7 Session 3 Business & Economic Development North End

8/18/2019 7 Session 3 Business & Economic Development North End

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Business and Global Society

HULT INTERNATIONAL BUSINESS SCHOOLSESSION 3

Business, Economic e!elo"ment and B#ibe#y

$#o%esso# &oanne La'#ence


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Ne(t class) *ui+ -)

Sessions -./)0atc1in2 ey4 T#ue56alse

6inal $#o7ect)

Teams s1ould be selectin2 t1ei# issueand let me 8no' '1ic1 SG Goal you

a#e t1in8in2 about by Session /.9: SeeAssi2nments. 6inal $#o7ect %o# details:

House8ee"in2

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a!os Soundbites

“My call to action here is simple: Embrace

your obligation to workers as well as yourshareholders." -- U.S. Vice President Joseph Biden

“!he ourth #ndustrial re$olution will re%uire

a "holistic" style o& leadership which $iewstoday's global challenges as inherentlyconnected.( -- )a$os ounder Professor KlausSchwab

In t1e

3


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Systems Thinking

“the ability to see the world as a

complex system, in which we understand that “you can’t do just

one thing” and that “everything is connected to everything else”….

Dynamic, interdisciplinary and interconnected New mental models : from linear to loops

Requires ‘real’ learning, collecti!e intelligence"

Systems thinking as a process: from defining to testing #ultifaceted: ST$$%&$

Structures' (nstitutions'Stakeholders

4

Session ;)Ta8ea'ays


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Corporate governance is the system bywhich companies are directed and managed .#t in*uences how the ob+ecti$es o& the companyare set and achie$ed how risk is monitored and

assessed and how per&ormance is optimised.Good corporate governance structuresencourage companies to create value,through entrepreneurism inno$ationde$elopment and eploration and pro$ideaccountability and control systems commensuratewith the risks in$ol$ed. ASXPrinciples of Good orpora!e Go"ernance and Bes! Prac!ices #eco$$enda!ions % 2&&3

as 'uo!ed on h!!p())corp*o".ne!)librar+)corpora!e,*o"ernance,de-ned)

Go!e#nment to Go!e#nance

http://var/www/apps/conversion/tmp/scratch_5/NULLhttp://var/www/apps/conversion/tmp/scratch_5/NULLhttp://var/www/apps/conversion/tmp/scratch_5/NULLhttp://var/www/apps/conversion/tmp/scratch_5/NULL


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Go!e#nance Systems)St#uctu#e ete#mines Be1a!io#

/


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Any group or individual who canafect or is afected by achievemento a rm’s objectives /?

0.Indi!iduals and constituencies t1at

cont#ibute eit1e# !olunta#ily o#in!olunta#ily to a com"any@s 'ealt1.c#eatin2 ca"acities and acti!ities, and'1o a#e t1e#e%o#e "otential

benecia#ies and5o# #is8 bea#e#s::@Pos!% Pres!on Sachs% “ana*in* !he 5!ended n!erprise6% 2&&2

Sta8e1olde# enitions

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Sta8e1olde# T1eo#y) 0ulti"le Sta8e1olde#sC#eate a Com"le( alue.C#eatin2 Deb@

8

8ocal COR$ORATION

Go!e#nments

Su""ly C1ain Associates

& $a#tne#s and Alliances

LocalCommunitiesandCiti+ens

Unions

Em"loyees

In!esto#sS1a#e1olde#s andLende#s

Custome#s andUse#s

Re2ulato#yAut1o#ities

$#i!ateO#2anisation

RESOURCE

BASE

INUSTRFSTRUCTURE

SOCIAL $OLITICAL ARENA

Source( ana*in* !he5!ended n!erprise... Pos! e!al 2&&2


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Systems ie') Sta8e1olde#s as

Inte#connected, Inte#de"endent,Inuential

em"loyees

Local 2o!e#nment

s1a#e1olde#sco$$uni!ies

su""lie#s

Custome#s

0ana2e#s

9

0edia

Par!ners


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“ T1e ca"acity o% a #m to 2ene#atesustainable 'ealt1 o!e# time isdete#mined by its #elations1i" 'it1c#itical sta8e1olde#s:

The ability to manage relationshipsand to develop and implement policies! practices that ta"e into account

goals and concerns o all relevantsta"eholders is a core managementcompetence..#

Pos!% Pres!on Sachs% “ana*in* !he 5!ended n!erprise%6 2&&2

Ne' Com"etency) Sta8e1olde#0ana2ement

1&


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1at is it 'e a#e t#yin2 to ac1ie!e 1at is t1e conte(t

1o a#e t1e "#ima#y, seconda#y sta8e1olde#s '1o can eJect, o#be eJected , by t1e outcome and 1a!e a !ested inte#est in t1eissue, decision o# ob7ecti!e


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Sta8e1olde#0ana2ement5En2a2ement ) $#ocess

0odel

Ste" M

Ste" 9

Ste" /

Ste" 3ete#mine

Ga"s

Ste" ;

Ste" -Sta8e1olde#Identication

Gene#al Natu#e o%Sta8e1olde# claims, moti!ations, and

t1ei# im"lications

$#io#itiseSta8e1olde# emands

e!elo"O#2anisational Res"onses

0onito#in2And Cont#olResta#t

$#ocess

Sou#ce) $#eble, ;9

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Sta8e1olde# Analysis Tool

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Sta8e1olde#s a#e classied byatt#ibutes)

$ower to inuence) ability to

im"ose its 'ill and b#in2 aboutdesi#ed outcome:

%egitimacy o% #elations1i") 'it1inacce"ted social system o% no#ms,!alues, belie%s . desi#able social

2ood: &rgency o% claim) time.sensiti!e,

c#itical t1e de2#ee to '1ic1delay is unacce"table and claim isim"o#tant to sta8e1olde#s:

,:ro$ “;oward a ;heor+ of S!aA*le% 1997?

0ate#iality, Rele!ance)$#io#itisin2

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0a""in2 Sta8e1olde# Inte#ests !:Inuence

1


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1/

0ate#iality 0at#i() 0ost#ele!ant

Im"o#tantto t1e

com"anybut not to

t1esta8e1olde#

s

Im"o#tantto com"any

andsta8e1olde#

s

Notim"o#tant

to t1ecom"any o#

to t1e

sta8e1olde#s

Im"o#tantto

sta8e1olde#s but not

t1ecom"any

;i$ ohin /hanging the 0usiness &rom the#nside 1ut p.4


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$lannin2 Im"lementin2

A%te#mat1

Relati!e Im"o#tance) Timeline

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To"ic(

:ac!ors% Trade Policies and Players

)ase: Botswana: Diamond in the Rough(ssue: Bribery and Corruption

Session 3)Business and Economic e!elo"ment

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*hat are the principles underlying neo+

classicism

-n what factors should emerging countries

focus in order to accelerate con!ergence

Neoclassical Economics

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.ey terms: / 0 %roduction function, or output

. 0 .apital

& 0 &a1or

)hief )haracteristics

23$4hi1its positi!e and diminishing returns to each

input of la1or or capital 53$4hi1its constant returns to scale

Neoclassical 6rowth #odel: 2789s

2&


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' (ithin any economy capital and labor are assumedto )ow to their most productive uses so theirmarginal returns are roughly e*ual across industries.

%abor grows at constant rate which is the rate o population growth.

(or"er receives marginal rate +wages, consumessome saves the rest which becomes investmentunds- interest rate is marginal return on capital+cost o capital, - investments go to improvementscapital depreciates at constant rate.

-- !orelli /hapter 2 p. 33

ssumptions;

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“An economy will eventually converge to the

same equilibrium regardless of where it

started out.< (Torelli, P 4!

True =ow

Steady State $quili1rium: )apital, &a1or

and -utput 6row at Same Rate

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1solute con!ergence: unconditional> poorcountries e4perience higher growth rates than

rich countries and catch up< ?ut @how to

e4plain $urope ! frica

)onditional )on!ergence: 1y controlling

factors that can influence output, such as

education, go!ernment quality, infrastructureand openness to trade, poor countries can

catch up<

)on!ergence =ypotheses

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Definition: How efficiently capital and laborare used within an economy ” (Torelli, p. !

Differences across countries due to %hysical capital Aonly 58B3 Superior Technology 6reater $fficiency

Deeper =uman )apital ?etter (nstitutions and 6o!ernance

Total Cactor %roducti!ity ATC%3

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%arado4: e4pect in!estment to flow to the

emerging markets for higher returns, 1ut


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Competitiveness and development of nations

#ichael %orter’s Diamond

Determinants of ational Competitive Advantage:

#

$ !abor $ !and $ atural

resources$ Capital $ "nfrastructure


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=uman capital #anagerial )apital Technology and &a1or %roducti!ity

Strong %olitical and &egal $n!ironment =ealthcare, nutrition, and medicine support

la1or producti!ity<

$


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Competitiveness and development of nations

$mployment and (ncome Trade changes relati!e prices

#rade brings price convergence between countries but widens the

income distribution within a country:

$


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Count#ies o%ten "#one to conict InsuQcient economic di!e#sication

Co##u"tion Aut1o#ita#ian #e2imes utc1 disease) non.#esou#ce

indust#ies ne2ati!ely aJected by #isin2

cu##ency

*hat is the Resource" )urse

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Trade and (n!estment

*hat is the difference 1etween Ricardo’s !iew of

a1solute !ersus comparati!e ad!antage *hat is the

limitation of his model

*hat is the Cactor %roportions model

*hy does trade matter *hat are some e4amples of

trade policies

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Ricardian #odel

Comparative advantage" country has a comparati!e ad!antage in

producing a good if the opportunity cost of producing that good in

terms of other goods is lower in that country than it is in other

countries"

%&

$ #rade rationale" (nternational tradeincreases the world output

1ecause it allows each country to

specialiGe in producing the good in

which it has a comparati!e

ad!antage<

$ !imitation" Ricardo’s modelassumes that comparati!e

ad!antage only arises from

international differences in la1or

producti!ity<

#

o u n t r y

$

# o u n t r y %

'ine

Cloth& o

i n t p

r o d u c t i o

n p o s s i b i l i t y ' r o

n t i e

r


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:

Cactor %roportions #odel

The =eckscher+-hlin #odel ACactor %roportions #odel3

&actor proportions: The model emphasiGes the interplay 1etween the

proportions in which different factors of production are a!aila1le in

different countries and the proportions in which they are used in

producing different goods<

"t means" )ountries tend to e4port goods that are intensi!e in the

factors they ha!e a1undantly<

Reason: The profita1ility of goods is determined 1y input costs Afor

la1or, capital, land3< 6oods that require inputs that are locally

a1undant will 1e cheaper to produce than goods that require scarceinputs<

%#


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Trade )oncepts

'ravity model " Says that the !olume of trade Ai


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Trade and in!estment Terms

&oreign Direct "nvestment (&D" !" n in!estment a1road that e4ceeds acertain percentage of ownership is considered a direct in!estment"

+enefits: &ower production or trade costs<

ro-imityconcentration tradeoff : *ith too much dispersed

production a company fails to achie!e economies of scale<

/ertical &D" " (s dri!en 1y production cost differences 1etween

countries<

Hori0ontal &D": Clows 1etween de!eloped countries, e


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Ci4ed ta4es on imports d Halorem Tariffs AHalue+added3 (mport Euotas $4port Euotas $4port Su1sidies Aagricultural3 e


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Trade and in!estment:

$4port Su1sidies How they wor1 " Su1sidies Aand tariffs3 distort the price ratios that

would otherwise result in free markets<

2ffect of subsidies" Recipients of su1sidies can offer goods and

ser!ices at lower prices, creating an unfair competiti!e ad!antage"

3ationale of subsidies:

◦ Reduced unemployment cost◦ (ncreased training

◦ Technology de!elopment

◦ d!ancement of producti!ity growth

◦ $ngineered competiti!e ad!antage

#ypes of subsidies: &oan guarantees, ta4 1reaks, RID in!estments,

triple+heli4", grants, regional assistance programs, 1ailouts<

'A##4*#%: %ro!ides a forum intended to limit and coordinate

su1sidies and tariffs and settle trade disputes<

%


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(nternational Trade greements

6eneral greements on Tariffs and Trade A6TT3 Created at the Bretton 'oods Conerence in in &)44 as a set o trade

rules" Replaced in &))* by an actual organi+ation, the 'T"

*orld Trade -rganiGation A*T-3◦ &- members: . to help trade low reely/

◦ 0ersees the implementation o agreements"

◦ Pro0ides a orum or the settlement o trade disputes"

Negotiations5ruguay 3ound " &)81)4, with agreements such as:

worldwide tari cuts

mo0es toward the trade liberali+ation o cloth and agriculture

intellectual property protection: greement on Trade+Related spects of

(ntellectual %roperty Rights ATR(%S3 A27783

Doha 3ound " 2ince #--&, without agreements o0er areas such as

agricultural subsidies"

%3


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%rinciples: +inding and enforceable commitments: )oncessions on tariff ceilings are

1inding< country can only raise tariffs after negotiating with its trading

partners<

ondiscrimination :

◦ 6ost favored nation rule" *T- mem1er must apply the sameconditions to all other mem1ers

◦ ational treatment : (mported goods must 1e treated like domestic

good"

#ransparency : Trade rules ha!e to 1e pu1lished<

3eciprocity " #utual li1eraliGation enforced to limit free+riding< 7afety valves" #em1ers are allowed to restrict trade in specific

circumstances, e


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27LK : Counded in %aris as -rganiGation for $uropean $conomic)ooperation A-$$)3 A#arshall %lan implementation3

27M9: 59 countries@ mostly de!eloped++ agree to $4pand to 6lo1al

#andate A-$)D3

592L: L countries, with requests to Ooin from others

Soft &aw" e


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BREA

4&


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)ase: +otswana: A Diamond in #he 3ough

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*hat is the 1ackground to the case *hat is the primary challenge faced 1y

?otswana at the start

*hat is the go!ernment’s o1Oecti!e *hat a1out De ?eers *hat are its

goals

?otswana: Diamond in The Rough

Situation

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*ho were the !arious stakeholders,

institutions that made up the system *hatwere their interests, needs, moti!ations

=ow do they play out in the feed1ack loops

System

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1o 1y 1at 0atte#s $#io#ity 6eedbac8

Loo"s

Sta8e1olde#s5Systems

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?otswana has 1een called the miracle of frica


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Is t1ei# 2#o't1 sustainable 1y o# '1ynot

1at ne' issues is Bots'ana no' %acin2

1at do you %eel 'ould be t1e mosteJecti!e 'ay o% add#essin2 t1em in t1elon2e# te#m

C1allen2es

4/


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ow would +ou e"alua!e !he eec!i"enessof !heir approachC

Dn a score of 1,% wi!h bein* !hehi*hes!% how would +ou ra!e !he*o"ern$en!Es)$ana*e$en!Es handlin* ofBo!swanaEs *row!h !hus farC Fh+C◦ Fha! lessons do +ou !a


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1. An duca!ed% =nfor$ed Ha!ion2. Prosperous Produc!i"e and =nno"a!i"e

Ha!ion

3. o$passiona!e% Jus! and arin* Ha!ion

4. Safe and Secure Ha!ion

. Dpen% Ie$ocra!ic and Accoun!able Ha!ion

/. oral and ;oleran! Ha!ion

7. ni!ed and Proud Ha!ion

Today) ision ;-M) Se!en$illa#s

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Transparency nternational ran"ed/otswana 01th out o the 230countries it surveyed nding thecountry less corrupt than either 4ranceor $ortugal.


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UNGC Anti.Co##u"tion

$#inci"le -:Businesses s1ould 'o#8a2ainst co##u"tion in allits %o#ms, includin2

e(to#tion and b#ibe#y:

&


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orrup!ion( Abuse o power or private gain#

+&5

Public orrup!ion( “6isuse o publicly derived power or private gain’

8e*al Ie-ni!ion

'an act done with the intent to givesome advantage inconsistent witho7cial duty and the rights o others:

enitions

1


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1at is co##u"tion

1at a#e !e common acts o% co##u"tion

1y s1ould 'e ca#e i:e: '1at a#e t1eeconomic and social costs o% co##u"tion

1tt"s)55''':youtube:com5'atc1!K;s=y$CHs

enin2 Co##u"tion

2

https://www.youtube.com/watch?v=q2Vs9yPCHs0https://www.youtube.com/watch?v=q2Vs9yPCHs0https://www.youtube.com/watch?v=q2Vs9yPCHs0https://www.youtube.com/watch?v=q2Vs9yPCHs0


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Issue) 1at Causes Co##u"tion

3

I 1


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Issue ) 1at a#e some 'ays tosol!e Co##u"tion

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en!ralied corrup!ion( *o"ern$en! oLcial se!sup s+s!e$ b+ which bribes are !a


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“$etty Co##u"tion ..small amounts 4D%acilitatin2 o# Ds"eed@ "ayments

G#and Co##u"tion)

Ddisto#tion o# co##u"tion o% cent#al%unctions o% 2o!e#nment

,0ribery in 0usiness: 4 5egal Perspecti$e% BS Ho!e 8+nn Sharp Paine% 2&&/

Scale o% Co##u"tion

/


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The 82 trillion estimate reers to theannual worldwide transactions only 9and o a particular type 9 and does notaccount or the signicant losses in

investment private sectordevelopment and economic growth toa country or to the increases in inantmortality poverty and ine*uality : all

resulting rom corruption andmisgovernance

6orld 0ank 7eport on 0ribery

Annual Cost) - T#illion

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Reduced and s8e'ed "ublic e("enditu#es ea8 "ublic in%#ast#uctu#e SKuande#ed o# misdi#ected talent 0a#co.economic 'ea8ness instability

Reduced in!estment Socio.economic %ailu#e Red ta"e and bu#eauc#atic delay Co##u"tion A!oidance 6o#e2oin2 0a#8et Su""o#tin2 Institutions En2a2ement 'it1 O#2ani+ed C#ime

#odri*ue% Ho!es on orrup!ion

Costs to Society

@


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Siemens) -:M Billion in nes -:MB liti2ationcosts

al.0a#t in 0e(ico ) /3=m5; y#s liti2ation

LIBOR scandal) > ban8s ned mo#e -:VB eu#os

GS in C1ina)/=;m, la#2est e!e# by C1inacou#t, "lus "#ison te#ms, "lus lost sales

Occu"ational %#aud) Ty"ical o#2ani+ation loses9W #e!enues to %#aud eac1 yea#)

Costs to Business

9

T1 /W G


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“60# research shows that countries that tacklecorruption and impro$e their rule o& law canincrease their national incomes by as much as&our times9.

4 country with an income per capita o&US2;;; that addresses corruption impro$esits go$ernance and the rule o& law could epect

to see its income rise to US


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US 6o#ei2n Co##u"t $#actices Act -=VV

T#ans"a#ency Inte#national -==3

OEC B#ibe#y Act -==V


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h!!p())www.ipaidabribe.co$

S"#eadin2)I"aidab#ibe:o#:8e)

''':b#ibeni2e#ia:com

1at about incenti!es i:e: 6o brahim; The$hilanthropist o


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:or a second consecu!i"e +ear% noleader has been dee$ed wor!h+ of!he N $illion #brahim Pri=e &or

4chie$ement in 4&rican 5eadership(

/>> 1ct ?3 2;?@

And t1e 'inne# isHa#d to 6ind

/3


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7 Session 3 Business & Economic Development North End

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Transcript of 7 Session 3 Business & Economic Development North End