Question

How do ethics differ in multinational companies versus pure domestic U.S. companies?

MNEs try to maximize profits. How do MNEs attempt to maximize profits and minimize profit volatility/risk at the same time?

Answer 1

•International Business Ethics: unique ethical problems faced by managers operating across national boundaries.

•International business ethics differs from domestic business ethics in two ways:

•International business is more complex, as different cultures do not agree on what one “should” do.

•MNCs often have power and assets that are equal to foreign governments, raising more ethical concerns over the use of such power.

The primary problem of international business ethics lies in the fact that most cultures and nations hold entirely different standards of both law and ethics.

In America, business ethics can be employed because, in general, the disagreement between what actions are ethical and what actions are unethical in a single culture will be lesser than the disagreement between two entirely different cultures with different values and cultural practices.

As a result, one business might believe it is acting perfectly in accordance with international business ethics, while another would view that first business as acting in a completely unethical fashion.

One of the biggest problems facing any international business code of ethics is that standards for employment practices are not constant between nations participating in international business.

The Foreign Corrupt Practices Act (FCPA) was originally implemented in 1977 in order to prevent the questionable practices discovered by many American companies in international business dealings. These American companies were often bribing foreign officials in order to illegitimately gain business from foreign governments.

Such corrupt practices had been outlawed in America since the Government's inception, but because these companies were bribing in foreign nations, they were not violating American law. The FCPA changed all that, as it made it illegal for American companies to bribe foreign officials in order to obtain foreign business.

The original flaw of the Foreign Corrupt Practices Act was that it did not enforce international business ethics in any kind of uniform way. Only companies operating in America were subject to the Foreign Corrupt Practices Act; many other companies would still bribe foreign officials in order to obtain business, and thus, would have an unfair advantage against American businesses.

MNEs attempt to maximize profits and minimize risk by strategically allocating organisational policies with the factors affecting them.

Companies may take different approaches to maximize profit or minimize loss based on their own organizational strengths. While product differentiation and low price can be critical to maximizing profit, controlling cost and maintaining market share may be more important in to minimizing loss.

There are a variety of strategies and tactics that managers can use to reduce conflict and promote peacebuilding. In deciding what approach to take, managers must consider whether they want to act alone or in collaboration with other firms or organizations. Depending upon the particular challenges at hand and the resources and capabilities of the firm, managers may choose to directly or indirectly reduce risk at its source by mitigating the factors that undermine peace.

First, this approach enables firms to share any costs associated with their efforts. Second, to address complex challenges, different perspectives are often quite valuable. Organizations working together from different sectors may also develop more creative solutions. Third, as managers are not trained to think about reducing risk at its source or to engage in peacebuilding, the necessary expertise is often outside the firm.

MNEs consider reducing risk at its source rather than trying to avoid or react to risks as they occur. By incorporating peacebuilding strategies, managers may not only reduce investment risk but also contribute to stability and prosperity in the communities where they operate, and gain a competitive advantage in doing so.