As part of our discussion regarding \"International Market Entry\" there is rela

Question

As part of our discussion regarding "International Market Entry" there is relatively brief mention of the Transnational Firm, a term first introduced by professors Bartlett and Ghoshal in their book, Managing across Borders: The Transnational Solution. Question 3 has two parts. Q3. Part 1. What do you think of the pressures brought on transnational firms for issues like pollution? Is it ethical for political groups to target only those firms or is it done because targeting these firms is politically expedient? Are the concepts of political expedience and ethical business practice mutually exclusive? Part 2. Over 75 percent of FDI from transnational corporations goes to Asia (particularly China) but only approximately 1 percent of FDI goes to Africa. Is it appropriate to force transnational corporations to spread their investment more evenly to areas such as Africa?

Explanation / Answer

Part 1

The pressure on transnational firms for issues like pollution is justified. If the pollution is not controlled now, the next generation would suffer. Even local firms should be strictly asked to conduct a thorough analysis of the impact of their existence on the environment. There should not be any distinction between transnational firms and local firms on the issue of pollution.

It is unethical to target only transnational firms on any issue. The rules and regulations should be applicable to all the firms irrespective of the type of firm. If the transnational firm is working within the WTO norms and other national level regulations, they should be allow to function.

It looks like the concepts of ethical business practice and political expedience are mutually exclusive. In democracies, garnering votes is the prime objective. Even if the business is following ethical business practices but it affects the voting constituency, governments target those businesses. Ideally, these two concepts should not be mutually exclusive.

Part 2

It is not appropriate to force transnational corporations to spread their investments more evenly across Africa. Any business exists to be profitable and to give returns to shareholders. If the business thinks that the returns on their investments in some regions would be low, it has every right not to make that investment. On the other hand, if that investment has potentially high returns, the business would invest anyways. There won't be any need for force.

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