CO NT E NTS
List of figures
xi
List of tables
xiii
Case study grid
xiv
Author’s acknowledgements About the author
xviii xix
Preface to the fifth edition Introduction
xx xxii
What makes this book stand out?
xxii
The global business environment: towards sustainability?
xxiv
Plan of the book
xxvi
Part 1: Business in the global environment
xxvi
Part 2: Dimensions of the business environment
xxvii
Part 3: Drivers of international business
xxviii
Part 4: Global challenges and sustainability Chapter features
xxix xxix
Tour of the book
xxxii
Digital resources
xxxiv
List of abbreviations
xxxv
Part 1
Business in the global environment
1
Chapter 1
The business enterprise in focus
2
OPENING CASE STUDY – The iconic brand of Levi Strauss
3
Introduction
4
What does the business enterprise exist to do?
5
How does the enterprise carry out its goals? MINI CASE STUDY – Taking a company private
Chapter 2
8 13
An overview of the global environment
22
MINI CASE STUDY – The Brazilian mining disaster and BHP Billiton
25
The multi-layered environment
26
The enterprise in a dynamic environment: Building sustainability
28
Conclusions
30
CLOSING CASE STUDY – Ikea at the crossroads
31
Review and revise
32
Globalization and the business environment
34
OPENING CASE STUDY – SoftBank, the Japanese technology giant
35
Introduction
36
The many faces of globalization
37
Economic development: country differences
40
MNEs and internationalization
44
MINI CASE STUDY – Harley-Davidson rides global markets
45
FDI and the global economy
48
MINI CASE STUDY – Vanishing car jobs in the US Midwest
59
Globalization across key dimensions of the environment
60
vi
Contents
Part 2 Chapter 3
vii
Globalization and sustainability: how compatible are they?
64
Conclusions
67
CLOSING CASE STUDY – Zara: the challenges of staying on top in global fashion
68
Review and revise
70
Dimensions of the business environment
73
Culture and societies
74
OPENING CASE STUDY – Spotlight on Qatar
75
Introduction
76
What is culture and how is it relevant to business?
77
National cultures and states: the dynamics of identity
78
Languages in a globalized world
80
Religions: cornerstones of beliefs and cultural identities
83
MINI CASE STUDY – Lifting the ban on women drivers in Saudi Arabia
86
Culture theories: what do they tell us about people and businesses?
88
Organizations in the global environment: what are their cultural guideposts?
92
Changing societies present challenges for decision-makers
97
MINI CASE STUDY – Raising the pension age in Russia causes controversy
106
Building sustainability in the socio-cultural environment: where does responsibility lie?
107
Conclusions
110
CLOSING CASE STUDY – Better prospects in South Africa for all in society? 111
Chapter 4
Chapter 5
Review and revise
112
The global economic environment
115
OPENING CASE STUDY – Economic slowdown in China
116
Introduction
117
National economies: income and growth
117
Other key economic indicators: inflation and balance of payments
128
Classifying national economic systems
133
MINI CASE STUDY – Mexico turns towards socialism
135
Market economies
136
Mixed economies: China and India
141
MINI CASE STUDY – The rise of India’s super-rich
144
The economies of Central and Eastern Europe
145
Regionalization: focus on the EU
147
The economic environment: towards sustainability?
151
Conclusions
153
CLOSING CASE STUDY – Uncertainty weighing on Jaguar Land Rover in the UK
153
Review and revise
155
The political environment: politics and business intertwined
157
OPENING CASE STUDY – A populist president in Brazil
158
Introduction
159
The political sphere
160
How does political authority arise and subsist?
162
Political risk: threats and uncertainties
168
MINI CASE STUDY – Political risks in Mali
173
viii
Contents
Chapter 6
Democracy and authoritarianism
174
Governmental institutions in national contexts
178
MINI CASE STUDY – The rule of law at risk in Poland
182
Political life in practice
184
Focus on the European Union
188
Global politics
193
The changing political environment: reaching for sustainability?
197
Conclusions
198
CLOSING CASE STUDY – The rise of authoritarian rule in Turkey
200
Review and revise
201
The legal environment
204
OPENING CASE STUDY – Uber Faces Challenges in Global Markets
205
Introduction
206
Classifying law
207
MINI CASE STUDY – The tragic cruise of the Costa Concordia
210
Legal risks and responsibilities in international business
211
National legal systems: diversity and interactions
214
Legal framework of the European Union
217
Cross-border business transactions
218
MINI CASE STUDY – Breaking up the AT&T monopoly
223
International law framing the business environment
225
International dispute settlement
228
The global legal environment: providing the foundations for sustainability?
232
Conclusions
234
CLOSING CASE STUDY – Facebook’s business model under scrutiny
235
Review and revise
237
Part 3
Drivers of international business
Chapter 7
International trade and globalization
Chapter 8
239 240
OPENING CASE STUDY – Huawei’s global success dented by US security fears
241
Introduction
242
Trends in world trade: impacts of globalization
243
Theories of international trade
247
National trade policies
250
Liberalizing trade at the international level: progress and setbacks
257
MINI CASE STUDY – Trade in soya beans causes friction
260
Regional, bilateral and plurilateral trade agreements
263
MINI CASE STUDY – Canadian motor industry fears for jobs
268
Globalization and world trade: sustainable strategies?
271
Conclusions
273
CLOSING CASE STUDY – High stakes in Glencore’s trading activities
274
Review and revise
276
Global finance
278
OPENING CASE STUDY – The rise and fall of Carillion
279
Introduction
280
Evolution of the international monetary system
281
International capital flows
285
Contents
ix
MINI CASE STUDY – Funding Circle, the peer-to-peer lender
291
Global financial risks and their consequences
292
Markets for corporate control
302
MINI CASE STUDY – Bayer takes over Monsanto: What are the implications? 304
Chapter 9
Global finance: towards sustainability in global financial markets?
306
Conclusions
307
CLOSING CASE STUDY – Argentina on the edge of financial crisis – again
308
Review and revise
310
Technology and innovation
312
OPENING CASE STUDY – Automation: opportunities and threats
313
Introduction
314
Concepts and processes
315
MINI CASE STUDY – Continuous innovation at Lego
317
Technological innovation and economic change
318
National systems of innovation
322
Patents and other intellectual property (IP) rights
327
MINI CASE STUDY – AbbVie and the pipeline for pharmaceutical patents
329
Technology diffusion and innovation
334
Technological innovation and sustainable development
336
Conclusions
337
CLOSING CASE STUDY – Apple facing new challenges
338
Review and revise
340
Part 4
Global challenges and sustainability
Chapter 10
Ecology and climate change
Chapter 11
343 344
OPENING CASE STUDY – The end for diesel?
345
Introduction
346
Environmental degradation in context
347
Climate change
349
Transboundary pollution and energy strategy
356
International frameworks to promote sustainable development
359
Managing environmental impacts
362
MINI CASE STUDY – Oil companies and reforestation strategies: how sustainable are they?
363
Sustainable consumption
367
The impacts of climate change: sustainability in the balance
369
MINI CASE STUDY – Saving the Taj Mahal
370
Conclusions
372
CLOSING CASE STUDY – Plastic waste and what to do about it
373
Review and revise
375
Ethics and Social Responsibility
377
OPENING CASE STUDY – The textile industry in the UK
378
Introduction
379
Philosophical foundations of ethics
380
Ethics in business contexts
386
MINI CASE STUDY – The close ties between gambling and football in the UK
389
MINI CASE STUDY – The status of workers in the gig economy
393
x
Contents
Chapter 12
Social responsibility of the firm
400
CSR and corporate governance
406
The social enterprise
410
Ethics and CSR: the sustainable business
411
Conclusions
412
CLOSING CASE STUDY – The Sacklers, Purdue Pharma and the opioid epidemic
413
Review and revise
415
Sustainable business: the prospects
417
OPENING CASE STUDY – Ten years on from the global financial crisis: a sustainable recovery?
418
Introduction
419
Sustainability: the key elements
420
MINI CASE STUDY – Burberry destroys stock to preserve the brand
424
Assessing the risks in the global environment
433
MINI CASE STUDY – How far has Bangladesh progressed in making its textile industry safe? 440 Who bears responsibilities for sustainability, and what should they be doing?
447
What are the prospects for a sustainable future?
451
CLOSING CASE STUDY – Tech billionaires turn philanthropists
455
Review and revise
457
Glossary
459
Atlas
471
Index
483
CHAPT
ER
1
THE BUSI NES S E NTER PR I S E I N FOC US © Hero Images
Outline of chapter Introduction What does the business enterprise exist to do? Purpose and goals The company in society: Stakeholders and corporate social responsibility (CSR) How does the enterprise carry out its goals? It all starts with entrepreneurs Companies: the engines of business activities Functional areas within the enterprise The multinational enterprise (MNE) Corporate governance: shareholders and other stakeholders An overview of the global environment Multiple dimensions and the PESTLE analysis The multi-layered environment The enterprise in a dynamic environment: Building sustainability Conclusions
This chapter will enable you to • Identify a variety of purposes pursued by business enterprises in the changing environment • Evaluate the differing types of ownership and decision-making structures through which enterprises pursue their goals • Appreciate the roles played by stakeholders in diverse enterprises • Gain an overview of dimensions and layers of the international business environment, together with an ability to see how their interactions impact on firms • Gain an overview of ways in which principles and practices of sustainability are integrated into the business environment
1 The Business Enterprise in Focus
3
OPENING CASE STUDY The iconic brand of Levi Strauss Nowadays, when we think of an iconic brand, we tend to think of a brand such as Apple’s iPhone, but there is an iconic brand that has been around much longer, and is popular with many more people from different walks of life worldwide. The original blue jeans made famous by Levi Strauss are universally popular, whether the wearer is richer or poorer, younger or older, keen on fashion or not. And although Levi Strauss conjures up an image of the American west, their jeans are popular all over the world, in both rural and urban settings. The company was founded in 1853 by a wholesale dry goods merchant who emigrated to the US from Germany. Levi Strauss made his way to California in the era of the great Gold Rush. Working with a partner who was a tailor, they had the idea of riveted jeans for workwear that, according to company legend, would be sold to gold miners. Levi Strauss jeans were patented in 1873, and the business grew steadily. Denim jeans became popular well beyond people engaged in tough, outdoor work. The market for denim jeans was becoming very competitive, and other companies, such as Wrangler, were also attracting loyal customers. The US was their main market, and sales at Levi Strauss reached a peak of $7.1bn in 1997. In the years that followed, denim jeans were facing competition from a range of other brands and products. Gap was offering a wide range of casual wear, and the advent of new fabrics such as lycra offered a more comfortable fit for users, especially those looking for a combination of fashion and comfortable apparel for leisure activities of all sorts. Were denim jeans losing their appeal? Levi jeans has remained a private, family-owned company for most of its existence. It was listed as a public company in 1971, but was de-listed in 1985, reverting to private ownership. In that period, the manufacturing of its clothing shifted from mainly US factories to overseas factories. By the 2000s, its US factories had almost all disappeared. This was a trend that affected the entire clothing industry in the US, as jobs in clothing and textiles shifted to lower cost locations, mainly in Asia. Competitive pressures signalled that the company needed to rethink its product offering and its brand in order to survive in a changing environment. Coming to the rescue was Charles
‘Chip’ Bergh, who took over as Chief Executive Officer (CEO) in 2011. He had come from the consumer products company, Procter & Gamble, and set about renewing the Levi Strauss brand, refashioning its appeal to today’s consumers. He felt that when consumer brands persist in producing the same products for the same markets, without an eye to innovation, they soon become jaded. The company, he felt, should look to new designs and new, improved fabrics. Stretch fabrics were introduced, and more design appeal was sought. While Levi Strauss’s products had always been more popular with men, he set about developing ranges that would be popular with women. He also had an eye on expansion in other markets. It was not long before sales were growing in Europe and Asia, although the US still accounts for 59% of its sales. The venerable old brand faced stiff competition from fast fashion companies such as H&M, which had lower prices and sleek designs. There was also strong competition from the value stores that appealed to highly price-sensitive shoppers. Moreover, retailing was fast becoming transformed by the growth in online sales. Levi Strauss thus had to move with the times. Has it succeeded? Sales rose to nearly $5 billion in 2017. As a sign of its new-found confidence, Levi Strauss opened its own flagship store in Times Square in New York in 2018. Here it offers bespoke tailoring services for customers and a nostalgic step back in time in its on-site Levi Strauss museum. For most older customers, denim jeans bring back pleasant memories of their own lives. Levi Strauss has worked to Wall Street traders mark the depict itself as an authentic debut of Levi Strauss on the brand in a world in which New York Stock Exchange. people have become used to © Getty Images, Spencer Platt
4
Business in the global environment
throwaway fashion. The idea of spending on something that is authentic and lasting seems especially to have struck the right note with millennial-generation customers. In 2018, the ownership of the company was still mainly in the hands of the descendants of Levi Strauss. But its renewed success has encouraged the family to take the company public again. The company was
listed on the New York Stock Exchange in March 2019, and enjoyed a rise in value of 30% on the first day’s trading. The new stock was oversubscribed, in a sign that many investors wanted to own a slice of this iconic company and its history. The Wall Street traders on the floor of the exchange set the tone by wearing Levi jeans for the occasion.
Questions •
What are the competitive pressures facing Levi Strauss?
•
What makes Levi Strauss an iconic brand?
•
In your opinion, why have the descendants kept the company under their own control all these years?
•
What are the challenges now facing Levi Strauss?
Further reading See the article by Dominic Rushe, ‘Levi’s shakes off the troubles by embracing the past’, 17 November 2018, in The Guardian, at www.theguardian.com Also see ‘Levi Strauss shares surge on first day of trading’, BBC news, 21 March 2019, at www.bbc.co.uk
Introduction Business activities shape the daily lives and aspirations of people all over the world, from the farmer in rural Africa to the executive of a large American bank. Business enterprises present a kaleidoscope of different organizations and goals, catering for customers ranging from the shopper purchasing a loaf of bread to the giant oil company agreeing to carry out exploration for a government. Business enterprises and their environments have become more complex and interconnected in recent years, with expanding and deepening ties in diverse locations. Expansion has brought increased risks and greater challenges for managers. They must adapt to differing environments and rapidly changing circumstances. They also serve a more informed public than that of only a few decades ago. The international public is more aware than ever of corporate activities, largely due to the pervasiveness of the internet and social media. Challenges for managers are heightened by a growing perception that companies bear responsibilities for their actions in societies. All business organizations, whatever their size and geographical scope, are faced with key questions to which they must respond. We begin this chapter by identifying these key questions behind the business enterprise, which are, ‘What do we exist to do?’ and ‘How should we be carrying out our goals?’. We then look at how enterprises come into existence, how decision-making takes place and, importantly, the responsibilities of decision-makers for their actions. A number of basic terms relating to companies and their governance are introduced. Business discourse often refers to ‘shareholder value’, but what exactly is a ‘share’ in a company, and why does it matter? These basic concepts are crucial in describing the organizational aspects of the company, which reflect its values and influence its behaviour. As will be seen, the company’s ownership, organization and behaviour are shaped by aspects of the business environment. As the global economy has expanded, there is a wider range of companies and countries engaged in global business. Moreover, states and state-related organizations are playing increasingly active roles. We highlight two cross-cutting views of
1 The Business Enterprise in Focus
5
the international environment. The first is the differing dimensions of the environment, including economic, cultural, political, legal, financial, ecological and technological. The second is that of spheres, from the local through to the national, regional and global. We thus provide a practical framework for understanding how enterprises interact through each dimension in multiple geographical environments. The last section of the chapter focuses on the challenges and responsibilities that have been highlighted, in particular, building sustainable business and the regulatory environment.
What does the business enterprise exist to do?
business any type of economic activity in which goods or services (or a combination of the two) are supplied in exchange for some payment, usually money international business business activities that straddle two or more countries for-profit organizations businesses that aim to make money not-for-profit organizations organizations such as charities, which exist for specific good causes in societies social enterprise an enterprise that lies between the for-profit and not-for-profit organization, aiming to make money but using it for a social cause
The street trader in India and the Silicon Valley executive might not seem to have much in common: they are worlds apart in geography, culture and technology. But they have more in common than meets the eye. Both seek to offer products that will please customers, and both must respond to changing tastes and lifestyles in order to make money to keep the enterprise afloat. This is the essence of business everywhere. Business refers to any type of economic activity in which goods or services (or a combination of the two) are supplied in exchange for some payment, usually money. This definition describes the basic exchange transaction. The types of activity covered include trading goods, manufacturing products, extracting natural resources and farming. International business refers to business activities that straddle two or more countries. Businesses nowadays routinely look beyond the bounds of their home country for new opportunities. Moreover, although it used to be mainly firms in the more advanced regions of the world (such as North America, Europe and Japan) which aspired to expand into other countries, we now see businesses from a much wider range of countries ‘going global’. These include Chinese, Indian, African and Latin American firms. Consequently, in most countries, there are likely to be both domestic and foreign companies competing alongside each other. Today’s international businesses come from a variety of backgrounds and represent a diverse range of organizations – from family firms to state-owned companies. There is thus a wide spectrum of purposes and goals lying behind international businesses.
Purpose and goals A business enterprise does not simply come into existence of its own accord. It is created by people with ideas about products or services, who may emerge in any society or geographic location, and who bring their own values and experience to bear on it. Particular national environments, with their distinctive values and social frameworks, are formative influences on founders of businesses. Entrepreneurs might simply seek personal gain for themselves and their families, but many will envisage an overarching purpose or mission of contributing to society through employment and wealth creation. They will have some idea of what type of entity they wish to create in terms of organization. They must also focus on the specific goods or services they wish to offer, and to whom. These objectives might change frequently, while broader goals are more enduring. Both the decision-makers and the circumstances will change, but the underlying question confronting them is ‘what purpose are we fulfilling or should we be fulfilling?’. Most of the world’s businesses aim to make money, and are sometimes referred to as for-profit organizations, to distinguish them from not-for-profit organizations, such as charities, which are established to serve specific good causes in societies. A third category is the social enterprise, which lies somewhere between the two: it aims to make money for a social cause rather than as profit for the owners. These are broad categories, and these types of enterprise vary considerably from country to country.
6
Business in the global environment
business model a broad term covering an organization’s reasons for existing, its goals and the means it adopts to achieve them innovation activities that lead to new and improved products and services supply chain series of stages involved in producing a product or service, from sourcing through to production, distribution and delivery to the customer, where each stage is co-ordinated to link with other stages in the process
Although for-profit enterprises aim to make a financial gain, most founders would say that their goal is not simply to make money, but to offer products which will satisfy customers. It need not be a wholly new product, but one that is more innovative technologically or a better design than rivals’ products. It could be a ‘greener’ product than those of rivals, such as a more fuel-efficient car, reflecting goals of a sustainable business. Alternatively, a firm might simply focus on delivering a standard product or service more cheaply than its competitors. These are all aspects of the firm’s business model, which is a broad term covering the organization’s goals and means of achieving them. The business model is about why the company exists, as well as about how it aims to serve customers. A business model is not set once and for all by founders, but can be changed over time to reflect innovation and changing markets (see Ovans, 2015). Innovation brings to mind the creation of new products that displace the older ones, but it also encompasses improvements and new ways of doing things (discussed fully in Chapter 9). Innovation lies at the heart of many business models, especially those in high-tech sectors, where it is key to maintaining competitiveness. Apple of the US has acquired an enviable reputation for its iconic iPhone, sold at premium prices, but the company has come under fire over the working conditions in the factories in which the phones are made, mainly in China. The basis of Apple’s business model has been its innovative products, but also crucial has been its strategy of having products manufactured in low-cost locations within a supply chain that is designed to serve markets globally. The supply chain visualizes the production process as a succession of stages, from sourcing and manufacture through to delivery. Supply chains have become global, as firms seek the most advantageous location for each stage. The supply chain is also referred to as a ‘value chain’, whereby value is added at each stage, as discussed in the next chapter. While this is applauded as a global strategy from the business perspective, it can be criticized on ethical grounds in a number of contexts. Consumer products, from basic essentials to expensive goods, are routinely made by exploited workers in poor countries – an uncomfortable reality for companies and their brands. The huge profits Apple accumulates from iPhone sales are deposited in foreign locations, in order to avoid the tax bills that would arise in the US. These arrangements, too, can be criticized as unethical. Apple is not alone. Many companies arrange their businesses to reduce tax burdens. They would argue that the pursuit of economic goals is, after all, what they are founded to do. This approach, however, sits uneasily with mission statements which typically depict the company as enhancing the quality of life. Consumers and investors have increasingly criticized an aggressive profit-seeking approach, pointing out that companies are part of the societies in which they operate: their economic power entails social responsibilities. Governments, too, have introduced legal reforms that seek to compel companies to pay tax in the countries where they operate, rather than utilize tax-avoidance structures. The for-profit company is just that, but there is a growing awareness that a pursuit of both economic and social goals is, in the long term, a more sustainable way in which to frame business goals (Carroll and Shabana, 2010). This point recurs throughout this book.
The company in society: Stakeholders and corporate social responsibility (CSR) As the last section highlighted, answering the question, ‘what do we exist to do?’ is more complex than might appear. A business seeks to enrich its owners, but it will not succeed unless it satisfies customers who purchase its products and services. Its activities involve employing people, acquiring productive assets, using resources and interacting with official authorities and other organizations in communities.
1 The Business Enterprise in Focus
stakeholder broad category including individuals, groups and even society generally, that exerts influence on the company or who the company is in a position to influence
These relationships all involve the business in society. These interests are referred to broadly as stakeholders. A stakeholder may be anyone, including individuals, groups and even society generally, that exerts influence on the company or who the company is in a position to influence (Freeman, 1984). The impacts may be direct or indirect, identifiable people or a more general notion of the community as something distinct from its current members. As Figure 1.1 shows, stakeholders who have direct relations with the company include owners, employees, customers and suppliers. These might be located in any country where the firm does business. A government authority can be a direct stakeholder if it has an ownership stake, but it is more likely to be an indirect stakeholder, framing the legal environment in which the firm operates. Indirect stakeholders, while they affect and are affected by the company’s operations, cover a range of broader societal interests, which enjoy fewer direct channels of communication with managers. They include the local community, society generally and the ecological environment affected by the company’s operations. Employees in a company’s supply chains are also stakeholders, but commonly do not directly interact with the lead company.
Stakeholders that directly affect the business, including: • Shareholders • Employees • Customers • Suppliers
Figure 1.1 The business and its stakeholders
outsourcing term covering any activity which an organization considers can be more advantageously carried out by another firm, often in another country offshoring term covering an outsourced activity that can be carried out in a jurisdiction where weak regulation and tax advantages offer attractions
7
The business and its stakeholders Stakeholders with indirect impacts on the business, including: • Governments and regulators • Communities • Workers in the firm’s supply chain • Ecological impacts
In a company which operates mainly in its own domestic market, managers have a fairly clear idea of their main stakeholders. Their employees and customers are readily identifiable. In a company which operates internationally, identifying stakeholders is far more difficult – and more challenging. The company’s branded products could be made by workers in other locations, who are employed by a different company and have little contact with the company whose brand appears on the products. This strategy is typical of companies that operate through global supply chains. A term often used in the context of seeking cost-saving solutions is outsourcing, which covers any activity which an organization considers can be more advantageously carried out by another firm, often in another country. The activity is usually one formerly carried out ‘in-house’, which the firm decides to contract out to another firm, with the aim of reducing costs. Outsourced manufacturing is one of the more prominent of these. It is exemplified by Nike, Gap and other familiar brands such as Levi Strauss, featured in the opening case study. Numerous business functions can be outsourced. Among them are IT and call centres. This is often referred to as ‘business process outsourcing’ (BPO). Closely associated with this approach is ‘offshoring’, a term used specifically to refer to outsourced activities that take place in advantageous jurisdictions such as those with lax regulation and low taxation. Financial arrangements are often the subject of offshoring strategies. The policy of seeking the most advantageous location for each aspect of the business is one of the
8
Business in the global environment
major trends associated with globalization, which we discuss in the next chapter. But it also exemplifies an aggressively profit-maximizing approach to the business which arguably jeopardizes stakeholder interests. For the company with activities and supply links in different countries, identifying and responding to stakeholder interests can be complex and involve taking decisions which have profound impacts in societies. A decision to close a factory can be made for purely internal economic reasons, but its impacts on employment and communities can be far-reaching. Stakeholders are important interests that impact on the firm’s business performance, but stakeholder management also has a normative dimension, as an aspect of business ethics (Carroll and Shabana, 2010). For example, managers introduce measures to foster the health and wellbeing of employees not simply because people will work harder if they have healthier lives, but because it is the right thing to do. This ethical principle is rooted in the concept of human rights, which are basic, universal rights of all individuals, wherever they are. Upholding human rights is central to the firm’s broader role in society. The approach to business activities which accords with these values is corporate social responsibility (CSR). CSR as an approach recognizes that, in addition to economic responsibilities, the firm has legal, moral and social roles. These refer to both individuals and whole societies. CSR has become rather an umbrella term, covering a spectrum of approaches to business objectives, which are highlighted throughout this book and are brought together in a critical assessment in Chapter 11. CSR takes a long-term view of the company’s goals. Pure profit-seeking is a shortterm approach that, in reality, can jeopardize the ability of the company to continue to generate profits. In what is often called the ‘business case’ for CSR, the firm places economic goals in a longer timeframe, maintaining its capacity to generate profits in the future. This longer term approach involves the sustainability of the firm’s business, which rests on the idea that today’s business should be carried out in ways which do not cause a detriment to the ability of future generations to fulfil their needs. An overarching theme of this book, sustainability takes into account the firm’s impacts on communities and the natural environment. The principle of sustainability encourages a business to think of stakeholders in the future, not just the present. Most firms would probably say they uphold goals of stakeholder involvement, CSR and sustainability, but firms differ markedly in their commitment of resources to these goals. Many see these as costs which jeopardize the company’s profit-making activities. Possible conflicts between social goals and economic goals underlie much of the discussion of challenges and responsibilities which occurs throughout the book.
human rights basic, universal rights of all individuals, wherever they are, which transcend social and cultural differences corporate social responsibility (CSR) an approach to business which recognizes that the organization has responsibilities in society beyond the economic role, extending to legal, ethical, environmental and social roles
G A LI GH
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sustainability the principle that business should be carried out in ways which do not cause a detriment to the ability of future generations to fulfil their needs
ESS
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What does the business exist to do? Think of a company whose products you regularly purchase. How would you describe its business model? Think about why you are buying its products and whether you feel loyalty to the brand. For example, it might be because the product is good quality, cheap or convenient. But it could also be because the brand stands for values that you support.
How does the enterprise carry out its goals? Although we speak of a firm forming goals and carrying them out, it is actually the people running the firm who take key decisions. In this section, we look at the players and processes which make it function. We focus here initially on the forms, structures and processes which constitute a legal framework; this is a necessary consideration before the firm can get on with what it is ‘really’ about, such as manufacturing. Most businesses start in a small way, with founders who become the first owners. They bear considerable responsibility, especially in the early stages of the business. Having a great idea for a business is only the beginning. They must create a legal and organizational structure to carry it out, and decide on how it will be
1 The Business Enterprise in Focus
9
financed and managed. Each of these aspects of the business has an international dimension for many enterprises, adding to the possible complications, but also offering tantalizing opportunities.
It all starts with entrepreneurs
entrepreneur person who starts up a business and imbues it with the energy and drive necessary to compete in markets
A person who starts up a business, usually with his or her own money, is known as an entrepreneur. This is a broad category. Entrepreneurs exist in every society, but they differ markedly in their goals and outlooks. In developing countries, most entrepreneurs are highly localized in their activities and market. In villages throughout developing countries, the ‘subsistence entrepreneur’ serves the local community, managing to make a living but harbouring no intentions to expand (Schoar, 2010). The majority of entrepreneurs in developing countries are subsistence entrepreneurs. It is often observed that what is needed to propel economic development in poor countries is the more ambitious and innovative entrepreneur, who aspires to grow from a start-up to a bigger business (Schoar, 2010). The ‘transformational entrepreneur’ is that kind of person, reflecting the predominant image of the entrepreneur as a person with a sense of mission, a great deal of energy and a willingness to take risks. When governments speak of the need to encourage entrepreneurs, it is this type of highly motivated businessperson they have in mind. The business environment plays an important role in encouraging – or discouraging – the entrepreneur, as shown in Figure 1.2.
What aspects of the environment foster successful entrepreneurs?
Societal factors
Figure 1.2 Country factors contributing to entrepreneurship
regulation broad term covering laws and rules relating to a particular type of activity or sector
∞ Educational opportunities and achievement ∞ Focus on innovation ∞ Level of technology
Legal and regulatory factors ∞ Ease of setting up a business ∞ Ease of employing staff ∞ Efficient and inexpensive court procedures
Available finance ∞ Ease of obtaining business loans ∞ Abundance of private investors ∞ Government loans to SMEs
Infrastructure ∞ Cheap and reliable utilities, e.g. electricity ∞ Internet and communications ∞ Transport ∞ Business premises
While all of the factors highlighted in Figure 1.2 are influential, some are more immediate in their impacts, and others are broad aspects of a country’s environment. Availability of finance and business regulation have immediate impacts on start-up businesses. Regulation refers to the laws and rules relating to a particular type of activity or sector. The term covers both formal legal requirements and less formal guidance such as codes of practice. When formalities of forming a business are streamlined or access to finance is facilitated, a rise in new businesses is likely to result. The effects of improvements in education are slower in their impacts, as are improvements in infrastructure. On the other hand, the relaxation of strict labour laws can have more immediate effect, as a change in the law encourages businesses to hire more staff. It could also be observed that where labour laws are very restrictive, for example, limiting an employer’s ability to dismiss an unsatisfactory employee, informal employment is common and workers are vulnerable to
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sole trader/ self-employed person person who is in business on his or her own account employee person who works for another (the employer), usually for wages, and whose work is controlled by the employer zero-hours contract employment arrangement whereby the worker is available for work but paid only for the hours worked, and the employer has no commitment to provide work gig economy category of work in which the person’s working life consists of moving from one job to another, typically working as a self-employed person small-to-medium size enterprise (SME) business ranging from micro-enterprises of just one person to firms with up to 249 employees
exploitation. India is an example of this restrictive environment. Facilitating entrepreneurs by encouraging them to employ people formally should lead to more secure livelihoods for workers. A new business is usually referred to as a ‘start-up’. The founder of an enterprise is traditionally known as a sole trader, but now more commonly referred to as a self-employed person. The self-employed person is an independent contractor, and can be contrasted with the employee, who works for another person (the employer), usually for wages, and whose work is controlled by the employer. The employer is obliged to comply with laws that protect employees, which typically include sick pay, paid holidays and social charges. While there might seem to be a clear distinction between an employee and a self-employed person, in fact, the distinction is blurred. Much work is casual, such as work paid by the hour, with no commitment to a set number of hours per week. The worker on a zero-hours contract is obliged to be available for work, but is not guaranteed a minimum number of hours of work. With the rise of digital platforms such as Uber, the ride-hailing company, the gig economy has become more prevalent in the modern work environment. Traditionally, the gig economy is associated with musicians and actors, who, as freelance workers, move from one job to the next. Now, the gig-economy worker is more often the person whose work derives from a digital platform. In some businesses, such as delivery services, workers are classified as self-employed although their work is to a large extent controlled by the company that takes them on (discussed in Chapter 11). The company is thus able to avoid the costs and obligations that fall on an employer. The worker in this situation can experience the worst of both worlds: compelled to follow orders from the company, but not enjoying benefits of employment status such as paid holidays. This practice has been reviewed by courts in a number of countries, including the UK, where judges tend to look at the reality of the relationship, rather than the labels used by the parties (see the discussion in Chapter 11). Uber, the ride-hailing company, is an example, featured in a case study in Chapter 6. The business of the sole trader has no independent existence separate from its owner. In practice, this means that if the business fails, the personal wealth of its owner can be used to cover the business’s debts. In the worst scenario, the owner’s resources could be wiped out in order to pay business debts. This risk is known as ‘unlimited liability’, and is one of the major drawbacks of being self-employed. Securing finance is one of the major challenges of the start-up business. The business at this stage might have only one or two employees, or even none, although it is common for family members to help out. It is a small-to-medium size enterprise (SME). This category covers the vast majority of the world’s business enterprises. The classification of SMEs is given below: •
Micro: 0–9 employees
•
Small: 10–49 employees
•
Medium: 50–249 employees
•
Large: 250 or more employees
SMEs range from informal micro-enterprises to firms with up to 249 employees, making this a highly diverse category. These firms provide an important source of employment and economic activity in all countries. SMEs employ more people worldwide than large firms, in both developed and developing countries (de Kok et al., 2013). In developing countries, where levels of poverty are high, SMEs can be significant in job creation (de Kok et al., 2013). SMEs are a vital source of innovation, from agriculture to pharmaceuticals. SMEs in the high-technology sector are actively sought by large enterprises, keen to exploit their innovative ideas. High-tech
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SMEs set their sights on global markets from the outset. These are often referred to as ‘born-global’ firms (Tanev, 2012). Whereas a firm traditionally expands gradually from its local and national environment, the born-global firm’s owners think from the outset in terms of international markets. Most are not the flamboyant risk takers that are sometimes depicted in the media. The successful entrepreneur is more likely to pursue a prudent strategy based on assessing each risk and keeping it within reasonable bounds (Murman and Sardana, 2012). Many well-known firms have grown from start-ups into global organizations. McDonald’s, founded as a single hamburger outlet in the 1950s, is an example, as is Microsoft (founded in 1975) and Google (founded in 1998). Of the three, it is striking that Google, the most recent, has grown the quickest, becoming the world’s dominant internet search engine in just a few years. The fact that these firms are all American is indicative that the cultural environment, as well as the legal and financial institutions, was favourable to entrepreneurs. Even so, the failure rate among start-ups is high, and any entrepreneur will admit that luck played a part in getting the business established.
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franchise business agreement by which a business (the franchisee) uses the brand, products and business format of another firm (the franchisor) under licence
Startups fail for many reasons. See what these experts on entrepreneurship say about success – and failure. ‘Why do so many startups fail?’, The Big Question from Chicago Booth, 30 November 2015.
Video link: Startups https://youtu.be/l_9OGlnAT58
For individual entrepreneurs, the franchise business provides an attractive route to starting a business. The franchise agreement allows a businessperson to trade under the name of an established brand, backed by an established organization (the ‘franchisor’), while retaining ownership of the business. Under the agreement, the business owner (‘franchisee’) pays fees to the franchisor organization for the right to sell its products or services. The franchisee does not have the freedom over the business that an independent owner would have, but stands a greater chance of success due to the strength of the established business ‘formula’ of the brand. Besides McDonald’s, Burger King and other fast-food chains, there are numerous other goods and service providers, such as car rental companies, which have grown through the use of franchising.
Companies: the engines of business activity
company legal form of organization that has a separate legal identity from its owner(s)
A business can carry on indefinitely as an unincorporated association or enterprise, that is, without formal corporate status. However, when it grows beyond a size that can be managed personally by the owner, it is usual for the owner to register it as a company, to give the business a separate legal identity and separate financial footing. The company, also called a ‘corporation’, is a legal entity separate from its owners. Registration with the correct authorities in each country (or individual state in the US) constitutes its formal creation, drawing a line between the company’s obligations and those of the owner(s). This means that its finances and legal obligations, such as tax, are separate from its owners. It is also possible to register as a European company within the EU, although for purposes such as taxation, the company is still considered a national entity. The company takes on a separate existence from its owners at the point when it is registered, by filing documents of its purpose and constitution with national authorities.
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share in a company, represents ownership of the company to the extent of the amount invested shareholders legal owners of a company equity in corporate finance, the share capital of a company limited liability principle that the shareholder is liable up to the amount that person or entity has invested in the company private limited company company whose shares are not publicly traded on a stock exchange
public limited company (PLC) company which lists on a stock exchange and offers shares to the public initial public offering (IPO) first offering by a company of its shares to the public on a stock exchange; also known as ‘flotation’
Companies vary widely in their formation, legal status, ownership and goals. Most of the companies featured in this book are registered companies that are commercial enterprises whose founders go through the process of registration in a particular location. The person who invests money in the company, either at its formation or later, acquires shares in it. The share represents ownership of the company to the extent of the amount invested. The whole of a company’s shares are its share capital, also known as its equity. The shareholder is liable up to the amount invested, and therefore enjoys limited liability. The founders are likely to be the first and largest shareholders (also known as stockholders). The introduction of limited liability made owning shares more attractive as an investment, and paved the way for widespread share ownership by the investing public. The shareholder who buys the company’s shares is providing capital to enable it to function. The larger the stake (that is, holding of shares), the more influence the shareholder will expect to exert, although, in practice, controlling interests may make this difficult. A share in a company carries certain rights, including the right to receive dividends and (normally) vote in annual general meetings (AGMs). Importantly, the shareholder is a ‘member’ of the company, whereas the creditor of the company is not. Registered companies may be private or public companies. The main distinction between the two is that shares in the public company (or a portion of them) are traded on a stock exchange, whereas shares in the private company cannot be traded on exchanges. The private limited company tends to resemble the family business in which the owner retains control. It has few shareholders, and these are ‘insiders’, often related. It is not allowed to sell its shares to the public. Private companies often face problems over raising capital, but some, such as Silicon Valley start-ups, have been successful in finding financial backers known as ‘venture capitalists’, who are willing to invest large sums in their businesses. Uber is an example, discussed in the opening case study in Chapter 6. So long as financial backers continue to invest in a new company, owners are likely to keep the company private, thereby ensuring their continuing control of the business. The private company faces fewer requirements for disclosure of its financial position than the public company. Although most are SMEs, many large international businesses choose to remain private companies. An example is Bosch, the German engineering company. Private companies are key economic players in Germany and many other countries. Private companies are thus significant players in the global economy. The public limited company (PLC) is a registered company that offers shares to the public, and is usually referred to simply as a public company. It invites the public to subscribe for its shares in an initial public offering (IPO), also known simply as a ‘listing’ or ‘flotation’ on a stock exchange. Stock exchanges are regulated under national legal frameworks, and also governed by their own listing rules (see Chapter 8). Typically, they specify that only a portion of a company’s shares need be floated publicly, that is, offered to the general public, in order to be listed. This portion can be only 20%, or even lower. The remaining shares are generally owned by a few insiders, or, in some cases, government bodies. For example, Gazprom, the Russian gas giant, is listed on the London Stock Exchange, but the company is majority owned by the Russian government. This arrangement is not uncommon, and can seem confusing. A public limited company listed on a stock exchange is considered legally to be in the private sector, whereas a public-sector entity is owned and controlled by the state. When a government decides to ‘privatize’ a state-owned organization, it begins by registering the company as a PLC. Gazprom, for example, was formerly the gas ministry of the USSR. Conversely, when a PLC is taken over by the state, it is said to be ‘nationalized’.
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Should we take the plunge and go public? If an entrepreneur has a successful business as a private company, it used to be thought a logical progression to go public, but this is no longer considered to be necessarily the best way forward. Why would the entrepreneur be tempted to go public? Think of the potential benefits and also the risks.
The public company faces scrutiny of its accounts by national regulators in the country in which it is registered, and in countries where its shares are listed on exchanges. It should be noted, however, that global scanning for the most advantageous location affects these decisions, just as it affects the location of production facilities. The company might register in an offshore location such as a Caribbean state, where oversight is minimal, and it could well decide to list on a stock exchange where the regulatory requirements are weak, and where the dominance of insiders is not an obstacle. In the US, nearly half of all public companies are registered in the tiny state of Delaware. While not strictly offshore, it offers many attractions that offshore registration offers, and appeals to business founders who wish to maintain control of their companies. Among companies that have registered in Delaware are the familiar ones such as Facebook, but also thousands of companies that are little more than shell entities that are linked in opaque corporate ownership structures. Delaware’s advantages include the ease with which company registration is facilitated and the business-friendly stance of its courts, but the darker side is facilitating non-disclosure of company ownership and activities. In 2012, the number of registered corporate entities in Delaware exceeded the number of human beings in the state: there are just over 900,000 registered companies and under 900,000 people (Wayne, 2012). It is thus worthy of note at this early juncture that founders of companies which ‘go public’ often wish to ‘have their cake and eat it’: they wish to attract the public to buy shares, but they also wish to retain control of the company and take the major decisions themselves. Google, for example, has a dual share structure whereby founders’ shares carry more voting rights than ordinary shares (they are weighted 10 to 1). Some public companies decide to take the reverse route and go back to being private companies. Some entrepreneurs wish to re-assert control over their business, as shown in the mini case study that follows.
MINI CASE STUDY Taking a company private Elon Musk, the flamboyant CEO (chief executive officer) of Tesla, the electric car company, announced in 2018 that he had ‘funding secured’ to take his company back into private ownership (Campbell and Pooley, 2018). Tesla had been listed on the Nasdaq exchange in 2010, and was worth over $70 billion. Taking it private would involve a mammoth undertaking to buy out the investors, and it soon emerged that he did not have the means to accomplish this feat. He faced legal action from the US regulator, the Securities and Exchange Commission, for making false state-
ments. While Musk attracted investors in Tesla because of his appeal as a technological visionary, they have reason to be concerned about his sometimes erratic behaviour and statements. Most entrepreneurs can appreciate the feelings of frustration arising from the external pressures on their companies when they become publicly listed. Market analysts are constantly focused on the latest share price, with little longterm view of the health of the company. Financial results are typically reported four times a year, leading to tensions surrounding expectations
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each quarter. There are numerous other regulatory obligations that pertain to public companies. For example, whereas a private company can appoint any directors it wishes, the public company is obliged to appoint some independent directors, who can represent the wider interests of all the investors. This is a protection for the investing public, but can be seen by founders as an obstacle to realizing their vision. Because a range of investors and their interests are involved, the public company is in the glare of publicity. A larger-than-life entrepreneur, such as Richard Branson, has been keen on media attention when marketing his products, but has objected to media attention when it focuses on how his companies are run. His company, Virgin, was floated in 1986, but taken private again two years later.
The traditional CEO is careful in all media communications, aware that any statements could be misinterpreted and have a negative impact on the company’s share price. Many entrepreneurs in today’s high-flying tech companies are the opposite of this traditional CEO. They have grown their companies rapidly, often attracting outside investors who have seen the potential of their innovative ideas in the process. This attraction helps to explain the popularity of Tesla’s shares, which translated into rising share prices, despite weak financial performance in the company’s carmaking business. The modern entrepreneur’s drive and vision can seem incompatible with the constraints of the listed company.
Questions •
What were the factors in Tesla’s success?
•
Would you advise investing in Tesla, or would you consider it too risky an investment?
Find out more See the article focusing on Elon Musk, ‘Colliding with reality’, by Richard Waters and Peter Campbell, 16 June 2018, in the Financial Times.
Functional areas within the enterprise
functional areas activities of a business which form part of the overall process of producing and delivering a product for a customer
Every enterprise, whether large or small, involves a number of different types of activity, or functional areas, which form part of the overall process of providing products for customers, often in numerous markets around the world. Physical resources, including plant, machinery and offices must be organized, and functions such as finance, production and marketing must be co-ordinated, to enable the entire enterprise to function smoothly as a unit. Every business carries out basic functions, such as finance, even though in a small business, it is unlikely to hire specialists in each area. By contrast, a large organization has separate departments. The importance of particular functional areas depends in part on the type of business. Product design and production, along with research and development (R&D), feature mainly in manufacturing firms, whereas all firms have need of finance, human resource management (HRM) and marketing functions. These functions cover the entire life of a product, from the design stage to the delivery of a final product to the customer. They even extend beyond the sale, to include after-sales service and recycling. Core functional areas are set out in Figure 1.3. At the centre of the figure is the company’s central management, which is responsible for overall strategy. These senior managers determine what the company’s goals are, and how best to achieve them. They are responsible for co-ordinating the activities of each functional area. We look at the part played by each of these functions in turn.
1 The Business Enterprise in Focus
Human resource management (HRM)
Logistics and supply chain management
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Finance and accounting Production
IT support
Central Management
Marketing Research and development (R&D) Figure 1.3 Functional areas of a business organization
Public relations (PR) and communications
Sales
•
Finance and accounting – This function concerns control over the revenues and outgoings of the business, aiming to balance the books and to generate sufficient profits for the future health of the firm. This function is far more complex in large public companies than in SMEs. Trends towards more innovative finance and international operations have called for considerable professional expertise. At the same time, as discussed earlier, legal duties of financial reporting and disclosure are now increasingly under the spotlight. The company’s chief financial officer (CFO) is a board member, and bears responsibilities for compliance with legal requirements.
•
Production – Production spans the entire process of producing a product for sale in markets. This function covers tangible goods and services, and often a combination of both. Production focuses on the operational processes by which products are manufactured. Quality, safety and efficiency are major concerns of production engineers and managers. Quality and safety have become more challenging as manufacturing has shifted to diverse locations, and in some instances, companies have brought back to the home country operations that had been carried out by low-cost workers in outsourced factories. This is likely to occur in operations where computerized systems and robotics reduces the need for workers.
•
Logistics and supply chain management – This functional area is closely linked to production, as supply chains are crucial to the production process. This is especially true for the manufacture of products that involve numerous components sourced externally. It is crucial for logistics solutions, involving transport and warehousing of products, to be as efficient and reliable as possible, to keep costs under control and to deliver orders to customers on time and according to their contractual terms.
•
Human resource management (HRM) – Formerly known as ‘personnel management’, HRM focuses on all aspects of the management of people in the organization, including recruitment, training, and rewarding the workforce. In the large, hierarchical organization, these activities are formally structured,
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whereas in the small organization, they tend to be carried out informally, with less paperwork and less reliance on formal procedures. Organizations have become sensitive to the need to take into account the individual employee’s own goals and development, as well as the needs of the company. International HR strategy is challenging. Each country has its own set of employment laws, and in each country, social and cultural factors play important roles in work values and practices. International HR managers increasingly realize the fact that motivating staff in different locations requires differing approaches and reward systems. •
Marketing – Marketing covers a range of related activities, including product offering, branding, advertising and pricing. Marketing aims to satisfy the needs and expectations of customers with products that offer a winning combination of value and attractive price. While global companies aim to create a strong brand image across their product range, they adapt products and marketing communications to differing country markets. They rely on market research to understand customer preferences in each market, both in terms of products and customer relations. Marketing is an area in which regulation is an important consideration, national authorities playing an active role in regulating, for example, product safety and advertising.
•
Sales – Sales are central to any business, and sales specialists work closely with marketing specialists to establish the company’s products in particular markets and to launch new products. Sales specialists must focus on how best to sell particular products in each market, including how best to price it to generate sales. The company’s competitive position in each market depends heavily on the expertise of those in its sales department.
•
Research and Development (R&D) – R&D is the function of seeking new knowledge and applications which can lead to new and improved products or processes. R&D activities are part of the larger focus on innovation in the company, and can take place within any of the functions listed in this section. R&D can focus on scientific and technical research, which is key to new product development. Pharmaceutical companies typically spend huge sums on R&D, as new medicines are their chief source of profits. For a media or internet company, innovation relies on creating new content (often adapted to new markets) and new ways of delivering content to the consumer.
•
IT and support services – It has become all too common for IT problems to upset production schedules, cause customers to be disappointed and cost substantial sums of money to put right. The security of the organization’s data and systems can be threatened, posing long-term risks to the business. Having reliable and secure IT systems able to cope with the changing needs of the business, along with the ability to respond quickly to glitches in the system, is crucial to a business. This support function is central to the firm’s activities in all the functional areas, as an IT malfunctioning in one can have knock-on effects in others. The IT system must support the gathering and storage of the firm’s data, facilitate internet networking with other firms, and offer security against threats such as leakage of data and cybercrime.
•
Public relations (PR) and communications – The traditional function of PR, which suggests a focus on publicity, has given way to a greater emphasis on quality communications involving the range of a company’s stakeholders. While ongoing communication is essential to stakeholder relations, it is also vital in relation to regulatory authorities, consumers and the general public. The rise in social media has transformed communication channels, enabling companies to reach a wider
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public, and also enabling consumers to acquire information about the company – often information that the company might prefer not to be disclosed through the social media. Managing communications is thus an important function for meeting consumer and investor expectations and also answering their concerns. Documents such as an annual CSR or sustainability report have become an important aspect of the large company’s approach to communication. An organization’s central management has the ultimate control over the ways in which these functional areas carry out the company’s goals. While each area is distinctive, all must be co-ordinated with each other, as Figure 1.3 shows. Finance and IT are crucial to each of the functional areas – and there is likely to be tension regarding the allocation of funds. For example, should the marketing budget be reduced in order to focus more on R&D? In today’s company, where costs are a paramount concern, the possibility of outsourcing business processes is relevant to most of these functional areas. We have seen that production is often outsourced, and many ‘back-office’ activities, such as accounting, finance, administration and customer relations can be outsourced to specialist service providers, often in low-cost locations. Each of the business functions adapts and changes as a business expands internationally, as the following examples show: •
Financial reporting will involve different regulatory environments and accounting standards.
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Operations will be linked in global production networks.
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HRM will adapt to different cultures and laws.
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Marketing strategy will be designed for differing markets.
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R&D will be configured in different locations according to specialist skills in each.
For the international manager, an understanding of the differing cultural environments where the company operates, and the various functional activities which take place in each unit, are crucial to the overall achievement of the company’s goals. A company’s approach to these challenges depends heavily on its own background and its relations with stakeholder organizations.
The multinational enterprise (MNE)
multinational enterprise (MNE) an organization which acquires ownership (whole or partial) or other contractual ties in other organizations (including companies and unincorporated businesses) outside its home country
Both private and public companies abound in the international environment. As they extend their operations outwards from their home countries, their organizations become more complex. A company can grow ‘organically’ by increasing its capacity and going into new markets without making major structural changes to the organization. When company executives become more ambitious internationally, they contemplate changes with deeper structural implication. A result has been a thriving global market in corporate ownership and control. As its strategy evolves, a company might buy other companies and sell those it no longer wishes to own. It might also buy stakes in other companies, often as a means of participating in a network of firms, rather than for purely ownership motives. This constant re-configuration of companies and businesses has become a prominent feature of the global business environment. In these ways, companies can grow relatively quickly internationally and adapt their businesses organizationally as changes in the competitive environment occur. The main organizational arrangement through which these changes take place is the multinational enterprise. The multinational enterprise (MNE) is a broad term signifying a lead company (the parent company) which has acquired ownership (whole or partial) and other contractual ties in other organizations (including companies and unincorporated
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businesses) outside its home country. The parent company co-ordinates the business activities carried out by all the organizations within the MNE’s broad control.
Parent company (Home country)
Figure 1.4 The multinational enterprise (MNE)
subsidiary company a company owned wholly or substantially by another company, which is in a position to exert control affiliate company organization connected through ownership stake or other strategic ties to an MNE, often in supply chains holding company an umbrella company that owns the multiple companies or divisions that make up the business
Company in
Company in
Company in
Country A 60% stake
Country B 30% stake
Country C 100% owned
The MNE as an organizational form is not a strictly legal category, but it is recognized as central in international business organization and has been a key driver of globalization, discussed in the next chapter. The term covers businesses of all sizes, from SMEs to global companies with hundreds of thousands of employees. It covers private companies as well as public ones. Typically, the parent company located in the home country co-ordinates the activities of other companies in the group. If the parent company owns a majority stake in another company, that other company is a subsidiary. Where the ownership stake is less than half, the other company is considered an affiliate company. The MNE thus operates through a range of subsidiaries and affiliates, usually connected in supply chains. The parent company can exert strong control over a subsidiary, or it can operate on a loosely co-ordinated basis, delegating much decision-making to local managers. A simple MNE is shown in Figure 1.4. In the figure, only the company in Country C is wholly owned and controlled. It is thus a subsidiary company. The parent has a 60% equity stake in the company in Country A, making it also a subsidiary, as this gives the parent a controlling stake. The 30% stake in the company in Country B makes this company an affiliate. MNEs can have quite complex webs of affiliates, and in some countries, especially in Japan and South Korea, affiliates own shares in each other, known as ‘cross-shareholding’, thereby giving the parent company effective control over an affiliate even though it might own only a small stake itself. The MNE parent company can be a holding company, that is, simply an umbrella company that owns the multiple companies or divisions that make up the business. An example is Google’s parent company, Alphabet. The parent company is likely to be registered in its home country, and its subsidiaries registered in the countries where they carry out their activities. Hence, the subsidiary can be viewed as a ‘local’ company, even if controlled by a foreign parent. In some countries, foreign investors are not permitted by law to own 100% of a local company, but a sizeable stake can bring considerable power. In another twist, a private parent company can control subsidiaries which are publicly listed in their countries of operation (an example is the steel company, ArcelorMittal). Managing subsidiaries in different country environments is one of the major challenges for today’s international managers, heightened by the expansion of competitive MNEs from developing and emerging economies.
Corporate governance: Shareholders and other stakeholders The sole trader or sole owner of a company may well take all the major decisions for the business, unfettered by the wishes of other owners and not accountable to anyone else within the business. Still, even a micro-enterprise has stakeholders, in
1 The Business Enterprise in Focus
corporate governance the highest decisionmaking structures and processes in the company Organisation for Economic Co-operation and Development (OECD) organization of the world’s main developed economies, which supports market economies and democratic institutions
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that it exists in a community, has customers, makes an environmental impact and must comply with regulatory authorities. A company’s highest decision-making processes constitute its corporate governance. Corporate governance refers to the highest decision-making structures and processes in the company. It differs from business to business, and is influenced by national economic, social, cultural and legal environments. It reflects broad perspectives on the company’s role in society, which have come under the spotlight in the wider debate on corporate governance and CSR in recent years. A company’s own heritage and corporate culture influence its corporate governance, both formally and informally. National governments have oversight of corporate governance, but most are reluctant to intervene actively in what is considered the internal governance of private-sector companies. Many would prefer the law to lay down broad principles rather than prescriptive frameworks, on the grounds that a onesize-fits-all approach is not appropriate. The Organisation for Economic Co-operation and Development (OECD) (at www. oecd.org), which was established by representatives of the world’s main developed economies in 1961, has been active in giving guidance on corporate governance (see Chapter 2 for details of the OECD). The OECD’s overarching principles support market economies and democratic institutions. Since 1999, it has published a set of Principles of Corporate Governance, which are intended to guide companies generally on best practice. These have become recognized as benchmark principles globally. While they are addressed mainly to large public companies, they are relevant to both public and private companies, and apply to companies with differing board structures (discussed below). Moreover, they are now addressed to the G20 group of countries, which include developing and emerging economies. OECD and G20 representatives took part in discussions that culminated in the publication of the most recent version, which was issued in 2015, replacing the 2004
Table 1.1 Corporate governance principles recommended by the OECD and G20 Principle
The corporate governance framework should:
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• Promote transparent and fair markets • Be consistent with the rule of law • Support effective supervision and enforcement
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• Protect and facilitate the exercise of shareholder rights • Ensure the equitable treatment of all shareholders, including minority and foreign shareholders
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• Provide sound incentives throughout the investment chain and provide for stock markets to function in a way that contributes to good corporate governance
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• Recognize the rights of stakeholders established by law or through mutual agreements • Encourage active co-operation between corporations and stakeholders in creating wealth, jobs, and the sustainability of financially sound enterprises
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• Ensure that timely and accurate disclosure is made on all material matters regarding the corporation, including the financial situation, performance, ownership and governance
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Board responsibilities: • Ensure strategic guidance of the company, effective monitoring of management by the board and the board’s accountability to the company and the shareholders • Apply high ethical standards and take into account the interests of stakeholders • Align key executive and board remuneration with the longer term interests of the company and shareholders • Exercise effective independent judgment on corporate affairs • Consider a sufficient number of non-executive board members capable of exercising independent judgment
Source: OECD (2015) G20/OECD Principles of Corporate Governance, OECD Publishing, at www.oecd-ilibrary.org
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directors individuals appointed by the company to bear ultimate responsibility for the company’s activities; collectively referred to as the board of directors board of directors body comprising all the directors of a company, including executive and non-executive, which is accountable to the company’s shareholders; can be a single board or a two-tier board co-determination principle of stakeholder participation in corporate governance, usually involving a two-tier board, with employee representation on the supervisory board executive directors directors who actively manage the company
version (OECD, 2015). Participants were keenly aware that corporate governance had come under the spotlight following the financial crisis. Key principles in the new version appear in Table 1.1, above. They largely replicate those in the previous version, including the recognition of the role of stakeholders, the protection of the status of minority shareholders and the assertion of the need for non-executive directors to be independent. However, it is notable that the first principle now asserts the need for ‘fair’ markets, rather than ‘efficient’ markets, as had appeared in the 2004 version. Although the senior executives are probably the most influential people in the company, the highest legal authority is its board of directors. Directors bear ultimate responsibility for the company’s activities. Collectively, they constitute the board of directors, accountable to the company’s shareholders. Structures differ from country to country. In Germany and other European countries, a twotier board of directors is the norm. A supervisory board holds the ultimate authority for major decisions, while a management board is responsible for dayto-day management. The single board is the norm in the Anglo-American type of structure, shown in Figure 1.5. It is based on the belief that shareholders’ interests are paramount. Board members have oversight over major decisions and owe duties to act in the best interests of the company as a whole, which, in practice, is equated with the interests of the shareholders. Where the state controls a company, there is a potential conflict between the government’s political goals and the best interests of the company as an enterprise. For example, executives might wish to slim down the workforce, but political leaders wish to retain as many jobs as possible. The supervisory board in the two-tier system includes employee representation, reflecting the principle of co-determination. The twotier model is often said to represent a stakeholder approach to governance, in contrast to the focus on shareholder value that characterizes the single-tier model. However, the supervisory board in the German two-tier structure has also been criticized as being under the control of dominant shareholders (Enriques and Volpin, 2007). The directors who actively manage the company are its executive directors, headed by a chief executive officer (CEO). The CEO occupies a pivotal role in decision-making and management of the company. The CEO is at the pinnacle of the company’s management, which consists of all the processes of planning, organizing and controlling the firm’s business. The firm’s managerial staff are all responsible to the CEO. In turn, the CEO must answer to the board, maintain the
chief executive officer (CEO) the company’s senior executive, who oversees its management and is accountable to the board of directors management all the processes of planning, organizing and controlling the firm’s business
Figure 1.5 The single-tier board of directors
Shareholders Annual general meeting (AGM) Executive and non-executive directors Board of Directors Chair Remuneration committee
Audit committee
Chief Executive officer (CEO)
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non-executive directors part-time company directors who are independent of the firm’s management and owners
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confidence of shareholders, inspire the company’s workforce and deal with an array of stakeholders. Whenever the company’s fortunes take a turn for the worse, the CEO is in the firing line. Non-executive directors are considered independent of the firm’s management and owners, although independence is questionable in some cases: in many countries personal ties and ownership stakes are considered not to impact on independent status. The non-executive director carries out board duties on a part-time basis, and, in theory, exerts more objective judgment on the company’s activities than working managers do. The onus is on non-executives to take their responsibilities seriously, and actively query the CEO over strategy. Non-executives are equally liable legally for corporate wrongdoing which they ought to have been aware of. There has been a tendency to appoint other CEOs and retired CEOs as non-executive directors. Having a managerial viewpoint themselves, these appointees are hardly likely to offer an outsider’s perspective. This approach is now changing, as uncritical boards have been implicated in a number of situations where misguided strategies and excessive executive rewards were allowed to go unchecked. An example is Enron, the energy trading company which collapsed in 2001. Enron had a corporate governance system which looked admirable on paper. However, its senior executives were able to steer the company towards their own goals, and the bodies which should have provided a check on their actions (such as the board and its committees) failed to do so. More recently, excessive risk-taking was blamed in a series of bank failures which led to the global financial crisis of 2008, including Lehman Brothers of the US, once the country’s fourth-largest investment bank, which collapsed under a mountain of $60 billion in bad debts. Other banks, deemed to be too big to fail, such as Citigroup, were rescued by US government bailouts. The UK government came to the rescue of major banks, RBS and Lloyds. These banks had become highly globalized and indebted, and had also become imbued with a corporate culture that rewarded short-term gains which involved excessive risk-taking (see Chapter 8). Executives of failed banks seemed to escape unscathed following the crisis, even continuing to receive bonus payments. It was acknowledged that regulatory failures, as well as misguided strategies by managers, had been to blame. Could better regulation have prevented the crisis? This is discussed in Chapter 8 and revisited in Chapter 12, in the context of managing a sustainable business. Company law is a part of the national law in most countries. These laws generally relate to company formation, the formal obligations of directors and financial reporting requirements. In areas where there are formal laws, compliance is mandatory. However, there are many areas of corporate governance, such as the issues listed in the OECD Principles in Table 1.1, that are not usually covered by company law. Some are covered by guidance set out in codes of practice that are non-binding. This is sometimes called ‘self-regulation’: companies are urged, but not compelled, to adopt best practices. The UK first adopted such a code in 1992. The code has undergone several revisions, the current version of which is the UK Corporate Governance Code of 2018 (Financial Reporting Council, 2018). This latest code relies on the ‘comply or explain’ approach, placing the onus on the company to either comply or explain why it is not complying with each principle in the code. This means that executives cannot simply ignore principles such as the appointment of non-executive directors: they have an obligation to provide meaningful explanations if they choose not to do so. Although the code has been recently revised, consultation began almost immediately between the UK government, businesses and regulatory bodies, with a view to further reforms of the regulatory framework on corporate governance. Among the issues that were addressed were executive remuneration, the role of the non-executive directors and the duty to strike a balance between
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G A LI GH
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shareholder value and the interests of other stakeholders, notably employees. This new review thus reflects the public disquiet that has continued to fester following corporate failures and controversial practices, including excessive executive remuneration and tax avoidance arrangements. Will a change of corporate culture be possible, or will a more heavy-handed regulatory approach be adopted? We will return to the ongoing issues surrounding corporate governance in Chapter 11.
ESS
DECI
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How can the board of directors better perform its responsibilities of monitoring management decisions? Boards of directors have been the targets of criticism in recent years, for having been acquiescent when managers were pursuing risky strategies. In particular, non-executive directors who are themselves CEOs are not likely to ‘rock the boat’. What benefits can the independent director contribute to more effective monitoring of the company?
An overview of the global environment The dimensions of the business environment stem largely from the characteristics which go to make up societies: every society has a cultural heritage, a social makeup, distinctive economic activities, political arrangements, one or more legal frameworks and technological capacities. A description of each of these aspects of a society gives a picture of the society as a whole. These dimensions do not stop at national borders. For each dimension, there is an array of interactions ranging from the local community to national and international influences. In fact these interactions have multiplied with deepening globalization. We look first at the distinctive characteristics of each dimension.
Multiple dimensions and the PESTLE analysis PESTLE analysis of a national environment which stands for political, economic, socio-cultural, technological, legal and environmental dimensions
A common tool of analysis of the business environment is the PESTLE analysis, as shown in Figure 1.6. Next to each of the six dimensions there is a short list of three aspects of the dimension that make it distinctive. Many more items could be listed, but these lists highlight some of the main features. These aspects are described briefly in the text that follows. The PESTLE analysis provides a tool for analyzing six key dimensions of the environment. This book devotes a chapter to each of these, and includes a separate chapter on the financial environment. The financial environment is closely related to the economic dimension, but nonetheless merits a separate chapter. National economic systems remain the backbone of the global economy: how they work for businesses and societies is a major focus of this chapter. The chapter on the financial environment provides an explanation of global financial markets and their interactions with national factors. The dimensions of the environment are interrelated. Insofar as the PESTLE analysis takes the dimensions separately, it is a blunt tool for analysis. It also tends to take a rather static view, not capturing changes over time. In this book, we aim to do both: to look at background forces and changes taking place. In many instances, there is tension between established norms and institutions, on the one hand, and newer forces seeking to bring about changes – often changes emanating from outside the country. Bearing these dynamics in mind, we describe each of these dimensions below, in the order that they appear in the PESTLE analysis, with the addition of the financial environment at the end.
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Figure 1.6 PESTLE analysis in the international business environment
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Political
∞ ∞ ∞ ∞ ∞ ∞
Political stability Form of government, e.g. democratic, authoritarian Level of freedoms, e.g. freedom of expression and association Incentives to foreign investors Level of transparency in political decision making Level of corruption in business and political ties
Economic
∞ ∞ ∞ ∞ ∞ ∞
Level of economic development Trends in GDP Rate of inflation Wage levels and level of unemployment Strength of currency and convertibility Rates of taxation
Socio-cultural
∞ ∞ ∞ ∞ ∞ ∞
Growth rate of population, and age distribution of population Language(s) Main religious and cultural groupings Educational attainment levels Level of social cohesion Role of women
Technological
∞ ∞ ∞ ∞ ∞ ∞
Government spending on R&D Legal regime for patent protection Energy availability and costs Transport infrastructure and costs Innovation system, including availability of skilled workforce Level of technology transfer
Legal
∞ ∞ ∞ ∞ ∞ ∞
Rule of law Independent judicial system Fair, impartial implementation of the law Contract law and procedural clarity Recognition of international law Adherence to human rights law
Environmental
∞ ∞ ∞ ∞ ∞ ∞
Environmental protection measures Climate change impacts Biodiversity Pollution, such as reductions in urban air pollution Clean technology Recycling technology
The dimensions in detail are as follows: •
Political (Chapter 5) – This dimension focuses on the formal system of government and on the groups that vie for political power in the country. Political systems vary from those with democratic institutions to those where authoritarian structures rule out most meaningful democratic participation. All businesses, domestic and foreign, seek a stable political environment, but whether democracy is more stable is not self-evident. Political risks arise in any system, and businesses take these into account in making investment decisions.
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sustainable development view of economic development involving continuing investment for future generations, taking into account the long-term viability of industries, both in terms of human values and environmental protection
intellectual property (IP) property in intangible assets, such as patents, copyrights and trademarks, which can be legally protected
•
Economic (Chapter 4) – What kind of economic activities make up the livelihoods of the country’s population? What are the country’s sources of wealth and how industrialized is it? Historically, industrialization contributes to growth and economic development. But growth should lead to sustainable development. Sustainable development looks beyond current needs to those of future generations, covering all in society as well as environmental concerns. Globalization, and especially the role of foreign direct investment (discussed in the next chapter), have been major trends, promoting economic growth in many developing economies.
•
Socio-cultural (Chapter 3) – This dimension looks at the values, attitudes and identities of the groups that make up a society, including minority groups. Social cohesion is an aspect of the environment that concerns businesses, especially in any context of possible social tension. The education system of the country, from primary education to university level, is an indicator of the country’s commitment to the individual betterment of all its inhabitants. While the spread of western consumer lifestyles associated with economic development are a global phenomenon, national cultures remain a potent force.
•
Technological (Chapter 9) – To what extent does the country encourage the use of applied scientific knowledge for practical purposes? The depth of a country’s scientific education and training, as well as the extent of government funding for R&D, are indicators of the country’s technological environment. It is important for businesses that new products and inventions which are the creative outputs of their researchers are protected in law. These are assets that can be protected by laws relating to intellectual property (IP). They include patents for the firm’s inventions; copyright for written works, music, film and software; and trademarks, such as company logos. As countries climb the technological ladder, the protection and enforcement of IP rights are demanded by businesses.
•
Legal (Chapter 6) – Every country has one or more systems of laws, backed up by the authority of the state. This area covers how laws are made and how they are enforced in practice. In any country, businesses look for clarity and predictability in the laws which pertain to them, with fair, impartial implementation and enforcement. These characteristics indicate the existence of the rule of law in a country. Where a country is fragmented, with differing lawmaking authorities in separate regions, instability can result, making it more difficult to do business in the country, especially for foreign firms unfamiliar with the differing authorities. Cross-border legal actions, involving both national and international law, have become more significant for companies in the era of deepening international ties.
•
Environmental (Chapter 10) – This dimension focuses on sustainability and environmental protection. Environmental degradation in today’s world has been caused largely by human activity, especially through industrialization, urbanization and modern large-scale agriculture. Businesses are gaining greater knowledge and awareness of the environmental impacts of their operations in differing locations, as well as their impacts on global phenomena such as climate change. Resource scarcity and climate change are increasingly becoming imperatives for corporate strategists to take into account.
•
Financial (Chapter 8) – Finance, including banking and other financial services, is essential for governments, businesses and individuals. National financial systems differ in their openness to outsiders, their transparency and their levels of regulation. Most countries’ financial systems have become more open in
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recent years, but the trend towards global financial markets has led to raised levels of risk and volatility. These risks can have devastating impacts in societies, as the global financial crisis of 2008 has shown. Regulation at both national and international levels has become a crucial element in maintaining financial stability.
MINI CASE STUDY The Brazilian mining disaster and BHP Billiton BHP Billiton is one of the world’s leading mining companies. It is one of the world’s largest iron ore exporters, the other large competitors being Vale of Brazil and Rio Tinto of Australia. BHP Billiton and Vale came together to form a joint venture, Samarco, to operate an iron ore mine in Brazil. A catastrophic accident at the Samarco mine occurred in 2015, when an earthwork dam that contained mining waste burst and set off a mudslide of iron ore waste into the river, the Rio Doce. The collapse of the dam killed 19 people. It destroyed several small communities and became Brazil’s worst environmental disaster to date. The water supply of hundreds of thousands of people was contaminated. The owners of the joint venture had experienced difficulties with the drainage, and changed the design of the dam between 2011 and 2012. However, the drainage became less efficient, leading to a dangerous build-up and ultimately to the collapse of the dam. The mine could not re-open for the foreseeable future, and BHP Billiton was compelled to write off its investment. Samarco was legally a separate company, and both civil and criminal proceedings were launched against it. Its president, five other executives and one contractor were charged with homicide over the disaster. While Samarco and its staff were more directly involved, the design failing would have been a matter for the owners of the joint venture. Compensation for the social and environmental damage, along with remedial actions, would amount to huge sums, for which the owners of Samarco were liable. An agreement between the two owners and Brazil’s federal authorities set the claim at a sum of nearly $47 bn, with initial payments to be made to help the victims. In Australia, shareholders in BHP Billiton commenced legal action against the company, arguing that they had suffered losses as a result of
the disaster. Three thousand investors joined the lawsuit against the company. The company’s value had declined some $14 billion in the months following the disaster, the share price falling 22%. BHP Billiton was thus embroiled in legal actions from the accident itself and from the consequent economic losses suffered by its investors. Mining is a perilous business in any environment. The risks in this particularly sensitive region in Brazil meant that design issues had to be beyond doubt, and extra precautions and monitoring should have been constant preoccupations. These high standards were not observed, and the result was Brazil’s worst mining disaster up until
A tragic mining disaster at Samarco in Brazil, pictured here, shone the spotlight on the role of global mining companies. © Getty Images AFP Contributor
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then. Unfortunately, a similar dam collapse followed four years later in the same region, with a far higher death toll. The tragedy in 2019 took place near the town of Brumandinho. The mine was operated by Vale, and the death toll was estimated to be in the region of 280 people. The tragedy was again linked to the accumulation of
mining waste which caused a mudslide. Brazil’s mining regulator has now recognized that this type of system is not safe, ordering existing operations to be phased out and no new projects to be licensed. However, Vale faces legal liability for the failure of its safety procedures. Several executives were arrested shortly after the disaster.
Questions •
Where does the greater part of the blame lie for the collapse of the dam?
•
Which dimensions of the business environment are involved in this case study? Explain the relevance of each of these.
Find out more See the article by Dom Phillips, ‘Brazil dam disaster: Firm knew of potential impact months in advance’, 1 March, 2018, in The Guardian.
The multi-layered environment Any dimension will have a layered perspective in terms of geography, as shown in Figure 1.7. For example, the political environment is made up of the local community, national government and international relations. For enterprises, it is necessary to see both the small picture, such as local politics, as well as the big picture, which might be the country’s position in relation to trading partners. In fact, understanding the big picture sometimes helps in understanding local currents, and vice versa. Thus, local political leaders could well wish to attract a foreign investor from a country with which there is a trade and investment agreement. Economic
Political
Financial Legal
The business enterprise
Local community
Technological Figure 1.7 The dimensions and layers of the international environment
National environment
Region of the world
Whole world
Cultural and social
Ecological
It is common to speak of global firms facing competition in the global environment, but in fact, global competition is frequently played out in local environments. Local companies, with their intimate knowledge of local markets, can be some of the toughest competitors which global companies encounter. An example is the stiff competition faced by McDonald’s in China from local fast-food chains.
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The international environment can be conceived as layered spatial areas, visualized as concentric circles, beginning with the smallest unit, the local community. Local communities exist in the larger unit of the country, which is itself part of a geographic region, and beyond that, the world. These layers are shown in Table 1.2. The table gives examples of key phenomena as well as relevant institutions and organizations in each sphere. There is considerable interaction and interdependence among these different spheres as countries and regions become more interconnected. Growing connectedness among people and organizations is a quintessential aspect of globalization, discussed in the next chapter. It is tempting to fall for the view that all aspects of the business environment are inevitably moving towards the global, but this would be a mistake. Some aspects of the international environment have seen greater international co-operation, such as the Paris climate change agreement of 2015, but each layer of the environment has its own characteristics and players. Although they are becoming interconnected, they are not melding together into a whole, but retain distinctiveness, which business strategists ignore at their peril. Table 1.2 Dimensions and layers of the international environment Layers & Dimensions
Local community
National environment
Region of the world
Whole world
Socio-cultural
Families; local customs; schools; urban or rural
National culture; language; sense of shared history
Cultural affinity across the region; movement of people between countries
Human rights; world religions; consumer culture
Economic
Local businesses; predominant industries
National industries; industrial structure; national income and economic growth
Degree of economic integration; regional trade relations
Global economic integration; WTO and multilateral trade agreements; global companies and industries
Political
Local government and politics
Political system; degree of civil and political freedoms
Degree of political co-operation; shared institutions (e.g. the EU)
International governmental cooperation (e.g. the UN)
Legal
Delegated lawmaking; planning; health & safety
Rule of law; independent judiciary and court system; national legislation
Legal harmonization; mutual recognition of court judgments
International law and the International Court of Justice (ICJ)
Technological
Schools and colleges; research centres
National school system; universities; government funding for R&D
Cross-border research ties; co-operation among universities
Global spread of breakthrough technology; global R&D networks
Financial
Penetration of banks and financial services
National financial system; regulatory system
Cross-border financial flows; regional regulation (e.g. the European Central Bank)
Global financial flows; international institutions (e.g. the IMF & World Bank)
Environmental
Ecosystems; pollution levels; air quality
Areas of environmental Regional institutions; costress; environmental operation over regional protection laws resources (e.g. rivers)
Climate change; international cooperation on emissions reduction
We look at each of these layers from the perspective of the business. •
Local community – Wherever the MNE operates or where its products are made, there will be a local community in which its impacts are immediate. A factory or other industrial process affects local people and the natural environment in the
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area. Production can bring jobs and wealth, but impacts on the environment can potentially be damaging. These are stakeholder issues which involve dialogue within local communities. •
National environment – The national environment is probably the most influential for a business. National laws cover company regulation, employment conditions and the environment. A country’s national culture is influential in strategic decisions about potential markets and location of operations. A country’s political system and leadership decide the policies which influence how stable it will be for foreign business investors.
•
Region of the world – Every country is located in a region and is drawn into relations with neighbouring countries. These relations can give rise to conflicts – regional wars are sadly not uncommon. But, more often, relations between neighbours are beneficial. Regional trade agreements have flourished in recent years, allowing for free movement of goods between countries in the region. The European Union (EU) is the most highly developed regional grouping (discussed in Chapters 4 and 5). Regions can pool resources to deal with common threats such as climate change.
•
World – There is increasing awareness of global phenomena, such as climate change, which require co-operation among all players, both businesses and governments, at all levels. Global regulatory frameworks have been established to co-ordinate these efforts. This is happening in respect of climate change. It is also happening in the area of human rights and financial regulation. Although national structures have been dominant in these areas, international frameworks are gaining authority. The international organizations highlighted in Table 1.2 are introduced in the next chapter. Business strategists are now looking beyond national regulation to rule-making at international level.
The way I see it … On the competitive environment, ‘The lesson to me is differentiate yourself…Move up the value chain. Being cheaper isn’t enough. Being the low-cost provider is temporal.’ Sam Palmisano, former CEO of IBM, in an interview with CRN technology news, 23 February, 2011, at www.crn.com
Sam Palmisano guided IBM through a period (2003–2011) when it was making the transition from hardware to services, and also towards social goals, for example, in local supply chains that take into account community needs. He is now the head of the Center for Global Enterprise (www.thecge.net), which focuses on sustainability in the global environment. See ‘IBM’s Sam Palmisano: Always put the enterprise ahead of the individual’, article and podcast, 18 January 2012, Knowledge@Wharton, at http://knowledge.wharton.upenn.edu What advice would Palmisano offer to today’s high-tech giants on the sustainable business?
The enterprise in a dynamic environment: Building sustainability What is the best long-term strategy for the firm? What should it be doing, and where? These questions involve sustainability, looking beyond questions such as how successful the firm’s products are in today’s consumer markets. The challenges become more complex as the business becomes extended globally, through supply chains, diverse investors and evolving markets. An issue raised early on in this chapter was that of how the firm sees its business in the future. Apart from the subsistence entrepreneur, who has few aspirations except making a living, businesses seek more than simply to
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carry on in existence in the future. Most businesses have goals that reflect values and a mission of a higher order, such as innovating to produce better products or products that use fewer scarce resources. Indeed, the firm that adopts a ‘business as usual’ approach in today’s international markets could face a harsh awakening when rivals’ innovations win over its customers. The aspects of sustainability are shown in Figure 1.8, which was featured in the Introduction to this book. Here, we look at how they apply to a range of direct stakeholders as well as broader considerations of societal wellbeing. It has become customary to say that the company exists to enhance shareholder value, as we have noted. But while this is often equated with rising share price and rising profits, these goals, too, look rather limited in today’s world. Economic prosperity, to be sustainable, must encompass society as a whole. But economic prosperity is only one aspect of human wellbeing. The notion of individual and societal wellbeing encompasses human rights and social justice as essential elements. Similarly, action on climate change and the natural environment promote a sustainable future for individuals, families and whole communities. These challenges confront governments as well as businesses. The figure highlights governance that promotes social goods. Crucially, governance includes both business actors and government actors, as well as international actors such as inter-governmental organizations. The global financial crisis of 2008 brought home to all the need for prudent regulation to ensure financial stability. Yet, as we will find throughout this book, risks continue to abound in global financial markets, and corporate leaders are under the spotlight for the ethics of their business models and strategies. All stakeholders, including shareholders, look for innovative products, but also products which reflect high ethical standards, including attentiveness to issues such as human rights, the environment and social goals. These are among the challenges of the sustainable business. Just looking to the next set of profit figures is short term. The sustainable business thus embraces responsibilities that reflect its participation in society.
Individual and societal wellbeing
Financial stability in national and global contexts
Figure 1.8 Elements of sustainability
Climate change and the ecological environment
Elements of sustainability
Governance that promotes social goods
Technological change that benefits societies and individuals
Economic prosperity for society as a whole
Technological change is usually viewed as bringing improvements and efficiencies in processes, bringing economic benefits to the innovative firms at the forefront of technological advances, and to the societies in which the new technology is adopted. Entrepreneurial businesses are often highly innovative. Much technological innovation is now focused on sustainable goals, such as green technology, but technological change inherently disrupts existing ways of doing things, often leading to the demise of old industries, along with the livelihoods of people who had depended on them. MNEs are now able to achieve maximum efficiencies from global supply chains, benefiting from the use of low-cost manufacturing environments. This trend, discussed further in the next chapter, has had significant impacts in both home and
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host countries. Consumers in developed countries have benefited from a huge range of products at lower prices than those manufactured in their own countries. Host economies have benefited from the investment of foreign companies, the employment created, and the opportunities to gain valuable technological expertise. That, at least, is the theory. In practice, questions arise as to how sustainable this outsourcing model is over time. The MNE is likely to move to an even cheaper manufacturing location when the opportunity arises, leaving behind a range of economic, financial and social challenges for the governmental authorities of the former host country. When a firm fails or chooses to close down operations in a given location, the impacts can be far-reaching, extending well beyond the loss of jobs in that firm. Other businesses in the community, such as retailers and caterers, will become precarious. Unemployment inevitably rises, and so does public spending on unemployment and other benefits. People who had no direct connections with the company could well find themselves out of work and struggling financially. It is no wonder that governments come under political pressure to tighten the regulation of foreign investors. Most regulation occurs at the national level, but global companies can – and do – choose countries on the basis of their ‘light-touch’ regulation, avoiding those that are more stringently regulated. We have highlighted national regulatory failures in the finance sector. Competition among countries to attract foreign investors has become a familiar feature of the global environment. Countries where taxes and social charges levied on companies are high tend to attract fewer foreign investors than countries without these provisions. This situation creates an apparent ‘race to the bottom’ which is anathema to building sustainability from a country’s perspective. It is arguable that co-operation among governments to co-ordinate regulations would be a way of responding to the aggressive profit-seeking strategies of some MNEs. While this might seem unlikely in a competitive economic environment, political leaders, as well as corporate decision-makers, are now recognizing the need for encouraging sustainability in wealth-generating activities.
Conclusions This chapter has highlighted internal aspects of a variety of business enterprises, including goals, organization and governance, which influence how they go about their activities and how decisions are taken. The relevant terminology, from IPOs to stakeholders, will recur throughout the book. The values and interests of the individual people behind corporate logos are key to shaping how the business behaves. The backgrounds of these actors on the business landscape have become increasingly diverse. Understanding diverse business environments has thus risen as a priority for managers. As this chapter has shown, the context provides much valuable information about firm behaviour in the past, and the ways in which changes might take place in the future. The chapter has provided an overview of the multiple dimensions of the environment which will be explored in future chapters. It has also set out the differing geographic layers of the environment, from local to international, which impact on the business enterprise. An awareness of these layers helps to understand why firms behave as they do. A local issue, such as emissions from a factory, is a matter for the inhabitants of the community most affected. It is an issue that should be addressed by their government (both local and national). But it is now also a global concern in that emissions contribute to rising temperatures globally. The geographical scanning of MNEs has had consequences in the ways companies perceive the international environment. Developing countries which host outsourced manufacturing are no longer perceived as remote by brand owners and consumers. Workers in outsourced factories are stakeholders of the MNE, even though not employed by it. The host country’s government, too, is a stakeholder, whose law and policies are influential for the MNE. In addition, growing concern at
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international level regarding human rights has heightened awareness of this issue among the company’s most valued stakeholders – its shareholders. For the student of international business, the coming together of global and local forces is one of the aspects of the business environment which is becoming most challenging.
CLOSING CASE STUDY Ikea at the crossroads India might seem an unlikely market for Ikea, the Swedish furniture retailer, to open new stores, but these are changing times in global consumer markets, and the rising middle classes in emerging economies are attracting some of the world’s most established retailers. Hardly any could be considered more established in western developed economies than Ikea, famous for its self-assembly furniture and lifestyle furnishings. Ikea’s business, originating as a small shop in rural Sweden in 1943, was the creation of its legendary founder, Ingvar Kamprad. By all accounts, Kamprad had an extraordinary entrepreneurial flair, and his vision drove the business throughout his long career, until his death in 2018 at the age of 91. By then, he had ceased to take an active role in running the company, but his departure symbolically marked a crossroads in Ikea’s history. How would it cope with the changing environment, especially without the visionary flair of the founder? Ikea has been highly successful in developing a business model that taps into the needs of consumers for affordable furniture and furnishings. It has expanded to 411 stores in 49 countries. These are huge out-of-town warehouse-type stores. Customers usually drive a considerable distance to the store, and take away the flat-pack furniture to assemble at home. Ikea’s expansion coincided with a combination of surging car ownership and home ownership, often in rapidly-growing suburban areas on the outskirts of cities. Customers were often young families looking to furnish their new homes on a relatively tight budget, undeterred by the challenges of assembling the furniture themselves. Contrast this scenario with today’s environment. Younger customers are still looking for affordability, but are likely to be living in rented apartments in city centres, far away from a traditional Ikea store, and they are less likely to be car owners. They tend to make many of their purchases online, where they can compare prices among competing sellers.
Ikea’s executives have responded to the challenges of changing shopping habits by opening smaller stores in city centres. For example, it operates pop-up shops for kitchens in a number of European cities. It is also working to develop its online catalogue that will function independently of its stores. More radically, it is planning other digital advances, allowing its goods to be sold on third-party websites such as Amazon and Alibaba. And, of course, it is expanding in emerging markets such as China and India. Ikea has long expanded into new markets, and has adapted to national preferences in each. For example, its restaurant menus that feature Swedish meatballs are adapted to tastes in differing countries. Offering chicken and vegetarian meatballs in its restaurants in India is relatively straightforward. But furniture
Flat-pack furniture appeals to budget-conscious consumers, but assembling it can be a challenge. © Universal Images Group
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Business in the global environment
retailing is more challenging in India. Indians are not accustomed to DIY furniture assembly. Lower middle-class customers are looking mainly for low prices, whereas more affluent customers seek high-quality wood items, which they tend to buy from Indian firms. Ikea could find itself occupying the uncomfortable middle ground. Still, in a country of 1.25 billion people, that middle ground would still consist of a lot of potential consumers. Although the Swedish flags were waving proudly at the inauguration of the Indian store, Ikea, in fact, is hardly a Swedish company. The many companies that make up its complex structure are organized under two parent companies, both owned by foundations which are located in Liechtenstein and the Netherlands. These corporate structures were designed to minimize tax and to cast a veil over the two companies’ governance. It is clear that the family has maintained overall control over the companies. The founder was said to be worth €58 billion in the years before his death, making him among the world’s richest men. Ethical question marks continue to cast a
shadow over the companies’ tax arrangements, and there are challenges, too, for Ikea’s sustainability profile. The company is one of the world’s biggest users of timber. Much of its furniture is of lower quality compressed wood, which is not very durable. The company has been criticized for this approach of producing vast quantities of low-cost, disposable furniture which is environmentally unsustainable. It has taken this criticism seriously, and has explored recycling solutions. But it is difficult to escape the fact that the quintessential Ikea product, such as the Billy bookcase, is at the heart of its business model. Ikea is at the crossroads of a new era without its visionary founder, and is confronting both competitive and ethical challenges. In a strategic innovation, Ikea has launched a subsidiary company that specializes in purpose-built, low-cost housing. Beginning in Scandinavian countries, the new company has now launched in the UK. This new venture recognizes the growing need for sustainable housing that is affordable and relatively simple to construct.
Questions •
What are the strengths of Ikea’s business model?
•
In what respects has retailing changed since Ikea conceived its large-format stores in out-of-town locations?
•
Have you been to an Ikea store? If so, how would you rate it as a shopping experience?
•
What are the challenges facing Ikea, and what are its prospects of meeting them?
Further reading See the article by Richard Milne, ‘What will Ikea build next?’, 3 February 2018, in the Financial Times, at www.ft.com
☛ Multiple choice questions Visit www.macmillanihe.com/morrison-gbe-5e to take a quick self-test quiz on what you have read in this chapter.
Review questions 1 2 3
How does a business decide what its goals will be? Define stakeholders and explain the stakeholder approach to corporate strategy. What is CSR, and why is it becoming more important in the formation of corporate goals? 4 What are the advantages and disadvantages of being a sole trader? 5 What are the aspects of the limited company which distinguish it from other types of business ownership? 6 What is distinctive about the entrepreneurial enterprise? 7 What is a franchise arrangement? Give some examples. 8 How does a private company differ from a public limited company (PLC)? 9 What is distinctive about the MNE as a type of organization? 10 How does corporate governance differ from the day-to-day management of a company?
1 The Business Enterprise in Focus
33
11 Why are independent (non-executive) directors considered essential in corporate governance? 12 Explain the shareholder and stakeholder perspectives on corporate governance. 13 What is the role of stakeholders in the two-tier board of directors? 14 Describe each of the main functions within the business enterprise. 15 What are the advantages and limitations of a PESTLE analysis?
✓ Assignments 1
Offer advice to the following CEO: Ralph is the CEO of a high-tech company in an EU country. The business has been highly innovative in computing expertise. He has built up the business from its early days as a start-up, and now has an established business model. Ralph has recently had an offer for the business from a large MNE, that values his company at €1 billion. He is tempted, but he would lose control of the business. What should he do? Set out your advice on whether he should take the offer.
2
The PESTLE analysis was designed to illuminate specific dimensions of a national environment. How can it be adapted to take into account other dimensions and broader scope, bringing in regional and global impacts?
Further reading Bartlett, C., and Ghoshal, S. (2002) Managing Across Borders: The transnational solution, 2nd edition (Boston: Harvard Business School Press). Brooks, I. (2018) Organisational Behaviour: Individuals, groups and organisation, 5th edition (Pearson). Hickson, D., and Pugh, D.S. (2007) Writers on Organizations (London: Penguin). Kay, J. (2007) Foundations of Corporate Success (Oxford: Oxford University Press). Maon, F., Lingreen, A., and V. Swaen (2009) ‘Designing and implementing corporate social responsibility: An
integrative framework grounded in theory and practice’, Journal of Business Ethics, 87(1): 71–89. Prahalad, C.K. (2009) The Fortune at the Bottom of the Pyramid (Philadelphia: Wharton School Publishing). Pugh, D.S. (ed) (2008) Organization Theory: Selected readings, 5th edition (London: Penguin Books). Tricker, R.I. (2015) Corporate Governance: Principles, policies and practices, 3rd edition (Oxford University Press). Wheelen, T., and Hunger, J., A. Hoffman, and C. Bamford (2017) Strategic Management and Business Policy, 15th edition (Pearson).
❒ References Campbell, P., and Pooley, C., ‘Tesla tumbles as SEC accuses Musk of fraud’, The Guardian, 29 September 2018. Carroll, A.B. and Shabana, K.M. (2010) ‘The business case for corporate social responsibility: A review of concepts, research and practice’, International Journal of Management Reviews, 85–105. De Kok, J., Deijl, C. and Veldhuis-Van Essen, C. (2013) Is Small Still Beautiful? Literature review of recent empirical evidence on the contribution of SMEs to employment creation (Geneva, ILO). Enriques, L., and Volpin, P. (2007) ‘Corporate governance reforms in continental Europe’, The Journal of Economic Perspectives, 21(1): 117–140. Financial Reporting Council (2018) UK Corporate Governance Code, at www.frc.org.uk Freeman, R.E. (1984) Strategic Management: A stakeholder approach (Boston, MA: Pitman).
Milne, R. (2018) ‘What will Ikea build next?’, Financial Times, 3 February. Murman, J. and Sandana, D. (2012) ‘Successful entrepreneurs minimize risk’, Australian Journal of Management, 38(1): 191–215. OECD (2015) G20/OECD Principles of Corporate Governance, OECD Publishing, at https://oecd-ilibrary.org Ovans, A. (2015) ‘What is a business model?’, Harvard Business Review, 23 January, at www.hbr.org Schoar, A. (2010) ‘The divide between subsistence and transformational entrepreneurship’, Innovation Policy and the Economy, 10(1): 57–81. Tanev, S. (2012) ‘Global from the start: the characteristics of born-global firms in the technology sector’, Technology Innovation Management Review, March, 5–8. Wayne, L. (2012) ‘How Delaware thrives as a corporate tax haven’, New York Times, 30 June, at www.nytimes.com
Visit the companion website at www.macmillanihe.com/morrison-gbe-5e for further learning and teaching resources.
INDEX OF ORGANIZATIONS
AbbVie 329–30 AfD (Alternative for Germany) 186 African National Congress (ANC) 111, 112 Airbnb 426 al-Qaida 85, 172 Alibaba 31, 35, 285 Alphabet 18, 206, 224, 286, 392 Amazon 31, 95, 123, 224, 286, 328, 452, 455–6 American Law Institute 216 American Medical Association (AMA) 395 Amnesty International 193, 406 Andean Community 265, 267 Apple 6, 47, 49, 56, 116, 196, 224, 234, 241, 286, 320, 338–9, 388, 397 ArcelorMittal 18, 305, 355 ARM 35 Asia-Pacific Economic Cooperation (APEC) 265, 269–70 Asian Infrastructure Investment Bank (AIIB) 295 Asos 291 Asset Protection Agency, UK 299 Association of Southeast Asian Nations (ASEAN) 147, 265, 266, 269 AT&T (American Telephone and Telegraph) 223, 224, 303 Bank of America 299 Bank of England 288, 298, 299, 301, 419 Banking Standards Board (BSB), UK 300 Barclays Bank 299, 450–1 BASF 355 BAT (British American Tobacco) 53 Bayer 304–5, 374 Bet 365, 389–90 Bharatiya Janata Party (BJP), India 87 BHP Billiton 25–6 Bill and Melinda Gates Foundation 455 BMW 54, 154 Bombay Stock Exchange 286 Boohoo 378–9 Bosch 12 BP 57, 221, 355, 364, 365, 448 British Telecom (BT) 241 Burberry 38, 423, 424–5 Burger King 11 BusinessEurope 355
Cadbury 303 Cambridge Analytica 236 Carillion 279–80 Cemex 302–3, 305 Chan Zuckerberg Initiative 455 ChemChina 53 Chevron 366, 445, 448 China Labour Watch 450 China Tower 325 Chinese Communist Party 186–7, 400 Chrysler 58 Citicorp 299 Citigroup 21 Coca-Cola 64, 78 Common Market for Eastern and Southern Africa (COMESA) 265, 266, 270 Competition and Markets Authority (CMA), UK 224 Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP) 271 Contemporary Amperex Technology 54 Costco 440 Coty 306 Council of Europe 385, 386 Dacia 145 Danone 212, 229 Deliveroo 393–4 Didi 35 Didi Dache 205 Disney 450 Dow Chemical 374 Dupont 374 Dutch East India Company 250 East African Community (EAC) 270 Economic Community of West African States (ECOWAS) 265, 266, 270 Economic Policy Institute (EPI) 408 EDF 358 Equinor 364 European Central Bank (ECB) 129, 131, 149, 281, 296 European Commission 148, 151, 182, 188, 189, 218, 222, 225, 234, 296, 406 European Commission Research Centre 349 European Court of Human Rights 210, 385 European Court of Justice (ECJ) 182, 188, 218, 385
483
European Economic Area (EEA) 191, 267 European Free Trade Area (EFTA) 191, 265, 267 European Parliament 188, 189–90, 218, 264, 271 European Patent Office (EPO) 330–1 ExxonMobil 374, 423, 448 Facebook 13, 211–12, 224, 235–6, 286, 337, 339, 425, 439, 451, 455 Fairtrade Foundation 403–4 Federal Trade Commission (FTC), US 224, 236 Fiat Chrysler 268–9, 345 Financial Conduct Authority (FCA), UK 280, 288, 299, 419 Financial Services Authority (FSA), UK 288 Food and Agriculture Organization (FAO) 348 Ford Motor Company 59, 93–4, 305 Foreign Intelligence Surveillance Court (FISA Court), US 213 Foxconn 47, 49, 56, 95, 96 Free Trade Area of the Asia-Pacific (FTAAP) 270 Funding Circle 291 G7 (Group of Seven) 195–6 G20, 19–20, 196 Gap 7, 398 Gazprom 12, 146, 187 General Agreement on Tariffs and Trade (GATT) 62, 257–8, 259, 281 General Electric (GE) 221 General Motors 58, 59–60, 116, 399 GlaxoSmithKline (GSK) 212–13, 303 Glencore 274–5 Global Commission on the Economy and Climate 366–7 Google 11, 13, 18, 35, 62, 82, 224, 285, 339, 380, 392 Greenpeace 193, 363 Group of Seven (G7) 195–6 H&M 440 Halifax Bank of Scotland (HBOS) 299 Harley-Davidson 45–6 Heinz 303 Honda 141, 153, 193, 211, 399 Hong Kong Stock Exchange 286, 287 Huawei 241–2, 339 Hyundai 41, 141
484
Index of Organizations
IBM 88, 223 Ikea 31–2 Inditex 68–9 Intel 62 Intergovernmental Panel on Climate Change (IPCC) 62, 351, 352 International Centre for the Settlement of Investor Disputes (ICSID) 230 International Competition Network (ICN) 225 International Court of Justice (ICJ) 62, 226 International Criminal Court (ICC) 194, 227–8 International Energy Agency 445 International Institute for Sustainable Development (IISD) 363 International Labour Organization (ILO) 108, 109, 126, 127, 194, 313, 384, 396, 397–8, 400, 405–6 International Monetary Fund (IMF) 63, 131, 149, 168, 196, 281–2, 283, 284, 290, 294–5, 297, 308, 309, 362, 432–3 International Organization for Standardization (ISO) 367, 406 Islamic State (ISIS) 85, 172, 227 Jaguar Land Rover 153–5, 305 JP Morgan Chase 299 Justice and Development Party (AKP), Turkey 200–1 KPMG 404 Kraft 303 Kraft Heinz 78 LafargeHolcim 302, 303, 305 Lego 317–18 Lehman Brothers 21, 418 Levi Strauss 3–4, 7 LG 41, 141 Lloyds 21 London Court of International Arbitration 229 London Stock Exchange (LSE) 12, 279, 286, 291 Lyft 205, 451 McDonald’s 11, 26, 38, 40, 48, 64, 78, 96, 391, 395, 447 Marks & Spencer 440 Marriott 385 Mercedes 154 MERCOSUR (Southern Common Market) 265, 266, 267 Microsoft 62, 82, 123, 224, 285, 320, 392, 439, 455 Mo Ibrahim Foundation 197 Monarch Airlines 192
Mondelèz 303 Monsanto 254, 304–5, 362, 374 National Health Service, UK 139, 140, 283 Netflix 303–4, 339 New York Stock Exchange (NYSE) 286, 287 Nike 7, 398, 406 Nissan 58–9, 153, 211 NML Capital 308 North Atlantic Treaty Organization (NATO) 170 Ola 205 Organisation for Economic Co-operation and Development (OECD) 19–20, 41–2, 65–6, 99, 289, 315–16, 404–7, 434 Organization of the Petroleum Exporting Countries (OPEC) 284 P&G (Procter & Gamble) 306 Persimmon 409 Petrobas 158 Pew Research Center 177, 254 Pimlico Plumbers 393 Plastic Waste Alliance 374 Primark 68–9, 440 Prudential Regulation Authority (PRA), UK 288 Purdue Pharma 413–14, 450 Regional Comprehensive Economic Partnership (RCEP) 269 Reliance Industries 144 Remote Gambling Association 389, 390 Renault 145 Reynolds American 53 Rinker Group 305 Rio Tinto 25 Rosneft 275 Roundtable on Sustainable Palm Oil (RSPO) 403 Royal Bank of Scotland (RBS) 21, 285–6, 288, 299, 418 Royal Dutch Shell 57, 364, 406 Ryanair 349 Samarco 25 Samsung 41, 141, 241, 339 Securities and Exchange Commission (SEC), US 288, 418 Shanghai Stock Exchange 286, 287 Shell 355, 364, 374, 423, 448 Shenzhen Stock Exchange 286, 287 Singapore International Arbitration Centre (SCIA) 229, 230 Skoda 145 SkyBet 389
SoftBank 35–6 Sony 35, 141 Southern African Development Community (SADC) 265, 266, 270 Statoil 448 Supreme Court of Canada 366 Supreme Court of India 221 Supreme Court of Poland 182 Syngenta 53 T-Mobile 241 Tata 55, 153, 305 TEPCO (Tokyo Electric and Power Company) 358–9 Tesla 13, 14 Texaco 365–6 Time Warner 303–4 Tokyo Stock Exchange 286 Toshiba 35 Total 364, 448 Toyota 59, 93–4, 141, 153, 211, 345, 399 Trades Union Congress (TUC), UK 394, 426 Trans-Pacific Partnership (TPP) 231, 261, 263, 269, 270–1 Transatlantic Trade and Investment Partnership (TTIP) 231, 261, 263, 271 Transparency International 188, 232–3, 430–1 Twitter 211–12 Uber 12, 35, 63, 205–6, 208, 320, 392–3, 426 UBS 299 UNESCO 64, 370 Unified Patent Court (UPC) 331 Unilever 406 Union Carbide 221 United Nations 41, 61, 79, 168, 193–5, 196 United Nations General Assembly 194, 383 United Nations Security Council 170, 194, 227 United Nations Commission on International Trade Law (UNCITRAL) 218 United Nations Conference on Trade and Development (UNCTAD) 54 United Nations Development Programme 41 United Nations Environment Programme (UNEP) 359, 371–2 United Nations Human Rights Office 88 US Department of Defense 171 US Federal Reserve 298, 301–2 US International Trade Commission (ITC) 259
Index of Organizations
US Patent and Trademark Office (USPTO) 332 US Supreme Court 178, 179, 186, 214, 216, 328–9, 444, 448–9 Vale 25–6 Virgin 14 Volkswagen 116, 145, 154, 345, 387–8 Wahaha 212, 229 Walmart 395, 399, 440
Waymo 206 Western Electrics 223 World Bank 41, 63, 168, 230, 281–2, 289, 362, 437 World Economic Forum 158 World Health Organization (WHO) 345, 369, 445, 446–7 World Intellectual Property Organization (WIPO) 331, 332 World Justice Project (WJP) 213
485
World Trade Organization (WTO) 38, 62, 130, 242, 255, 256–7, 258–63, 282 World Wildlife Fund 406 Xstrata 274–5 YouTube
211–12
Zara 68–9 ZTE 241
I NDE X O F PEOPLE
Acemoglu, D. 134 Alston, P. 123 Ambani, Mukesh 144 Arkwright, Richard 319 Azevêdo, Roberto 262 Azuara, Theresa 137 Balassa, Bela 264 Barra, Mary 59 Bartlett, C.A. 92–3, 96 Bentham, Jeremy 380 Bergh, Charles 3 Berlin, Isaiah 381 Berners-Lee, Sir Tim 320 Bezos, Jeff 123, 455 Blair, Tony 227 Bolsonaro, Jair 158–9, 354 Bolton, John 228 Bond, Michael Harris 89 Bonino, Emma 443 Bourguignon, F. 125 Branson, Richard 14 Buffet, Warren 123, 303 Bush, George W. 170, 172, 224, 227, 320 Cadwalladr, Carole 95 Calderon, Felipe 366 Cameron, David 190 Carroll, A.B. 401–2 Castro, C. 360, 363 Chan, Priscilla 455 Chavez, Hugo 175 Clinton, Bill 274 Clinton, Hillary 180 Coates, Denise 389–90 Confucius 88 Cook, Tim 339 de Soto, Hernando 282 Desai, Samir 291 Dunning, John 50–1 Erdogan, Recep Tayyip 150, 167, 200–1 Fernandez de Kirchner, Cristina 309 Ford, Henry 93–4 Fox, Liam 444 Freeman, Edward 402 Friedman, Thomas 38 Gates, Bill 123, 455 Gertler, Dan 275
Ghoshal, S. 92–3, 96 Gilens, M. 177 Glasenberg, Ivan 274–5 Hacker, J. 177 Halliday, J. 382 Hasina, Sheikh 441 Hegel, G.W.F. 381 Hofstede, Geert 78, 88–90, 92 Humes, Hans 297 Hymer, Stephen 50 Ibrahim, Mo 197 Imamoglu, Ekrem 201 Ive, Jony 338, 339 Jobs, Steve 338–9 Johnson, Boris 191 Kalanick, Travis 205 Kamprad, Ingvar 31 Kant, Immanuel 382 Keita, Ibrahim Boubacar Keita, Salif 173 Khashoggi, Jamal 35 Kirchner, Nestor 309
173
Landes, David 134, 317 Lincoln, Abraham 176 Locke, John 383 López Obrador, Andres Manuel 135–6, 268 Lula da Silva, Luiz Inácio 158, 169 Ma, Jack 35 Macri, Mauricio 296, 309 McWilliams, A. 403 Maddison, A. 121, 156, 347, 437 Mao Zedong 142 Marchinonne, Sergio 268–9 May, Theresa 190–1, 444 Meekings, James 291 Meng Wanzhou 241 Merkel, Angela 186 Mill, John Stuart 381–2 Mitsotakis, Kyriakos 296 Mittal, Lakshmi 305 Modi, Narendra 143, 144, 430 Mowery, D.C. 322 Mudde, C. 166, 168, 175, 202, 203 Mullinger, Andrew 291 Musk, Elon 13 Nixon, Richard 284
487
Obama, Barack 133, 138, 170 Ocasio-Cortez, Alexandria 456 Orban, Victor 175, 443 Ortega, Amancio 68 Ostry, J. 125 Oxley, J. 322 Page, B. 177 Palmisano, Sam 28 Pierson, P. 177 Piketty, Thomas 121, 156, 436 Plamenatz, J. 381 Polman, Paul 367 Porter, Michael 249–50 Povlsen, Anders Holch 291 Putin, Vladimir 106–7, 146, 166, 187, 295, 443 Ramaphosa, Cyril 111, 112 Rawls, J. 124 Reagan, Ronald 132, 214 Ren Zhengfei 241 Ricardo, David 248 Rich, Marc 274 Robinson, J. 134 Rodrik, Dani 40 Ronen, S. 77, 92 Roosevelt, Franklin D. 166, 418, 419 Rousseau, Jean-Jacques 381 Rousseff, Dilma 158, 169 Sackler, Richard 413–14 Saez, Emmanuel 125 Sands, P. 170, 203, 238 Scalia, Antonin 214 Schrems, Max 235–6 Schumpeter, Joseph 319–20 Sen, A. 124, 137, 156, 363, 376 Shenkar, O. 77, 92 Shkreli, Martin 333 Smith, Adam 136–7, 247, 319, 380, 427–8 Smith, Gary 393 Snowden, Edward 439 Son, Masayoshi 35–6 Song, Sang-Hyun 228 Stiglitz, Joseph 40, 131, 156, 295, 297, 311, 415, 457 Strutt, Jedediah 319 Sunstein, C. 168, 203 Tata, Ratan 55 Taylor, Frederick Tellis, G. 327
94
488
Index of People
Trompenaars, Fons 91, 92 Trumka, Richard 385 Trump, Donald on climate change 63, 158, 242, 354 election as US president 167, 168, 180, 252 on foreign affairs 170, 196, 173 on immigration 137, 186, 303
on judicial institutions 214, 444, 448 nationalism 64, 168, 268, 442, 444 populism 167, 168, 175 on trade 45, 54, 60, 130, 136, 200, 260, 261, 268 Vernon, Raymond
50, 248
Williamson, John 282 Wolin, S. 186 Xi Jinping 442 Zuckerberg, Mark 235–6, 455, 456 Zuma, Jacob 111
S U B J EC T I ND E X
absolute advantage 247 absolutism 164 Accord for Fire and Building Safety 440–1 achievement cultures 91 acid rain 356 acquisitions 47, 53, 54, 225, 303–6 affiliate companies 18, 37–8 Afghanistan 42, 99, 100, 172, 438 Africa 43, 163 cultural dimensions 89 deforestation 348 demographic change 104–5 desertification 352 economic growth 121 economic inequality 123 international trade 244, 245 life expectancy 104–5 pensions 106 population below poverty line 436, 437 population growth 104, 347 regional trade 265, 270 religions 83, 84, 85 social protections 128 unemployment 127 urbanization 102–3 ageing populations 104–6 agency work 391 agriculture 40 antibiotics 446–7 and climate change 352 cotton production 255–8 and environmental degradation 347, 422–3 Fairtrade 403–4 genetically-modified organisms (GMOs) 252, 254, 255, 304, 362 palm oil 403, 446 soya beans 260–1 subsidies 255–8, 260 sustainable 403–4 air pollution 62, 143, 345–6, 348–9, 356–7, 365, 369–71, 445, 446 Albania 42, 150 Algeria 42, 102, 438 Alliance for Bangladesh Worker Safety 440–1 Amazon rainforests 158–9 Americanization 64 Angola 42, 111, 265, 270 anti-immigration policies 64 anti-terror laws 439 antibiotics 446–7
Antigua 265 apartheid 111 Arab spring uprisings 172, 176, 438 Arabic language 80, 81, 82 arbitration 208, 229–30, 366 Argentina 42, 196 debt crisis 296, 297, 308–9, 432 hedge funds 293 legal system 215 regional trade 265, 267 rule of law 213 Armenia 42 arm’s length contracting 220 artificial intelligence (AI) 58, 109, 313 ascription cultures 91 Asia cultural dimensions 89 deforestation 348 economic inequality 123 international trade 244, 245 market economies 140–1 mixed economies 141–4 pensions 106 population below poverty line 436, 437 population growth 104 regional trade 265, 266, 269–70 religions 83, 85, 87–8 social protections 128 stock exchanges 287 textile industry 69, 440–1 unemployment 127 Asian financial crisis (1998) 63, 131, 141, 294–5 assembly lines 93–4 asset-backed securities (ABSs) 293 assimilation 81 asylum 99 augmented reality (AR) 69 Australia 25, 41, 42, 196, 445 cotton production 256 droughts 352 economy 136 education 323 greenhouse gas emissions 350 legal system 215 native cultures 81 regional trade 265, 269, 270 relationship orientations 91 rule of law 213 Austria 42, 89, 147, 265, 267 authoritarianism 23, 39, 94, 107, 174–6, 186–7, 200–1, 232, 429–30, 442–3
489
automation 58, 109, 313–14, 426 Azerbaijan 42 Bahamas 265 balance of payments 129–30 Bangladesh 42, 43, 69, 227, 398 corruption 233, 430, 431 foreign direct investment 53 legal system 215 migrant workers 98, 396 pensions 106 Rana Plaza disaster 412, 440 remittances 101 Rohingya people 88 and sea level rise 352, 445 textile industry 440–1 urbanization 103 banks 21, 63, 132, 133, 292–3, 298–301, 418–19 Barbados 265 Belarus 42 Belgium 42, 147, 265, 358 Belize 265 Bengali language 80, 81 Benin 42, 257, 265 Bermuda 233, 234 Bhopal chemical disaster, India 221, 359 bilateral trade agreements 263, 264 bilateral treaties 226 biodiversity 347, 348, 360 board of directors 20–1 Bolivia 42, 265 bonds 289, 293–4 born-global businesses 11 Bosnia and Herzegovina 42 Botswana 42, 265, 270 brands franchising 11, 47–8, 96 global 38 Brazil 42, 43, 196, 398 Amazon rainforests 158–9 and climate change 354 corruption 158, 169, 233, 430, 431 cotton production 255–7 cultural dimensions 90 economic inequality 123 economy 121 education 323 and globalization 61 GMO labelling 254 gross national income (GNI) 119, 120 language 80 legal system 215, 218
490
Subject Index
mergers and acquisitions 306 mining disasters 25–6 political risk 169 populism 158–9, 430 regional trade 265, 267 religion 83 rule of law 213 soya beans 260 urbanization 103 women in legislature 183 see also BRIC countries Bretton Woods agreement 257, 281–4 Brexit 59, 129, 151, 153–4, 184, 188, 190–3, 218, 266, 386, 443–4 BRIC countries 43, 57, 80, 169 see also Brazil; China; India; Russia British Virgin Islands 234 Brunei 265, 270 Brussels Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters 228, 229 Buddhism 84, 87–8 Bulgaria 42, 145, 147, 148, 265 Burkina Faso 42, 256, 257, 265 Burma see Myanmar Burundi 163, 265 business, defined 5 business enterprises 4–22 born-global 11 and climate change initiatives 355–6 competition law 62, 137, 212, 218, 222–5, 250, 320 corporate crime 209–10, 450–1 corporate governance 18–22, 66, 406–10 entrepreneurs 5, 9–11, 13–14 environmental management 364–7, 388 functional areas 14–17 high-technology 10–11, 53, 126, 208, 320 lobbying 186, 187–8, 355 managerial culture 93–6 organizational culture 92–3 purpose and goals 5–6 small-to-medium size enterprises (SMEs) 10–11, 43, 325 social enterprises 5, 410–11 and society 6–8 start-ups 10–11, 126, 320 state-owned 12, 116, 138, 145, 146, 283 sustainability 8, 28–30 and sustainable development 363–4 triple-bottom-line reporting 367 see also companies; corporate social responsibility (CSR); multinational enterprises (MNEs)
business models 6 business process outsourcing (BPO) 7 business strategies acquisitions 47, 53, 54, 225, 303–6 exporting 46 franchising 11, 47–8, 96 greenfield investment 46–7, 49, 58 horizontal integration 302 joint ventures 47, 92 mergers 224, 225, 302–3, 305–6 modes of internationalization 46–8 offshoring 7–8, 13 outsourcing 7, 17, 29–30, 40, 47, 56, 95, 452 portfolio investment 48 vertical integration 51, 304 see also foreign direct investment (FDI) Cambodia 42, 265 Cameroon 256 Canada 42, 195–6, 366 car industry 268–9 economy 136 foreign direct investment 52 greenhouse gas emissions 350 languages 81 legal system 215 life expectancy 139 nuclear power 358 oil sands 366 regional trade 265, 266, 267–9, 270 trade disputes 259 capabilities approach 363 Cape Verde 265 capital 285–91 debt financing 285, 288–91, 303 equity financing 285–8, 303 peer-to-peer lending 291 capital account 129 capitalism 133, 165 laissez-faire 136 see also market economies car industry 41, 58–60, 116, 145, 153–5, 211, 268–9, 335, 368 diesel 154, 345–6, 387 Fordism 93–4, 95 trade unions 399 voluntary export restraint (VER) 254 carbon footprint 353, 363–4 carbon offsets 363–4, 423 carbon pricing 372 CARICOM (Caribbean Community) 265 cartels 224 case law 214, 215, 216 caste system 87
categorical imperative 382 Cayman Islands 234 Central and Eastern Europe (CEE) 41, 42, 127, 231 economies 145–6 hybrid political systems 181 trade 246 CEOs see chief executive officers Chad 42, 257 chaebol 141 charitable giving 402, 403 Chernobyl nuclear disaster, Soviet Union 356, 359 chief executive officers (CEOs) 13–14, 20–1 chief financial officers (CFOs) 15 child labour 384 Chile 42, 215, 227, 233, 265, 270, 431 China 42, 43, 196, 227, 398, 441 5G 241, 242, 325 air pollution 369, 445 airline industry 368 Asian Infrastructure Investment Bank (AIIB) 295 authoritarianism 39, 175, 186–7, 232, 429, 442 balance of payments 130 Belt and Road Initiative 143, 196 car industry 335, 368 coal 357 communism 133, 165 corporate debt 290–1 corruption 212–13, 232, 233, 430–1 cotton production 255–6 currency 284–5 economic inequality 123 economy 102, 116–17, 120, 121, 133, 134, 135, 141–3, 152, 165, 250, 428 education 323 environmental degradation 62, 102, 357 export processing zones (EPZ) 61 fast-food businesses 26 foreign direct investment 49, 52, 53–4, 196 and globalization 39–40, 61 greenhouse gas emissions 350, 351, 353 gross national income (GNI) 119, 120 guanxi 220 Huawei 241–2, 339 human rights 384 industrialization 41, 42, 61, 62, 102, 252 internet use 82 legal system 62, 212–13, 215, 218, 232 life expectancy 139 mergers and acquisitions 305, 306
Subject Index
migrant workers 56, 66, 397 military expenditure 171, 196 nuclear power 358 outsourcing 47 patents 331–2 pensions 106 political risk 169 population growth 104 R&D expenditure 324, 325, 326 regional trade 265, 269, 270 relationship orientations 91 religion 83, 85, 87, 88 remittances 101 rule of law 213 social protections 128 soya beans 260–1 state-owned enterprises 116 stock exchanges 287 technological innovation 317 technology transfer 335 Tiananmen Square protests 429 trade 245, 246, 247, 271–2 trade disputes 37, 54, 116, 242, 259–61 trade unions 400 UN Security Council 194, 227 urbanization 102, 103 see also BRIC countries Chinese language 80, 81, 82 Christianity 83, 84–5 civil and political rights 176, 383–4 civil law 208, 209 civil law tradition 214, 215–16, 219 civil society 160 see also non-governmental organizations (NGOs) Clean Development Mechanism 353 climate change 62–3, 349–56, 444–6 business responses 355–6, 365 carbon footprint 353, 363–4 carbon offsets 363–4, 423 and deforestation 159, 348, 446 extreme weather events 352, 445, 447 global warming 349, 351, 352, 365, 371, 444–5 green technology 352, 356, 372, 423 greenhouse gas (GHG) emissions 62–3, 348, 349–54, 355, 356–7, 444–6 international co-operation to combat 352–4 Kyoto Protocol 62, 352–3 and migration 98 Paris agreement 27, 62, 63, 159, 353–4, 355, 371, 444–5, 448 sea level rise 352, 445 sustainability 369–72, 422–5 UN recommendations for action 371–2 clothing industry 3–4, 38, 68–9, 378–9, 440–1
co-determination 20 coal 356–7, 358 coalition governments 184 codes of practice 9, 21–2, 403 collectivism 89, 90, 91, 140–1, 220 Colombia 41, 42, 123, 265 common law tradition 214–15, 216, 219 common markets 264 Commonwealth of Independent States (CIS) 42 communism 133, 165–6 community interest companies (CICs) 410 Comoros 42, 265 companies 11–13 chaebol 141 community interest companies (CICs) 410 competition law 62, 137, 212, 218, 222–5, 250, 320 corporate crime 209–10, 450–1 corporate governance 18–22, 66, 406–10 dispute settlement 208, 228–32 environmental management 364–7, 388 fiduciary duty 407 keiretsu 141 managerial culture 93–6 organizational culture 92–3 private limited 12, 13–14 privatization 13–14 public limited 12–14, 285 right to free speech 186 and society 6–8 state-owned 12, 116, 138, 145, 146, 283 and sustainable development 363–4 triple-bottom-line reporting 367 see also business enterprises; corporate social responsibility (CSR); multinational enterprises (MNEs) company law 21 comparative advantage 248 competition law 62, 137, 212, 218, 222–5, 250, 320 competitive advantage theory 249–50 Confucianism 88 conglomerates 304, 305, 306 consequentialist principle 380–2 constitutionalism 164–5 consumer price index 129 consumer society 64 consumption, sustainable 367–8 contextualism, ethical 381 contracts 219 contract law 211, 212, 217, 218–22, 228–9 of employment 391, 452
491
service 219, 391–2 zero-hours 10, 391, 396, 452 Convention on Biological Diversity 360 Convention on Contracts for the International Sale of Goods (CISG) 218–19 Convention on the Transboundary Effects of Industrial Accidents 360 convergence, cultural 78, 91–2 corporate citizenship 401 corporate crime 209–10, 450–1 corporate culture 92–3 corporate debt 149, 290–1 corporate governance 18–22, 66, 406–10 see also corporate social responsibility (CSR) corporate killing 210 corporate social performance (CSP) 403 corporate social responsibility (CSR) 8, 66–7, 152, 400–6, 411–12 business case for 403 codes of practice 403 corporate citizenship 401 and corporate governance 406–10 environmental, social and governance reporting (ESG) 404 executive pay 407–9 fiduciary duty 407 international standards 404–6 philanthropy 402, 403, 455–6 stakeholder theory 402 theories of 401–2 third-party verification 403–4 corporations see companies corruption 111–12, 144–5, 150, 158, 169, 187–8, 212–13, 232–3, 430–1 Corruption Perceptions Index 232–3, 430–1 Costa Concordia accident 210–11 Costa Rica 42 Côte d’Ivoire 256, 265 cotton production 255–8 courts 178, 179, 194, 208, 209, 214, 216, 226–8 creative destruction 319–21 crimes against humanity 227, 228, 385 crimes of aggression 194, 227–8 criminal law 209–10 Croatia 42, 145, 147, 148, 150, 265 CSR see corporate social responsibility Cuba 42, 133, 134, 165–6, 183 cultural dimensions 88–90 culture achievement vs. ascription 91 assimilation 81
492
Subject Index
and contract law 219–20 convergence and divergence 78, 91–2 cultural distance 80 defined 77–8 ethical relativism 381 high and low context 80, 219 individualism vs. collectivism 89, 90, 91, 220 languages 80–2, 219 long-term vs. short-term orientation 89 managerial 93–4 masculine vs. feminine 89, 90 national 77, 78–80 neutral vs. emotional 91 norms 77–8 organizational 92–3 power distance 88–9, 90 religions 77, 83–8 specific vs. diffuse 91 subcultures 81 theories of 88–92 and trade 253 uncertainty avoidance 89, 90 universalism vs. particularism 91 see also socio-cultural environment currency crises 294–5 currency exchange rate systems 149, 253, 257, 281, 283–5 current account 129–30 customs unions 264 Cyprus 42, 147, 265 Czech Republic 42, 91, 145, 146, 147, 148, 233, 265, 431 Daraprim 333 data protection 235–6 de-industrialization 58 debt corporate 149, 290–1 household 149, 290, 434 national 132, 149 securitization of 293 sovereign 149, 289–90, 293–4, 296–7, 308–9 debt bondage 396, 397 debt financing 285, 288–91, 303 Deepwater Horizon disaster, US 221, 365 deflation 129 deforestation 158–9, 348, 446 democracy 23, 159, 174, 176–7, 186, 429–30, 443 electoral 177, 429–30 liberal 165, 176, 177 social 177 South Africa 111–12, 441 Democratic Republic of Congo 42, 111, 213, 233, 265, 275, 431 demographic change 104–7 Denmark 42, 147, 265, 267
corruption 233, 431 cultural dimensions 89 education 322, 323 healthcare 139–40 patents 332 referendums 184 rule of law 213 taxation 131, 132 trade unions 399–400 depressions 122 see also Great Depression derivatives 293 developed countries 41, 42 ageing populations 105 impacts of foreign direct investment 57–9 triad countries 244 developing countries 41, 42, 43, 107–8 and climate change 352, 353, 354 demographic change 104–5 entrepreneurs 9 foreign direct investment 48–9, 51, 52, 53, 55–7 G20, 19–20 international trade 243–6, 255–7, 261–2 location advantages 56 micro-finance 411 migration 98, 100–1 outsourcing to 7, 17, 29–30, 40, 47, 56, 95, 452 pensions 106 plastic waste 374 population growth 104, 347 remittances 98, 100–1 resource curse 57, 272 small-to-medium size enterprises (SMEs) 10 social enterprises 411 technology transfer 55, 63, 321, 334–6 urbanization 101–4, 369 see also emerging economies; least-developed countries diesel 154, 345–6, 387 diffuse cultures 91 directors 20–1 boards of 20–1, 22, 279, 300, 303, 406, 407, 409, 453 executive 19–21, 141, 299–300, 307, 407, 414 fiduciary duty 407 non-executive 19–20, 21, 279, 407 disasters 99, 412 chemical industry 221 mining 25–6 natural 99, 447 nuclear 221, 356, 358–9 oil spills 221, 359, 365 discrimination 80 gender 86–7
indigenous peoples 79, 81 minority groups 64, 79, 87 Dispute Settlement Understanding (DSU) 258 divergence, cultural 78, 91–2 Djibouti 265 Dominica 265 ‘dotcom’ bubble 53 droughts 352, 445 Dubai 100 eclectic paradigm 50–1 ecological environment 23, 24, 65, 346–7, 369–73 acid rain 356 air pollution 62, 143, 345–6, 348–9, 356–7, 365, 369–71, 445, 446 antibiotics 446–7 biodiversity 347, 348, 360 deforestation 158–9, 348, 446 diesel 154, 345–6, 387 dimensions and layers of 27 ecology defined 347 environmental degradation 24, 62, 97, 102, 103, 347–9, 365–6 environmental management 364–7, 388 genetically-modified organisms (GMOs) 252, 254, 255, 304, 362 global commons 348–9 and globalization 60, 62–3 inter-generational justice 388 nuclear power 221, 356, 358–9 palm oil 403, 446 plastic waste 373–5, 423 recycling 32, 69, 423 reforestation strategies 363–4, 423 renewable energy 355, 356, 357 Rio principles 359–60 risks 444–7 sustainability 369–72, 422–5 sustainable consumption 367–8 transboundary pollution 356–9 triple-bottom-line reporting 367 see also climate change; sustainable development Economic and Monetary Union (EMU) 148 economic development 66, 97 country differences 40–3 defined 41 and economic growth 120 and migration 100 and technology 321 and urbanization 102–3 economic environment 23, 24, 117 dimensions and layers of 27 European Union 147–51 and globalization 60, 61, 427–8 regionalization 147
Subject Index
risks 433–7 sustainability 151–2, 427–9 see also national economies economic growth 120–2, 125, 142, 146 economic indicators 41, 117–18 balance of payments 129–30 economic growth 120–2, 125, 142, 146 gross domestic product (GDP) 119 gross national income (GNI) 41, 118–20, 148 inequality 122–5, 137, 143–5 inflation 128–9, 149, 282, 283 national debt 132, 149 purchasing power parity (PPP) 119 unemployment 125–8 economic inequality 122–5, 137, 143–5 economic systems 133–5 Asian capitalist systems 140–1 liberal market economies 134–5, 136–7 mixed economies 134, 135, 141–4 planned economies 133, 134 social market economies 134–5, 138–40 Ecuador 42, 231, 265, 365–6 Egypt 42, 83, 101, 103, 213, 215, 265 elections 176, 183–4 European Union 189–90 first-past-the-post system 183 proportional representation 183–4 referendums 184 turnout 181, 189 women in legislatures 183 electoral democracy 177, 429–30 emerging economies 42, 43, 61, 262 corporate debt 290–1 and environmental degradation 349 G20, 19–20 and globalization 43 and Ikea 31–2 political risk 169 social enterprises 411 emotional cultures 91 employees 10, 390, 391 employment 10 agency work 391 child labour 384 contracts of 391, 452 executive pay 407–9 forced labour 390, 396–7, 440 gig economy 10, 65–6, 320, 392–4, 426–7, 452 job creation policies 126 migrant workers 56, 66, 75–6, 95, 98–9, 100, 395–7, 440
minimum wage 394–5 subcontracting 391 and technological innovation 58, 63, 109, 126, 313–14 and trade 252 wages 394–5, 399, 408–9 work relationships 10, 390–2 working conditions 56, 64, 65–6, 69, 75–6, 378–9, 390–7, 421, 426–7, 439–40, 450, 452 zero-hours contracts 10, 391, 396, 452 see also unemployment empowerment 94 English language 80–1, 82 entrepreneurs 5, 9–11, 13–14 environmental degradation 24, 62, 97, 102, 103, 347–9, 365–6, 422–3 environmental management 364–7, 388 environmental, social and governance (ESG) reporting , 404 Equatorial Guinea 42, 121 equity 12 equity financing 285–8, 303 equity markets 258–8, 301, 302, 408 Eritrea 265 ESG reporting 404 Estonia 42, 145, 147, 213, 265 Eswatini (formerly Swaziland) 265, 270 Ethical Trading Initiative 379 ethics 379–400 categorical imperative 382 child labour 384 consequentialist principle 380–2 contextualism 381 corporate governance 406–10 defined 380 ethical dimensions of business 386–8 ethical relativism 381 executive pay 407–9 fair trade agriculture 403–4 fiduciary duty 407 forced labour 390, 396–7, 440 gambling 386–7, 389–90 gig economy 10, 65–6, 320, 392–4, 426–7, 452 human rights 8, 62, 64, 69, 75, 79–80, 83, 88, 226, 227, 382–6, 394–400, 411–12 inter-generational justice 388 liberty 380, 381–2 migrant workers 56, 66, 75–6, 95, 98–9, 100, 395–7, 440 modern slavery 396–7, 440 opioid epidemic 413–14, 450 principles and theories 380–2 reasonable care duty 388 social enterprises 5, 410–11 in supply chains 69, 396–7
493
sustainable business 411–12 utilitarianism 380–2 wages 394–5, 399, 408–9 work relationships 10, 390–2 workers’ rights to organize 397–400 working conditions 56, 64, 65–6, 69, 75–6, 378–9, 390–7, 421, 426–7, 439–40, 450, 452 zero-hours contracts 10, 391, 396, 452 see also corporate social responsibility (CSR); inequality Ethiopia 42, 43, 265 ethnocentrism 77 eurobonds 289 Eurocurrency market 284 European Convention on Action against Trafficking in Human Beings 396 European Convention on Human Rights (ECHR) 385, 386 European Economic Area (EEA) 191, 267 European Free Trade Area (EFTA) 191, 267 European Patent Convention (EPC) 328, 330 European Union 11, 41, 61, 188–93, 196, 264, 265–6, 398 Brexit 59, 129, 151, 153–4, 184, 188, 190–3, 218, 266, 386, 443–4 budget 150 Commission 148, 151, 182, 188, 189, 218, 222, 225, 234, 296, 406 Common Agricultural Policy (CAP) 255 Council 188–9 debt crisis 149, 296–7 economies 147–51 elections 189–90 enlargement 150–1 ESG reporting 404 European Court of Justice 182, 188, 218, 385 eurozone 129, 147, 148–9, 296 executive pay 409 General Data Protection Regulation (GDPR) 236 GMO labelling 254 greenhouse gas emissions 350, 351, 353, 355 human rights 62, 385, 386 inflation 129 legal framework 62, 217–18, 220, 224, 225, 229, 234 Lisbon Treaty 150, 151, 188, 217 Maastricht Treaty 149, 217 monetary policy 148–9 Parliament 188, 189–90, 218, 264, 271
494
Subject Index
patents 328, 330–1 populism 189–90 presidency 188–9 product liability 220, 222 R&D expenditure 325 Rapid Alert System 222 refugees 99, 148 Single European Act 266 subsidies 255 tax avoidance 388 trade 191, 246, 266–7 trade disputes 45, 54 Treaty of Rome 148, 189, 217 TTIP trade agreement 271 urbanization 102 voter turnout 189 European Union Charter of Fundamental Rights 385, 386 exchange rate systems 149, 253, 257, 281, 283–5 executive directors 20–1 executive pay 407–9 executives 178, 179, 180–1 export-oriented manufacturing 52, 57, 61, 65 export processing zones (EPZ) 61 exporting strategy 46 exports and imports 243–7 extractive institutions 134 fair trade agriculture 403–4 false accounting 209 family enterprises 391 farming see agriculture fascism 166 fashion industry 3–4, 38, 68–9, 378–9, 440–1 fast-food businesses 11, 26, 38, 40, 48, 64, 78, 96, 391, 395, 447 FDI see foreign direct investment federalism (system of government) 163 feminine cultures 89, 90 fiduciary duty 407 finance and accounting 14, 15 financial crime 209, 450–1 financial crises 63, 294–302 Asian financial crisis (1998) 63, 131, 141, 294–5 currency crises 294–5 global financial crisis (2008) 21, 29, 53, 58, 63, 65, 116, 122, 126, 131, 149, 151, 167, 243, 288, 289, 298–302, 305–6, 418–19, 432, 453–4 and monetary policy 301–2 quantitative easing (QE) 301–2 sovereign debt crises 149, 296–7, 308–9, 432 financial environment 23, 24–5, 280–308 acquisitions 47, 53, 54, 225, 303–6
asset-backed securities (ABSs) 293 bonds 289, 293–4 Bretton Woods agreement 281–4 corporate debt 149, 290–1 currency exchange rate systems 149, 253, 257, 281, 283–5 debt financing 285, 288–91, 303 derivatives 293 dimensions and layers of 27 equity financing 285–8, 303 eurobonds 289 financial risks 292–4, 433–7 futures contracts 292 and globalization 60, 63, 292–4 gold standard 281 hedge 292 hedge funds 293–4, 297, 308 international capital flows 285–91 international monetary system 281–5 leverage 288 leveraged buy-outs (LBOs) 303 mergers 224, 225, 302–3, 305–6 micro-finance 411 option contracts 292 peer-to-peer lending 291 ‘pegged’ exchange rates 284 private equity funds 303 quantitative easing (QE) 301–2 sovereign debt 149, 289–90, 293–4, 296–7, 308–9 stock exchanges 12, 13, 285–8 sustainability 306–7, 431–3 vulture funds 293–4, 308 see also financial crises Finland 42, 90, 140, 147, 265, 267, 332, 358 first-mover advantages 249 first-past-the-post system 183 fiscal policy 131, 372 flooding 352, 445 folk religions 83, 84 for-profit organizations 5–6 forced labour 390, 396–7, 440 forced migration 99 Fordism 93–4, 95 foreign direct investment (FDI) 36, 39, 46–7, 48–59, 65, 145, 196 acquisitions 47, 53, 54, 225, 303–6 greenfield investment 46–7, 49, 58 impacts on developed countries 57–9 impacts on developing countries 55–7 and investor-state dispute settlement (ISDS) 229–32, 234, 270, 271, 366
inward and outward flows 52–4 joint ventures 47, 92 location advantages 49, 50–1, 52, 56, 57, 65 outsourcing 7, 17, 29–30, 40, 47, 56, 95, 452 ownership advantages 50 and product life cycle theory 50, 248 spillover effects 55, 58–9, 334–6 technology transfer 55, 63, 321, 334–6 theorizing 50–1 fossil fuels 355–7, 423, 445–6 see also oil industry France 42, 147, 151, 195–6, 265 cultural dimensions 90 economic inequality 122 economy 134 ESG reporting 404 foreign direct investment 52 gross national income (GNI) 119, 120, 148 hybrid political system 181 imperial power 195 legal system 215, 218 mergers and acquisitions 306 migrant workers 100 nuclear power 358 taxation 131, 132 trade 266, 267 UN Security Council 194, 227 franchising 11, 47–8, 96 fraud 209, 450–1 free trade agreements (FTAs) 147, 263–70 free trade areas 264 French language 81, 82 Fukushima nuclear disaster, Japan 221, 358–9 functional areas of businesses 14–17 futures contracts 292 Gambia 42, 265 gambling 386–7, 389–90 GDP see gross domestic product gender inequality 106, 143 genetically-modified organisms (GMOs) 252, 254, 255, 304, 362 genocide 227, 385 Georgia 42 German language 82 Germany 42, 147, 166, 195–6, 212, 265 balance of payments 130 board of directors 20 car industry 58 cultural dimensions 90 economic inequality 123 economy 121, 134 education 323 foreign direct investment 52, 58
Subject Index
gross national income (GNI) 119, 120, 148 healthcare 139–40 legal system 215, 218 life expectancy 139 migrant workers 100 military expenditure 171 nuclear power 358 patents 332 political parties 186 private companies 12 R&D expenditure 324, 325, 326, 327 rule of law 213 sovereign debt 289 taxation 131 technology transfer 335 trade 246, 266, 267 women in legislature 183 Ghana 102, 215, 265 gig economy 10, 65–6, 320, 392–4, 426–7, 452 Gini index 123 Glass-Steagall Act (US) 418 global commons 348–9 Global Compact 406 global financial crisis (2008) 21, 29, 53, 58, 63, 65, 116, 122, 126, 131, 149, 151, 167, 243, 288, 289, 298–302, 305–6, 418–19, 432, 453–4 Global Reporting Initiative (GRI) 406 global warming 349, 351, 352, 365, 371, 444–5 globalization 36–40, 169 anti-globalization protests 38 defined 37–40 and ecological environment 60, 62–3 and economic environment 60, 61, 427–8 and emerging economies 43 and financial environment 60, 63, 292–4 interconnectedness 39 interdependence 39 and international trade 243–7, 248, 271–2 and least-developed countries 43 and legal environment 60, 62 and organizational culture 92–3 and political environment 60, 61–2 and socio-cultural environment 60, 63–4, 76 and sustainability 64–7 and technological environment 60, 63, 335, 336 see also foreign direct investment (FDI) GNI see gross national income gold standard 281
governance corporate 18–22, 66, 406–10 and sustainability 29, 66, 429–31 see also corporate social responsibility (CSR) government debt 149, 289–90, 293–4, 296–7, 308–9 government 178 checks and balances 178, 179 coalition 184 defined 178 executive branch 178, 179, 180–1 functions of 178–9 hybrid systems 180, 181 judicial system 178, 179 legislative function 178, 179 parliamentary systems 180, 181 presidential systems 180–1 separation of powers 178 systems of 180–1 women in legislatures 183 Great Depression 37, 122, 138, 251, 257, 293, 384 Greece 42, 147, 265 cotton production 256 cultural dimensions 90 debt crisis 149, 296–7 legal system 215 religion 84 sovereign debt 149, 289, 290 greed 298, 300, 453 green consumerism 367–8 greenfield investment 46–7, 49, 58 greenhouse gas (GHG) emissions 62–3, 348, 349–54, 355, 356–7, 444–6 Grenada 265 gross domestic product (GDP) 119 gross national income (GNI) 41, 118–20, 148 Guam 196 guanxi 220 Guatemala 42 Guinea 265 Guinea-Bissau 42, 265 Guyana 265 Haiti 42, 265 hate speech 211–12, 337 HDI see Human Development Index healthcare 97, 138–40, 395, 422, 448–9 heatwaves 352 hedge 292 hedge funds 293–4, 297, 308 high-context culture 80, 219 high-technology sector 10–11, 53, 126, 208, 320 Hindi language 80, 81, 82 Hinduism 83, 84, 87 HIV/AIDS 105 holding companies 18 Hong Kong 52, 88, 265, 306, 429
495
horizontal integration 302 household debt 149, 290, 434 human development 41 Human Development Index (HDI) 41, 107, 142, 173, 400 human resource management (HRM) 14, 15–16 human rights 226, 382 and business 8, 62, 64, 69, 75–6, 79–80, 378–9, 411–12 child labour 384 European Convention on Human Rights 385–6 forced labour 395–7 Human Rights Act (UK) 386 International Covenant on Civil and Political Rights (ICCPR) 83, 383–4 International Covenant on Economic, Social and Cultural Rights (ICESCR) 383–4, 385, 394 religious freedom 83, 88 right to organize 397 Universal Declaration of Human Rights 384 in the workplace 394–400 human trafficking 396–7 humanitarian aid 100 Humira 329–30 Hungary 42, 131, 147, 148, 265 economy 145, 146 gross national income (GNI) 148 healthcare 140 populism 166, 168, 175, 443 rule of law 150, 213 women in legislature 183 hybrid political systems 180, 181 hyperglobalization 38 Iceland 42, 131, 151, 265, 267, 299, 451 ideologies 165–8 communism 133, 165–6 liberal democracy 165, 176, 177 nationalism 37, 61–2, 64, 107, 148, 166–8, 175, 180, 196, 442–4 populism 148, 158–9, 166–8, 175, 180, 186, 189–90, 196, 430, 442–4, 454 socialism 133, 135–6, 165–6 ILO Tripartite Declaration of Principles concerning MNEs and Social Policy 405–6, 411 immigration see migration import quotas 254 import substitution 252 imports and exports 243–7 inclusive growth 121–2 inclusive institutions 134 India 10, 39, 42, 43, 196, 227, 398, 430 air pollution 369–71, 445 Bhopal chemical disaster 221, 359
496
Subject Index
caste system 87 coal 357, 358 corruption 144–5, 233, 431 cotton production 256 economic inequality 143–5 economy 121, 134, 135, 142, 143–4, 152, 250 education 323 ESG reporting 404 foreign direct investment 49, 53 greenhouse gas emissions 350, 353 gross national income (GNI) 119, 120 and Ikea 31–2 industrialization 41, 252 languages 80, 81, 82 legal system 215, 216, 218 life expectancy 139 mergers and acquisitions 306 migrant workers 98 military expenditure 171 pensions 106 political risk 169 population growth 104 R&D expenditure 325, 326 regional trade 269 religion 83, 87, 88 remittances 101 rule of law 213 Taj Mahal 370–1 trade disputes 262 urbanization 102, 103 women in legislature 183 see also BRIC countries indigenous peoples 79, 81, 83 individualism 89, 90, 91, 136, 220 Indonesia 42, 43, 196, 398 coal 357 cultural dimensions 90 economy 121 financial crisis 295 legal system 215 political risk 169 regional trade 265 religion 83, 85 remittances 101 industrial relations 58, 65, 94, 95, 96, 384, 397–400, 426 Industrial Revolution 242, 319, 328, 336, 347, 351, 426 industrialization 40–1, 42, 55, 61, 62, 65, 80, 97, 102, 362, 426 and economic growth 121 and environmental degradation 347–9 import substitution 252 and trade 251–2 inequality 433–4 gender 106, 143 in national economies 122–5, 137, 143–5 inflation 128–9, 149, 282, 283
information technology (IT) 16 see also internet initial public offerings (IPOs) 12, 35, 285, 286, 291, 451 innovation 6 see also technological innovation institutions (economic and political) extractive 134 inclusive 134 international 193–5 supranational 217 see also government intellectual property rights 24, 208, 212, 258, 259, 327–32 inter-generational justice 388 intermediate goods 245 internalization advantages 51 internally displaced people 99 international business born-global businesses 11 contract law 218–22 defined 5 dispute settlement 228–32 functional areas 17 investor-state dispute settlement (ISDS) 229–32, 234, 270, 271, 366 legal risks and responsibilities 211–14 offshoring 7–8, 13 outsourcing 7, 17, 29–30, 40, 47, 56, 95, 452 see also multinational enterprises (MNEs); trade, international International Covenant on Civil and Political Rights (ICCPR) 83, 383–4 International Covenant on Economic, Social and Cultural Rights (ICESCR) 383–4, 385, 394 international law 60, 62, 72, 73, 99, 163–4, 170, 172, 194, 206, 208, 209, 207, 224–32, 450 see also human rights, international dispute settlement international monetary system 281–5 international poverty line (IPL) 436 internationalization 43–8, 65 modes of 46–8 push and pull factors 44–5 see also foreign direct investment (FDI) internet 16, 38, 39, 63, 337 ‘dotcom’ bubble 53 languages used 82 numbers of users 314–15 online gambling 389–90 online retailing 31, 38, 68–9 social media 16–17, 211–12, 337 inventions 315 patentable 328
investor-state dispute settlement (ISDS) 229–32, 234, 270, 271, 366 invisible hand 136–7, 247, 427–8 IPOs see initial public offerings Iran 215, 241–2, 398 Iraq 42, 57, 99, 170, 172, 227, 438 Ireland 42, 147, 265 financial crisis 131, 149, 151, 299 social protections 132 tax havens 234 taxation 131, 132, 388 ISDS see investor-state dispute settlement Islam 83, 84, 85 Islamic fundamentalism 85 Islamic law 85, 217 ISO standards 367, 406 Israel 42, 79, 215 Italy 42, 147, 166, 195–6, 265 ageing population 105 Costa Concordia accident 210–11 debt crisis 149 legal system 215 referendums 184 social protections 132 sovereign debt 149, 289, 290 Jamaica 215, 265 Japan 18, 35–6, 41, 42, 78, 164, 195–6 ageing population 105 car industry 41, 58–9, 94, 254 cultural dimensions 89, 90 economy 121, 140–1, 250, 283 education 323 foreign direct investment 52, 58–9 Fukushima nuclear disaster 221, 358–9 GMO labelling 254 greenhouse gas emissions 350 gross national income (GNI) 119, 120 industrialization 41, 121, 251–2 keiretsu 141 lean production 58, 94 legal system 215, 218 life expectancy 139 managerial culture 94 national culture 79 patents 331, 332 pensions 106 R&D expenditure 324, 325, 326, 327 regional trade 265, 269 relationship orientations 91 religion 87, 88 sovereign debt 289, 290 technology transfer 335 trade 244, 246 trade disputes 54
Subject Index
urbanization 103 women in legislature 183 Japanese language 81, 82 Jersey 234, 293–4 joint ventures 47, 92 Judaism 84 judicial system 178, 179, 194, 208, 209, 214, 216, 226–8 just-in-time (JIT) system 94 justice inter-generational 388 social 29, 131, 138, 165 Kazakhstan 42 keiretsu 141 Kenya 42, 215, 265 Kosovo 150 Kuwait 42, 100, 170, 183 Kyoto Protocol 62, 352–3 Kyrgyzstan 42 languages 80–2, 219 Laos 265 Latin America cultural dimensions 89 deforestation 348 economic inequality 123 international trade 244, 245 languages 80, 81 native cultures 81 presidential systems 180 regional trade 265 religions 84 unemployment 127 Latvia 42, 145, 147, 265 law see legal environment lean production 58, 94 least-developed countries 42, 43, 104 Lebanon 438 legal environment 9–10, 23, 24, 160–1, 206–35 anti-terror laws 439 arbitration 208, 229–30, 366 arm’s length contracting 220 case law 214, 215, 216 civil law 208, 209 civil law tradition 214, 215–16, 219 classifying law 207–10 common law tradition 214–15, 216, 219 company law 21 competition law 62, 137, 207, 212, 218, 224–5 constitutionalism 164–5 contract law 211, 212, 217, 218–22, 228–9 corporate crime 209–10, 450–1 crime of aggression 194, 227–8 criminal law 209–10 data protection 235–6
dimensions and layers of 27 dispute settlement 208, 228–32 environmental regulations 355 European Union 62, 217–18, 220, 224, 225, 229, 234 and globalization 60, 62 intellectual property rights 24, 208, 212, 258, 259, 327–32 international law 62, 225–32 investor-state dispute settlement (ISDS) 229–32, 234, 270, 271, 366 Islamic law 85, 217 judicial system 178, 179, 194, 208, 209, 214, 216, 226–8 law defined 207 legal risks and responsibilities 211–14 legislation 214, 216 litigation 208, 229, 293–4 mediation 208, 229 national legal systems 214–17 negligence 220–2, 228 non-western legal systems 216–17 offshore finance 209, 233–4 patents 24, 212, 259, 327–32, 414 privacy law 62 private international law 228–32 product liability 220–2, 228 product recall 222 public international law 225–8 public law 208, 209 relational contracting 220 rule of law 150, 164–5, 176, 182, 212, 213–14, 232 statute law 214, 216 sustainability 232–4 tort 220–2, 228 treaties 226 legislation 214, 216 legislative assemblies 179 legislatures 178, 179 women in 183 Lesotho 42, 265, 270 leverage 288 leveraged buy-outs (LBOs) 303 liability limited 12 product 220–2, 228 unlimited 10 liberal democracy 165, 176, 177 liberal market economies 134–5, 136–7 liberalization market 39, 63, 134, 136, 142, 148, 282 trade 39, 226, 251, 255, 257–63, 282 Liberia 265 liberty 380, 381–2 Libya 172, 265 Liechtenstein 32, 265, 267
497
life cycle theory, product 50, 248 life expectancy 41, 97, 106–7, 139, 435 limited liability 12 Lisbon Treaty 150, 151, 188, 217 Lithuania 42, 145, 147, 265 litigation 208, 229, 293–4 lobbying 186, 187–8, 355 localization 64, 92–3 location advantages 49, 50–1, 52, 56, 57, 65 logistics 15 long-term orientation 89 low-context culture 80, 219 Luxembourg 42, 52, 147, 265 Maastricht Treaty 149, 217 Macedonia 42, 148, 150 macroeconomics 118 see also national economies Madagascar 265 Malawi 42, 265, 447 Malaysia 42, 90, 196, 215, 265, 270, 398 Malaysian language 82 Mali 42, 121, 173–4, 256, 257, 265 Malta 42, 147, 265 management 20–1 Fordism 93–4, 95 managerial culture 93–6 scientific management 95–6 see also manufacturing manufacturing 40–1 assembly lines 93–4 automation 58, 109, 313–14, 426 export-oriented 52, 57, 61, 65 lean production 58, 94 managerial culture 93–6 outsourcing 7, 17, 29–30, 40, 47, 56, 95, 452 product liability 220–2, 228 product life cycle theory 50, 248 reasonable care duty 388 scientific management 93–6 see also car industry; production market economies 134–5, 136–41, 165, 432 Asian capitalist systems 140–1 liberal market model 134–5, 136–7 social market model 134–5, 138–40 marketing 14, 16 markets defined 37 globalization 37–40 liberalization 39, 63, 134, 136, 142, 148, 282 Marshall Plan 283 masculine cultures 89, 90 Mauritius 265 mercantilism 250–1 mergers 224, 225, 302–3, 305–6
498
Subject Index
Mexico 42, 43, 137, 196 cultural dimensions 90 economic inequality 123 foreign direct investment 57 healthcare 140 legal system 215 life expectancy 139 regional trade 265, 266, 267–8, 270 relationship orientations 91 remittances 101 socialism 135–6 urbanization 103 micro-finance 411 microeconomics 118 Middle East 43, 171–2 greenhouse gas emissions 350–1 international trade 245 migrant workers 75–6, 98–9, 100, 396 population below poverty line 437 religion 85 unemployment 127 migration 97, 98–101, 443 anti-immigration policies 64 assimilation 81 asylum 99 forced 99 migrant workers 56, 66, 75–6, 95, 98–9, 100, 395–7, 440 refugees 88, 99–100, 111, 148, 438–9 remittances 98, 100–1 rural to urban 101, 103 military expenditure 171 Millennium Development Goals (MDGs) 360–1 minimum wage 394–5 mining 25–6, 40, 275, 366 minority groups 64, 79, 81–2, 87, 176 mixed economies 134, 135, 141–4 mobile phones 314, 337 Huawei 241–2, 339 iPhone 6, 47, 56, 116, 234, 241, 320, 338–9, 397 Samsung 141, 241, 339 modern slavery 396–7, 440 Moldova 42, 148, 151 monetary policy 129, 131, 148–9, 301–2 money laundering 209, 234 Mongolia 42 monopoly 137, 223–5 Monserrat 265 Montenegro 42 morality 380 see also ethics Morocco 42, 69, 398 most-favoured-nation principle (MFN) 257–8, 259 motorcycle industry 45–6 Mozambique 42, 265, 270, 447
multi-layered environment 26–8 multi-party systems 183, 184, 185 multilateral trade agreements 257–63, 264 multilateral treaties 226 multinational enterprises (MNEs) 17–18, 452–3 acquisitions 47, 53, 54, 225, 303–6 affiliates 18, 37–8 conglomerates 304, 305, 306 and cultural distance 80 environmental management 364–7, 388 environmental, social and governance (ESG) reporting 404 exporting strategy 46 franchising 47–8, 96 and globalization 37–8, 39 greenfield investment 46–7, 49, 58 holding companies 18 horizontal integration 302 and human rights 80 internationalization 43–8, 65 joint ventures 47, 92 legal risks and responsibilities 211–14 managerial culture 95–6 mergers 224, 225, 302–3, 305–6 organizational culture 92–3 outsourcing 7, 17, 29–30, 40, 47, 56, 95, 452 portfolio investment 48 primary stakeholders 402 scientific management 95–6 secondary stakeholders 402 subsidiaries 18, 37–8, 46, 92 tax avoidance 209, 233–4, 388, 455–6 value chains 37–8 vertical integration 51, 304 see also foreign direct investment (FDI); trade, international Myanmar 42, 83, 87–8, 265 NAFTA see North American Free Trade Agreement Namibia 265, 270 Nasdaq system 286 nation-states 79, 162 see also states national cultures 77, 78–80 national economies 117–33 Asian capitalist systems 140–1 balance of payments 129–30 capital account 129 current account 129–30 economic growth 120–2, 125, 142, 146 fiscal policy 131, 372 government policies 130–3
gross domestic product (GDP) 119 gross national income (GNI) 41, 118–20, 148 inequality in 122–5, 137, 143–5 inflation 128–9, 149, 282, 283 liberal market economies 134–5, 136–7 mixed economies 134, 135, 141–4 monetary policy 129, 131, 148, 301–2 national budget balance 132 national debt 132, 149 planned economies 133, 134 social market economies 134–5, 138–40 transition economies 135, 145–6 unemployment 30, 58, 66, 104, 111, 125–8 see also emerging economies national environment 27, 28 national legal systems 214–17 nationalism 37, 61–2, 64, 107, 148, 166–8, 175, 180, 196, 442–4 nationalization 12, 168–9 natural disasters 99, 447 natural environment see ecological environment negligence 220–2, 228 Nepal 42, 98, 101 Netherlands 32, 42, 62, 147, 151, 265 corruption 233, 431 cultural dimensions 89, 90 international courts 226–7 patents 332 tax havens 234 neutral cultures 91 New Zealand 41, 42, 265, 269, 270, 398 Nicaragua 42 Niger 42, 265 Nigeria 42, 57, 101, 102, 163, 169, 215, 265 non-executive directors 21 non-governmental organizations (NGOs) 100, 160, 193, 363 North American Free Trade Agreement (NAFTA) 91, 136, 147, 265, 266, 267–9 North Korea 134, 165 Norway 42, 265, 267, 364 cultural dimensions 89 economic inequality 123 education 322, 323 ESG reporting 404 and European Union 191 sovereign debt 289 not-for-profit organizations 5 nuclear power 221, 356, 358–9 OECD Guidelines for Multinational Enterprises 404–7 offshore finance 209, 233–4
Subject Index
offshoring 7–8, 13 oil industry 57, 121, 423, 448 carbon offsets 363–4, 423 environmental degradation 365–6 oil shock 284 oil spills 221, 359, 365 OLI paradigm 50–1 oligopoly 137, 249, 253 Oman 398 online gambling 389–90 online retailing 31, 38, 68–9 opioid epidemic 413–14, 450 option contracts 292 organizational culture 92–3 Oslo Symposium 367–8 outsourcing 7, 17, 30, 36, 47, 56, 64, 219, 280, 378, 400, 410, 430 ownership advantages 50 OxyContin 413–14, 450 Pakistan 42, 83, 98, 100, 101, 183 palm oil 403, 446 Panama Papers 209, 233 Papua New Guinea 265 Paradise Papers 209, 233–4 Paraguay 265, 267 Paris climate change agreement 27, 62, 63, 159, 353–4, 355, 371, 444–5, 448 parliamentary systems 180, 181 particularism 91 particulate matter (PM) 345, 369, 445 Patent Co-operation Treaty (PCT) 331 patentable inventions 328 patents 24, 212, 259, 327–32, 414 peer-to-peer lending 291 ‘pegged’ exchange rates 284 pensions 105–7, 132 see also social protections Peru 42, 265, 270 PESTLE analysis 22–5 pharmaceutical industry 16, 208, 212–13, 252, 329–30, 333, 413–14 philanthropy 402, 403, 455–6 Philippines 42, 101, 105, 196, 213, 227, 265 planned economies 133, 134 plastic waste 373–5, 423 pluralism 160, 165, 174, 177, 185–6 plurilateral trade agreements 263, 264, 270–1 Poland 42, 147, 148, 265 economy 145, 146 judicial reforms 182 populism 166, 168, 443 rule of law 150, 182, 213 trade 266, 267 political environment 23, 159–99 absolutism 164 authoritarianism 23, 39, 94, 107, 174–6, 186–7, 200–1, 232, 429–30, 442–3
authority 162–8 and business interests 186, 187–8 capitalism 133, 136, 165 characteristics of states 162–4 civil society 160 coalition governments 184 communism 133, 165–6 constitutionalism 164–5 democracy 23, 159, 174, 176–7, 186, 429–30, 443 dimensions and layers of 27 elections 176, 183–4, 189–90 European Union 188–93 federal systems 163 first-past-the-post system 183 functions of government 178–9 global politics 193–7 and globalization 60, 61–2 hybrid systems 180, 181 ideologies 165–8 international institutions 193–5 liberal democracy 165, 176, 177 lobbying 186, 187–8, 355 military expenditure 171 monarchy 164 multi-party systems 183, 184, 185 nationalism 37, 61–2, 64, 107, 148, 166–8, 175, 180, 196, 442–4 parliamentary systems 180, 181 pluralism 160, 165, 174, 177, 185–6 political parties 185–8 political risks 168–74, 441–4 politics defined 160 populism 148, 158–9, 166–8, 175, 180, 186, 189–90, 196, 430, 442–4, 454 presidential systems 180–1 proportional representation 183–4 realpolitik 195 referendums 184 rule of law 150, 164–5, 176, 182, 212, 213–14, 232 separation of powers 178 socialism 133, 135–6, 165–6 sovereignty 163–4, 170, 385 superpowers 195 sustainability 197–8 systems of government 180–1 terrorism 85, 172, 173, 227, 439 two-party systems 180, 181, 183, 185 unitary systems 163 women in legislatures 183 political institutions 134 political integration 61, 264 political parties 185–8 polycentrism 77 population growth 104, 347 populism 148, 158–9, 166–8, 175, 180, 186, 189–90, 196, 430, 442–4, 454
499
portfolio investment 48 Portugal 42, 69, 147, 195, 265, 267 Portuguese language 80, 81, 82 poverty 10, 43, 108, 360, 361 in Africa 270 and climate change 352 in developing countries 10, 43, 66, 67 in India 120 and inequality 104 poverty lines 436, 437 reduction 102, 120, 123, 142, 433 urban 103 in the US 123, 395 power distance 88–9, 90 PPP see purchasing power parity presidential systems 180–1 primary production 40 primary stakeholders 402 privacy law 62, 207, 211, 224, 233, 235-6, 339, 384, 439, 455 private equity funds 303 private limited companies 12, 13–14 private sector 12 privatization 13–14, 145, 161, 282 product liability 220–2, 228 product life cycle theory 50, 248 product recall 222 production 14, 15 outsourcing 7, 17, 29–30, 40, 47, 56, 95, 452 primary 40 product life cycle theory 50, 248 secondary 40 see also manufacturing progressive taxation 125, 131, 137 property rights 282 see also intellectual property rights proportional representation 183–4 prosperity 122 protectionism 251, 252, 254, 258, 259, 444 protest 429 Arab spring 172, 438 in Argentina 309 in China 429 in Greece 296 in Poland 182 in Russia 107 in the UK 192 in the US 395 public law 208, 209 public limited companies (PLCs) 12–14, 285 public relations (PR) and communications 16–17 public sector 12 public spending 30, 66, 118, 131–2, 138, 234 healthcare 97, 138–40, 395, 422, 448–9 pensions 105–7, 132
500
Subject Index
social protections 108–9, 123, 128, 132, 137 Punjabi language 80, 81 purchasing power parity (PPP) 119 Qatar 75–6, 100, 262, 350, 396, 398, 450 quantitative easing (QE) 301–2 Rana Plaza disaster, Bangladesh 412, 440 realpolitik 195 reasonable care duty 388 recessions 122 recycling 32, 69, 423 redistributive policies 125, 137 referendums 184 Brexit 59, 129, 151, 153–4, 184, 188, 190–3, 218, 266, 386, 443–4 reforestation strategies 363–4, 423 refugees 88, 99–100, 111, 148, 438–9 regional trade agreements (RTAs) 147, 263–70 regionalization 147 see also European Union regulation 9–10, 28, 30, 211, 387, 389, 412 competition 16, 137, 161 environmental 347, 352, 355–6, 373, 423 financial 21, 24–5, 29, 45, 125, 133, 146, 259, 289, 300, 306, 432, 453 markets 16, 137, 161 stock exchanges 287, 288 technology xxv, 212, 236, 425 see also legal environment relational contracting 220 relativism, ethical 381 religions 77, 83–8 remittances 98, 100–1 renewable energy 355, 356, 357 research and development (R&D) 14, 16, 316–17, 324–6 resource curse 57, 272 resource-rich countries 42, 43, 57, 75–6, 100, 169–70 Rio Declaration on Environment and Development 359–60 risks 10, 11, 21, 433–47 economic and financial 292–4, 433–7 legal 211–14 to natural environment 444–7 political 168–74, 441–4 socio-cultural environment 437–40 Rohingya people 88 Romania 42, 145, 146, 147, 148, 265 Rome Convention on the Law Applicable to Contracts 228, 229
Rome Statute (1998) 227 rule of law 150, 164–5, 176, 182, 212, 213–14, 232 Russia 12, 42, 43, 57, 195–6, 227, 398, 430 annexation of Crimea 146, 170, 187, 195–6 coal 357 corruption 233, 431 economy 146 financial crisis 295 GMO labelling 254 greenhouse gas emissions 350 gross national income (GNI) 119, 120 ideology 165, 166 life expectancy 107 military expenditure 171 pensions 106–7 political parties 187 political risk 169 R&D expenditure 324, 326 regional trade 265 religion 83, 84 rule of law 213 UN Security Council 194, 227 see also BRIC countries Russian language 81, 82 Rwanda 42, 163, 227, 265 St. Kitts and Nevis 265 St. Lucia 265 Saudi Arabia 35, 42, 100, 196, 398 legal system 217 military expenditure 171 monarchy 164 urbanization 102 women drivers 86–7 scientific management 93–6 sea level rise 352, 445 secondary production 40 secondary stakeholders 402 self-determination 79, 162, 383 self-employed persons 10 self-employment 390 self-regulation 21, 306, 389 Senegal 265 separation of powers 178 Serbia 42, 148, 150, 213 service contracts 219, 391–2 services international trade in 243–4, 262, 263 tertiary sector 40 Seychelles 265 shareholders 12, 303, 355–6 and corporate governance 18–22, 66, 406, 407–9 shares 12 equity financing 285–8, 303 portfolio investment 48 Shari’a 217
short-term orientation 89 Sierra Leone 42, 265 Silicon Valley 49, 235–6, 455 Singapore 42, 215, 265, 269, 270, 398 slavery, modern 396–7 Slovakia 42, 145, 147, 265, 324, 326, 358 Slovenia 42, 145, 147, 265 small-to-medium size enterprises (SMEs) 10–11, 43, 325 smartphones see mobile phones social and economic rights 383–4 social democracy 177 social enterprises 5, 410–11 social justice 29, 131, 138, 165 social market economies 134–5, 138–40 social media 16–17, 211–12, 337 social protections 108–9, 123, 128, 132, 137 socialism 133, 135–6, 165–6 societal change 97 ageing populations 104–6 demographic change 104–7 population growth 104, 347 urbanization 97, 101–4, 348, 369 see also migration socio-cultural environment 23, 24 dimensions and layers of 27 and globalization 60, 63–4, 76–7 risks 437–40 sustainability 107–10 see also culture; societal change sole traders 10, 18 Somalia 42, 100, 111, 265 South Africa 42, 43, 196, 430 apartheid 111 coal 357 corruption 111–12 democracy 111–12, 441 economic inequality 123 ESG reporting 404 legal system 218 native cultures 81 political risk 169 referendums 184 regional trade 265, 270 rule of law 213 South Korea 18, 39, 41, 42, 196, 398 chaebol 141 cultural dimensions 89 economy 140–1 education 323 financial crisis 295 mergers and acquisitions 306 nuclear power 358 patents 331, 332 pensions 106 R&D expenditure 324, 325, 326 regional trade 269 religion 88 technology transfer 335 South Sudan 42, 100, 193
Subject Index
sovereign debt 149, 289–90, 293–4, 296–7, 308–9 sovereign wealth funds 48 sovereignty 163–4, 170, 385 Soviet Union 42, 94, 133, 145, 162, 165, 195, 326, 356, 359, 441 soya beans 260–1 Spain 42, 68–9, 147, 164, 265 debt crisis 149 droughts 352 foreign direct investment 52 gross national income (GNI) 148 imperial power 195 languages 82 political parties 186 R&D expenditure 324, 326 social protections 132 women in legislature 183 Spanish language 80, 81, 82 specific cultures 91 spillover effects 55, 58–9, 334–6 Sri Lanka 87 stakeholder theory 402 stakeholders 7–8, 18–22, 66, 401–2, 407, 409–10 Standard & Poor’s 500 Index (S&P 500) 301, 302 start-up businesses 10–11, 126, 320 state-owned enterprises 12, 116, 138, 145, 146, 283 states 79 defining characteristics 162–4 external threats to 170–2, 173 federal systems 163 ideologies 165–8 political authority 162–8 political risks 168–74, 441–4 sovereignty 163–4, 170, 385 unitary systems 163 see also government statute law 214, 216 stock exchanges 12, 13, 285–8 strategic trade policy 253 sub-prime mortgages 298, 418 subcontracting 391 subcultures 81 subsidiary companies 18, 37–8, 46, 92 subsidies 39–40, 49, 254–7 subsistence entrepreneurs 9 Sudan 42, 57, 217, 265 superpowers 195 supply chains 15, 18, 29, 20–30, 37–8, 59, 65, 246, 396–7 and exports 244, 245, 246 and foreign direct investment 36, 44, 51, 54 global xxv, 6, 7, 36, 38, 39, 154, 226 and MNEs 18, 29, 59 stakeholders 7, 272, 400, 402, 411, 440 technology 63
supranational institutions 217 sustainability 8, 28–30, 69, 419–33 business responsibilities 449–51 climate change and ecological environment 369–72, 422–5 economic environment 151–2, 427–9 financial environment 306–7, 431–3 and globalization 64–7 and governance 29, 66, 429–31 government responsibilities 447–9 individual and societal wellbeing 420–2 and international trade 271–2 legal environment 232–4 political environment 197–8 prospects for sustainable future 451–4 socio-cultural environment 107–10 and technological innovation 336–7, 425–7 sustainable consumption 367–8 sustainable development 24, 43, 66, 102, 359–62, 371 in business context 363–4 Rio principles 359–60 and social protections 108–9 and technological innovation 336–7 Sustainable Development Goals (SDGs) 101, 108, 360–2, 449 Swaziland (Eswatini) 265, 270 Sweden 31, 42, 147, 265, 267 cultural dimensions 89, 90 legal system 215 nuclear power 358 patents 332 R&D expenditure 324, 326 referendums 184 sovereign debt 289 trade unions 399–400 women in legislature 183 Switzerland 42, 81, 184, 265, 267, 332 Syria 99, 100, 148, 170, 172, 227, 438–9 Taiwan 88, 265, 335 Taj Mahal 370–1 Tajikistan 42 Tanzania 42, 265 tariffs 45, 54, 57, 130, 242, 253–4, 260 taxation 58, 66, 118, 131–2 avoidance 209, 233–4, 388, 455–6 evasion schemes 388 on fossil fuels 372 progressive 125, 131, 137 tax havens 209, 233–4 Taylorism 93–6
501
technological innovation 10–11, 23, 24, 29, 314–38 5G 241, 242, 325 artificial intelligence (AI) 58, 109, 313 automation 58, 109, 313–14, 426 concepts and processes 315–17 creative destruction 319–21 definitions 6, 315–16 dimensions and layers of 27 disruptive impacts of 58, 63, 109, 126, 313–14, 426–7 and economic development 321 education and training 322–3 and employment 58, 63, 109, 126, 313–14, 426–7 and globalization 60, 63, 335, 336 green/low-carbon 352, 356, 372, 423 intellectual property rights 24, 208, 212, 258, 259, 327–32 national systems of innovation 322–7 patents 24, 212, 259, 327–32 research and development (R&D) 16, 316–17, 324–6 SoftBank 35–6 and sustainable development 336–7, 425–7 technology diffusion and transfer 55, 63, 321, 334–6 technology licensing 335 see also mobile phones terrorism 85, 172, 173, 227, 439 tertiary sector 40 textile industry 3–4, 38, 68–9, 378–9, 440–1 Thailand 42, 87, 265, 294–5, 398 think tanks 186, 187, 456 Timor Leste 42 Togo 42, 265 tort law 220–2, 228 trade barriers 37, 254 see also tariffs Trade Facilitation Agreement (TFA) 262 Trade in Services Agreement (TiSA) 263 trade, international 38, 48–9, 62, 242–74 absolute advantage 247 anti-dumping agreement 258 balance of payments 129–30 bilateral agreements 263, 264 Bretton Woods agreement 257 common markets 264 comparative advantage 248 competitive advantage 249–50 contract law 218–22 and culture 253 customs unions 264 dispute settlement 258–61 dumping 258
502
Subject Index
and employment 252 first-mover advantages 249 free trade areas 264 free trade debate 251 GATT principles 257–8, 259 and globalization 243–7, 248, 271–2 import quotas 254 import substitution 252 imports and exports 243–7 and industrialization 251–2 and intellectual property rights 258, 259 intermediate goods 245 investor-state dispute settlement (ISDS) 229–32, 234, 270, 271, 366 local content requirements 254 mercantilism 250–1 most-favoured-nation principle (MFN) 257–8, 259 multilateral agreements 257–63, 264 and national trade policies 250–7 non-tariff barriers 254 plurilateral agreements 263, 264, 270–1 product life cycle theory 248 protectionism 251, 252, 254, 258, 259 regional agreements 147, 263–70 in services 243–4, 262, 263 subsidies 254–7, 260, 262 sustainability 271–2 tariffs 45, 54, 57, 130, 242, 253–4, 260 theories of 247–50 trade defined 243 trade disputes 37, 45, 54, 116, 242, 258–61, 262 trade liberalization 39, 226, 251, 255, 257–63, 282 voluntary export restraint (VER) 254 Trade-Related Aspects of Intellectual Property Rights (TRIPS) 258, 259, 333 trade unions 58, 65, 94, 95, 96, 384, 398–400, 426 transaction costs 51 transformational entrepreneurs 9 transition economies 41, 42, 135, 145–6, 246 treaties 226 Treaty of Lisbon 150, 151, 188, 217 Treaty of Rome 148, 189, 217 triad countries 244 Trinidad & Tobago 265 triple-bottom-line reporting 367 Tunisia 42, 227, 265 Turkey 42, 69, 150, 196 authoritarianism 200–1, 430 corruption 233, 431
healthcare 140 life expectancy 139 migrant workers 100 political risk 169 populism 167, 168 R&D expenditure 324, 326 refugees 438–9 rule of law 213 urbanization 102 Turkmenistan 42 two-party systems 180, 181, 183, 185 Uganda 42, 265 Ukraine 42, 146, 170, 187, 195–6, 227 uncertainty avoidance 89, 90 unemployment 30, 58, 66, 104, 111, 125–8 unemployment benefits 128, 132 unitary systems (of government) 163 United Arab Emirates 42, 398 United Kingdom 42, 147, 195–6, 265, 267 acquisitions 303 balance of payments 130 banks 21, 298–301 Brexit 59, 129, 151, 153–4, 184, 188, 190–3, 218, 266, 386, 443–4 car industry 153–5 collapse of Carillion 279–80 community interest companies (CICs) 410 constitution 164 Consumer Rights Act (2017) 217, 218, 220 corporate crime 450–1 corporate governance 21–2 corporate killing 210 corruption 233, 431 cultural dimensions 90 Debt Relief (Developing Countries) Act (2010) 293–4 diesel cars 345, 346 economy 121, 134, 136 education 323 electoral system 181, 183 executive pay 409 FDI 48–9, 52, 58–9 Financial Services (Banking Reform) Act (2013) 300, 307 financial services regulation 288, 418–19 and global financial crisis 288, 298–301, 418–19 gross national income (GNI) 119, 120 healthcare 140 and Huawei 241 Human Rights Act (1998) 386 imperial power 195 industrialization 41 inflation 129 legal system 215, 216, 217, 218, 220, 224
legislature 179 life expectancy 139 lobbying 187–8 mergers and acquisitions 306 military expenditure 171 minimum wage 394 modern slavery 396–7 monetary policy 301 National Health Service 139, 140, 283 parliamentary system 181 political parties 185–6 quantitative easing (QE) 301 R&D expenditure 324, 326 referendums 184 relationship orientations 91 rule of law 213 social enterprises 410 sovereign debt 289 stock exchange 12, 279, 286, 291 tax havens 234 taxation 131 textile industry 378–9 trade 266, 267 trade unions 398–9, 426 UN Security Council 194, 227 voter turnout 181 women in legislature 183 United Nations 41, 61, 79, 168, 193–5, 196 Charter 170, 194, 227 General Assembly 194, 383 Global Compact 406 Human Development Index (HDI) 41, 107, 142, 173, 400 Millennium Development Goals (MDGs) 360–1 Security Council 170, 194, 227 Sustainable Development Goals (SDGs) 101, 108, 360–2, 449 United Nations Conference on Environment and Development (UNCED) 359 United Nations Conference on Trade and Development (UNCTAD) 231–2 United States 42, 195–6, 227, 398 Affordable Care Act 138–9, 448–9 ‘America first’ policies 54, 64, 259, 444 balance of payments 130 banks 21, 293 car industry 58, 59–60, 93–4, 399 checks and balances 178, 179 and climate change 354 coal 357 company registration 13 Constitution 178, 179, 180 consumer society 64 corporate crime 451 corruption 233, 431
Subject Index
cotton production 255–7 and Cuba 133 cultural dimensions 90 Declaration of Independence 383 Deepwater Horizon disaster 221, 365 democracy 177 economic inequality 123, 124, 125, 137 economy 121, 134, 136, 283–4, 428–9 education 323 electoral system 180, 183 foreign direct investment 52, 54, 58, 196 federalism 163 financial services regulation 288, 418–19 Glass-Steagall Act (1933) 293, 418–19 and global financial crisis 298–9, 301–2, 418–19 and globalization 39–40, 61 GMO labelling 254, 255 greenhouse gas emissions 350, 353 gross national income (GNI) 119, 120 healthcare 138–9, 140, 395, 448–9 and Huawei 241–2 human rights 384 and IMF 282 industrialization 41 legal system 214, 215, 216, 218, 220–1, 223–4 legislature 179 life expectancy 139 lobbying 187 managerial culture 93–4 Marshall Plan 283 mergers and acquisitions 305, 306 military actions 170–1 military expenditure 171 minimum wage 394–5 monetary policy 301–2 national culture 79
nationalism 61–2, 64, 167–8, 196, 444 native cultures 81 New Deal 138, 384, 418 nuclear power 358 patents 328–9, 331, 332 plastic waste 374 political parties 185–6, 187–8 populism 166, 167–8, 196, 430, 444 presidential system 180–1 presidential veto powers 178, 179, 444 protectionism 251, 252, 259, 444 quantitative easing (QE) 301–2 R&D expenditure 324, 325, 326 regional trade 265, 266, 267–9, 270–1 relationship orientations 91 rule of law 213 Sherman Act (1890) 223, 224 sovereign debt 289 soya beans 260–1 stock exchanges 286, 287 subsidies 255–7, 260 as superpower 195 taxation 131, 132 technological innovation 63 trade 245, 246, 247 trade agreements 231, 261 trade disputes 37, 45, 54, 116, 242, 259–61, 262 trade unions 384, 399 UN Security Council 194, 227 Uniform Commercial Code 218 war on terror 172 women in legislature 183 United States-Mexico-Canada Free Trade Agreement (USMCA) 268, 269 Universal Declaration of Human Rights (UDHR) 79, 383–4, 406 universalism 91 unlimited liability 10 urbanization 97, 101–4, 348, 369 Uruguay 42, 267 utilitarianism 380–2 Uzbekistan 42
503
value chains 37–8 values 77–8 Venezuela 42, 57, 100, 169, 175, 213, 265, 297 venture capitalists 12 vertical integration 51, 304 veto powers in European Union 189 UN Security Council 194, 227 US presidential 178, 179, 444 Vienna Convention 218–19 Vietnam 42, 101, 105, 121, 196, 265, 269, 270, 398 violent conflict 99, 100, 170–2, 438–9 voluntary export restraint (VER) 254 vulture funds 293–4, 308 wages 394–5, 399, 408–9 war crimes 227, 228, 385 war on terror 172 wars see violent conflict Washington consensus 282, 295 weather, extreme events 352, 445, 447 welfare state 137, 138–40, 421 see also social protections wellbeing, human 97, 382, 420–2 healthcare 97, 138–40 life expectancy 41, 97, 104–5, 107, 139 pensions 105–7, 132 social protections 108–9, 123, 128, 132, 137 see also human rights westernization 85 World Inequality Report 124 World Investment Report 54 Yemen 42, 170, 172 youth unemployment 126–7 Zambia 42, 215, 265 zero-hours contracts 10, 391, 396, 452 Zimbabwe 111, 265, 447