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Chapter 7 The 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 The process of globalization Globalization Refers to the increasing movement of goods, services, and capital across national borders. Globalization is considered a process—an ongoing series of interrelated events. Transnational corporation A company that does business in more than one country. Figure 7.1 The world’s top 10 nonfinancial transnational corporations, ranked by foreign assets Corporation Home Economy Industry Foreign Assets (in $ millions) Vodafone United Kingdom Telecommunications $221,238 General Electric United States Electrical Equipment 159,188 ExxonMobil United States Petroleum 101,728 France Diversified 93,260 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 Telefonica Spain Telecommunications 55,968 Fiat Italy Motor Vehicles 52, 803 Vivendi Universal General Motors Source: United Nations, World Investment Report 2002, Table IV-1, p.98. Data for the year 2000. Figure 7.2 Acceleration of world trade, 1960-2001 30 % of GDP 25 20 15 10 5 0 1960 1970 1980 Years 1990 2000 Source: World Development Indicators 2003 (New York: World Bank, July 2003, and World Development Indicators 2002 (New York: World Bank, May 2002). The 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 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. Figure 7.3 Pros and cons of globalization Arguments for globalization Arguments against globalization Increases economic productivity. Causes job insecurity. Reduces prices for consumers. Weakens environmental and labor standards. Gives developing countries access to foreign investment funds to support economic development. Transfers technology. Spreads democracy and freedom, and reduces military conflict. 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. Comparative political and economic systems Democracy Refers 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 systems Military dictatorships Repressive regimes ruled by dictators who exercise total power through control of the armed forces. Free enterprise systems Based on the principle of voluntary association and exchange. Members of society satisfy most of their economic needs through voluntary market transactions. Central state control Economic 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 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 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 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. Figure 7.4a Distinctive attributes of the three major sectors: Business 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. Figure 7.4b Distinctive attributes of the three major sectors: Government 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-Civil Society Collaborations,” Journal of Corporate Citizenship, Autumn 2002, pp. 43-56, Tables 1 and 2. Figure 7.4c Distinctive attributes of the three major sectors: Civil Society 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-Civil Society Collaborations,” Journal of Corporate Citizenship, Autumn 2002, pp. 43-56, Tables 1 and 2.