Exam 8: The Future of the Transnational: An Evolving Global Role

The primary difference between transactional MNEs and exploitive MNEs is that the former employs an approach that tends to be legally compliant and non-oppressive in its emerging market dealings.

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Question 1

Correct Answer:

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As the geographic (country) manager for a rapidly expanding multinational industrial manufacturer, you are responsible for managing the manufacturing operations in a developing economy. Business is fantastic. Pursuing the mandate given to you by your boss ("your job is to win at any cost"), your annual bonus alone has grown at a compounded annual rate of 50% over the past three years. Yet, your conscience has also been growing heavy. You have come under increasing local pressure as a consequence of an indigenous newspaper reporter's efforts to investigate the following incidents associated with your operations: (i) the high incidence of infant mortality experienced in households situated adjacent to a lake into which your plant is discharging effluents; (ii) the recent attempted suicide of two employees who were told that they would lose their jobs if they did not agree to extend their workday by four hours, despite already working eleven hours per day during a six day work week; and, (iii) the allegation that your domestic managers regularly secure expedited customs clearance for the raw materials needed at your manufacturing plant by taking local officials on jaunts to a nearby casino. A telephone conversation with a trusted mentor-professor from the college where you earned your business degree leads to the professor urging you to consider either leaving the company or, initiating an appeal to headquarters to change its exploitive ways in favour of becoming more responsive in its foreign business dealings. You choose to accept the challenge of appealing to headquarters and decide to write a memo to initiate your efforts. However, you are cognizant that while you are familiar with the distinction between exploitive and responsive approaches adopted by MNEs, headquarters may dismiss these terms as "academic mumbo jumbo." What should you say in your memo to headquarters?

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Question 2

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A good answer to this question will highlight some of the more pertinent distinctions between the exploitive and responsive approaches and then provide a more detailed description of the actual changes / policies that could be implemented. More specifically, the country manager's memo might include the following arguments:
Exploitive MNEs:
• The company is currently encouraging its foreign subsidiaries to adopt an exploitive approach;
• The approach contemplates engaging in the following types of activities:
a) exploiting existing local wages, working conditions and suppliers, driving them lower if possible;
b) accepting no responsibility for the company's social or environmental impact;
c) engaging in locally-accepted bribery and corruption practices to win benefits;
Responsive MNEs:
• The company should aspire to begin transforming itself towards adopting a responsive approach;
• This new approach would contemplate engaging in the following types of activities:
a) demonstrating a commitment to caring for employees and developing their skills;
b) aiming to positively affect those whose lives the company touches in communities in which it operates;
c) setting its standard of behaviour above minimum local legal requirements and conforming to higher international standards set by agencies such as the United Nations;
• Specific policies that could be implemented by this foreign subsidiary to effect the transition from an exploitive to a responsive approach could include the following:
a) Labor policies - the company should implement maximum work week policies that allow employees the opportunity to earn a living, but also provide time to rest and re-energize. The company should pursue adherence to the Global Compact Principle # 4 which advocates the elimination of compulsory labor (e.g., soliciting overtime labor under duress). Further, the company should ensure that employees are being given adequate breaks during the workday, in addition to ensuring that employees are not working in excess of the number of hours permitted in the MNE's home country;
b) Environmental protection policies - the company should implement policies designed to support Principles # 7-9 of the Global Compact. More specifically, the company should commit to making structural modifications which keep the manufacturing facility's effluent levels below the acceptable limits mandated in the MNE's home country. The company could also make a financial contribution needed to commence environmental remediation efforts with respect to the nearby lake.
c) Anti-corruption policies - the company should establish anti-corruption policies consistent with the principles detailed in the Global Compact's Principle # 10 which discourages the use of bribery. This could be achieved by examining the company's supply chain to ascertain why expedited customs clearance is needed. Perhaps the lead times for re-ordering raw materials need to be re-visited. The student could give a wide range of proposed solutions here - the key is to suggest an alternative to the raw materials delivery issue that involves an effort to improve the manner in which the company conducts its commercial affairs, while also eliminating its reliance on corrupt practices to facilitate its business operations.

The relationship between transactional MNEs and non-governmental organizations (NGOs) is frequently characterized by confrontation and accusation.

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Question 3

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False

In the 1970s, Nobel economist Milton Friedman advocated all of the following behaviours by MNEs, $\underline{except:}$

(Multiple Choice)

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Question 4

Experience has shown that encouraging foreign direct investment by MNEs in developing economies has been less effective than government-funded aid programs in efforts to reduce global poverty.

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Question 5

Which, if any, of the following business activities are likely to be acceptable to business ethicists:

(Multiple Choice)

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Question 6

Transformative MNEs commit to leading initiatives to bring life-enhancing changes to their home countries.

(True/False)

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Question 7

The exploitive approach to managing MNEs is now considered to be a relic from the past and has been essentially non-existent since the late 1980s.

(True/False)

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Question 8

The World Bank estimates that approximately one-third of the world's population subsists on less than $2 per day.

(True/False)

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Question 9

MNEs that internationalize in developing countries have encountered all of the following differences pertaining to the labor force, except:

(Multiple Choice)

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Question 10

While the two extreme characterizations of the MNE-stakeholder relationship (exploitive and transformative) tend to garner the most media attention, it is the more moderate perspectives of the MNE-stakeholder relationship (transactional and responsive) that tend to predominate in the context of FDI in emerging markets. However, given that these two perspectives represent the middle ground along the spectrum between exploitive and transformative, the distinctions between transactional and responsive characterizations of the MNE-stakeholder relationship in emerging markets are occasionally blurred. Clarify the differences between the transactional and responsive perspectives by comparing and contrasting the two characterizations, using examples that you think illustrate your position.

(Essay)

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Question 11

Exploitive MNEs are often able to extract substantial concessions from host country governments because host countries are eager to secure which of the following in connection with new investments made by MNEs:

(Multiple Choice)

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Question 12

In the past, many MNEs exhibited behaviour that was significantly exploitive or transactional.

(True/False)

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Question 13

MNEs have successfully insulated themselves from the accusations associated with entering regulatory environments that permit sweatshops by outsourcing manufacturing to arm's-length suppliers.

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Question 14

Progress in reducing global poverty has been observed to be more closely associated with investments by MNEs than it has with the foreign aid efforts of national governments and non-governmental organizations that have historically demonstrated a lack of business experience.

(True/False)

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Question 15

Transformative MNEs are sensitive and responsive to the problems and the needs of the developing world but the freedom of these MNEs to lead broad-scale efforts to deal with their root causes is often limited by governance issues and the need to generate profits.

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Question 16

Which of the following characteristics are not typically associated with transactional MNEs

(Multiple Choice)

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Question 17

You are employed by a large national chemical manufacturing firm that is considering its first investment in an emerging market. Your boss is concerned - while she senses an unprecedented opportunity to grow the firm, she is also mindful of the demonstrations surrounding a recent gathering of world leaders in which activists voiced a wide range of concerns over the perils of globalization. She appreciates the need to position the chemical manufacturing firm in the eyes of prospective stakeholders, but is unsure where to target. In the hopes of establishing a position that is neither overly exploitive, nor overly transformative, your boss has asked you for a report detailing the two most extreme positions that the chemical manufacturing firm could occupy. Compare and contrast these two characterizations of the MNE-stakeholder relationship in emerging markets, providing examples you think will illustrate your position.

(Essay)

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Question 18

Which of the following are not characteristic of the attitudes of transactional MNEs in the context of their relationships with stakeholders

(Multiple Choice)

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Question 19

To buttress the arguments of activists who have demonstrated against increasing globalization, a former chief economist at the World Bank has argued that the actions and policies of all the following groups have often damaged developing countries' economies more than they have helped them, except:

(Multiple Choice)

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Question 20

Showing 1 - 20 of 30

The primary difference between transactional MNEs and exploitive MNEs is that the former employs an approach that tends to be legally compliant and non-oppressive in its emerging market dealings.

The relationship between transactional MNEs and non-governmental organizations (NGOs) is frequently characterized by confrontation and accusation.

In the 1970s, Nobel economist Milton Friedman advocated all of the following behaviours by MNEs, $\underline{except:}$

Experience has shown that encouraging foreign direct investment by MNEs in developing economies has been less effective than government-funded aid programs in efforts to reduce global poverty.

Which, if any, of the following business activities are likely to be acceptable to business ethicists:

Transformative MNEs commit to leading initiatives to bring life-enhancing changes to their home countries.

The exploitive approach to managing MNEs is now considered to be a relic from the past and has been essentially non-existent since the late 1980s.

The World Bank estimates that approximately one-third of the world's population subsists on less than $2 per day.

MNEs that internationalize in developing countries have encountered all of the following differences pertaining to the labor force, except:

Exploitive MNEs are often able to extract substantial concessions from host country governments because host countries are eager to secure which of the following in connection with new investments made by MNEs:

In the past, many MNEs exhibited behaviour that was significantly exploitive or transactional.

MNEs have successfully insulated themselves from the accusations associated with entering regulatory environments that permit sweatshops by outsourcing manufacturing to arm's-length suppliers.

Progress in reducing global poverty has been observed to be more closely associated with investments by MNEs than it has with the foreign aid efforts of national governments and non-governmental organizations that have historically demonstrated a lack of business experience.

Transformative MNEs are sensitive and responsive to the problems and the needs of the developing world but the freedom of these MNEs to lead broad-scale efforts to deal with their root causes is often limited by governance issues and the need to generate profits.

Which of the following characteristics are not typically associated with transactional MNEs

Which of the following are not characteristic of the attitudes of transactional MNEs in the context of their relationships with stakeholders

To buttress the arguments of activists who have demonstrated against increasing globalization, a former chief economist at the World Bank has argued that the actions and policies of all the following groups have often damaged developing countries' economies more than they have helped them, except:

Expanding Abroad: Motivations, Means, and Mentalities

Understanding the International Context: Responding to Conflicting Environmental Forces

Developing Transnational Strategies: Building Layers of Competitive Advantage

Developing a Transnational Organization: Managing Integration, Responsiveness, and Flexibility

Creating Worldwide Innovation and Learning: Exploiting Cross Border Knowledge Management

Engaging in Cross-Border Collaboration: Managing across Corporate Boundaries

Implementing the Strategy: Building Multidimensional Capabilities

Filters

Exam 8: The Future of the Transnational: An Evolving Global Role

The primary difference between transactional MNEs and exploitive MNEs is that the former employs an approach that tends to be legally compliant and non-oppressive in its emerging market dealings.

The relationship between transactional MNEs and non-governmental organizations (NGOs) is frequently characterized by confrontation and accusation.

In the 1970s, Nobel economist Milton Friedman advocated all of the following behaviours by MNEs, except:‾\underline{except:}except:​

Experience has shown that encouraging foreign direct investment by MNEs in developing economies has been less effective than government-funded aid programs in efforts to reduce global poverty.

Which, if any, of the following business activities are likely to be acceptable to business ethicists:

Transformative MNEs commit to leading initiatives to bring life-enhancing changes to their home countries.

The exploitive approach to managing MNEs is now considered to be a relic from the past and has been essentially non-existent since the late 1980s.

The World Bank estimates that approximately one-third of the world's population subsists on less than $2 per day.

MNEs that internationalize in developing countries have encountered all of the following differences pertaining to the labor force, except:

Exploitive MNEs are often able to extract substantial concessions from host country governments because host countries are eager to secure which of the following in connection with new investments made by MNEs:

In the past, many MNEs exhibited behaviour that was significantly exploitive or transactional.

MNEs have successfully insulated themselves from the accusations associated with entering regulatory environments that permit sweatshops by outsourcing manufacturing to arm's-length suppliers.

Progress in reducing global poverty has been observed to be more closely associated with investments by MNEs than it has with the foreign aid efforts of national governments and non-governmental organizations that have historically demonstrated a lack of business experience.

Transformative MNEs are sensitive and responsive to the problems and the needs of the developing world but the freedom of these MNEs to lead broad-scale efforts to deal with their root causes is often limited by governance issues and the need to generate profits.

Which of the following characteristics are not typically associated with transactional MNEs

Which of the following are not characteristic of the attitudes of transactional MNEs in the context of their relationships with stakeholders

To buttress the arguments of activists who have demonstrated against increasing globalization, a former chief economist at the World Bank has argued that the actions and policies of all the following groups have often damaged developing countries' economies more than they have helped them, except:

Expanding Abroad: Motivations, Means, and Mentalities

Understanding the International Context: Responding to Conflicting Environmental Forces

Developing Transnational Strategies: Building Layers of Competitive Advantage

Developing a Transnational Organization: Managing Integration, Responsiveness, and Flexibility

Creating Worldwide Innovation and Learning: Exploiting Cross Border Knowledge Management

Engaging in Cross-Border Collaboration: Managing across Corporate Boundaries

Implementing the Strategy: Building Multidimensional Capabilities

Filters

In the 1970s, Nobel economist Milton Friedman advocated all of the following behaviours by MNEs, $\underline{except:}$