Managing Political Risk, Ethics, and Staffing in International Business
Essay
Write a 3,500 word essay on how contemporary international firms practice the following international management functions: political risk management, ethical behaviour, and human resource management. See essay structure/content section below for specifics.
The central purpose of your essay is explaining and discussing the above international management functions. However, you must also identify:
• Any relationships or connections between the functions (ethics, political risk management and HR management)
• Any changes or new patterns of corporate behaviour that have emerged in each of these areas.
The essay should include relevant academic literature/research in support. This means your explanations and discussions have to be supported with citations and/or quotes. Although you will be able to identify relevant studies in the reference list in the lecture slides, you are strongly advised to identify and collect other studies through own research efforts on google scholar and/or through the e-journal portals within library gate (such as pro-quest, emerald, business source complete).
But you should further support your discussion with recent corporate examples (from the last three years). Use brief vignettes of corporate examples, and not to overboard the essay with examples. Please ensure your examples are relevant to the argument (s) you are making and are sourced/referenced.
Required Essay Structure and Content
• Introduction (between 150 and 200 words)
• Main section:
The main thrust of the essay should include a discussion on the following topics:
A. Explain and contrast the strategies to manage international political risk.
B. Explain and contrast the purpose and implications of two ethical theories for managing ethics within international business.
C. Explain and contrast the various approaches to staffing (including the ethnocentric, polycentric and geocentric staffing models, and the choice of women managers).
The space afforded to A, B and C should be fairly balanced but does not have to be exact.
• Conclusion (between 150 and 200 words).
Answers to potential questions?
What do you mean by explain and contrast?
Within the respective functional area (e.g, political risk management), explain the various approaches with adequate detail as opposed to a simple listing of the approaches. Then, contrast the approaches – identify some points of difference and/or commonality.
Can I offer some critique of the approaches within the respective areas (political risk, ethics and IHRM)?
Yes, you can. Pointing out some advantages and disadvantages is always useful for explaining and comparing.
How many corporate examples do I use?
No precise number but make sure each topic area (A, B and C) has at least two examples. I would aim to avoid having too many examples overall because this will only reduce the flow of discussion and quality of content. We should see more academic literature/citations than corporate examples.
What should I do when I cannot find a corporate example for a specific approach?
Don’t worry about it. It is not necessary to assign an example for each approach.
Are there any other rules about using corporate examples?
Yes. They must be in the last three years. Following good practice for any formal document, please also provide a source to the information on the example within the essay. The corporate examples can be from any sector, nationality, and size of company. But if you want to use examples from the same sector or nationality, then that’s fine.
What do mean by connections or relationships between the topics/themes?
This simply means where one theme impacts the other. For example, the company’s primary approach to ethical management in foreign operations should impact their foreign staffing and vice versa.
How do I present the material which teases out some connections between the topics?
It is best to state the connection within the relevant section and possibly cross-reference to the other related section. Do not have a stand-alone section for this material. Rather the connections between the topics (e.g., HRM and Ethics) should be integrated within the essay.
How many connections do I identify?
It is difficult nor unnecessary to state a precise number of connections. But suffice to say, the bulk of the essay should be based on explaining and discussing the approaches in parts A, B and C. Even so, aim to identify several connections between political risk management, ethic approaches and the IHRM issues of staffing.
However, rather than seeking to list many, concentrate more on making credible connections with relevant support from the literature (if possible). Quality over quantity!
How do I present the material on new developments or patterns of behaviour in the area?
Aim to integrate the new developments within sections A, B and C. For example, when explaining political risk management strategies, you may identify how a political risk strategy has been increasingly emphasized over others; maybe because of new developments in the political environment. Or you may identify combinations of behaviour, or the use of certain strategies in certain situations. It is one goal of the essay for you to check if any new developments exist and their nature.
Do I use the report format for this assignment?
No. It is an essay.
Do I write in the first or third person?
The format of writing does not matter. It is up to you.
Can I use tables or diagrams?
Yes. These are not included in the word count.
What’s also not included in the word count?
References.
Can I go below or above the word count?
Yes, by 10% below or above the 3,500-word cap.
Submission of Assignments
Please check blackboard for assignment deadline notification around the beginning of the module. Late submissions without good reason will be penalised as per university regulations. Make sure you keep a copy of all work submitted.
How will student feedback be obtained on this module and how will this be used?
Marks and feedback for assignments will be available via grade centre.
EXTENSIONS
These may be granted, but ONLY by the Student Support Officer and NOT by the Module Leaders or seminar tutors. Please contact the student support officer for your course or speak to SHIP
SUPPORT FOR YOUR WORK
Do not hesitate to contact your tutors and module leaders for advice and guidance regarding successfully completing the module.
REFERENCING
This must be carried out thoroughly, and all work must be fully referenced in the APA style. Detail on APA style referencing is available on Library website.
This is an academic programme of study and failure to reference and acknowledge sources could be deemed as academic dishonesty or plagiarism and penalised.
Managing Political Risk, Ethics, and Staffing in International Business
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Managing Political Risk, Ethics, and Staffing in International Business
Business management is fundamental to business success. Businesses must practice basic management functions, regardless of whether they operate domestically or internationally. However, international firms deal with unique challenges presented by the diversity of the markets they serve. These organizations have to deal with greater risks, difficulties, and challenges while engaging in international business, and therefore, they must perform management functions at an international scale. They must also address the cultural issues that arise in international business. According to Medvedev and Amann (2021), international management allows international companies to make practical decisions in cross-border business processes. International firms must engage in international management issues such as risk management, ethics, human resources, marketing, research and development, and procurement. This paper’s aim is to identify the strategies international organizations utilize to mitigate international political risks, the ethical theories used to manage international business ethics, and the staffing approaches for international firms. The paper will also establish the connection between the three management functions.
Managing International Political Risk
International firms must identify strategies to mitigate political risks in the host countries. One of the key strategies that international firms employ to manage political risk is to create trust-based networks in the host country. According to Ali et al. (2021), business in international markets depends on the host country’s relationships, and establishing trust-based networks is a suitable way of creating the relationships necessary for success. Trust-based networks allow international firms to connect with the local market, understand the country's political system, and gain allies to help them navigate the system and its related risks. The networks can be formal or informal. Formal networks include partnerships with local businesses and influencers. For instance, given the contentious US-China relationships in recent years, many US international firms have been forming partnerships with local Chinese businesses to navigate the political climate in China and mitigate potential risks. In 2020, Starbucks partnered with Meituan, a Chinese company, to help it navigate the murky Chinese business environment (Kharpal, 2022). Meituan has a good knowledge of the Chinese political system and can help Starbucks navigate this system while expanding its market in China. Also, Meituan is a local partner who can advocate for Starbucks in the Chinese political system because both companies will benefit if Starbucks' business in China thrives. Ali et al. (2021) add that hiring local employees helps international firms create informal, trust-based relationships with the host government and local businesses. Informal trust-based relationships are an asset in managing political risk because they provide international firms with support against potential political risk.
Second, international firms can manage political risks by closely monitoring global political issues. According to Czinkota et al. (2023), international firms can monitor the political environment in host countries by examining data and any analysis from experts. This includes information provided by the host country’s private sector, which is a source of reliable information about any political development. It also consists of any geopolitical data shared by international organizations such as Transparency International and the World Bank, regulatory data, historical data, and other data that can provide insights into a country's political environment. Alternatively, international firms can hire consultants to help monitor the host country's political climate. Monitoring ensures that the firm is aware of any existing or upcoming political issues that might pose a risk to the business (Czinkota et al., 2023). Monitoring the political environment is a proactive approach to managing political risks. It ensures that the firm identifies political risks before they occur instead of reacting to them when they occur. This approach differs from forming trust-based networks with the locals because it keeps the firm ahead of issues. However, in both, there is a reliance on the information provided by the locals about the political risk. Monitoring allows international firms to prepare for potential political risks and put in place measures to mitigate the risks when it occurs.
Third, international firms can develop a legal contract with the host country’s government. According to Morris and Oldroyd (2020), global firms can negotiate legal agreements with host governments, outlining the possible course of action to take in case of business loss due to political risks. For instance, the contract can outline how an international firm will be compensated if the host country decides to impose a limit on the firm’s ability to convert funds to foreign currency. The host country has to abide by the terms of the contract, failure to which can result in legal recourse. Establishing an avenue for recourse is important, especially because governments can breach agreements and push a firm out of the country. Morris and Oldroyd (2020) suggest specifying that any breach of contract will be adjudicated by the US government or any other government with a stable and well-developed legal system. This approach, like other strategies in this section, is proactive and can mitigate political risks to a certain degree. However, unlike the other strategies discussed in this section, it holds the host country accountable for any political disruptions that present political risks to the international firm. However, a change of government can present challenges to this approach. For instance, a new government that takes over after a revolution might refuse to honor the contract of the past government, and the only recourse for the international firm would be to sue the new government. However, such a process can be costly and time-consuming.
Fourth, international firms can pay for political risk insurance. Political risk insurance protects international firms against political risks such as breach of contract, political violence, the host government's expropriation of assets, and foreign currency inconvertibility, among others (Mayer, 2018). It protects the firm against financial losses arising from political risk. Morris and Oldroyd (2020) state that the political insurance policy covers any losses incurred by international firms in the event of a political risk in the host country as specified in the insurance cover. The higher the political risk, the higher the cost of the insurance plan. Political risk insurance has received increased attention over the years because it is considered the key tool for political risk mitigation. According to Mayer (2018), the demand for political risk insurance has increased by 20% in recent years as more investors want assurance that their investments are protected from different forms of political risk. The demand is even higher among international firms operating in fragile states. Many international firms from developed economies are at an advantage because the emphasis on political risk insurance is high. According to Czinkota et al. (2023), most industrialized countries provide political risk insurance plans for firms doing business in foreign countries. For instance, the US International Development Finance Corporation (DFC) gives political risk insurance to international firms. It recently provided political risk insurance to Gavi, the Vaccine Alliance, to cover any political risks for the company's COVAX Facility across Eastern Europe, Latin and Central America, and the Middle East (Gavi, 2021). International firms can also obtain political risk insurance from private insurers. The idea is to obtain an insurance plan covering the unique political risks a host country presents. Political risk insurance is a last resort approach that provides international firms compensation after the fact (Morris & Oldroyd, 2020). It takes a proactive view, just like the host-country political environment monitoring approach. However, unlike the other strategies discussed in this section, it does not cover all political events that present political risks (Morris & Oldroyd, 2020). In addition, it strictly takes a financial compensation view on political risks, and it can be costly for firms to obtain insurance coverage (Ali et al., 2021). To this end, international firms should combine these strategies since a single strategy cannot effectively mitigate political risk.
Managing Ethics within International Business
International business is characterized by many ethical issues, such as corruption, human rights, and employment practices in host countries. International firms rely on ethical theories to manage ethics and make ethical decisions.
Virtue Theory/Ethics
One of the ethical theories for managing ethics within the international business is virtue theory/ethics. According to Shackelford et al. (2021), virtue theory focuses on the moral character and integrity of the decision-maker. It is neither about the actions nor the consequences of the action but about the virtues held by an individual. The virtue theory is based on the premise that organizations and their stakeholders do not rationally pick the most ethical choice from a list of choices. Rather, they automatically know the right action because their virtues guide them. According to Tsoukas (2018), virtue ethics posit that organizations do not deliberate the specific action to take; instead, they respond instinctively to ethical situations. This theory implies that organizations are programmed to take the right action because their corporate values give them the disposition to respond to ethical issues in a certain way. Further, according to the virtue theory, an organization’s or decision-makers moral character is developed through practice (Tsoukas, 2018). This means that if an organization wants to make moral decisions about its hiring process, it must practice ethical hiring until it becomes consistent with that behavior. Organizations that are known for fairly treating their employees have developed the tendency to behave fairly towards employees through practice; by behaving fairly to employees across a series of situations that call for fairness.
From an international business perspective, the goal of the virtue theory is to ensure that both the organizations and their stakeholders pursue virtuous principles and that their actions align with the values that define the organization and its stakeholders. In this case, a decision is considered ethical if it is based on the virtuous character of the decision-maker. Shackelford et al. (2021) indicate that virtue ethics push an organization to ask what its corporate purpose and values are and whether its corporate actions align with its corporate purpose and values. For instance, a company whose corporate values include diversity and inclusivity should ensure its hiring practices align with these values. Google is an example of a company that has applied virtue ethics to manage ethics within the organization. Some of the corporate values firmly emphasized at Google are diversity and equity. To this end, Google demonstrates diversity and equity in its hiring practices through a series of situations, giving it the consistency necessary to be considered an equitable employer. For instance, it has ensured equity in hiring people who lack English fluency to ensure that its team comprises English-speaking and non-English-speaking employees. In 2021, it eliminated the English fluency requirement in Brazil to attract non-English-speaking employees (Google, 2022). It also provides training to its hiring managers to help them eliminate personal biases during the hiring process. Improved hiring processes at Google allow it to create informal partnerships with local governments and businesses. As mentioned earlier, the informal partnerships created through the appropriate hiring of locals are strategic for organizations that want to mitigate political risk (Ali et al., 2021). Therefore, organizations can utilize the virtue theory to not only make ethical decisions during the hiring process but also create allies with local businesses and governments to help in minimizing political risks.
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