Changing Dynamics Of Global Business: Impact On Ethics And Standards

Trends in Global Business

Dynamics of Global Business and Their Impact on Ethical Standards

Ethics refer to moral principles that govern the conduct of human beings while ethical leadership is the application of ethical standards in the way leaders conduct themselves and lead their teams (Hartman, DesJardins, and MacDonald 2011). In this 21^st century, ethical conduct of both individuals and businesses have formed a basis within which the society judges them. This has posed a challenge to global businesses since they have to conform to the ethical and cultural standards of the various countries in which they operate (Crane and Matten 2016). Unlike the past centuries, the 21^st century has been characterized with powerful technology that is being used to expose unethical business practices.

Global business from developed countries have portrayed various trends in the way they penetrate the emerging markets in the developing countries. These trends/ dynamics are ever changing as technology and business culture keeps on evolving and have highly impacted ethical standards, especially in the developing countries/ emerging markets (Crane and Matten 2016). The trends include:

Adoption of electronic commerce; in the twenty-first-century electronic commerce is the most embraced trend by many business which want to sell beyond their geographical boundaries. Also, majority of consumers prefer to use e-commerce due its convenience in terms of availability, time-saving, and cost saving. However according to Ferraro and Briody (2013), despite the good benefits of e-commerce it has created loopholes through which businesses violate ethical standards, they include: delivery of low-quality products since the consumers do not have an opportunity to assess the product before buying, fraudulent e-commerce sites that retain customer’s credit card details and use them to hack the customer’s bank account, price discrimination, and delay in the delivery of products.

Franchising: this is a business expansion and goods distribution strategy that uses licensing relationship. The franchisor specifies the products that the franchisee will offer and provides the necessary support, brand, and operating system to the franchisee (Kearney 2012). Most of the franchisors are from developed countries while the franchisees are from developing countries, a good example is Coca-Cola. Franchising is advantageous to both parties and their respective countries in the sense that; it creates employment to the franchisee and reduces expansion cost to the franchisor. Its main ethical impacts according to Fitzsimmons, Miska, and Stahl (2011), are; cultural differences which may affect operational hours of the business, differences in moral standards that may affect viability of some products especially in fashion and foodstuff franchises.

Impact of Trends on Ethics and Standards

Agency business and relationships: this refers to where a business contracts another party to act on its behalf. This is common among multinationals in the insurance, banking, and automobile sectors. In such a relationship, the agent is expected to maintain the ethical standards of the principal which may include service delivery (Peng 2016). This may result to ethical conflicts especially where the principal’s ethical standards are based on legislation in the principal’s country, such legislation may be inconsistency with the laws and policies in the agent’s country, thus creating an ethical conflict (Blodgett, Dumas, and Zanzi 2011). For example, a global bank such as Barclays bank may encounter different interest rate ceilings and floors in the various countries that it operates in.   

In cases where a business conducts standard conflicts across border, the standards of the country in which the business wants to sell its products in or to expand its operations to shall prevail (Peng 2016). For example when KFC franchise is operating in Saint Lucia, it must follow the standards of Saint Lucia, otherwise, it will be deemed to be unethical or non-compliant with the laws and policies of the country.

For a business to operate successfully in emerging markets it requires to have well established ethical standards and policies. Leaders play a very pivotal role in the formulation, implementation, and maintenance of the ethical standards (Avey, Wernsing, and Palanski 2012). They, therefore, must be good role models so that other stakeholders in the organization can follow them in operating ethically. There are various strategies and procedures that business leaders can use to enhance ethical standards, fight corruption and promote corporate social responsibility in the organization they include;

Determining the most critical areas in organization ethics: According to Cooper (2012), this involves assessing the entire organization to determine the areas in which unethical conduct is mainly portrayed. The analysis should also capture the manner in which the various parties are engaging in the unethical conduct. Such areas may include; bribery, nepotism, pollution, product quality, service delivery, recruitment, and social responsibility among others.

Adopting globally acceptable standards; these are the standards which have been formulated by global standardization bodies such as the International Organization for Standardization (ISO). The global standards forms a framework through which many organizations operate therefore they will have little cross-cultural conflicts with the cultural standards of the country that the organization operates in (Peng 2016). Secondly, the global standards will give the organization a base to establish its own standards.

Process of Establishing Ethical Standards in Emerging Markets

Formulating organizational standards: from the analysis of the ethical areas in the organization, and the foundations provided by the global standards, the organizational leaders should formulate standards that will be followed by the different branches of the organization in the various countries (Piccolo et al. 2010). Such standards should be in conformity with the laws of the country in which the branch operates, industry regulations, and the cultural and moral values of the society (Kaynak and Herbig 2014). This would make the organization to be socially acceptable in that emerging market since it follows the society’s moral values. For example, a textile business would consider having different cloth standards and design for western and Middle East countries.   

Establishing strict disciplinary measures: Strict disciplinary measures will deter any of the parties from violating the set standards. The disciplinary measures should be in conformity with human rights guidelines, laws and policies (Kaynak and Herbig 2014). Such disciplinary measures may include; retrenchment, demotion, and suspension among others.

Communicating the standards to all stakeholders: for the set standards to be followed, the concerned parties must be informed so that they can know what is expected of them in the execution of their duties (Avey, Wernsing, and Palanski 2012). Communication must involve formal channels such as letters and memos. The management can also go a step further and conduct a workshop in which the stakeholders will be trained on the expected code of conduct.

Role and Importance of Ethics in Leadership

Respecting rights and dignity of other people; unlike traditional leadership styles, ethical leadership styles embraces the rights of subordinates and other colleagues, through treating them fairly and giving them the freedom and privileges that they deserve (Kaynak and Herbig 2014).  This creates a working environment in which everyone is valued as a crucial stakeholder to the organization.

Qualitative decision making; ethical leaders follow the set organization standards and policies in making decisions in the organization (Shapiro and Stefkovich 2016). Such decision are immune from any personal compromise, therefore, they are suitable for the organization. The ethical leaders also acknowledge that their decisions have an impact on other people and functions of the organization (Blodgett, Dumas, and Zanzi 2011). For example, an ethical leader will follow the right procedure in hiring staff or disciplining staff.

Advocates for universal benefit: ethical leaders are less self-centered and more group oriented (Kaynak and Herbig 2014). They, therefore, focus more on improving every member of the group through creating an enabling environment, encouraging idea sharing, and rendering the necessary support (Fitzsimmons, Miska, and Stahl 2011). This increase the morale and self-actualization of the group members since they are able to grow together as a team, thus increasing the productivity of each one of them and the entire group. Universal benefits extends even to other stakeholders such as consumers, suppliers, and investors.

Cultural differences in the world pose a great challenge in identifying rigid characteristics of an ethical leader. This is because different cultures have different acceptable codes of conduct, laws, values, policies, and moral beliefs, therefore, what may be viewed as right in one society might be completely wrong in another society (Ferraro and Briody 2013).

Analysis of Ethical Leadership Concepts

The various concepts of ethical leadership focus more on how leaders can use their power to lead subordinates in a way that upholds common good and govern the organization in a socially acceptable way (Kaynak and Herbig 2014). Ethical leadership concepts are based on some basic principles which include; justice, service to others, honesty, respecting others, community welfare, and integrity, among others (Hartman, DesJardins, and MacDonald 2011). The ethical concepts provide a framework which leaders should use to make decisions in the organization.

There are divergences on the various approaches or concepts of ethical leadership which are mainly caused by different cultural values and believes in different societies. Therefore there is no unanimous agreement among the concepts, on what should be defined as the final universal ethical standards for all leaders to follow (Blodgett, Dumas, and Zanzi 2011). Some ethical concepts emphasize on the need for leaders to follow cultural and social values of the particular society, while others embrace the need to follow the standards that are being followed by global business giants and developed nations.     

Cooper (2012), argues that the concepts of ethical leadership are still being developed with the main questions being; Are there any universal characteristic of an ethical leader? what should be done about the ethical inconsistencies in different societies? As the society becomes more concerned about the value that an organization brings to them (Godos-Díez, Fernández-Gago and Martínez-Campillo 2011), many businesses are ditching the traditional profit focused style of operation and adopting a socially inclusive style of operation which is based on social values, ethics, and moral principles. Organizations are adding more value to the society through corporate social responsibility, quality products, environment protection, and promoting social justice among others.  

References

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Blodgett, M.S., Dumas, C. and Zanzi, A., 2011. Emerging trends in global ethics: A comparative study of US and international family business values. Journal of Business Ethics, 99(1), pp.29-38.

Ciulla, J.B. ed., 2014. Ethics, the heart of leadership. ABC-CLIO.

Cooper, T.L., 2012. The responsible administrator: An approach to ethics for the administrative role. John Wiley & Sons.

Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press.

Ferraro, G.P. and Briody, E.K., 2013. The cultural dimension of global business. Upper Saddle River: Pearson.

Fitzsimmons, S.R., Miska, C. and Stahl, G.K., 2011. Multicultural employees: Global business’ untapped resource.

Godos-Díez, J.L., Fernández-Gago, R. and Martínez-Campillo, A., 2011. How important are CEOs to CSR practices? An analysis of the mediating effect of the perceived role of ethics and social responsibility. Journal of Business Ethics, 98(4), pp.531-548.

Hartman, L.P., DesJardins, J.R. and MacDonald, C., 2011. Business ethics: Decision making for personal integrity and social responsibility. McGraw-Hill/Irwin.

Kaynak, E. and Herbig, P., 2014. Handbook of cross-cultural marketing. Routledge.

Kearney, C., 2012. Emerging markets research: Trends, issues and future directions. Emerging Markets Review, 13(2), pp.159-183.

Peng, M.W., 2016. Global business. Cengage Learning.

Piccolo, R.F., Greenbaum, R., Hartog, D.N.D. and Folger, R., 2010. The relationship between ethical leadership and core job characteristics. Journal of Organizational Behavior, 31(2?3), pp.259-278.

Shapiro, J.P. and Stefkovich, J.A., 2016. Ethical leadership and decision making in education: Applying theoretical perspectives to complex dilemmas. Routledge.