Politics and Business within International Business

Politics and Business

Often there are decisions made by governments which effect international business sometimes in a very big way. Some countries put pressure on others to make political changes, which benefit the pressurising countries. There are sanctions which aim to stop businesses trading with these countries, by importing or exporting goods to and from them. Sanctions may only be put on some forms of trade or used to completely cut off trade with a country. These sanctions can be enforced through legal channels with an organisation such as the UN or EU for example.

Some examples include:

The End of the Apartheid System in South Africa

To end the apartheid system there were sanctions in South Africa, this is a link to further reading into the end of the apartheid system of South Africa:

http://www.fsmitha.com/h2/ch34-sa.htm

This is a link to a paper by an American university, which looks at the effect that the sanctions had on the apartheid:

http://www.econ.yale.edu/growth_pdf/cdp796.pdf

Proposed sanctions against Israel to stop its actions against Palestinians in Gaza

The sanctions which are being suggested against Israel are in an attempt to prevent them from being capable of terrorising Palestinians as their economy would feel the effect of the sanction as trading ceased with them and the world. This is a link to a news article which calls for sanctions to be put up against Israel:

http://www.imemc.org/article/57823

Sanctions against Cuba by the US

In cuba, when castro was in power the US put up sanctions against them to combat communism. Before the sanction two-thirds of Cuba's trade was with the US, so when the sanction came into place in 1962, there were serious problems with Cuba's economy, leading to them having to look to new markets. This is a link to a bbc news article:

http://news.bbc.co.uk/1/hi/world/americas/67554.stm

The way that this effects international business is through the collapse of some trade routes, which may have been cut off by sanctions. This could mean that businesses who did trade with certain countries may no longer be able to and therefore lose a lot of business. Also domestic businesses may be more protected by the government using protectionism methods. This is very common in a recession like at the moment where businesses are in a lot of financial trouble.

Governments also effect international business by encouraging bribes on domestic business deals

or through subsidies to encourage businesses to operate in certain areas. Bribes are most commonly found in the arms industry as governments are normally the main customers to this industry. This can be seen as normal in certain countries which have normally got a more corrupt government.

The above are pictures of politics and business effecting international business

Exploitation In International Business

Exploitation of Third World Economies and Labour Force

There are two types of exploitation of the Third World which are Labour Exploitation and Economy exploitation.

The Third World is regularly exploited by multinationals and developed countries, especially their labour force which is normally considerably cheaper in comparison to the workforce in developed countries. This is because in the MDC's there are many more rights and regulations for workers including a minimum wage which can be a lot higher than the wages of Third World workers. The developed world also does exploit the third worlds' economy by paying low prices for the goods and services that they sell which are normally primary goods such as raw materials. The exploited labour is normally where workers are made to work for long hours and at very low rates in poor working conditions such as factories and sweatshops. These workers normally are very poor and have low or no education, with a lacking health care service. The governments of these MDC's can exploit the third world through trade agreements which favour them and don't take into account the effects on the third world.

Some examples of these two kinds of exploitation are :

The African mining companies operations

The african mining companies which are mostly owned by western countries are known for their exploitation of third world workers who work in poor conditions for very little pay. This link shows the history of african mining:

http://www.bbc.co.uk/worldservice/specials/1624_story_of_africa/page25.shtml

Unfair wages for African Workers

Tesco have reported profits of over £3 billion last year and workers in africa are being paid under £98 per month, some people are saying that Tesco should share out the profits more and give the workers in africa a better wage. This article from the guardian explains this in more detail:

http://www.guardian.co.uk/business/2009/may/15/tesco-south-africa-workers-conditions

Illegal logging in Brazil and Indonesia

Illegal logging is an example of explotation of third world economies, as big businesses are taking advantage of the relaxed rules and using this to operate in these activities. Indonesia has become a victim of this especially with illegal logging being a massive problem, this is a site looking at the implication of this on the country:

http://www.abc.net.au/4corners/content/2002/timber_mafia/viewpoints/viewpoints_doherty.htm

These forms of exploitation are easier on the poor and weak and big internationals use this to cut down their costs and increase profit.

However if this exploitation was to be leaked through the press to the public about a specific company then this may deter their customers from using them for goods or services as it would be seen to be unethical. So this reduced business would have drastic effects on their profits and so by using Third world labour they are taking a risk that if it got out then they would be in a bad position with public image. Also if there were suppliers for this business then they may not supply them anymore so that their negative image does not go onto them and ruin their customer base.

The above are pictures of various pictures of exploitation and a map of the first, second and third world.

Pollution In International Business

Pollution

Pollution is the wastage created from the production and manufacturing of goods in various forms. There are many negative effects associated from the pollution which can have serious effects on the planet, with things like global warming - reducing the O zone layer. The manufactured goods process has pollution at all stages - extraction, production, consumption and disposal. From this process some pollution problems could be:

• Destruction of the landscape from quarrying
• Toxic waste which poisons the land and water supply
• Unrecyclable materials within modern electrical equipment which cannot be easily disposed of

Some Examples are:

Shell Burst Pipe In Nigeria

One example of this pollution is from the incident of shells oil extraction in Nigeria, where a pipe burst creating a mass oil spillage - polluting the surrounding land. This had poor consequences for the business as they didn't send a team to clean it up for some time, and it took a lot of work to make the land usable. This is a link to pictures of the effects of this burst pipe:

http://news.bbc.co.uk/1/shared/spl/hi/picture_gallery/04/africa_polluting_nigeria/html/7.stm

Air Pollution

Air pollution is caused by almost every business, but this can have dire consequences on the environement and people across the world. This has led to businesses having to look at their levels of emissions. This is a bbc news article looking at the effects on people of air pollution:

http://news.bbc.co.uk/nol/ukfs_news/hi/newsid_8020000/newsid_8028200/8028244.stm

Emissions Trading Scheme (ETS)

Also the European Comission, has pollution permits which are distributed through ETS (Emissions Trading Scheme) to countries who then distribute them to individual firms. These permits allow for one tonne of CO2 emissions each, and there is a maximum emission level for the whole of the EU which cannot be broken as fines are then issued. This total level means that businesses have to buy these permits in order to pollute. This effects international business as firms have to take into account their CO2 emissions and buy permits in order to pollute. This link shows the pollution hotspots across the world:

http://news.bbc.co.uk/1/hi/sci/tech/4083331.stm

The way that your company deals with pollution could change your image and brand. If you are seen to be more 'green' and recycle for example then customers are more likely to buy from you or use the services that you offer. If another business wishes to use you for something then they may look for a business who considers the environment so that they have a positive for their customers as well.

The above are pictures of various types of pollution and the effects that they have on the environment around them.

Child Labour Issues Within International Business

Child Labour

Child labour is when children who should be in full time education are put into labour (employment) instead. This is currently in places such as Africa, India, Mexico and Brazil. They work mainly in agriculture, or manufacturing sectors of business and are employed a lot by Multinational Corporations. Some of these companies which use child labour are:

• Nike
• Gap
• Adidas
• Walmart
• Primark
• Asda

Having your company name involved in this issue is seen to give your company a bad ethical image and could result in customers not buying your goods if they knew. It may lower costs of production, but could result in legal conflicts and loss of custom for being unethical. One example of a company who were found out to be producing their goods with child labour are Nike. They produce a lot of sports clothing and equipment which is used by millions across the globe. They were found to be operating sweatshops in Pakistan and Cambodia where footballs were being made by children as young as 10 years old. This gave them a very bad public image and may have effected their level of sales. As a result of this they have changed their labour force to over 16's only officially, but we don't know if they are still using some child labour.

Some Examples of Child Labour Include:

Nike and Child Labour

Nike, the sportswear and equipment manufacturer, was famously involved with employing young children to make their footballs. They were employed by the company to stich together the footballs by hand in countries such as Pakistan and Cambodia. They faced huge problems with unhappy customers when this information came to light, and it has taken them a long time to regian their brand identity, Here is a link of Nike admitting their mistakes:

http://www.commondreams.org/headlines01/1020-01.htm

Gap Using Child Labour

The clothing retailer, Gap was found to have been using child labour for the production of their clothes. This was particularly damaging to the company becuase they had made a name for themselves as an ethical comapany who look after their workforce. This had a large impact on the Gap brand which was not seen as ethical anymore. This is a link to a news article on this:

http://www.guardian.co.uk/business/2007/oct/28/ethicalbusiness.india

How big is the problem?

• The International Labour Organization estimates there are 218 million working children aged between five and 17 (2006)

• 126 million are estimated to work in the worst forms of child labour -- one in every 12 of the world's five to 17 year olds (2006)

• 74 million children under 15 are in hazardous work and should be "immediately withdrawn from this work" (2006)

• 8.4 million children are in slavery, trafficking, debt bondage and other forms of forced labour, forced recruitment for armed conflict, prostitution, pornography and other illicit activities (2002)

• Girls are particularly in demand for domestic work

• Around 70 per cent of child workers carry out unpaid work for their families

The above map shows where the most common areas for child labour to exist are.

These are pictures showing some examples of child labour. They show footballs being stitched, rubbish being collected by a young boy, and another boy putting a tyre onto a wheel.