Lee has a BA in Political Science; and my MA is in Political Science with a concentration in International Relations.
Globalization and Business
Globalization is a recent phenomenon where business is no longer restricted to the borders of one nation, but is now open to the entire world. As the world financial markets and businesses become more integrated, there is more of a need for uniformity in the international system. With growing business integration, there are many issues of employment law that arise from continued globalization.
There are many immigration challenges that can affect a domestic and international organization. Domestic organizations have to consider whether or not they should hire a domestic or an immigrant work force. Typically a domestic company will hire immigrants because they are willing to work for far less than someone that is not an immigrant. Companies located in countries that are experiencing a workforce depletion may find it hard to keep workers and not lose them to a company in another nation.
An international organization may experience the same issues. An international organization may not want to set up offices or factories in certain countries because they are having an immigration issue. The issues may create a volatile political situation, and the company may be criticized for hiring these immigrants. This may make the country politically unstable. For example, in the United States there is at times an anti-immigration sentiment, and therefore it can be harder for companies to hire immigrants that they would normally hire. The same can be true for domestic or international organizations.
International Trade Relations
International trade relations can have a profound effect on domestic and international organizations. Free trade agreements are one thing that have the largest effect on any nation and their organizations. Free trade agreements are made between nations to allow goods to be sold and bought across each nation's borders without imposing a tax on the goods.
Free trade agreements can hurt companies in developed countries specifically, as they allow for cheaper goods manufactured in developing countries, where wages are lower, to be sold in the country at a lower cost than domestic products. A prime example of a free trade agreement is the 'North American Free Trade Agreement' (or NAFTA), which was recently revised due to concerns over cheaper products from Mexico hurting U.S. manufacturing businesses. As a result, it will be replaced with the 'United States-Mexico-Canada Agreement' (or 'USMCA') in July 2020.
The same can happen for an international organization. An international organization may have manufacturing overseas and may not be able to ship their goods to other nations for free due to changing politics. This is most common in the third world countries where politics change all the time, and companies are suddenly cut off from their overseas operations. This happened to the American oil companies when Venezuela forcibly nationalized the oil companies doing business there. It's a risk for any international organization to do business in a foreign nation that isn't stable.
Employee Compensation & Fair Labor
It can be argued that employee compensation is what drives productivity; if you have happy, well-paid employees, then your productivity will be higher. A domestic company in any nation can have an issue of wages being too low, which makes the available workforce leave the nation in search of higher wages. However, a domestic company in a nation that has too high of a wage can also suffer due to not being able to afford an adequate number of employees for a profitable production.
International organizations have a similar issue. Most of the time they'll send the base of their manufacturing overseas because labor is cheap and there are fewer regulations. However, if that foreign nation in which they're operating suddenly improves wages and working conditions, then the company may leave to find cheaper labor elsewhere. This can slow production and ultimately affect the bottom line. This happens most often when a company will send their manufacturing base to a third world country.
Fair labor is different in each nation. There has been growing pressure that companies only do business with nations that have fair labor practices. Fair labor affects companies in different ways. For a domestic organization, fair labor puts limits on what the company may do. For example, in the United States, the standard workweek is forty hours long. Therefore production is either limited to those forty hours, or more employees are hired to keep production going longer.
For international organizations, fair labor is different because they have operations in various countries. The best example here is labor in China. Labor regulations are very loose in China, and therefore many international organizations put their manufacturing bases in China. While this provides cheap labor that can be worked for long hours, it does come with consequences. Many American organizations have recently been criticized for having manufacturing in China because of labor practices.
Outsourcing is a controversial business practice of a company sending part or all of its manufacturing operations overseas. For a domestic organization, outsourcing can be a bad or good phenomenon. A domestic organization could benefit from cheaper labor and therefore higher profits. A disadvantage is that other companies may do the same thing and therefore create more competition.
For an international organization, outsourcing is a typical practice since they operate in different nations. The corporate offices may be in one country, while manufacturing and production can be scattered in various other countries. This can be both bad and good for an international organization. It's good for them because it creates cheap labor and cheap products, which gives the company a higher profit. It can be bad for them as having operations spread out amongst so many different countries, any issues in one of them can cause a major disruption for the company.
In this lesson, we have gone over several global issues that affect domestic and international organizations. We first learned that globalization is the phenomenon of business and financial markets operating across borders and in various different nations. We've also gone over how immigration challenges and the politics of a nation may affect immigration and how organizations get employees. Trade relations affect the pricing of goods and how goods move across borders between nations, such as the use of free trade agreements, which are made between nations to allow goods to be sold and bought across each nation's borders without imposing a tax on the goods.
Employee compensation and fair labor also affect how an organization gets employees and who they may hire. Furthermore, it can determine how employees get paid, how long they work, and their working conditions. Lastly, outsourcing shows us how organizations may send manufacturing overseas for cheaper labor and products.
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