INTERNATIONAL BUSINESS & TRADE MARCH 2023

ETHICS,
CORPORATE SOCIAL RESPONSIBILITY,
& SUSTAINABILITY
B U N A
& NA
HA R E

CHAP 5
LEARNING OBJECTIVES

TABLE OF CONTENT
UNDERSTAND THE ETHICAL, CORPORATE SOCIAL RESPONSIBILITY, AND SUSTAINABILITY
ISSUES FACED BY INTERNATIONAL BUSINESSES.
1

RECOGNIZE AN ETHICAL, CORPORATE SOCIAL RESPONSIBILITY, AND OR SUSTAINABLITY DILEMMA

2

IDENTIFY THE CAUSES OF UNETHICAL BEHAVIOR BY MANAGERS AS THEY RELATE TO

BUSINESS, CORPORATE SOCIAL RESPONSIBILITY OR SUSTAINABILITY
3

DESCRIBE THE DIFFERENT PHILOSOPHICAL APPROACHES TO BUSINESS ETHICS THAT APPLY

4 GLOBALLY

EXPLAIN HOW GLOBAL MANAGERS CAN INCORPORATE ETHICAL CONSIDERATIONS INTO THEIR
5 DECISION MAKING IN GENERAL, AS WELL AS CORPORATE SOCIAL RESPONSIBILITY AND
SUSTAINABILITY INITIATIVES.
 01

Understand
THE ETHICAL, CORPORATE SOCIAL RESPONSIBILITY,
AND SUSTAINABILITY ISSUES

FACED BY INTERNATIONAL BUSINESSES

 INTRODUCTION

ETHICS BUSINESS ETHICS ETHICAL STRATEGY

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.
are the accepted principles of is a strategy, or course of
right or wrong governing the action that does not violate
conduct of business people. these accepted principles.

MANY ETHICAL ISSUES IN INTERNATIONAL BUSINESS ARE ROOTED IN THE FACT THAT POLITICAL SYSTEMS,
THE LAW, ECONOMIC DEVELOPMENT, AND CULTURE VARY SIGNIFICANTLY FROM NATION TO NATION.

IN THE INTERNATIONAL BUSINESS SETTING, THE MOST COMMON ETHICAL ISSUES INVOLVE
EMPLOYMENT PRACTICES, HUMAN RIGHTS, ENVIRONMENTAL REGULATIONS, AND MORAL
OBLIGATION OF MULTINATIONAL CORPORATIONS.
EMPLOYMENT
PRACTICES
a term referring to the patterns that may be observed in a
company’s hiring and workplace conditions.

UNLAWFUL EMPLOYMENT PRACTICES

are any actions taken by an employer that are discriminatory

or otherwise illegal.
This includes any form of discrimination based on race, color,
religion, sex, national origin, age, disability, or genetic
information.
It also includes any form of retaliation against an employee
for filing a complaint or participating in an investigation.
Unlawful employment practices can also include any form of
harassment or intimidation in the workplace.
 01

NIKE’S ETHICAL EVOLUTION: FROM SWEATSHOP CONTROVERSY

TO CORPORATE RESPONSIBILITY
Nike faced protests due to poor working conditions at subcontractors.
CBS report revealed young women working with toxic materials for 20 cents/hour in Vietnam.
Living wage in Vietnam was $3/day, unachievable without substantial overtime.
Nike, not breaking laws, faced ethical concerns about "sweatshop labor."
Demonstrations and boycotts ensued, prompting Nike to reevaluate policies.
Nike established a code of conduct for subcontractors and implemented annual monitoring.
The case raises questions about multinational firms tolerating poor working conditions abroad.
The importance of establishing minimal standards, regular auditing, and corrective action is emphasized.
HUMAN RIGHTS
Human rights are universal. This means that every
person around the world deserves to be treated
with dignity and have their interests considered
equally.

HUMAN RIGHTS ISSUES IN WORKPLACE

Basic human rights still are not respected in a

large number of nations
Rights taken for granted in developed nations,
such as freedom of association, freedom of
speech, freedom of assembly, freedom of
movement, and freedom from political repression,
for example, are not universally accepted
worldwide.
 02
SHATTERED RIGHTS: APARTHEID’S DARK LEGACY ON
WORKPLACE HUMAN RIGHTS IN SOUTH AFRICA
Apartheid in South Africa lasted until 1994, involving
white rule and racial segregation.
Apartheid policies included denying political rights to the
nonwhite majority, enforcing segregation, and limiting job
opportunities for Blacks.
Western businesses operated in South Africa, indirectly
supporting apartheid, despite criticism.
In the late 1970s and early 1980s, some companies,
including General Motors (GM), began changing their
policies.
GM adopted the Sullivan principles, promoting passive
resistance to apartheid laws in South African operations
and supporting abolition efforts.
Sullivan's principles were widely adopted by U.S. firms,
initially ignored by the South African government to
maintain foreign investments.
After a decade, Sullivan realized more action was needed,
leading to divestments by companies like Exxon, IBM,
and Xerox from their South African operations.
State pension funds refusing to hold stock in such
companies and economic sanctions contributed to the end
of white minority rule and apartheid.
Nelson Mandela's 1994 election marked a turning point,
partially attributed to the ethical stance of multinational
corporations.
The ethical stance of these corporations is argued to have
played a role in improving human rights in South Africa.
 IS IT ETHICAL FOR MULTINATIONAL
CORPORATIONS TO DO BUSINESS IN THESE
REPRESSIVE COUNTRIES?
As an answer, it is often argued that inward investment by a multinational can be
a force for economic, political, & and social progress that ultimately improves
the rights of people in repressive regimes.

Investment in China, for example, is frequently justified on the grounds that although
China's human rights record is often questioned by human rights groups and although the
country is not a democracy, continuing inward investment will help boost economic growth
and raise living standards.

THERE IS A LIMIT TO THIS ARGUMENT. AS IN THE CASE OF SOUTH

AFRICA, SOME REGIMES ARE SO REPRESSIVE THAT INVESTMENT
CANNOT BE JUSTIFIED ON ETHICAL GROUNDS.

Myanmar has been ruled by a military dictatorship since 1962. The country had one of the
worst human rights records globally. In the mid-1990s, numerous companies exited Myanmar due
to severe human rights violations, deeming business there unethical. Critics argue that
Myanmar's small economy makes divestment less economically impactful for companies compared
to divesting from larger nations like China.

ENVIRONMENTAL
POLLUTION
Ethics, social responsibility, and
sustainability issues can arise when
environmental regulations in host nations are
inferior to those in the home nation.
Developed nations enforce stringent regulations
on pollution and workplace safety, while
critics contend that the absence of comparable
regulations in developing nations allows
multinational operations to contribute to
higher pollution levels.
SHOULD A MULTINATIONAL CORPORATION
FEEL FREE TO POLLUTE IN A DEVELOPING
NATION?
TRAGEDY OF COMMONS
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.
The phenomenon was first named by Garrett Hardin
when describing a particular problem in sixteenth-
century England.
Commons, large open areas freely accessible for
pasture, were utilized by the poor to supplement
their incomes by grazing livestock; however, the
unregulated increase in livestock led to
overgrazing, degradation of the commons, and the
loss of a vital income supplement.
This issue is taking on greater importance as
concerns about human-induced global warming move to
center stage.
Climate scientists assert that human industrial and
commercial activities are elevating atmospheric
carbon dioxide levels, a greenhouse gas causing
global warming by reflecting heat to the Earth's
surface, prompting societies worldwide to impose
restrictions on carbon dioxide emissions from
industrial and commercial processes.
 "LOCKHEED'S BRIBERY
SCANDAL"
Lockheed's president, Carl
CORRUPTION
Kotchian, made a $12.6 million
payment to Japanese agents and
officials to secure an order for
Lockheed's TriStar jet from Nippon
Air.
U.S. officials charged Lockheed
with falsification of records and
Corruption has been a
tax violations upon discovering the
problem in almost every payments.
society in history and it Despite such payments being
considered acceptable business
continues to be one today. practice in Japan, the revelations
caused a scandal.
The involved government ministers
There always have been and
faced criminal charges, one
always will be corrupt committed suicide, and the Japanese
government officials. government fell in disgrace.
The incident outraged the Japanese
people, challenging the notion that
International businesses such payments were an accepted way
can gain and have gained of doing business in Japan.
The payment was revealed as a
economic advantages by
bribe, aimed at securing an order
making payments to those that could have gone to another
officials. manufacturer, such as Boeing.
Kotchian's actions were deemed
unethical, and claiming the payment
as an "acceptable form of doing
business in Japan" was considered
self-serving and incorrect.
The Lockheed case led to the
creation of the Foreign Corrupt
Practices Act (FCPA) in the
U.S., prohibiting bribery to
foreign government officials for
business gain. Initially
criticized for potential
competitive disadvantages, the
FCPA was later amended to allow
"facilitating payments" – small
payments to ensure standard
treatment from a foreign
government, overcoming potential
obstructions by officials.
Following the U.S. example, the
Organization for Economic
Cooperation and Development
(OECD) member states' trade and
finance ministers adopted the
Convention on Combating Bribery
of Foreign Public Officials in
International Business
Transactions in 1999. The
convention mandates
criminalizing the bribery of
foreign public officials but
excludes facilitating payments
meant to expedite routine
government actions.
 03

CORPORATE APPROACHES Many multinationals, including BP and Dow Corning,

have adopted a zero-tolerance policy towards facilitating
TO FACILITATING payments, while others maintain more nuanced
approaches. Dow Corning, initially allowing for minimal
facilitating payments in certain situations, has evolved

PAYMENTS: FROM NUANCED towards a stronger zero-tolerance stance. The shift

reflects the challenges in distinguishing between
facilitating payments and bribes, as illustrated by cases

POLICIES TO ZERO-
like Con-way's FCPA violations for what could small
payments to customs officials in the Philippines. In total,
Con-way distributed some $244,000 to these officials
who were induced to violate customs regulations, settle
TOLERANCE disputes, and not enforce lines for administrative
violations
 02

Recognize
AN ETHICAL, CORPORATE SOCIAL RESPONSIBILITY,
AND SUSTAINABILITY DILEMMAS
 For example, imagine that a visiting American executive finds that a

ETHICAL
foreign subsidiary in a poor nation has hired a 12-year-old girl to work
on a factory floor.

Appalled to find that the subsidiary is using child labor in direct

DILEMMAS
violation of the company's own ethical code, the American A young girl
making cigarettes in Bagan, Myanmar. instructs the local manager to
replace the child with an adult. The local manager dutifully complies.

An ethical dilemma is a problem in the The girl, an orphan, who is the only breadwinner for herself and her
decision-making process between two six-year-old brother, is unable to find another job, so in desperation
possible options, neither of which is she turns to prostitution.
absolutely acceptable from an ethical
perspective.
Two years later, she dies of AIDS. Had the visiting American understood
the gravity of the girl's situation, would he still have requested her
Multinational corporations face ambiguous replacement? Would it have been better to stick with the status quo and
ethical obligations regarding employment allow the girl to continue working?
conditions, human rights, corruption, and
environmental pollution. While there is no Probably not, because that would have violated the reasonable
universal agreement on accepted ethical
prohibition against child labor found in the company's own ethical code.
principles globally, increasing marketplace
pressures from stakeholders are pushing
companies to be more transparent in their
ethical decision-making, with cultural
WHAT THEN WOULD HAVE BEEN THE RIGHT THING TO
perspectives influencing interpretations of what
is considered ethical in international business. DO?
 03

Identify
THE CAUSES OF UNETHICAL BEHAVIOR BY MANAGER
AS THEY RELATE TO BUSINESS, CORPORATE SOCIAL
RESPONSIBILITY, OR SUSTAINABILITY
 02

SIX DETERMINANTS OF ETHICAL BEHAVIOR

Personal Ethics
Decision-making processes
Organizational culture
Unrealistic Performance Goals
Leadership
Societal Culture
 02

PERSONAL ETHICS
The generally accepted principles of right and wrong
governing the conduct of individuals. The personal
ethical code guides our behavior come from a number
of sources, including our parents, schools, religion, and
the media.
 02

DECISION-MAKING PROCESS
Business people sometimes do not realize they are behaving unethically,
primarily they simply fail to ask “Is this decision or action ethical?” Instead, they
apply straightforward business calculus to what they perceive to be business
decisions, forgetting that the decision may also have important ethical dimension,

Two Assumption:
1. Too often it is assume that individuals in the workplace make ethical
decisions in the same war they would if they home
2. Too often it is assumed that people from different cultures make ethical
decisions following a similar process.
 02

ORGANIZATIONAL CULTURE
Refers to the values and norms shared among employees of an
organization.

Value - abstract ideas about what a group believes to be good, right.

and desirable

Norms - are social rules and guidelines that prescribe

appropriateness in particular situations.
 02

UNREALISTIC PERFORMACE GOALS

The pressure from the parent company to meet unrealistic
performance goals that can only be attained only by cutting corners
or acting in an unethical manner. The combination of an
organizational culture that legitimizes unethical behavior, or at least
turns blind eye to such behavior, and unrealistic performance goal
may be particularly toxic.
 02

LEADERSHIP
Leaders help establish the culture of an organization, and they set the
example, rules, and guidelines that others follow, as well as the
structure and processes for operating both strategically and daily
operations.
 02

SOCIETAL CULTURE
the culture that a particular society follows to interact in
such a way to share a common interest
 04

Describe
THE DIFFERENT PHILOSOPHICAL APPROACHES TO
BUSINESS ETHICS THAT APPLY GLOBALLY
 STRAW MEN

The straw men approach to business ethics is

raised by scholars primarily to demonstrate that
they offer inappropriate guidelines for ethical
decision making in a multinational enterprise. The
approaches have some inherent value, but all are
unsatisfactory in important ways.
 STRAW MEN

Four Approaches:
The Friedman Doctrine
Cultural Relativism
The Righteous Moralist
The Naive Immoralist
 THE FRIEDMAN DOCTRINE
Nobel Prize-winning economist Milton Friedman
Basic position “the social responsibility of business
is to increase profit” so long as the company stays
within the rules of law.
He explicitly rejects the idea that businesses should
undertake social expenditures beyond those
mandated by the law and required for the efficient
running of a business.
 CULTURAL RELATIVISM
The belief that ethics are nothing more than the
reflection of a culture - all ethics are culturally
determined - and that accordingly, a firm should
adopt the ethics of the culture in which it is
operating.
This approach is often summarized by the maxim
when in Rome, do as the Romans do.
Implicitly rejects the idea that universal notions of
morality transcend different cultures.
 THE RIGHTEOUS MORALIST
Claims that a multinational’s home country
standards of ethics that are the appropriate ones
for companies to follow in foreign countries.
The main criticism of the righteous moralist
approach is that its proponents go too far. While
there are some universal moral principles that
should not be violated, it does not always follow that
the appropriate thing to do is adopt home-country
standards.
 THE NAIVE IMMORALIST

Asserts that if the manager of a multinational sees

that firms from toher nations are not following
ethical norms in a host nation, that manager should
not either.
 UTILITARIAN AND KANTIAN ETHICS
These approaches were developed in the eighteenth
and nineteenth centuries.

Holds that the moral worth of actions or practice is

determined by consequences. An action is judged
desirable if it leads to the best possible balance of
good consequences over bad consequences.
 UTILITARIAN AND KANTIAN ETHICS
Utiliarianism recognizes that actions have multiple
consequences, some of which are goods in a social
sense and some of which are harmful.

Kantian ethics is based on the philosophy of

Immanuel Kent. It holds that people should not be
treated as ends and never purely as means to the
ends of others.
 RIGHT THEORIES

Developed in the twentieth century

Recognized that human beings have fundamental

rights and privileges that transcend national
boundaries and cultures.
 JUSTICE THEORIES
Attributed to philosopher John Rawls

Focuses on the attainment of a just distribution of

economic goods and services.

Just distribution is one that is considered fair and

equitable.
 05

Explain
HOW GLOBAL MANAGERS CAN INCORPORATE ETHICAL
CONSIDERATIONS INTO THEIR DECISION MAKING IN GENERAL,

AS WELL AS CORPORATE SOCIAL RESPONSIBILITY AND

SUSTAINABILITY INITIATIVES
7 ACTIONS FOR INTERNATIONAL BUSINESSES AND
MANAGERS TO ENSURE ETHICAL CONSIDERATIONS
IN DECISIONS:
FAVOR HIRING AND PROMOTING
1 PEOPLE WITH A WELL-GROUNDED 5 DEVELOP MORAL COURAGE
SENSE OF PERSONAL ETHICS

BUILD AN ORGANIZATIONAL CULTURE MAKE CORPORATE SOCIAL

AND EXEMPLIFY LEADERSHIP 6 RESPONSIBILITY A CORNERSTONE O
2
BEHAVIORS THAT PLACE A HIGH VALUE ENTERPRISE POLICY
ON ETHICAL BEHAVIOR

PUT DECISION-MAKING PROCESES IN 7 PURSUE STRATEGIES THAT ARE

PLACE THAT REQUIRE PEOPLE TO SUSTAINABLE
3
COMSIDER THE CHICAL DIMENSION OF
BUSINESS DECISIONS.

INSTITUTE ETHICS OFFICERS IN THE

4
ORGANIZATION
HIRING AND
PROMOTION
How do you know that someone has a poor sense of personal
ethics? In our society. we have an incentive to hide a lack of
personal ethics from public view. Once people realize that you
are unethical, they will no longer trust you.

HOW CAN BUSINESSES PREVENT HIRING INDIVIDUALS WITH

CONCEALED POOR PERSONAL ETHICS, GIVEN THE MOTIVATION
FOR DISHONESTY DURING THE HIRING PROCESS?

Businesses can give potential employees psychological tests to

try to discern their ethical predispositions.

They can check with prior employers or other employees regarding

someone's reputation (e.g. by asking for letters of reference
and talking to people who have worked with the prospective
employee).
 ORGANIZATIONAL CULTURE &
LEADERSHIP
To foster ethical behavior, businesses need to build an organizational
culture that values ethical behavior. Three things are particularly important
in building an organizational culture that emphasizes ethical behavior.

ONE TWO THREE

Having articulated values in a
First, the businesses must
code of ethics or some other
explicitly articulate values
document, leaders in the
that emphasize ethical
business must give life and
behavior.
meaning to those words by
repeatedly emphasizing their
importance and then acting on
them.
Finally, building an
organizational culture that
places a high value on ethical
behavior requires incentive and
reward systems. including
promotions that reward people
who engage in ethical behavior
and sanction those who do not.
 ONE
Rights Theories
DECISION
Rights theories, such as
deontological ethics, emphasize
the importance of respecting and
MAKING
upholding individual rights in the
decision-making process within
an ethical corporate setting.
PROCESSES
In this context, the focus is on
recognizing and safeguarding the
fundamental rights of
stakeholders, including
employees, customers, and the
Business people must be
wider community.
able to think through the
ethical implications of Decision-making is guided by
decisions in a systematic principles that prioritize the
protection of these rights, even if
way. it means sacrificing certain
outcomes or interests for the
greater goal of respecting
individuals' inherent rights and
dignity.
TWO
Rawl’s Theory of
Justice
John Rawls' theory of justice, as
outlined in his work "A Theory of
Justice," suggests that fairness
and justice should be the guiding
principles in the decision-making
process.
In the context of ethical corporate
decision-making, Rawlsian justice
implies that decisions should be
made impartially, without
knowledge of the specific
interests, status, or advantages of
any particular group or individual
within the company.
This approach seeks to ensure
fairness and equity in the
distribution of benefits and
burdens across different
stakeholders, including
employees, shareholders, and the
broader community.
 THREE
Have “YES” as an answer
DECISION
to the following
questions:
Does my decision fall within the
MAKING
accepted values or standards that
typically apply in the
organizational environment (as
PROCESSES
articulated in a code of ethics or
some other corporate statement)?
• Am I willing to see the decision
communicated to all stakeholders
Business people must be affected by it-for example, by
able to think through the having it reported in newspapers,
ethical implications of on television, or via social media?
decisions in a systematic
• Would the people with whom I
way. have a significant personal
relationship, such as family
members, friends, or even
managers in other businesses,
approve of the decision?
FOUR
5 step process
In step I, business people should
identify which stakeholders a
decision would affect and in what
ways.
Step 2 involves judging the ethics
of the proposed strategic decision,
given the information gained in
step 1.
Step 3 requires managers to
establish moral intent.
Step 4 requires the company to
engage in ethical behavior.
Step 5 requires the business to
audit its decisions, reviewing them
to make sure they were consistent
with ethical principles, such as
those stated in the company's
code of ethics.
 ETHICAL OFFICERS
Responsible for managing their organization’s ethics and legal compliances.

They are typically responsible for:

1. Assessing the needs and risks that an ethics program must address
2. Developing and distributing a code of ethics
3. Conducting training programs for employees
4. Establishing and maintaining a confidential service to address employees’ questions
about issues that may be ethical or unethical
5. Making that the organization is in compliance with governement laws and regulations
6. Monitoring and auditing ethical conduct
7. Taking action, as appropriate, on possible violations
8. Reviewing and updating the code of ethics periodically
 MORAL COURAGE
It enables managers to walk aways from a decision that is
profitable but unethical.

Gives an employee the strength to say no to a superior who

instructs the employee to pursue actions that are unethical

Gives employee the integrity to go public to the media and blow

the whistle on persistent unethical behavior in a company
CORPORATE SOCIAL RESPONSIBILITY

Refers to the idea that business people should

consider the social consequences of economic
actions when making business decisions and that
there should be a presumption in favor of decisions
that have both good economic and social
consequences.
SUSTAINABILITY
The organization - throught its actions - does not exert
a negative impact on the ability of future generations to
meet their own economic needs and its actions imparts
long-run economic and social benefits on stakeholders.

The concept of sustainability requires that managers

should adopt what is commonly thought of as a
precautionary principle when assessing a course of
action.
ACTIVITY:
1.A term referring to the patterns that may be observed in a company’s hiring and
workplace conditions.

2. Every person around the world deserves to be treated with dignity and have their
interests considered equally.

3. Responsible for managing their organization’s ethics and legal compliances.

4.A problem in the decision-making process between two possible options, neither of
which is absolutely acceptable from an ethical perspective.

5-10. Give the 6 determinants of ethical behavior

 05

THANK YOU!
 NATIONAL DIFFERENCES

Differences
in Culture
GROUP 1: ANGELES, GAMBOA, QUIJANO
LEARNING Objectives:
LO 1: EXPLAIN WHAT IS MEANT BY THE CULTURE OF A SOCIETY
LO 2: IDENTIFY THE FORCES THAT LEAD TO DIFFERENCES IN SOCIAL CULTURE
LO 3: IDENTIFY THE BUSINESS AND ECONOMIC IMPLICATIONS OF DIFFERENCES
IN CULTURE
LO 4: RECOGNIZE HOW DIFFERENCES IN SOCIAL CULTURE INFLUENCES
VALUES IN BUSINESS
LO 5: DEMONSTRATE AN APPRECIATION FOR THE ECONOMIC AND BUSINESS
IMPLICATIONS OF CULTURAL CHANGE.
 LO1:
EXPLAIN WHAT IS
MEANT BY THE
CULTURE OF A
SOCIETY
 WHAT IS CULTURE ?
He defined culture as "that complex whole which includes knowledge, belief,
art, morals, law, custom, and other capabilities acquired by a person as a
member of society." - Edward Taylor

He defined culture as "the collective programming of the mind which distinguishes

the members of one human group from another... Culture, in this sense, includes
systems of values, and values are among the building blocks of culture." - Geert
Hofstede
They defined culture as a “system of ideas and argue that these ideas
constitute a design for living.”
- Sociologists Zvi Namenwirth and Robert Weber
 WHAT IS CULTURE ?

“Culture as a system of values and norms shared among a

group of people, which when taken together constitute a
design for living.”

Values are ideas about what a group believes to be good, right, and desirable.
Norms are the social rules and guidelines that prescribe appropriate behavior
in particular situations.
Society refers to a group of people sharing a common set of values and norms.
What is Values?
Values form the bedrock of a
culture. Values provide the context
within which a society's norms are
established and justified. They
may include a society's attitudes
toward such concepts as
individual freedom, democracy,
truth, justice, honesty, loyalty,
social obligations, collective
responsibility, gender, love, sex,
marriage, and so on.
What is Norms?
Norms are the social rules that govern
people's actions toward one another.
These norms can be subdivided into two
major categories:
1. Folkways - Folkways are the
routine conventions of everyday
life. Although folkways define the
way people are expected to
behave, violations of them are not
normally a serious matter.
What is Norms? 2. Mores - Mores are norms that are seen as
central to the functioning of a society and to
EXAMPLE: A good example of a its social life. They have much greater
folkway is people's attitude toward significance than folkways.
time. In general, people are very
aware of what time it is, the The CHAIN OF CAUSATION runs
passage of time, and the both ways. While factors such as
importance of time in the United social structure and religion clearly
States and northern European influence the values and norms of
cultures such as Germany, a society, the values and norms of
Netherlands, and the Scandinavian a society can influence social
countries (Denmark, Finland, structure and religion.
Iceland, Norway, and Sweden).
Social Structure
A society's social structure refers to its basic social organization. It indicates how a society
is organized in terms of the values, norms, and relationships that are part of its fabric. How
society operates and how people, groups, and companies treat each other both emerge
from and are determinants of, the behaviors of individuals in that specific society.

Two dimensions that are particularly important when explaining differences across
social structures (although many dimensions exist beyond these two):
1. The first is the degree to which the basic unit of a social organization is the
individual, as opposed to the group, or even company for which a person works.
2. The second dimension is the degree to which a society is stratified into classes or
castes.
The Individuals
Individualism is more than just an abstract political philosophy. In many
societies, the individual is the basic building block of social organization. This
is reflected not just in the political and economic organization of society, but
also in the way people perceive themselves and relate to each other in social
and business settings.
EXAMPLE
Western societies, particularly in the United States, place a significant
emphasis on individual achievement, where personal success is often valued
over organizational loyalty. This culture fosters a competitive environment
where individuals strive to enhance their personal brands and advance their
careers based on their own merits rather than relying solely on institutional
affiliations.
The Group
A group is an association of two or more
individuals who have a shared sense of
identity and who interact with each other in
structured ways on the basis of a common
set of expectations about each other's
behavior. Human social life is group life.
Individuals are involved in families, work
groups, social groups, recreational groups,
and potentially myriad other groups. In
contrast to the Western emphasis on the
individual, the group is the primary unit of
social organization in many other societies.
Social media has expanded the
boundaries of what is included in
group life and placed an added
emphasis on extended social
groups. Social media has unique
possibilities that affect both
individuals within a social group
and the group itself.
The Group
EXAMPLE:
In Japan, the social status of individuals has traditionally been determined
as much by the standing of the group to which they belong as by their individual
performance. In traditional Japanese society, the group was the family or
village to which an individual belonged. Today, the group has frequently come to
be associated with the work team or business organization. In a now-classic
study of Japanese society. Nakane noted how this expresses itself in everyday
life:
Rather than saying, "I am a typesetter" or "I am a filing clerk." (they are
likely to say. "I am from B Publishing Group" or "I belong to S company.
 LO2:
IDENTIFY THE
FORCES THAT LEAD
TO DIFFERENCES IN
SOCIAL CULTURE
Forces that lead to differences in
Social Culture

SOCIAL RELIGIOUS AND LANGUAGE EDUCATION

STRATIFICATION ETHICAL SYSTEM
 SOCIAL 01

Stratification
All societies are stratified on a hierarchical
basis into social categories-that is, into
social strata. These strata are typically
defined on the basis of socioeconomic
characteristics such as family background,
occupation, and income.

02
Social stratification causes social disparity
and many problems as it is an unjust
system with monopoly of power and wealth
in a particular group. It affects life
chances, lifestyles and prestige.
 4 BASIC PRINCIPLES OF SOCIAL
STRATIFICATION
1. Social
stratification is a 2. Social 3. Social 4. Social
trait of society, not a stratification stratification is stratification
reflection of carries over a generally involves not just
individual generation to the universal but inequality but also
differences. next generation. variable. beliefs.

occur through various all societies have some

characteristic of mechanisms such as form of social Beliefs also play a
society as a whole inheritance of wealth stratification, the significant role in
rather than being and property, access to specific criteria, shaping and maintaining
solely attributable to education and mechanisms, and degree stratification systems.
individual differences. opportunities, social of stratification can
networks, and cultural vary significantly from
capital one society to another.
Social Mobility
refers to the extent to which
individuals can move out of the
strata into which they are born.
Social mobility varies significantly
from society to society. The most
rigid system of stratification is a
caste system.
Caste System
is a closed system of stratification
in which social position is
determined by the family into
which a person is born, and change
in that position is usually not
possible during an individual's
lifetime. Often, a caste position
carries with it a specific
occupation.
 RELIGIOUS AND 01 RELIGION

Ethical System
defined as a system of shared beliefs and
rituals that are concerned with the realm
of the sacred

02 ETHICAL SYSTEM
refers to a set of moral principles, or
values, that are used to guide and shape
behavior.
 Common Religions in
the World

CHRISTIANITY ISLAM HINDUISM BUDDHISM CONFUCIANISM

 LANGUAGE
One obvious way in which many countries differ is the language used by the
population. By language, we mean both the spoken and the unspoken means
of communication. Language is also one of the defining characteristics of a
culture.
 EDUCATION
Formal education plays a key role in a
society, and it is usually the medium
through which individuals learn many
of the languages, knowledge, and skills
that are indispensable in a modern
society. Formal education supplements
the family's role in socializing the
young into the values and norms of a
society.
 LO3
IDENTIFY THE BUSINESS
AND ECONOMIC
IMPLICATIONS OF
DIFFERENCE IN CULTURE
 Significance
Holds paramount significance in
today's globalized marketplace
Cultural awareness fosters better
relationships with international
partners, mitigating
misunderstandings and conflicts
that may arise due to differing
cultural norms.
 Economic
01 CHRISTIANITY

Implications
Stem from its influence on cultural norms, business
ethics, and consumer behavior worldwide. Economic
effects may vary across regions and denominations
due to cultural diversity and secular influences.

02 ISLAM
Emphasizes ethical business conduct, promoting
profit-sharing over interest-based transactions and
encouraging Sharia-compliant financial products and
services.

03 HINDUISM
Hinduism's emphasis on karma and dharma influences
business ethics, promoting fairness and social
responsibility.
 Economic
04 BUDDHISM
Its emphasis on simplicity and non-materialism shapes Implications
consumer preferences towards eco-friendly and
mindful consumption patterns.

05 CONFUCIANISM
Confucian emphasis on education and meritocracy
impacts HR practices, encouraging investment in
skilled workforce development.
 LO4
RECOGNIZE HOW
DIFFERENCES IN SOCIAL
CULTURE INFLUENCE IN
BUSINESS
 Culture and Business
Of considerable importance for a
multinational corporation, or any
company-small, medium, or large-
with operations in different
countries, is how a society's culture
affects the values found in the
workplace.
 Chinese Market
For instance, when a foreign company enters the
Chinese market, it may encounter challenges in
establishing business partnerships or securing
contracts.

Local companies and individuals may

prioritize relationships with trusted
partners or acquaintances over purely
transactional interactions.
 GEERT HOFSTEDE’S 01 POWER DISTANCE

5 dimension
focused on how a society deals
with the fact that people are
unequal in physical and
intellectual capabilities.

02 INDIVIDUALISM VERSUS
COLLECTIVISM
focused on the relationship
between the individual and his or
her fellows.
 GEERT HOFSTEDE’S 03 UNCERTAINTY AVOIDANCE

5 dimension
measured the extent to which different
cultures socialized their members into
accepting ambiguous situations and
tolerating uncertainty

04 MASCULINITY VERSUS
FEMINITY
looked at the relationship
between gender and work roles.
 LONG TERM VERSUS SHORT-
GEERT HOFSTEDE’S 05 TERM ORIENTATION

5 dimension
refers to the extent to
which a culture programs its
citizens to accept delayed
gratification of their
material, social, and
emotional needs
 2 CULTURAL VALUES FRAMEWORKS
BY HOFSTEDE
The Global Leadership and
The World Values Survey
Organizational Behavior
(WVS)
Effectiveness (GLOBE)
instrument
is designed to address the a research project spanning
notion that a leader's more than 100 countries that
effectiveness is explores people's values and
contextual. It is embedded norms, how they change over
in the societal and
time, and what impact they
organizational values and
norms of the people being have in society and on
led. business
 LO5
DEMONSTRATE AN
APPRECIATION FOR THE
ECONOMIC AND
BUSINESS IMPLICATIONS
OF CULTURAL CHANGE.
 Cultural Change
An important point we want to make in this
chapter on culture is that culture is not a
constant; it evolves over time. Changes in value
systems can be slow and painful for a society.
Change, however, does occur and can often be
quite profound.
Cross-Cult ural Lit eracy
One of the biggest dangers confronting a company that goes abroad for the first time is
the danger of being ill-informed. International businesses that are ill-informed about
another culture are likely to fail. Doing business in different cultures requires adaptation to
conform to the value systems and norms of that culture.
Ethnocentrism is a belief in the superiority of one's own ethnic group or culture. Hand in
hand with ethnocentrism goes a disregard or contempt for the culture of other countries.
ETHNOCENTRIC APPROACH:
A company that fills all key management positions with parent-company nationals.
EXAMPLE:
For their part, Germans can be a bit taken aback by the tendency of Americans to call people by
their first name. This is uncomfortable enough among executives of the same rank, but it can be
seen as insulting when a junior American executive addresses a more senior German manager by
their first name without having been invited to do so.
Cult ural and Competi ti ve Advantage
It is the value systems and norms of a country that influence the costs of doing
business in that country. The costs of doing business in a country influence the
ability of firms to establish a competitive advantage.

For international business, the connection between culture and

competitive advantage is important for two reasons.
1. First, the connection suggests which countries are likely to produce
the most viable competitors.
2. Second, the connection between culture and competitive advantage
has important implications for the choice of countries in which to
locate production facilities and do business.
Thank
you!
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International
trade theory
ALTHEA S. BOCO & KYLA GRACE Q. MENDEZ
 LEARNING OUTCOMES
01 Understand why nations trade with each other

02 Summarize the different theories explaining trade flows between nations

Recognize why many economists believe that unrestricted free trade between nations
03 will raise the economic welfare of countries that participate in a free trade system

Explain the arguments of those who maintain that the government can play a
04 proactive role in promoting national competitive advantage in certain industries

05 Understand the important implications that international trade theory holds for
management practice
International
trade theory
 Why do nation
trade with each
other?
 main reasons

economic access to growth & political &

benefit resources development diplomatical
- increased economic - to access the - to achieve significant - to strengthen their
efficiency and an resources they lack, economic growth and political and
overall increase in and to produce goods support their diplomatic
economic output. and services development. relationships with
other nations.
 Trade
theory
Also known as the old trade theory,
assumes that countries specialize in
producing goods in which they have a
comparative advantage, which is
determined by differences in their
factor endowments.

Free Trade - refers to a situation in

which a government does not attempt
to influence through quotas or tariffs
what is citizen can buy or what they can
sell to another country.
new trade
theory
Nations may benefit from trade even
when they do not differ in resource
endowments or technology.

Suggests that economies of scale,

network effects, and first-mover
advantage can influence trade patterns.
mercantilism
The first theory of international trade, emerged in
England in the mid-sixteenth century. The principle
assertion was that gold and silver were the
mainstays of national wealth and essential to
vigorous commerce.

Mercantilists believed that a country's

prosperity and power were dependent on its
ability to export more goods than it imported.
ABsolute Advantage
The Wealth of Nation 1776 by Adam Smith, opposing
the mercantilist’s assumption that trade is a zero-
sum game.
A country has an absolute advantage in the
production of a product when it is more efficient
than any other country at producing it.
In simple terms, a country can produce a good
more efficiently and at a lower cost than its
trading partners, giving it a competitive edge
 ABsolute Advantage
Assume that two countries, Ghana and South Korea, both have 200 units of
resources that could either be used to produce rice or cocoa

ghana south korea

It takes 10 units of resources to produce It takes 40 units of resources to produce
one ton of cocoa and 20 units of one ton of cocoa and 10 units of
resources to produce one ton of rice resources to produce one ton of rice

So, Ghana could produce 20 tons of So, South Korea could produce 5 tons of
cocoa and no rice, 10 tons of rice and cocoa and no rice, 20 tons of rice and no
no cocoa, or some combination of rice cocoa, or some combination of rice and
and cocoa between the two extremes cocoa between the two extremes

GHANA has an absolute advantage in the production of cocoa

SOUTH KOREA has an absolute advantage in the production of rice
ABsolute Advantage

Table 1. Absolute Advantage and the Gains from the trade

 theory of
comparative Advantage
Ricardo’s theory of comparative advantage suggests that
countries should specialize in the production of those goods they
produce most efficiently and buy goods that they produce less
efficiently from other countries, even if this means buying goods
from other countries that they could produce more efficiently at
home
heckscher-ohlin theory
Eli Heckscher and Bertil Ohlin argued that comparative
advantage arises from differences in national factor endowment
- the extent to which a country is endowed with resources like
land, labor, and capital

The Heckscher-Ohlin theory predicts that countries will export

goods that make intensive use of those factors that are locally
abundant, while importing goods that make intensive use of
factors that are locally scarce
the product life cycle theory
Raymond Vernon proposed that as products mature, both
the location of sales and the optimal production location will
change affecting the flow and direction of trade
evaluating porter’s theory
porter’s
theory
To achieve international success is a
function of the combined diamond
factors.
The presence of all four components is
required to boost competitive
performance.
Government can influence the each of
the four components - either positively
or negatively.
His model will predict the pattern of
international trade that we observe in
real world.
 implications for business
LOCATION implications
It makes sense for a firm to disperse its productive activities
to those countries where they can be performed most
efficiently

first-mover implications
Firms that establish a first-mover advantage with regard to the
production of a particular new product may subsequently dominate
global trade in that product

government policy implication

Government policies with respect to free trade or protecting
domestic industries can significantly impact global
competitiveness

Business should work to encourage governmental policies that

support free trade
Thank You for
listening
 GOVERNMENT POLICY
AND
INTERNATIONAL TRADE

REPORTERS:
Niña Caputolan
Denise Marie Manit
 Instruments of Trade Policy
Trade policy uses eight main instruments tariffs, bans, subsidies, import quotas,
voluntary export restraints, local content requirements, administrative policies,
and antidumping duties.

Import Tariffs
An import tariff is a tax levied on imports or exports. Tariffs fall into two
categories. Specific tariffs are levied as a fixed charge for each unit of a good
imported.
Export Tarrifs and Bans
An export tariff is a tax placed on the export of a good. The
goal behind an export tariff is to discriminate against
exporting in order to ensure there is sufficient supply of a
good within a country.
WHY DO COUNTRIES USE EXPORT
TARIFFS?
 A subsidy is a government payment to a domestic producer.
Subsidies take many forms, including cash grants, low
interest loans, tax breaks, and government equity
participation in domestic firms.

By lowering production costs, subsidies help domestic

producers in two ways: competing against foreign imports
and gaining export markets. Also, agriculture tends to be one
of the largest beneficiaries of subsidies in most countries.

Subsidies
 IMPORT QOUTAS AND
VOLUNTARY EXPORT
RESTRAINTS

An import quota is a direct restriction on the quantity of

some good that may be imported into a country. The
restriction is usually enforced by issuing import licenses to a
group of individuals or firms.
 ADMINISTRATIVE POLICIES
In addition to the formal instruments of trade policy, governments of all
types sometimes use informal or administrative policies to restrict
imports and boost exports. Administrative trade policies are
bureaucratic rules designed to make it difficult for imports to enter a
con-try.
The Case for Government
Intervention
Arguments for government intervention take two paths: political and
economic. Political arguments for intervention are concerned with
protecting the interests of certain groups within a nation (normally
producers), often at the expense of other groups normally consumers, or
with achieving some political objective that lies outside the sphere of
economic relationships, such as protecting the environment or human
rights. Economic arguments for intervention are typically concerned with
boosting the overall wealth of a nation to the benefit of all, both
producers and consumers.
 Retaliating
Some argue that government
should use the threat to intervene
in trade policy as a bargaining tool
to help open foreign markets and
force trading partners to “play by
the rules of the game.”
Protecting Consumers
Protecting Consumers Many
governments have long had
regulations to protect consumers
from unsafe products. The indirect
effect of such regulations often is
to limit or ban the importation of
such products.
 FURTHERING FOREIGN POLICY
OBJECTIVES

Governments sometimes use trade policy to support their

foreign policy objectives. A government may grant preferential
trade terms to a country with which it wants to build strong
relations. Trade policy has also been used several times to
pressure or punish "rogue states" that do not abide by
international law or norms.
Political arguments for intervention
political argument for government intervention
is that it is necessary for protecting jobs and
industries from unfair foreign competition.

Protecting Jobs and Industries

Protecting National Security
Retaliating
Protecting Consumers
Furthering Foreign Policy Objectives
Protecting Human Rights
ECONOMIC ARGUMENTS FOR INTERVENTION

are typically concerned with boosting the

overall wealth of a nation (to the benefit of all,
both producers and consumers).

The Infant Industry Argument

Strategic Trade Policy
DOMESTIC POLICIES
Development of the World Trading system

FROM SMITH TO THE GREAT DEPRESSION

1947-1979: GATT, TRADE LIBERALIZATION &
ECONOMIC GROWTH
1980-1993 PROTECTIONIST TRENDS
THE URUGUAY ROUND & THE WORLD TRADE
ORGANIZATION
The World Trade Organization

General Agreement on Trade in Services (GATS) has taken the

lead in extending free trade agreements to services.

The WTO's Agreement on Trade-Related Aspects of Intellectual

Property Rights (TRIPS) is an attempt to narrow the gaps in the
way intellectual property rights are protected around the
world and to bring them under common international rules.
 WTO as Global Police
The fact that countries are using the WTO
repr-sents an important vote of confidence in
the organization's dispute resolution
procedures.

Expanded Trade Agreements

As part of the deal, many Asian countries
made important concessions that allow
significant foreign participtation in their
financial services sectors for the first time.
 Antidumping Actions

Antidumping actions seem to be concentrated in

certain sectors of the economy, such as basic metal
industries (e.g., aluminum and steel), chemicals,
plastics, and machinery and electrical equipment.
Protectionism in Agriculture

The historically high tariff rates on agricultural products

reflect a desire to protect domestic agriculture and
traditional farming communities from foreign
competition. In addition to high tariffs, agricultural
producers also benefit from substantial subsidies.
THANK YOU
FOR
LISTENING