INTERNATIONAL BUSINESS

(INE 2028)

Dr. Nguyen Thi Phuong Linh

Email: phuonglinhnt@vnu.edu.vn

Phone: 0967257858

Address: Phòng 407, Nhà E4, Trường Đại học

Kinh tế - ĐHQGHN, 144 Xuân Thủy, Cầu Giấy,
Hà Nội
 Course calendar
Part 1: Introduction and
Part 2: Country difference
Overview
Chapter 1: Globalisation Chapter 2: National Difference in Political Economy
Chapter 3: Differences in Culture
Chapter 4: Ethics in International Business

Part 3: Competing in a Global marketplace

Chapter 5: The strategy of IB Chapter 7: Global production, outsourcing &

Chapter 6: Entry strategy and Strategic Logistics
Alliances Chapter 8: Global marketing and R&D
Chapter 9: Global human resources management
Chapter 4:
Ethics in
International
Business
Learning Objectives

Understand Understand ethical issues faced by international business

Recognize Recognize ethical dilemma

Identify Identify the causes of unethical behavior by managers

Describe Describe the different philosophical approaches to ethics

Explain Explain how managers can incorporate ethical considerations into their decision making
 What Is Ethics?

Ethics refers to
Business ethics Ethical strategy
accepted principles
are the is a strategy, or
of right or wrong that
accepted course of
govern
principles of action, that
• the conduct of a person
right or wrong does not
• the members of a
profession governing the violate these
• the actions of an conduct of accepted
organization businesspeople principles
Which Ethical Issues Are the Most Relevant To
International Firms?

Environmental
Employment practices Human rights regulations

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The moral obligation of

Corruption
multinational companies
How Are Ethics Relevant To Employment Practices?

 The working condition standards are different between countries

 Which standards should firms apply when doing international business?
❖ home country standards
❖ host country standards
❖ something in between
→ What should the company do? For now, establishing minimally acceptable standards that
safeguard the basic rights and dignity of employees, auditing foreign subsidiaries and
subcontractors on a regular basis to make sure those standards are met, and taking
corrective action if they are not, is a good way to guard against ethical abuses.
❑ Video: Globalization of Nike: https://www.youtube.com/watch?v=b0jG8jJCMfU
Question: Give comments about Nike’s success and the working conditions of workers at Nike’s
subcontractor.
Nhiễm độc thiếc trong mỗi trường độc hại
Link youtube:
https://www.youtube.com/watch?v=_Bwvfyf0pSA
How Are Ethics Relevant
To Human Rights?

 Basic human rights are not respected in many nations. Rights that we take for granted in
developed countries, such as freedom of association, freedom of speech, freedom of
assembly, freedom of movement, and freedom from political repression, are by no means
universally accepted.
 Should the company do business in countries where human basic rights are not respected?
➢ 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 (China)
➢ Some regimes are so repressive that investment cannot be justified on ethical grounds.
International firms can contribute to human right violation (Nigeria – Royal Dutch Shell).
 Nigeria is a country where serious questions have arisen
over the extent to which foreign multinationals doing business
in the country have contributed to human rights violations.
Most notably, the largest foreign oil producer in the country,
Royal Dutch Shell, has been repeatedly criticized. In the early
1990s, several ethnic groups in Nigeria, which was ruled by a
military dictatorship, protested against foreign oil companies
for causing widespread pollution and failing to invest in the
communities from which they extracted oil. Shell reportedly
Example of requested the assistance of Nigeria’s Mobile Police Force
human right (MPF) to quell the demonstrations.
According to the human rights group Amnesty
violations International, the results were bloody. In 1990, the MPF put
down protests against Shell in the village of Umuechem, killing
80 people and destroying 495 homes. In 1993, following
protests in the Ogoni region of Nigeria that were designed to
stop contractors from laying a new pipeline for Shell, the MPF
raided the area to quell the unrest. In the chaos that
followed, it has been alleged that 27 villages were razed,
80,000 Ogoni people were displaced, and 2,000 people were
killed.
How Are Ethics Relevant
To Environmental Regulations?

 Many developed nations have substantial regulations governing the emission of

pollutants, the dumping of toxic chemicals, the use of toxic materials in the workplace,
and so on. Those regulations are often lacking in developing nations.
➢ According to critics, the result can be higher levels of pollution from the operations of
multinationals than would be allowed at home.
 Is it permissible for multinationals to pollute in developing countries simply because there
are no regulations against it?
 The question takes on added importance because some parts of the environment are a
public good that no one owns but anyone can despoil.
➢ 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.
 Discussion:
Formosa Subsidiary Caused
Mass Fish Deaths in Vietnam

❖ Find information about this case

❖ How did the company pollute the

marine environment? Why?

❖ How has the company suffered

damage to its business?

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How Are Ethics Relevant To Corruption?

 The U.S. Foreign Corrupt Practices Act outlawed the practice of paying bribes to foreign
government officials in order to gain business
 The Convention on Combating Bribery of Foreign Public Officials in International Business
Transactions, adopted by the Organization for Economic Cooperation and Development (OECD),
obliges member states to make the bribery of foreign public officials a criminal offense
 Is it permissible for multinationals to pay government officials facilitating payments?
➢ Several economists suggest that corruption may improve efficiency and help growth because corruption is
a form of black marketeering, smuggling, and side payments to “speed up” approval for business
investments.
➢ In contrast, other economists have argued that corruption reduces the returns on business investment and
leads to low economic growth. In a country where corruption is common, unproductive bureaucrats who
demand side payments for granting the enterprise permission to operate may siphon off the profits from
business activity. This reduces businesses’ incentive to invest and may retard a country’s economic growth
rate.
 Corruption is a little like gambling—it’s hard to stop! If you do it once, you’re likely to do it again.
How Are Ethics Relevant
To Moral Obligations?

 Social responsibility indicates that multinationals should give something back to the
societies that enable them to prosper and grow
➢ Social responsibility refers to the idea that managers 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
good social consequences
 Businesses need to recognize their noblesse oblige - honorable and benevolent behavior
that is the responsibility of successful companies
➢ Give something back to the societies that have made their success possible
What Are Ethical Dilemmas?

The ethical obligations of a

multinational corporation
Ethical dilemmas are
toward employment
situations in which none of
conditions, human rights,
the available alternatives
corruption, environmental
seems ethically acceptable
pollution, and the use of power
are not always clear-cut.
Example of ethical dilemmas
Imagine that a visiting American executive finds that a 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 violation of the company’s own ethical code, the American
instructs the local manager to replace the child with an adult. The local manager dutifully
complies. The girl, an orphan, who is the only breadwinner for herself and her 6-year-old
brother, is unable to find another job, so in desperation, she turns to prostitution. Two years
later, she died of AIDS.
Meanwhile, her brother takes up begging. He encounters the American while begging
outside the local McDonald’s. Oblivious that this is the man responsible for his fate, the boy
begs him for money. The American quickens his pace and walks rapidly past the outstretched
hand into the restaurant, where he orders a quarter-pound cheeseburger with fries and a
cold milkshake. A year later, the boy contracted tuberculosis and died.
=> Had the visiting American understood the gravity of the girl’s situation, would he still have
requested her replacement?
The Roots of Unethical Behavior

Unrealistic
performance
goals
Decision
Organizational
making
culture
process

Personal Ethic Leadership

ethics behavior
 The Roots of Unethical behavior

1. Personal ethics
 Business ethics are not divorced from personal ethics, which are the generally
accepted principles of right and wrong governing the conduct of individuals. Our
personal ethical code exerts a profound influence on the way we behave as
businesspeople
 Home-country managers working abroad in multinational firms (expatriate managers)
may experience more than the usual degree of pressure to violate their personal ethics.
They are away from their ordinary social context and supporting culture, and they are
psychologically and geographically distant from the parent company.
 They may be based in a culture that does not place the same value on ethical norms
important in the manager’s home country, and they may be surrounded by local
employees who have less rigorous ethical standards
 Local managers might encourage the expatriate to adopt unethical behavior
The Roots of Unethical behavior

2. Decision-making processes

 Several studies of unethical behavior in a business setting have concluded that

businesspeople sometimes do not realize they are behaving unethically, primarily
because they simply fail to ask, “Is this decision or action ethical?”

 Instead, they apply a straightforward business calculus to what they perceive to

be a business decision, forgetting that the decision may also have an important
ethical dimension
The roots of Unethical behavior

3. Organizational culture – the values and norms that are shared among employees of an
organization
 Organizational culture that does not emphasize business culture encourages
unethical behavior
4. Unrealistic performance expectations
 encourage managers to cut corners or act in an unethical manner
5. Leadership - helps establish the culture of an organization and set the examples that
others follow
 when leaders act unethically, sub-contractors and employees will be more likely to
act unethically either
What Are The Philosophical Approaches To Ethics?

Others approaches are

Straw men approaches
favored by moral
There are several deny the value of
philosophers and are
different approaches business ethics or apply
the basis for current
to business ethics the concept in an
models of ethical
unsatisfactory way
behavior
The Straw Men Approaches To Business Ethics

 There are four common straw men approaches

1. Friedman doctrine - the only social responsibility of business is to increase profits, so long as
the company stays within the rules of law
2. Cultural relativism - ethics are culturally determined, and firms should adopt the ethics of
the cultures in which they operate
➢ “When in Rome, do as the Romans do.”
3. Righteous moralist - a multinational’s home country standards of ethics should be
followed in foreign countries
4. Naïve immoralist - if a manager of a multinational sees that firms from other nations are
not following ethical norms in a host nation, that manager should not either
➢ All approaches offer inappropriate guidelines for ethical decision making
Utilitarian And Kantian Approaches to Business Ethics

 Utilitarian ethics - the moral worth of actions or practices is determined by

their consequences
➢ actions are desirable if they lead to the best possible balance of good
consequences over bad consequences
➢ but, it is difficult to measure the benefits, costs, and risks of an action
➢ the approach fails to consider justice

 Kantian ethics - (Immanuel Kant) - people should be treated as ends and

never purely as means to the ends of others
The Rights and Justice Theories
 Rights theories - human beings have fundamental rights and privileges which transcend
national boundaries and cultures
➢ establish a minimum level of morally acceptable behavior
➢ the Universal Declaration of Human Rights specifies the basic principles that should
always be adhered to irrespective of the culture in which one is doing business
 Justice theories - A distribution of economic goods and services that is considered fair and
equitable.
Two fundamental principles of justices
➢ 1st principle: each person be permitted the maximum amount of basic liberty
compatible with a similar liberty for others.
➢ 2nd principle: once equal basic liberty is assured, inequality in basic social goods is
allowed only if such inequalities benefit everyone.
 ❖ To encourage ethical decision-making, firms
should
1. Hire and promote people with a well-grounded
sense of personal ethics
 refrain from promoting individuals who have acted
unethically
How Can  prospective employees should find out as much as
they can about the ethical climate in an
Managers 2.
organization prior to taking a position
Build an organizational culture that places a high
Make Ethical value on ethical behavior
 articulate values that place a strong emphasis on
Decisions? ethical behavior
 emphasize the importance of a code of ethics – a
formal statement of the ethical priorities a business
adheres to
 implement a system of incentives and rewards that
recognize people who engage in ethical behavior
and sanction those who do not
 3. Make sure that leaders within the business
articulate the rhetoric of ethical behavior and
act in a manner that is consistent with that
rhetoric
4. Develop moral courage
 enables managers to walk away from a decision
that is profitable but unethical
How Can  gives an employee the strength to say no to a
superior who instructs her to pursue actions that are
Managers unethical
 gives employees the integrity to go public to the

Make Ethical media and blow the whistle on persistent unethical

behavior in a company

Decisions? 5. Put decision-making processes in place that

require people to consider the ethical
dimension of business decisions. Ask whether:
 decisions fall within the accepted values of
standards that typically apply in the organizational
environment
 decisions can be communicated to all
stakeholders affected by it
 if colleagues would approve of decisions
 Managers can also use a five-step process to
think through ethical problems:
Step1: Identity which stakeholders (the individuals or
groups who have an interest, stake, or claim in

How Can the actions and overall performance of a

company) a decision would affect and in what

Managers ways
❖ internal stakeholders are people who work for
Make Ethical or who own the business, such as employees,

Decisions?
the board of directors, and stockholders
❖ external stakeholders are the individuals or
groups who have some claim on a firm, such
as customers, suppliers, and unions
Step 2: Determine whether a proposed decision
would violate the fundamental rights of any
stakeholders
 Step 3: Establish moral intent - place moral
concerns ahead of other concerns in

How Can cases where either the fundamental

rights of stakeholders or key moral
Managers principles have been violated
Make Ethical Step 4: Engage in ethical behavior
Decisions? Step 5: Audit decisions and review them
to make sure that they are consistent
with ethical principles
What Is An Ethics Officer?

 Ethics officers ensure

➢ all employees are trained in ethics

➢ ethics are considered in the decision-making process

➢ the company’s code of conduct is followed

 In the end, there are clearly things that an

international business should do, and there are
things that an international business should not do

 But, not all ethical dilemmas have a clean and

obvious solution
Critical thinking and discussion questions

 Under what conditions is it ethically defensible to outsource production to the developing

world where labor costs are lower when such actions also involve laying off long-term
employees in the firm’s home country?
 A manager from a developing country is overseeing a multinational’s operations in a
country where drug trafficking and lawlessness are rife. One day, a representative of a
local “big man” approaches the manager and asks for a “donation” to help the “big
man” provide housing for the poor. The representative tells the manager that in return for
the donation, the “big man” will make sure that the manager has a productive stay in his
country. No threats are made, but the manager is well aware that the “big man” heads a
criminal organization that is engaged in drug trafficking. He also knows that the big man
does indeed help the poor in the run-down neighborhood of the city where he was born.
What should the manager do?
 Review Question
All of the following except ____ contribute to
unethical behavior by international
managers.

a) Decision-making processes

b) Leadership

c) Personal ethics

d) National culture
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Review Question
According to ________, a company’s home
country standards of ethics are the
appropriate ones to follow in foreign
countries.

a) the righteous moralist

b) the naïve immoralist

c) the Friedman doctrine

d) cultural relativism 4-34

Review Question

________ recognize that human beings have

fundamental rights and privileges which
transcend national boundaries and cultures.

a) Kantian ethics

b) Utilitarian approaches

c) Straw men

d) Rights theories
Review Question

The _____ suggests that everyone is

imagined to be ignorant of all his or her
particular characteristics.

a) tragedy of the commons

b) veil of ignorance

c) code of ethics

d) the Universal Declaration of Human

Rights 4-36
Review Question
What is a company’s formal statement of
ethical priorities called?

a) Mission statement

b) Code of ethics

c) Code of values

d) Organizational culture
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Review Question
Which is not an area where multinational
firms are concerned about ethics?

a) Human rights

b) Trade regulations

c) Environmental regulations

d) Corruption
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