The Challenges of GlobalizationThe Challenges of Globalization

The Process of Globalization The Globalization Debate Doing Business in a Diverse World Global Codes of Corporate Conduct Collaborative Partnerships for Global Problem Solving

Chapter

7

The process of globalizationThe process of globalization

GlobalizationRefers to the increasing movement of goods, services, and capital across national borders.

Globalization is considered a process—an ongoing series of interrelated events.

Transnational corporationA company that does business in more than one country.

The world’s top 10 nonfinancial transnational The world’s top 10 nonfinancial transnational corporations, ranked by foreign assetscorporations, ranked by foreign assets

Figure 7.1

Corporation Home Economy Industry Foreign Assets (in $ millions)

Fiat Italy Motor Vehicles 52, 803

Vodafone United Kingdom Telecommunications $221,238

Telefonica Spain Telecommunications 55,968

General Electric United States Electrical Equipment 159,188

ExxonMobil United States Petroleum 101,728

Vivendi Universal France Diversified 93,260

General Motors United States Motor Vehicles 75,150

Royal Dutch/Shell U.K./Netherlands Petroleum 74,807

BP United Kingdom Petroleum 57,451

Toyota Motor Japan Motor Vehicles 55,974

Source: United Nations, World Investment Report 2002, Table IV-1, p.98. Data for the year 2000.

Acceleration of world trade, 1960-2001Acceleration of world trade, 1960-2001Figure 7.2

0

5

10

15

20

25

30

1960 1980 20001970Years

% o

f GD

P

Source: World Development Indicators 2003 (New York: World Bank, July 2003, andWorld Development Indicators 2002 (New York: World Bank, May 2002).

1990

The acceleration of globalizationThe acceleration of globalization

The factors that drive the acceleration of globalization: Improved communications Improved transportation systems The rise of major transnational corporations Social and political reforms The rise of international financial and trade institutions

International financial and trade institutionsInternational financial and trade institutions

The World Bank Provides economic development loans to its member nations. Funds used mainly for roads, dams, power plants, pipelines, and

other infrastructure projects.International Monetary Fund Purpose is to make currency exchange easier for member

countries so that they can participate in global trade. Lends foreign exchange to member countries.World Trade Organization An international body that established the ground rules for trade

among nations. Its major objective is to promote free trade.

Pros and cons of globalizationPros and cons of globalization

Arguments for globalization

Increases economic productivity.

Reduces prices for consumers.

Gives developing countries access to foreign investment funds to support economic development.

Transfers technology.

Spreads democracy and freedom, and reduces military conflict.

Arguments against globalization

Causes job insecurity.

Weakens environmental and labor standards.

Prevents individual nations from adopting policies promoting environmental or social objectives.

Undermines cultural, linguistic, and religious diversity.

Is just as compatible with despotism as it is with freedom.

Figure 7.3

Comparative political and economic systemsComparative political and economic systems

DemocracyRefers broadly to the presence of political freedom.

Four defining features of democracy (according to the U.N.) Fair elections An independent media Separation of powers among the executive, legislative, and

judicial branches of government An open society where citizens have the right to form their own

independent organizations to pursue social, religious, and cultural goals

Comparative political and economic systemsComparative political and economic systems

Military dictatorshipsRepressive regimes ruled by dictators who exercise total power through control of the armed forces.

Free enterprise systemsBased on the principle of voluntary association and exchange. Members of society satisfy most of their economic needs through voluntary market transactions.

Central state controlEconomic power is concentrated in the hands of government officials and political authorities. The central government owns the property that is used to produce goods and services.

Global codes of corporate conductGlobal codes of corporate conduct

The United Nations Global Compact A values-based platform designed to promote institutional

learning. Corporations are invited to voluntarily endorse core principles

covering labor, human rights, and environmental standards.The OECD Guidelines for Multinational Enterprises Code of conduct for corporations developed by member nations

of the OECD. The guidelines are voluntary, address employment relations,

information disclosure, environmental stewardship, consumer interests, and the management of technology.

Global codes of corporate conductGlobal codes of corporate conduct

The Global Sullivan Principles The objectives are to support economic, social, and political

justice by companies where they do business. Calls on companies to support human rights and to encourage

equal opportunity at all levels of employment.The Caux Principles Emphasizes working for the common good and respect for human

rights.

A three-sector worldA three-sector world

Business Government Civil society

Comprises nonprofit, educational, religious, community, family, and interest-group organizations. Nongovernmental organizations (NGOs)

Concerned with such issues as environmental risk, labor practices, workers rights, community development, and human rights.

Distinctive attributes of the three major sectors: Distinctive attributes of the three major sectors: BusinessBusiness

Figure 7.4a

Organizational form For-profit

Goods produced Private

Primary control agent Owners

Primary power form Money

Primary goals Wealth creation

Assessment frame Profitability

Resources Capital assets, technical knowledge, production skills

Weaknesses Short-term focus, lack of concern for external impacts

Source: Adapted from Steven Waddell, “Core Competences: A Key Force in Business-Government-Civil

Society Collaborations,” Journal of Corporate Citizenship, Autumn 2002, pp. 43-56, Tables 1 and 2.

Distinctive attributes of the three major sectors: Distinctive attributes of the three major sectors: GovernmentGovernment

Figure 7.4b

Organizational form Governmental

Goods produced Public

Primary control agent Voters/rulers

Primary power form Laws, police, fines

Primary goals Societal order

Assessment frame Legality

Resources Tax revenue, policy knowledge, regulatory and enforcement power

Weaknesses Bureaucratic, slow-moving, poorly coordinated internally

Source: Adapted from Steven Waddell, “Core Competences: A Key Force in Business-Government-CivilSociety Collaborations,” Journal of Corporate Citizenship, Autumn 2002, pp. 43-56, Tables 1 and 2.

Distinctive attributes of the three major sectors: Distinctive attributes of the three major sectors: Civil SocietyCivil Society

Figure 7.4c

Organizational form Nonprofit

Goods produced Group

Primary control agent Communities

Primary power form Traditions, values

Primary goals Expression of values

Assessment frame Justice

Resources Community knowledge, inspirational leadership

Weaknesses Amateurish, lack of financial resources, parochial perspective

Source: Adapted from Steven Waddell, “Core Competences: A Key Force in Business-Government-CivilSociety Collaborations,” Journal of Corporate Citizenship, Autumn 2002, pp. 43-56, Tables 1 and 2.