Week 6 – Discussion Post 5 – Jeffry Reed In a global economy, what is the impact to a business if a country enacts strict employment laws? If a country enacts strict employment laws, the scope of impact can be favorable to everyone involved or can be detrimental to business operations. For example, suppose there are two organizations competing in the marketplace; Company A and Company B. Company A has an excellent business plan with efficient operational procedures that allow them to be competitive while providing generous employee wages and benefits.
Company B, on the other hand, is equally profitable, but has less efficient operational procedures and exploits its employees. In this example, Company A will be strengthened by the enactment of stricter employment laws while Company B will be weakened. We see this same type of scenario in the US marketplace whenever the governments raise the minimum wage; some companies are weakened due to having to allocate greater amounts to wages while other companies who already meet the new minimum wage are strengthened due to competition being weakened.
However, as our readings have revealed, the implications of laws and regulations are far reaching and the results are not always immediately apparent. Is it management’s responsibility to search out the best location to transact business? As outlined by Halbert & Ingulli (2009) A basic assumption of classic microeconomic theory is that the overriding goal of any business is to be profitable. As trustees (fiduciaries) of the shareholders, managers have a primary responsibility to try to improve the value of shareholder investment.
In fact, under the law of corporations, managers are answerable to the owners of a company-its stockholders-if they fail to take reasonable care in running it. According to this definition, management is indeed responsible in determining the most advantageous location(s) to transact business. While the extent of responsibility is ambiguous to define, as it hard to imagine why management would not make the best decisions based on the information available. None the less, it is clear that managers are accountable in their positions within the organization.
Are there any other laws or regulations that can drive businesses out of one country in favor of a more business friendly country? Depending on the type of international business and organization is engaged in, the laws and regulation enacted by governments can make international business unachievable for many businesses. Some of the major issues applicable are •Government controls on foreign investment •Government controls on purchasing •Tariffs & Import/Export Quotas Business in general is competitive. Organizations competing internationally are often at a disadvantage to local organization for a variety of reasons.
If government controls are too burdensome, competing in a given international market may not be advantageous in favor of other counties who provide incentives for organizations to engage in international business on one form or another. References: Brown, Robert L. , & Gutterman, Alan S. (2003) A Short Course in International Business Plans: Charting a Strategy for Success in Global Commerce, 3rd Edition. World Trade Press. Halbert & Ingulli. (2009) Law & Ethics in the Business Environment. 6th edition. Retrieved from http://apus. campusguides. com/BUSN601