1. Mike Perez
Cole Underwood
Sarah Torp
Chapters 2 & 3

2. Chapter 2-The Political Legal and
Technological Environment
Summary
Individualism
-People should be free to pursue economic and political endeavors without constraints
- Synonym with capitalism and is connected to a free market society
-Encourage diversity or competition, combined with private ownership will stimulate
productivity
-Following the status quo will stunt progress but competing with increase creativity and
progress
-David Hume, Adam Smith and Aristotle are supporters of this philosophy
-Research shows that team performance is negatively influenced by those who consider
themselves individualistic but competition stimulates motivation and encourages efforts to
achieve goals
Collectivism
- Views the needs or goals of society at large as more important than individual desires.
-Plato believed that individual rights should be sacrificed and property should be community
owned.
- Emerged in Germany and Italy as “national socialism” or fascism
-Authoritarian ideology that considers the individual inferior to the needs of the state and
seeks to forge a type of national unity based on religion, cultural, race or ethnicity

3. Socialism
-There is government ownership but profit is not the ultimate goal
-Based on the philosophies of Karl Marx, Friedrich Engles, and Vladimir IIyich
Lenin
-Classless society when everything was essentially communal
-Broken down into two extremes: Communist & Social Democracy
-Communist: Limited individual freedom, everything is government regulated.
Former countries under communist control include Soviet Union, Nicaragua,
Cambodia, Laos and Vietnam.
-Although many countries are no longer under communist rule, China is still
communist to this day
-Social Democracy: Achieved it's goal through a non violent movement
-Australia, France, Germany, Great Britain, Norway, Spain and Sweden are
examples
- Problems: businesses that were nationalized were inefficient due to the guarantee
of funding and the monopolistic structure. Citizens noticed an increase in taxes and
prices

4. >The political system or system of government in a country greatly
influences how it manages and conducts business.
- Legal and regulatory environments can be extremely confusing.
- In result, slower time to market and greater costs occur.
- MNCs must take time to evaluate legal framework of every different
market.
> There are four foundations on which laws are based
- Islamic Law
- Socialist Law
- Common Law
- Civil or Code Law
> MNCs must understand that there are certain rules that one must
follow when interacting with another MCN. These are called
International Law.

5. > International Law can mostly be summed up by a few basic
broad principles.
> The International law examples demonstrate the
framework of operation for MNCs, but there are also many
specific laws that impact businesses as well.
- Foreign Corrupt Practices Act is a major example that is
easily seen from American history.
- Other examples include; Bureaucratization and
privatization

6. • Advancements in technology:
o increase the quality of products
o aid in information gathering
o improve research and development
• International connections and interdependence due to
technological advancements is referred to as "flattening the
world"
• Internet and cell phones are the most significant
technological advances that provide people with instant
communication and information

7. • Technology is constantly evolving and shaping international
business
o Satellites will enable people in very remote areas to communicate
and receive information with their phones
o Automatic translation telephones
o Artificial intelligence and embedded learning technology will
allow machines to "think" like humans
• Advances in biotechnology, e-business, and telecommunications
create a shift toward high-tech, knowledge-based economies
o MNCs may take advantage of these and prosper
• Advances in technology have already eliminated middle
management and white- and blue-collar jobs
o outsourcing and offshoring to lower costs
• What are the costs and benefits of technological advancements that
impact international management?

8. Advancements in Technology
Benefits Costs
• allows for more • employees' jobs are
opportunities to conduct eliminated
business internationally • salaries are reduced
• cost of doing business because workers' skills are
globally declines not in demand & have
• productivity will increase been replaced by machines
• prices will eventually • job loss is especially
decrease devastating in developing
countries

9. Chapter 2 Questions

10. Question #1
The government system greatly impacts how a country does
business. As political polocies continue to change, MNC's must
adapt their strategies and practices to accommodate their
partners. For example, Chinese government would experience
greater challenges when working with EU countries because
they are communist. MNC's would need to understand how the
communist system of government works and be able to meet
the requirements in order to work together successfully with an
EU country.
"Effective management occurs when the philosophies are
recognized."
- Agree or disagree? Discussion.

11. Question #2
• Most positive effects of technological advancements and
telecommunications should be seen in developing countries
where inefficiencies in labor and production impede growth
• Digitization, higher-speed telecommunication, and
advancements in biotechnology give developing countries
the opportunity to jump into the 21st century
• Are there any negative effects?

12. Question #2
• Examples:
o People in South America and Eastern Europe used to wait
years to get a telephone installed, and now it is relatively
inexpensive and fast with cell phones
 will improve quality of life
 big market for telecommunications in developing
economies
o In India, the recent high-tech boom has created jobs for a
growing number of people and will continue to do so the
future

15. Chapter 3-Ethics & Social Responsibility
-Ethics: the study of morality and standards of conduct
Working conditions, work hours, and labor regulations create
challenges for employers and employees.
-Human Rights- There is no universally adopted standard
Women in the workforce--in Japan they are only offered
secretarial or dead end jobs even with college degrees. It's
believed they will marry early and leave the job. There are also
no sexual harassment laws and managers see women as
assistants, therefore not understanding the problem with it.
Discussion- Is it even worth going to college if you are only
going to get a low paying job and risk sexual harassment?
Despite equal opportunity initiatives in the U.S., France, Germany, and
Great Britain, women do not receive the same treatment or pay as men in
the workforce. Will women ever be able to break through the glass ceiling?

17. Summary Continued
-The Foreign Corrupt Practices Act (FCPA) makes it
illegal for US companies & their managers to attempt to
influence foreign officials through personal payments.
IRS continually audits books of MNC's.
Those involved are subject to high penalties and jail time.
-Passing of this act has paid off because many US multinational
companies have increased amount of business in countries they
use to pay bribes and made it clear they will not buy stock in
companies that use unethical practices.
- Look at page 66 at the corruption graph and discuss.
-Discussion: Do you think ethnics typically comes into play
during a business deal?

18. • Corporate social responsibility - the actions of a firm to benefit society
beyond the requirements of the law and the direct interests of the firm
• Nongovernmental organizations (NGOs) - private, not-for-profit
organizations that seek to serve society's interests by focusing on social,
political, and economic issues
o poverty, social justice, education, health, and environment
o examples: Save the Children and World Wildlife Fund
 sharp criticism of Nike, Levi's, Chiquita
 NGOs recognize that MNCs can have positive impacts on countries
where they do business
 adhering to higher social and environmental standards
• Sustainability - development that meets humanity's needs without harming
future generations
• Corporate governance - the system by which business corporations are
directed and controlled
o provides structure of how company objectives are set, how to obtain the
objectives, and monitors performance
o U.S. and U.K. are "outsider" systems due to dispersed ownership of
corporate equity among many outside investors

19. • Governments, MNCs, and NGOs are now working together to
contribute to international development assistance and ensure that
corporate governance practices are sound and effective
o while keeping corporate social responsibility and sustainability in
mind
• New corporate ethics guidelines passed in the United States have
forced MNCs to examine their own ethical practices and make
changes to comply
o This continuing trend toward globalization and free trade
appears to encourage the development of a set of global ethical,
social responsibility, and anti-corruption standards
o Shifting from traditional business conduct to new ethical
standards
o What motivates MNCs to implement ethical and socially
responsible business practices? page 59

20. Japan's Ethical Issues
-Japan cabinet members have accepted questionable payments
and favors.
-The bank system has failed to take action when distributing
loans and continued to operate despite being technically
bankrupt.
-Japanese firms have concealed consumer complaints for over
20 years
-Women paid dramatically less for the same job as men and as
mentioned before, big problem with sexual harassment

21. Chapter #3 Questions
1. What lessons can US MNC's learn from the political and
bribery scandals in Japan that can be value to them in doing
business in this country? Discuss 2.
2. How do ethical practices differ in the US and the European
countries such as France and Germany? What implications
does your answer have for the US multinationals operating in
Europe?

23. Colgate's Distasteful Toothpaste ...
-Please read pages 78 - 80 and answer the review questions.
You may work with a partner.

24. Colgate's Distasteful Toothpaste ...
1)
- First strategic error, gave H&H complete control of the
product.
- Second, waited too long to address the issue
- Ethics - The study of morality and standards of conduct
- Ethics demands us to do what is deemed right by society,
Colgate should have known that the racial slur of "Darkie" was
something that needed to be addressed. Colgate needed to take
control of H&H sooner rather than later.

25. Colgate's Distasteful Toothpaste ...
2)
- In our opinion Colgate needed to address the issue sooner
and with more force. Colgate thought that by not responding to
the issue it would eventually go away, but in fact, by trying to
suppress the issue for so long, it actually did more harm than
good. A complete name and label change, though possibly
dropping total sales, was necessary. Both could have been
slowly brought into the market and made public over time so
that consumers would find the new H&H product just as good
as before.

26. Colgate's Distasteful Toothpaste ...
3)
- After a name change, there is almost no way to keep all
consumer loyalty, this is why Colgate did not want to change
the name. It is definitely a big issue when deciding on a
something such as a change in name or image.
- Almost fully the reason why Colgate did not respond very
quickly to name change.

27. Colgate's Distasteful Toothpaste ...
4)
- No, the "no management rights" clause was not a good
thing for the company.
- In the negotiation process Colgate could have set up an
equal rights clause and therefore had more say in the decision
making process. If Colgate had more say, they could have
caught the problem long before if became such a national issue.