by Merlin Hernandez

 

Emerging business practices among global partners often attempt to superimpose alien cultural values and practices on local standards and traditions. There is often the assumption by western societies that pathways to development in less-developed economies involve the adoption of western models, policies, and similar projects. It is an ethnocentric view that applies western-biased value judgments to foreign cultural traditions and indigenous growth models.

This presents ethical dilemmas that arise in the tradeoff between economic growth and political self-determination. Large multinationals have long taken advantage of the growth potential of so-called emerging markets through cheap labor for manufacturing and/or indigenous micro distribution networks that have intimate knowledge of localized channels. But little consideration is given to the value of these communities to the corporations’ cost efficiencies and distribution networks i.e. host economies are vital components to increased profits but not sufficiently valued to warrant investment in their socio-economic condition.

Traditional economic measures of societal development (GNP, GDP) have come under criticism for their failure to fully accommodate quality of life (QOL) factors to real development. This has resulted in the development of social indicators which are slowly infusing measurements for ethical business practices into the mix, particularly in a cross-cultural context. Multinational corporations may be ethically bound to participate more directly in the development of host economies by seeking to engage governments in a dialogue on how they might improve the lives of those who will comprise the labor force or provide ancillary services.

Current globalization practices are not geared towards the macroeconomic changes that empower the world’s poorer people. These relationships do not support better working conditions, improved wage structures, easier access to education, nutrition or health care. It is a business model that remains essentially one-sided with profits funneled back to the parent company. So while growth is generated in the poorer economy, ownership still rests with the developed world and the populations of host nations do not benefit from the long term advantages of their productivity.

Economic colonialism results from the wanton imposition of business models and policies with a profound profit motive that serves to enrich only the major corporations operating in these less-developed economies.  Global businesses have used these localized systems with little regard for the QOL considerations of their micro partners. It gives an appreciation of the Chinese model for global integration which has a clear focus on China’s needs in the equation with a web of regulations and allowable practices designed to support the growth of indigenous Chinese businesses.

A more ethical approach on the part of multinationals would involve the building of meaningful partnerships through the recognition of the developmental needs of the local economy. Corporate proactivity may take the form of micro entrepreneurship schemes through facilitating uncollaterized micro credit for small factories and micro distributors as well as businesses like bakeries, laundermats, groceries, drug stores, feed stores, agribusiness – ventures that will grow with the new job opportunities and higher standard of living of small towns and villages.

Responsible and ethical marketing practices would then view host economies not merely as emerging markets – a passive construct – but as emerging participants in the global business environment with the capacity to be producers as well as consumers. Partnership with government agencies can see new schools and health centers to more efficiently serve the needs of the community.  Community micro distribution channels that benefit the market penetration objectives of the multinational partner will see higher living standards translate into higher sales volumes. It would indeed be a win-win all around – for producer, intermediary, and consumer.

Global expansion will then be governed by the need for large western corporations to be instrumental in improving living standards, and initiating social enterprise as well as inclusive capitalism projects. This would help to develop local expertise and small businesses, and facilitate business training and access to micro credit that will support economic growth and social empowerment, the building blocks of self-determination.

Related Articles on this Blog

• Child Labor

• Going International

• Intellectual Property

• NAFTA

• Outsourcing

• Outsourcing Twist: Jobs come home

• Reversal of Globalization

•The other side of Outsourcing

Merlin Hernandez is an entrepreneurial development and management consultant who operates mainly in the small and medium enterprise sector. For more information on this and other topics, please send enquiries to businesssolutions1168@gmail.com