MODULE I: Business and Society
Sunday, 2 June 2013
10:02 p.m.
CORPORATE SOCIAL RESPONSIBILITY (Week 2)
Categories and descriptions from Bovée and Thill (2013)
MINIMALIST
CYNICAL
DEFENSIVE
PROACTIVE
Companies do not have 
social responsibilities beyond earning money and obeying 
the law.
Eg. Mercury Energy
Companies use CSR as a
marketing ploy to distract
attention from their self-
centred behaviour.
Companies engage in CSR
only after being shamed or
forced into it.
Eg. Sanlu Milk Scandal
Companies have a 
responsibility to help society
beyond paying taxes and
obeying the law.
RESPONSE: PHILANTHROPY
Give resources to unrelated causes to the company's lines of business.
Eg. Westpac Rescue Helicopter.
RESPONSE: STRATEGIC CSR
Invest resources in areas aligned with the company's line of business.
Eg. Fonterra's Milk in Schools.
PYRAMID OF SOCIAL RESPONSIBILITY
from A. B. Carroll (1991) 
An ETHICAL DILEMMA is a conflict where something may be legal but unethical - the law and ethics do not necessarily agree.
LAW
?
ETHICS
Corporate social responsibility achieves commercial success in ways that honour
ethical values and respect people, communities and the natural environment.
Sometimes the company objectives outline a company's stance in regards to:
the environment
shareholders/investors
their customers
their employees
their local community.
A stakeholder a person or organisation that holds an interest in a company. They can affect and/or are affected by the business' decisions. Stakeholders include employees, customers and shareholders.
MORAL TYPES AND ORIENTATION TOWARD STAKEHOLDER GROUPS
from A. B. Carroll (1991) 
ii. THE BUSINESS CONTEXT: GLOBAL, NATIONAL AND INDUSTRY LEVELS (Week 4)
POSITIVE AND NEGATIVE EFFECTS OF BUSINESS
from Bovée and Thill (2013)
THE MULTIPLE ENVIRONMENTS OF BUSINESS
from Bovée and Thill (2013)
These environments overlap, and can affect a business by creating opportunities or constraints.
GLOBALISATION AND THE GLOBAL MARKETPLACE
Economic Globalisation
There are many reasons as to why businesses consider globalisation -- see pg. 49 of Bovée and Thill (2013) for more detail.
From webcast by D. Kolb (2013):
Cost efficiency
 eg. Fisher and Paykel Appliances: cheaper manufacture costs in Thailand vs Dunedin.
Following your customers
eg. Beca Engineering: its services are provided to international firms, foreign projects or  governments.
Geographic market growth
eg. adding Melbourne flight route: the city's population is nearly equivalent to the whole of New Zealand.
Finding new customers
eg. Pumpkin Patch: gone to the US and UK to expand to a bigger customer market because New Zealand is small.
Building a global brand
eg. Kim Crawford wines: never produced its own wines, but created the brand. 
Exploring/exploiting new technologies 
eg. Xero: develops accounting software that is IT-based and services based online.
Global commodity markets
eg. Fonterra: one of the largest dairy exporters but global market determines price of dairy.
Exchange rates
affect financial results by increasing or decreasing price of imports or exports (imports are cheaper with a strong dollar, and vice versa). 
affect international investment (higher investment into country with a weak dollar).
affect inflation (reduced inflation with strong dollar -- a weaker dollar is worth less).
Conflicts in International Trade
Free trade is international trade without restriction or interference. Supporters claim the net effects of free trade are positive. Opposition claim free trade exploits workers and threatens the middle class.
Government intervention occurs when a government feels free trade is not in the best interests of national industries, the workforce, consumers or national security. They can implement measures to protect specific groups or industries, but protectionism is often harmful in the long term, resulting in a weak and inefficient industry from lack of real competition. 
Policies include:
Tariffs: taxes, surcharges, duties, levies. Used to restrict trade; generate revenue; or punish countries who have violated international trade laws.
Export subsidies: helping domestic producers to export goods by receiving enough funds to lower prices enough to compete effectively internationally.
Restrictive import standards: helping domestic producers by making it harder or more expensive for foreign countries to import, eg. special licences for a type of business.
Import quotas: limit of imported goods allowed.
Embargos or sanctions: bans of import or export of specific goods or complete severance of trade between countries. Sanctions are politically-motivated, eg. arms trade bans, visa denials, reduction in foreign assistance.
Anti-dumping measures: government acts to prove a fair price of a good so companies do not sell large quantities at prices lower than production cost or home country price.
International Trade Organisations
Organisations facilitating international trade, such as establishing what is fair and otherwise, include:
The World Trade Organisation (WTO): forum for negotiating, implementing and monitoring international trade procedures. Mediates disputes amongst members.
The International Monetary Fund (IMF) : monitors global developments, provides technical advice and training, provides short-term loans, works to alleviate poverty in developing nations.
The World Bank: agency of the United Nations, owned by member states. Indirectly contributes to trade through work improving economic conditions in the developing world.
Trading blocs are regional organisations promoting trade between its member nations. Examples include:
North American Free Trade Agreement (NAFTA): members are Canada, USA, Mexico; eliminated tariffs and quotas.
European Union: constitutes world's largest economy; one of the largest trading blocs with 27 members. Introduced the Euro.
Asia-Pacific Economic Co-operation: works to liberalise trade in Pacific Rim; represents 40% of the world's population and 50%+ of world GDP; 21 members.
Union of South American Nations
Association of Southeast Asian Nations (ASEAN)
Greater Arab Free Trade Area (GAFTA)
Forms of Business Activity
Companies deciding to globalise will need to adopt an appropriate organisational form, with different levels of ownership, financial commitment and risk.
Importing and Exporting
- the purchasing and selling of goods or services without a legal business presence in countries other than home country. Little risk.
International Licensing
- agreement and entitlement for a company to use another company's intellectual property (eg. copyrights, brand names, patents) locally for a fee or royalty.
eg. pharmaceutical companies.
International Franchising
- selling rights to use a business system, including brand name and internal operational processes.
eg. McDonalds, Burger King, Domino's.
International Strategic Alliances and Joint Ventures
- strategic alliance: form a long-term partnership with  locally established company (or more than one company), to develop, produce or sell products.
eg. Windows OS on Nokia phones.
- joint venture: two or more firms form a new legal entity, recognised separately from its individual companies.
eg. Sony-Ericsson, a joint venture between Sony (Japanese) and Ericsson (Swedish).
Foreign Direct Investment
- entering a foreign market through whole or part ownership of an existing company in locality. When a physical business entity is established in a locality, the company becomes a multi-national corporation. Gives greater control but higher economic and political risk involved -- FDI usually occurs in industralised countries that usually offer protection for foreign investors.
eg. Amazon acquired Joyo in China, an already-established e-commerce company in China.
Organisational Strategies for International Expansion
Companies wanting to establish a presence in another country can adopt one of the following strategies. It needs to take into consideration company objectives (long-term), nature of their product, market characteristics and managerial ability to oversee geographically-diverse operations.
Multi-domestic 
- decentralised approach: company creates highly independent operating units within each new country, giving managers 
freedom to operate as if independent -- might not always be a good idea, eg. Carrefour in China. 
- does not deliver economies of scale.
Global
- highly centralised: headquarters in home country exercising managerial control.
- notion of economic globalisation: the world is a single, integrated market.
Trans-national
- hybrid between multi-domestic and global: benefits from scale, but responds to local conditions. ("Think globally, act locally.")
- major strategic decisions are centralised; localised business units exercise freedom to make appropriate decisions for respective local markets.
PESTE ANALYSIS
This is used to determine influences in a business environment.
Political - changes can make jobs or a workforce disappear (eg. brain drain, talent wars).
Economic - eg. economies of scale, consumer demand, low cost labour, labour shortage.
Social - social trends and influences eg. peer pressured trends.
Technical - disruptive technologies can have huge impact such as creating new markets (eg. tablets); incremental changes every year .
Environmental - impact on the environment, which matters in business eg. Air New Zealand's fuel usage.
Applied example: Icebreaker.
Political - New Zealand offers little trade protection as a significant free market.
Economic - customer affordability
Social - wool was seen as unfashionable.
Technical - treatment of merino wool so that it is comfortable; technical excellence required for 'premium technical product'.
Environment - 'clean green New Zealand' image needs to be maintained in all aspects of the supply chain (factories in China).