Chapter
7
The Challenges of Globalization
 The
Process of Globalization
 The Globalization Debate
 Doing Business in a Diverse World
 Global Codes of Corporate Conduct
 Collaborative Partnerships for Global Problem Solving
The process of globalization
Globalization
Refers to the increasing movement of goods, services, and capital
across national borders.
 Globalization
is considered a process—an ongoing series of
interrelated events.
Transnational corporation
A company that does business in more than one country.
Figure 7.1
The world’s top 10 nonfinancial transnational
corporations, ranked by foreign assets
Corporation
Home Economy
Industry
Foreign Assets
(in $ millions)
Vodafone
United Kingdom
Telecommunications
$221,238
General Electric
United States
Electrical Equipment
159,188
ExxonMobil
United States
Petroleum
101,728
France
Diversified
93,260
United States
Motor Vehicles
75,150
Royal Dutch/Shell
U.K./Netherlands
Petroleum
74,807
BP
United Kingdom
Petroleum
57,451
Toyota Motor
Japan
Motor Vehicles
55,974
Telefonica
Spain
Telecommunications
55,968
Fiat
Italy
Motor Vehicles
52, 803
Vivendi Universal
General Motors
Source: United Nations, World Investment Report 2002, Table IV-1, p.98. Data for the year 2000.
Figure 7.2
Acceleration of world trade, 1960-2001
30
% of GDP
25
20
15
10
5
0
1960
1970
1980
Years
1990
2000
Source: World Development Indicators 2003 (New York: World Bank, July 2003, and
World Development Indicators 2002 (New York: World Bank, May 2002).
The acceleration of globalization
The factors that drive the acceleration of globalization:
 Improved communications
 Improved transportation systems
 The rise of major transnational corporations
 Social and political reforms
 The rise of international financial and trade institutions
International financial and trade institutions
The World Bank
 Provides economic development loans to its member nations.
 Funds used mainly for roads, dams, power plants, pipelines, and
other infrastructure projects.
International Monetary Fund
 Purpose is to make currency exchange easier for member
countries so that they can participate in global trade.
 Lends foreign exchange to member countries.
World Trade Organization
 An international body that established the ground rules for trade
among nations.
 Its major objective is to promote free trade.
Figure 7.3
Pros and cons of globalization
Arguments for globalization
Arguments against globalization
Increases economic productivity.
Causes job insecurity.
Reduces prices for consumers.
Weakens environmental and labor
standards.
Gives developing countries access to
foreign investment funds to support
economic development.
Transfers technology.
Spreads democracy and freedom, and
reduces military conflict.
Prevents individual nations from
adopting policies promoting
environmental or social objectives.
Undermines cultural, linguistic, and
religious diversity.
Is just as compatible with despotism as
it is with freedom.
Comparative political and economic systems
Democracy
Refers broadly to the presence of political freedom.
Four defining features of democracy (according to the U.N.)
 Fair elections
 An independent media
 Separation of powers among the executive, legislative, and
judicial branches of government
 An open society where citizens have the right to form their own
independent organizations to pursue social, religious, and cultural
goals
Comparative political and economic systems
Military dictatorships
Repressive regimes ruled by dictators who exercise total power
through control of the armed forces.
Free enterprise systems
Based on the principle of voluntary association and exchange.
Members of society satisfy most of their economic needs through
voluntary market transactions.
Central state control
Economic power is concentrated in the hands of government
officials and political authorities. The central government owns
the property that is used to produce goods and services.
Global codes of corporate conduct
The United Nations Global Compact
 A values-based platform designed to promote institutional
learning.
 Corporations are invited to voluntarily endorse core principles
covering labor, human rights, and environmental standards.
The OECD Guidelines for Multinational Enterprises
 Code of conduct for corporations developed by member nations
of the OECD.
 The guidelines are voluntary, address employment relations,
information disclosure, environmental stewardship, consumer
interests, and the management of technology.
Global codes of corporate conduct
The Global Sullivan Principles
 The objectives are to support economic, social, and political
justice by companies where they do business.
 Calls on companies to support human rights and to encourage
equal opportunity at all levels of employment.
The Caux Principles
 Emphasizes working for the common good and respect for human
rights.
A three-sector world



Business
Government
Civil society
Comprises nonprofit, educational, religious, community, family,
and interest-group organizations.

Nongovernmental organizations (NGOs)

Concerned with such issues as environmental risk, labor practices,
workers rights, community development, and human rights.
Figure 7.4a
Distinctive attributes of the three major sectors:
Business
Organizational form
For-profit
Goods produced
Private
Primary control agent
Owners
Primary power form
Money
Primary goals
Wealth creation
Assessment frame
Profitability
Resources
Capital assets, technical knowledge,
production skills
Weaknesses
Short-term focus, lack of concern for
external impacts
Source: Adapted from Steven Waddell, “Core Competences: A Key Force in Business-Government-Civil
Society Collaborations,” Journal of Corporate Citizenship, Autumn 2002, pp. 43-56, Tables 1 and 2.
Figure 7.4b
Distinctive attributes of the three major sectors:
Government
Organizational form
Governmental
Goods produced
Public
Primary control agent
Voters/rulers
Primary power form
Laws, police, fines
Primary goals
Societal order
Assessment frame
Legality
Resources
Tax revenue, policy knowledge,
regulatory and enforcement power
Weaknesses
Bureaucratic, slow-moving, poorly
coordinated internally
Source: Adapted from Steven Waddell, “Core Competences: A Key Force in Business-Government-Civil
Society Collaborations,” Journal of Corporate Citizenship, Autumn 2002, pp. 43-56, Tables 1 and 2.
Figure 7.4c
Distinctive attributes of the three major sectors:
Civil Society
Organizational form
Nonprofit
Goods produced
Group
Primary control agent
Communities
Primary power form
Traditions, values
Primary goals
Expression of values
Assessment frame
Justice
Resources
Community knowledge, inspirational
leadership
Weaknesses
Amateurish, lack of financial resources,
parochial perspective
Source: Adapted from Steven Waddell, “Core Competences: A Key Force in Business-Government-Civil
Society Collaborations,” Journal of Corporate Citizenship, Autumn 2002, pp. 43-56, Tables 1 and 2.