in terms of fictitious

consulting charges to get unfair advantage [10]. One such global company is Diageo

which was accused of paying more than 1.7 million dollars as bribe to Indian

Government official which were responsible for authorizing sales of liquor in India, from

2003 to 2009.
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5. Outsourcing

The practice of contracting or using services of external organizations to do a particular

function has become very common with a major advantage of cutting costs but it has

many ethical implications in terms of labor rights, privacy and safety issues. The

company outsourcing the work to various contractors do not define properly the

boundaries and operational feasibilities which give them room to deny if any error of

maleficence occurs at the hands of contractors. The major ethical challenges involve

human rights violations, cultural difference, abuse of environmental laws, confidentiality

and safety issues. Indian BPO workers have been on receiving end of racial abuse by

foreign clients, who think of Indian worker as job thieves. Western clients behave

inappropriately with BPO workers hurtling abuses [11].

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Conclusion

It is critical that MNCs, as well as smaller businesses doing business abroad, have a

comprehensive, uniform, and general code of conduct. The growth of global trade among global

partners and the rise of foreign direct investment necessitate that everyone works toward a better

understanding and a consistent set of precepts on which to base decisions, which can help

promote and advance a variety of businesses and social contacts around the world. The end

outcome should be to help trade, increase profits, and improve people's living standards.
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References

[1] Bundaleska. E, Dimitrova. M, Naumovski V. (2013) Outsourcing, Can We Go Wrong?

International MANU and ECPD Conference: New Knowledge for New Development

[2] C. Fritz Foley, James Hines, and David Wessel (2021). Global Goliaths - Multinational

Corporations in the 21st Century Economy. The Brookings Institution.

[3] Jason Fernando (2022, January 01) Globalization.

https://www.investopedia.com/terms/g/globalization.asp

[4] James Conca (2015, December 3). Making Climate Change Fashionable - The Garment

Industry Takes On Global Warming. Forbes.

https://www.forbes.com/sites/jamesconca/2015/12/03/making-climate-change-

fashionable-the-garment-industry-takes-on-global-warming/?sh=55738b0c79e4

[5] https://digital.hbs.edu/platform-rctom/submission/nike-is-it-the-sustainability-transformation-

of-the-decade/#:~:text=Nike%20set%20a%20prime%20example%20of%20using

%20sustainability,emission%20cuts%2C%20constrained%20supply%20of%20cotton

%20and%20leather%29.

[6] Leon Mexico, 5th World Footwear Congress. Shoes & Accessories (Factiva), Market Trends:

Footwear Consumer 2030 – Incorporating Global Trends to Foresight Footwear Market

[7] Nike, Inc., The manufacturing map of global factories, (August 2017)

http://manufacturingmap.nikeinc.com/

[8] PTI. (2017, November 26). Abuse and stress: What Indian BPO workers have to undergo on

a daily basis. Economic Times. https://economictimes.indiatimes.com/jobs/abuse-and-

stress-what-indian-bpo-workers-have-to-undergo-on-a-daily-basis/articleshow/

61806162.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
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[9] Rajini Vaidyanathan (2020, November 17) “Indian factory workers supplying major brands

allege routine exploitation”. https://www.bbc.com/news/world-asia-54960346

[10] Teichmann, F. (2019) Methods of bribery in multinational corporations. Journal of Financial

Crime Vol. 26 No. 4. https://doi.org/10.1108/JFC-05-2018-0049

[11] TV Mahalingam and Shantanu Nandan Sharma (2011, September 15). MNCs corruption:

As Indian cos go global, anti-graft laws likely to affect them in different countries.

Economics Times. https://economictimes.indiatimes.com/news/company/corporate-

trends/mncs-corruption-as-indian-cos-go-global-anti-graft-laws-likely-to-affect-them-in-

different-countries/articleshow/9509862.cms?

utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Words count excluding reference is 1761