Supply Chains as Sources of Competitive Advantage
Optimizing the Supply Chains A supply chain is the network of relationships between the upstream and downstream activities with all stakeholders who are involved in this chain of relationships. To take an example, if a particular good or service has to be delivered to the customer, there are raw materials that are needed for the […]
Role of a Finance Certifier in Six Sigma Project
The Finance Certifier is the only member of the Six Sigma Project team apart from the Project Lead that is selected by the Project Champion. This is because, it is the Project Champions responsibility to ensure that the financials of the Project are absolutely unbiased. Of late, finance certifiers have come under a lot of […]
Selecting Critical Business Process for BPI Projects
Using Business Process Improvement as a tool to improve internal efficiencies and to bring about the desired changes in business operations has become an accepted practice in most of the Organizations. At a time where the life cycle of products and businesses is becoming shorter and fast changing in line with changes in technology and […]
Inventory Costs – Ordering Cost, Carrying Cost and Stock Out Cost
Inventory procurement, storage and management is associated with huge costs associated with each these functions. Inventory costs are basically categorized into three headings: Ordering Cost Carrying Cost Shortage or stock out Cost & Cost of Replenishment Cost of Loss, pilferage, shrinkage and obsolescence etc. Cost of Logistics Sales Discounts, Volume discounts and other related costs. […]
The Globalization of Supply Chains and its Implications for Trade and Commerce
Globalization of Supply Chains and its Implications We have discussed how the globalization of the world economy has made the globe more integrated and interconnected. While this has both positive and negative effects on the way global trade and commerce takes place, there is one critical aspect that needs our attention. That is to do […]
It is a known facet of globalization that businesses that operate across the world have to contend with global policies and local regulations at the same time.
In other words, these international businesses have to not only follow the global rules set by world trade bodies like the WTO (World Trade Organization), GATT (General Agreement on Tariffs and Trade) and the United Nations but also have to obey the local regulations in the countries in which they operate. This is sometimes referred to as the marriage of globalization and localization, which gives rise to the term Glocalization that, was popularized by the famous cheerleader of globalization, Thomas Friedman. The implications of this adaptation are that more often than not, many international businesses have to comply with the quantum of profits that they can repatriate from the market in which they are operating.
Repatriation refers to the practice of sending back the profits from the countries in which these international businesses to their home country.
For instance, the global consumer products giants, Unilever and Proctor and Gamble have to ensure that the rules in the countries in which they operate have to be complied with during their business activities.
This has led to these giant companies having separate subsidiaries in the Asian and African countries where they have their presence so as to ensure full compliance with the local regulations.
The other aspect about international businesses is to do with the internal policies.
For instance, many multinationals have global HR (Human Resource) policies that need to be followed across all units. However, the labor laws in the specific countries in which they operate have to be taken into account as well when they formulate policies for these units.
For instance, in many Asian countries including China and India, there are strict labor laws that mandate the working hours for women and insist that the companies provide transportation in case of longer working hours. This means that the international businesses have to be cognizant of these laws and to comply with them as well.
Indeed, many multinationals often complain that they are constrained by the local rules and regulations. The rejoinder from the local authorities is that these are the costs of doing business in that country.
Perhaps no aspect of international businesses and the need to suit themselves to local rules is more important than the hiring and firing of employees. In the west, it is common for companies to hire employees when there is an economic boom and fire them when the boom bursts.
However, in many Asian countries, hiring and firing of workers has to conform to strict regulations and the companies must show evidence that the downsizing or the layoffs were warranted.
The other side of the coin is that many western companies take advantage of the lax labor laws in countries like Bangladesh, Thailand, and Indonesia to setup what are known as “sweatshops” or manufacturing units that can operate at the terms of the western companies. This has drawn howls of protest from human rights activists who complain that the western companies are exploiting the workers in these countries taking advantage of the lax labor laws.
Whichever side of the debate you are in, the fact remains that harmonizing the global rules and the local regulations is indeed a challenge for western companies seeking to do business in other parts of the world.
Added to this is the fact that in Africa, many western companies have been accused of resource theft or exploitation of the mineral and oil wealth in those countries leading to severe resistance from the locals.
Finally, we have touched upon many themes in this article and each of them is a separate topic for discussion as the dynamics between the global rules and the local regulations takes on interesting aspects of how multinationals operate.
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Cross Border Mergers and Acquisitions and Some Recent Trends in this Field
February 12, 2025
