Global Politics Business
LECTURE 2: Phenomenon of globalization?
You have been seconded as chief economic advisor to the office of the newly electedPresident of a newly created small state in sub-Saharan Africa. The state has beencreated out of an agreement ending a brief but violent civil war. The economicinfrastructure is in ruins, but the state has two key assets: the legacy of a wellestablished school system means that adult literacy is almost universal; and large oilreserves have been discovered off the coast. The President’s question to you on yourfirst day in the office is: should he seek to develop the economy in partnership withthe many foreign multinationals who wish to enter the national economy, or should hepursue a policy of domestically controlled economic development with tariffprotection and severe restrictions on foreign ownership of enterprises and assets?
LECTURE 3: Democratic citizenship and global business regulation:is there a problem?
You are a large multinational oil exploration and production company. Youhave along established presence in a Latin American country with a history of dictatorshipby governments closely tied to traditional economic elites and the leading parts of themilitary. You have for a generation supported these governments, and figures fromthe economic and military elites have usually served on your Board. But a disastrousattempted invasion of a neighbouringstate has completely discredited the old regime,and obliged it to call free elections. Four weeks before the election it looks certainthat a democratic opposition party will win; the party’s programme involves takinginto public ownership the ten largest business corporations, including yours. Youmust either a) ensure that election does not take place; or b) ensure that thedemocratic opposition loses; or c) try to ally with the democratic opposition and
persuade it to abandon its public ownership proposals.
Advise the CEO on which is the best strategy.
You have been seconded as chief advisor on financial regulation policy to the FinanceMinistry of a West European state (not the UK) because you have extensiveexperience of working in financial markets. The Finance Minister, observing theimpact of London’s success as a financial centre, wants to reform domestic financialregulation so as to create a global off-shore financial centre’ in other words tocreate a regulatory space where taxes, regulations and laws will be kept to theabsolute minimum.
Advise the Minister on whether he should pursue this policy.
Your firm is a large manufacturer of advanced weapons systems, including the latestgeneration of fighter aircraft. You trade in the global market, but in this lattermarket, there are relatively few business opportunities: the only realistic purchasers ofthe fighter weapons systems are governments. Your firm is competing for a largecontract, worth in excess of £15 billion over the life of the contract, from a state in theMiIDle East. You know that you are now on a shortlist of two. Attracting thecontract will not only guarantee the health of the firms for several years; it will alsosafeguard several thousand jobs in your home, host, country. But you know also thatsecuring the contract depends not just on price and quality; it also depends onwillingness to provide bribes, disguised as commissions’, to leading figures in thepurchasing government. Bribery is illegal in your home country, and yourgovernment has a code which also forbids bribery of foreign officials. You know thatyour competitor for the contract is prepared to bribe, and that its government will turna blind eye to this.Advise your CEO what to do.
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You are multinational maker of sport footwear, with a large market in branded sportsshoes in Western Europe and North America. You source most of your shoes fromsmall sub-contractors in parts of Asia and sub-Saharan Africa.Costs are low, andmarkups on branded footwear are very high; but you are in intense competition withtwo similar firms in the same market. Your firm has been attacked by a church basedNGO as an employer of sweated’ labour. The church associated with the NGO haslarge congregations, especially in North America, and the NGO is threatening toadvise its affluent congregations to boycott your products if you not renegotiate yoursourcing contracts.
Advise your CEO on the appropriate strategy.
You are a large multinational automobile manufacturer. You are planning a
significant new investment: over £5billion to be invested in a new plant to produce thecar which will be the flagship’ model of your company over the next 5-10 yearperiod.Your firm has narrowed the choice of location down to two. The first is a democraticand capitalist nation in Western Europe. It is politically very stable, has a long andsuccessful tradition in car manufacture, and has a highly educated, skilled, and highlyunionised workforce. It also has direct labour costs, and aID on welfare costs, thatmake it one of the most expensive places on earth to manufacture and assembleautombobiles. The alternative location is a developing’ economy. It has a history ofpolitical instability, but is presently ruled by a well established military regime. There
is an ample supply of cheap labour, and while higher education is rare, the populationhas a high (over 80%) literacy rate. Labour costs are very low, unions are controlledby the state, and the only welfare schemes are those provided by firms.
Advise the CEO on which location to choose.
You are a multinationallyorganised supermarket chain operating principally acrossWestern Europe. Your markets in Western Europe are both mature and intenselycompetitive. You have identified the Indian market as a highly promising area ofexpansion: the combination of an emergent consumer conscious miIDle class,together with the absence of home firms with expertise in supermarket retailing,combine to make Indian expansion promising. But you have two big problems: smallshopkeepers in India are politically powerful and are mobilised against theliberalisation of regulation that presently prohibit the entry of foreign supermarketchains; and once inside India you will need to persuade policymakers to liberalisenumerous rules ranging from limitations of store location to limitations on inghours, if you are to maximise your comparative advantage.
Advise the CEO on how to tackle these problems.
You are a multinational mining corporation (principally bauxite) which has recentlybeen involved in a series of scandals involving employment of slave labour, practicesdamaging to the health of workers, and large scale bribery. The previous CEO andBoard were forced to resign. The new board and CEO have committed to a corporatecode of ethical responsibility, but so far the commitment amounts to no more thanthis.
Advise the CEO on what needs to be done next.