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RUNNING HEAD: GLOBALIZATION AND STAKEHOLDERS

Globalization and Stakeholder Utilization

Justin Logan

Siena Heights University

8/6/2018
GLOBALIZATION AND STAKEHOLDERS

Introduction

The world of business is forever changing. With new technologies and the ever-

increasing speed of transferring information means that data, money, and other goods can be sent

to someone across the globe faster than ever before, but also slower than the capabilities in the

future (Weiss, 2014). This also means that companies and organizations need to adapt, change,

and grow with these new abilities to maintain relevant and ethical. Businesses are also spreading

out around the world with international dealings and taking advantage of this globalization of

economies. This makes managing the in the international stakeholders and maintaining a

standard of ethical practices very difficult for companies to maintain and execute.

International Business

Globalization is the concept of the world becoming more interdependent and

interconnected than ever before. Weiss (2014) explains that because there are currently

approximately 7 billion people alive, and that number is only growing, and with such an amount

of information and options readily available, individual markets are quickly becoming one large

market. International trade is become easier to achieve and this is causing part of the merging of

markets from different countries. Not only is globalization about these merging markets, but also

about the work force and employment issues. Job availability is much better when considering

that the employee can search for a job in not only their home country, but the whole world.

Trade Agreements

There are a few different groups that have trade agreements in place such as the European

Union, North American Free Trade Agreement, World Trade Organization, etc. Many people

have issues with these kinds of agreements which is why we see the TPP becoming dissolved in

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recent years (Meyer, 2016). President Trump pulled out of the Trans-Pacific Partnership because

of the potential loss of jobs and money to foreign markets. What the TTP essentially was, was a

group of twelve countries coming together to cut tariffs in order to promote easier and cheaper

trade between the member countries. The problem is with this specific partnership, was that even

though this market group is responsible for about 40% of the world market, larger companies

would have an easier time moving their factories to Chili, Singapore, and/or Mexico costing

Americans jobs and hurting the U.S.’s immediate economy.

Stakeholders

Companies that have factories or facilities outside the country in which it is based is

known as an MNE, or a multinational enterprise (Weiss, 2014). There are many reasons that

companies and organizations expand into other countries, most of it being for larger profits. The

phrase ‘sweat-shop’ is thrown around quite a bit because before stricter regulations were

implemented, many companies planted their factories in less fortunate regions of the world in

order to make their products for a fraction of what it would cost to produce in America due to

unions and minimum wage standards. Then the companies would sell it for top dollar in the

United States for the widest profit margin possible. Modern MNEs tend to help economies all

through the process. From stimulating the economy by putting more pocket in the factory

workers’ hands, to selling the product creating a cash-flow.

So just who are the stakeholders for MNEs? The same that there are for national

organizations, just a larger group. With facilities in multiple nations and stores along with them,

there are consumers from different cultures with different wants and needs that must be satisfied.

The employees in these countries need to be paid a fair wage when adjusted for exchange rates

and fair wage in that country. Also, internal stakeholders become much more diverse and the

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group becomes much larger when considering regional directors and public relations for new

regions. Different cultures require different managing tactics and different marketing campaigns,

which create more consultant positions and different regional boards. It becomes a more multi-

tier system with many more groups governing other groups.

One interesting addition to the typical stakeholder group is the addition of countries.

Nations involved with these MNEs also have a stake in how a company does because more often

than not, these companies help stimulate economic growth. Anderson (2017) makes the point of

treaties between countries that only allow certain companies and organizations to open new

factories or shops in these places. Likewise, the nation in which the company is based in wants to

ensure that the manufacturing plants remain to continue the growth at ‘home’ instead of cutting

jobs in favor of cheaper labor as mentioned previously in this paper.

Stakeholder Relations

As explained previously, it is very easy for companies to find themselves in an ethical

dilemma. With all these international laws that change with the borders, as well as individual

executives making poor decisions based on personal want and greed instead of the benefit of the

company or the consumer, it is important for an organization to have a set of checks and balances

to remain as ethical as possible. One way to do this is to have a very positive and involved

relationship with the stakeholders.

Voegtlin, Patzer, and Scherer (2011) suggest a few ways to do this. One is to maintain a

level of legitimacy, meaning to establish and secure a set of morals for the company to follow

that transcends national borders. In other words, companies need to have a strong set of mission

and vision statements and believe in it thoroughly. Another way to look at is breaking down

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legitimacy into three smaller sections; pragmatic, moral, and cognitive legitimacy. Pragmatic is

when a company can satisfy their main stakeholders with their beliefs and standards. Moral

legitimacy is what it sounds like, what is the right thing to do for everyone involved. Lastly,

Voegtlin et al. (2012) says this about cognitive legitimacy, “Cognitive legitimacy rests on the

taken-for-granted assumptions of an organization’s role and behavior in a society.” The most

effective of these, according to the study, is moral legitimacy. Stakeholders must be involved in

the decision-making process every time in order to maintain a set of moral guidelines.

Trust

As a leader, it goes without saying that the trust of the employees is not only necessary,

but imperative, but the employees’ trust is not the only trust one needs. A leader of an

organization needs to also have the trust of their superior, inferior, and consumers. The superiors

need to have faith that the leaders they chose can adequately manage their team towards a

common goal, the team needs to trust that their leader can take them to the end goal, and the

consumers need to trust that the company has reputable people in charge.

Dirks and Ferrin (2002), state that there are two different types of trust, one being

relation-based, and the other being character based. Relation-based perspective is more directed

at the ability of two entities, whether individuals or companies, to interact with each other

towards a combined goal or mutual benefit. When these interactions occur positively, more

opportunities like these are bound to occur, thus creating a level of trust. With the character-

based perspective however, a person’s trust factor is decided upon their perceived qualities such

as integrity or fairness. The issues with this sort of trust, is that these factors can be manipulated

to complete an objective, or the person can be masking his or her real personality. Once again,

the way to monitor this is to have active involvement by both external and internal stakeholders.

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Conclusion

Multinational entities need to be able to create, implement and maintain some set moral

and ethical standards more-so than single nation companies. This is because there are many more

people involved throughout the hierarchy of the MNEs than others. Anderson (2017) goes as far

as to say that because of the amount of people, organizations, and governments watching and

scrutinizing these MNEs, the flaws in their ethics are more likely to be exposed.

Companies can ensure a high ethical standard in a few different ways. Mainly this

involves including stakeholders as much as much as possible in decision-making. Another is to

do as much in-service training as possible (Anderson, 2017). External consultants frequently

examining different branches in different countries can also ensure moral and ethical standards

because of their objective perspective since they have no stake.

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References

Andersen, T. J. (2017). Corporate responsible behavior in multinational enterprise. International

Journal of Organizational Analysis, 25(3), 485-505. doi:10.1108/ijoa-12-2016-1098

Dirks, K. T., & Ferrin, D. L. (2002). Trust in leadership: Metaanalytic findings and implications

for research and practice. Journal of Applied Psychology, 87(4), 611–628.

Meyer, T. (2016). Saving the Political Consensus in Favor of Free Trade. SSRN Electronic

Journal, 70(3), 985th ser. doi:10.2139/ssrn.2853689

Voegtlin, C., Patzer, M., & Scherer, A. G. (2012). Responsible Leadership in Global Business: A

New Approach to Leadership and Its Multi-Level Outcomes. Journal of Business Ethics,

105(1), 1-16. doi:10.1007/s10551-011-0952-4

Weiss, J. W. (2014). Business Ethics A Stakeholder and Issues Management Approach (6th ed.).

San Franisco, CA: Berrett-Koehler.

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