Question 1
"When in Rome, do as the Romans do" is a controversial guideline for MNC's doing business in developing countries with respect to ethical practices and social responsibility. On the one hand, identifying key ethical and social elements of developing countries, and implementing them at the local subsidiaries can be highly beneficial for MNCs. Such an approach would make it easier for MNCs to reach the customers of these markets. People are more willing to buy a product from a company that operates in a manner that they know and understand. For instance, consumers in the U.S. claim the economic responsibility is the most crucial, customers in France value legal responsibilities the most, and German customers consider ethical and legal responsibility to be the most important. Additionally, localization approach allows MNCs to perform under the same conditions as the local competition. Making the best use of country-specific ethical and social practices minimizes the possibility of being overpowered by other companies due to local ethical-based competitive advantage. Therefore, there are several positive outcomes for MNCs that derive from “doing as the Romans do” in developing countries in terms of social responsibility and ethical practices.
However, this approach also has a lot of serious disadvantages for MNCs. Universal set of healthy ethical practices and profound approach to social responsibility across all countries frequently enables MNCs to develop a solid competitive advantage through its’ ethical climates. Establishing one complex of ethical standards in the domestic market, and a different set of ethical principles in the developing countries can cause a cognitive dissonance within a MNC. Stakeholders of the company will be confused regarding fundamental beliefs, values and behaviors that truly determine the methods and the purpose of the company’s functioning, thus negating the positive effect of a unified ethical climate.
Another harmful aspect for MNCs that comes from using localized ethical and social responsibility approaches in developing countries lies in potential negative effect on the company’s image, brand name and reputation. For instance, many developing countries have problems with corruption, including bribery and tax evasion. Based on these ethical specifics, companies that successfully operate in such markets are in an advantageous position over a competitor who does not play by these rules. However, if a MNC decides to exploit these mechanisms, and adapts its ethical principles to match the local ones, such actions will stain its reputation with key stakeholders, including customers, shareholders, and suppliers, on a global level, resulting in significant issues in the long run.
Lastly, because of the rapid development of numerous international environmental standards and principles of social responsibility, successful performance of MNCs becomes largely dependent on their ability to abide by these criteria and indicators.
Therefore, after considering both approaches of standardization and localization of ethical principles and social responsibility policies, following the saying “When in Rome, doing as the Romans do” is potentially more harmful for MNCs than establishing a universal ethical code of conduct, and a shared set of social norms. It is important to note that this is only true when the company abides by standards good practice; and when implementation of ethical principles of a target developing country can harm the company’s reputation and image. Additionally, universal approach to establishment of ethical practices reinforces organizational culture of MNCs, and enables development of a competitive advantage on this basis.
Question 2
Prior to intense development of globalization, one of the most valued traits of global managers was their ability to maintain stability. However, nowadays the situation is radically different, because globalization forces have made a great impact on key roles and functions of global managers.
Firstly, managers of MNCs must now consider a much larger scope of operations in decision-making process. Having subsidiaries, production facilities, suppliers and distributors in different countries and on different continents all around the world, global organizations are now exposed to a substantially larger amount of external forces. Earlier, large companies chiefly focused on their domestic markets, and ensuring effective and successful performance of the company on this market was the top priority of almost any global manager. Due to globalization, however, the modern global manager must consider a much bigger picture. Each decision must be thoroughly planned and analyzed, and to some extent adjusted for each key country of operation, to ensure effective strategy execution on a global level.
Secondly, today’s environment is vastly more dynamic and fast-paced. Global strategies are being revised, corrected and adjusted much more often. Forecasts and estimations are rarely made for a period longer than 5-7 years. Therefore, a successful global manager must be able to adapt and react to rapidly changing external forces. Technology, for example, is developing with an incredible speed. Global supply-demand relationship is also changing much more frequently across different industries and markets. Political and social developments are no less intense and swift. Hence, global managers must now take into account a wider spectrum of technological, economic, social and political forces when managing global organizations.
Thirdly, with the increasing globalization of markets, competition has become much more fierce and intense. MNCs from all around the world are now competing with each other and with smaller companies in almost every country on the planet. Considering the rapidly changing business environment, opportunities of redistribution of market shares between competitors are created much more frequently. In order to maintain a strong competitive position in each market of operation, it is crucial for global managers to keep track of the latest market trends and tendencies, and to be able to make the company’s products and services appeal to customers of different geographies, cultures, religions, and nationalities.
Also, internal environment of global organizations has become much more diverse. There is no MNC where all employees belong to one ethnicity. Many services are outsourced to other countries, where the same functions can be executed more efficiently and effectively. Global managers must now be able to manage organizations with a very diverse workforce, which implies new approaches to creating and enhancing motivation, building healthy corporate culture, establishing and communicating organizational values and beliefs, and setting goals.
Globalization forces have greatly affected global managers. The environment has become a lot more dynamic, requiring global managers to be flexible and proactive. Their roles have also undergone considerable changes, and are now mainly focused around synchronizing all elements of company’s global strategy across geographies, adjusting and adapting to changes in external and internal environment, and monitoring the latest market developments to maintain and reinforce the company’s competitive position on a global arena.
