Multinational Organizations Role in Human Rights

Listen to this postI witnessed a heated discussion over the human rights and one of the discussion points was around the question “Should multinational organizations work in countries that are accused of human rights violations?”

Multinational organizations may work in countries that are accused of human rights violation. The organization should not intentionally violate human rights or encourage it. However, the organization should help the local community by paying them a fair wage to the amount of work done by the labor. Lam (2009) surveyed Chinese executives working for American multinational organizations in China and the executives felt that “Corporate Social Program” are human resources department job. The Chinese executives did not see their ethical responsibility or feel the obligation toward the society because their functional strategies did not incorporate social responsibilities (Lam, 2009). Multinational organizations, similar to domestic  organizations, are influenced by three conflicting needs, the organization, the industry and the society (Labbai, 2007). The ethical conflict between personal ethics and the organization would have strong effect on the organization operations in the international market (Labbai, 2007). The executives’ and the line managers’ ethical responsibilities would be the deciding factor for the multinational organization to behave ethically in countries that violate human rights.
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References:

Labbai, M. (2007). Social Responsibility and Ethics in Marketing. Paper presented at the International Marketing Conference on Marketing & Society, 8-10 April, 2007, IIMK.

Lam, M. (2009). Beyond Credibility of Doing Business in China: Strategies for Improving Corporate Citizenship of Foreign Multinational Enterprises in China. [Article]. Journal of Business Ethics, 87, 137-146. doi: 10.1007/s10551-008-9803-3

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At What Age We Can Work?

Listen to this postChildren under the age of 16 should not work, rather, they should be at school learning to be a better and effective community members. The sad fact is that children cannot afford schooling or at least have enough to feed themselves in the underdeveloped countries. Families in the underdeveloped countries teach their children  to read and write by sending them to the community educators, but they will be learning their parents crafts when they are strong enough to work (at the age of 8-12). The children would help their parents at the farm (or workshop) and then learn how to perfect the required skill to start supporting themselves and their families. Our parents went through the same 60 years ago, but when the oil was discover in Kuwait they went to night-school to educate themselves and work in better jobs. There is nothing wrong with children working instead of learning because working is educational activity also. The problem would be if the children work in harsh condition or got underpaid. Otherwise, working children are better off in a secured factory than attracted to do other illegitimate or criminal jobs. I would suggest that children should work for 8 hours then go through few hours of education provided by their multinational employer.

Should Organizations Operate Internationally?

Listen to this postOrganizations should work internationally because they would probably transfer their culture and best practices to the countries where they chose to work in. Transferring the knowledge to subsidiaries and international branches would help the multinational organization to save time and effort in communications and production (Mostyn, 2004). The standardization in the business processes would ensure consistency in the production and its quality, however, robust processes are needed to reach this level of alignment (Mostyn, 2004). Collective knowledge creation, trust-base collaborations and the multinational organization’s willingness to collaborate is the success reason to knowledge sharing and best practice implementation (Miesing, Kriger, & Slough, 2007). Multinational organizations might not be obligated to transfer their knowledge and best practices without the local government enforcement, but the organizational ethical commitment and the benefits resulted from it would help the organization to be ethical and supportive to the local community.
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References:

Miesing, P., Kriger, M. P., & Slough, N. (2007). Towards a model of effective knowledge transfer within transnationals: The case of Chinese foreign invested enterprises. Journal of Technology Transfer, 32(1-2), 109-122. doi: http://www.springerlink.com/link.asp?id=104998

Mostyn, A. (2004). The rise of global awareness. [Article]. Strategic Communication Management, 9(1), 5-5.

Does Music Artists Hate P2P?

Listen to this postFile sharing sites are delivering free music to users around the word. Most of the files are shred or downloaded freely. The media got the public to believe that the file sharing sites are negativity affecting the new artists and the recording companies. but, not every recording artist is upset because their music was downloaded without payment. The Peer-to-Peer (P2P) file sharing sites help exposing the new artist to the audience. The audience can search the artist and then download the music illegally to listen to it at their convenience. The file sharing sites are good advertising source that help the new artist to reach to the greatest number of audience. The newly downloaded files are a sampling opportunities for the users to test the music if its meets their taste. Research by Bounie, Bourrreau, and Waelbroeck (2007) showed that 93% of the  P2P users purchased new music after they have sampled it on the downloaded MP3 format. Further, the research also reviled that 67% of the surveyed participant purchased new CDs that they discovered by downloading from the P2P sites. That CDs they would not normally purchased if they did not discover it on the file sharing sites.

References

Bounie, D., Bourrreau, M., & Waelbroeck, P. (2007). Pirates or explorers? Analysis of music consumption in french graduate schools. [Article]. Brussels Economic Review, 50(2), 167-192.

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What Is Your Value Proposition?

Listen to this postValue Proposition is a business or marketing statement that summarizes the customers need to buy a product or use a service from an organization. The term “Value proposition” became a buzz word lately and many people started abusing the term for the wrong purpose. Marketing Manager main goal is developing a marketing plan that details how the company would meet its strategic objectives. The plan will show analysis of the cost, benefits and values that the organization would deliver to the stakeholders. The value proposition model explains how the supplier would fulfill the customer’s needs.  The value proposition “specifies the interdependence between the performance attributes of a product or service and the fulfillment of needs” (Kulonda, 2009). The value proposition model would list six steps for the marketing manager to set for his or her goals :

  1. First step is identifying the market in which the organization is going to create value for. The market would include the consumers, environment and the shareholders.
  2. The second step would be listening to the customers and stakeholders to addressing their concerns and requests. The organization should recognize the valuable feedback from the customers. The feedback should be real and confirmed by the organization’s representatives. The organization would not consider exaggerations and political statements that some people would use to draw the media’s attention.
  3. The third step would be describing the services and products offered by organization to the stakeholders. The stakeholders would receive the right information for the organization without distortion.
  4. Fourth step for marketing manager is to list the benefits expected from the organization business. Where and how the benefits would be felt and how it would be materializing.
  5. The marketing manager would address the stakeholder’s concern by discussing the alternatives for their existing business. Show why the organization have chosen certain suppliers, why the supplier is local or offshore. Alternatives are always available for the organization but the marketing manager would explain why the current supply chain and current products are the best business model a company would choose in the current business environment.
  6. Finally, the marketing manage would display the organization’s road map to deliver what it promised to do in the above steps.

The value proposition should talk to the customers needs and should not be another sale presentation the list what the organization is good at.
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References:
Kulonda, D. J. (2009). Manufacturing strategy for high tech start-ups: A reconsideration. [Article]. Issues in Innovation, 3(1), 74-92.

Self-Regulation Is The Best Answer

Listen to this postThe most obvious reason to self-regulation would be to avoid governmental intervention to enforce rules and regulations for the industry. The industry knows its business better that the government. The industry knows what is possible and what is difficult and costly to regulate. Another reason for the self-regulation would be the public image, because the public would respect and appreciate the industry’s effort when it is self set and enforced rather than seeing the effort as an obligation. Catastrophic event, like the Bhopal toxic chemical release that lead to 3800 fatalities, initiated a self-regulating effort that established the Responsible Care program which regulate the chemical industry. The Three Mile Island incident in 1979 created the Institute of Nuclear Power Operations to self-regulate the safety in nuclear power plants (Sharma, Teret, & Brownell, 2010). Most of the natural resources are scarce. The industries that depend on natural resources should regulate itself to avoid over using the scarce resource. Fishery and forestry are self-regulating themselves to avoid over fishing or deforestation (Sharma, et al., 2010).

Obese childResearch indicated children and adolescents as major contributors to the obesity problem (Goren, Harris, Schwartz, & Brownell, 2010). The food industry is moving toward self-regulations to control the unhealthy food marketing and selling. The self-regulation is one step before the forced regulation by the government. The food industry is issuing statements of concern and announce that self-regulations would solve the unhealthy food consumption by children (Sharma, et al., 2010).

The self-regulations is mostly originated by the industry but The Federal Trade Commission (FTC) is ensuring the industries’ compliance. In the United States of America,The FTC feels that Alcohol industries’ self-regulation standards are too lean. The FTC advice the Distilled Spirits Council, the Wine Institute, and the Beer Institute-pledged to revise their self-regulation codes (Sharma, et al., 2010). One of the important codes which were revised is the percentage of legal drinking age viewers for a magazine. The new percentage was change from 50% to 70%, so the alcohol industry would not be able to advertise its products in a magazine with more than 30% of its readers are under the legal age for drinking. The codes are revised by the alcohol industry and supervised by the FTC but there is a growing concern over enforcing these codes. The public and the communities have difficulties in trusting the industry’s honest effort.

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References:

Goren, A., Harris, J. L., Schwartz, M. B., & Brownell, K. D. (2010). Predicting support for restricting food marketing to youth. Health Affairs, 29(3), 419-424.

Sharma, L. L., Teret, S. P., & Brownell, K. D. (2010). The food industry and self-regulation: Standards to promote success and to avoid public health failures. [Article]. American Journal of Public Health, 100(2), 240-246.

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The Results of Wrong Relationship Marketing

RakazListen to this postReligious and patriotic campaigns are getting more intense and popular in the last few years in Kuwait. The campaigns are trying to reach the young generation in the age of 16-26 and those with modernized thinking and western influence. Most of the advertisement and billboards that display the campaigns massages are showing young men wearing western outfit (T-shirts and pans) while the Deshdash (traditional men outfit)  is never used in these messages. The western outfit may be used intentionally to relate to the targeted group but at the same time wrong message might be delivered. Showing the young generation in non-traditional outfit encourage them to abandon the traditional principles which is directly connected with religion and patriotism.

I have done an extensive research on the wrong relationship marketing done by Coca-Cola in India and would like to share the research with you. The researched case might not be similar to the above subject but would present the consequences of building the wrong relationship. Please click here to read the full research.

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Stock Market’s Movements and Reactions

Investors reaction

Listen to this postMarket efficiency remains inconclusive for many reasons, but one of them is stock price overreaction to information (Ball, 2001). The “Recency Theory” state that traders overestimate recent information and become too optimistic when the firm is winning and too pessimistic when the firm is losing, therefore the traders tend to overreact to recent information (Offerman & Sonnemans, 2004). The “Hot-Hand theory” states that the past winning or losing record of a firm will convince the traders to overvalue or undervalue the firm thus overreact to the information (Offerman & Sonnemans, 2004). A study by Ma, Tang, & Hasan (2005) selected 852 stocks (between 1996 to 1997) and found strong evidence of price reversal after two days of stock price overreaction. The study suggest constructing a strategy to predict the price reversal to gain profit from the overreacted price margin. The above theories and study would be a good research topics for exploration.

Econometric is defined by Encyclopedia Britannica as “the statistical and mathematical analysis of economic relationships” (“Econometrics,” 2009) such analysis use statistical techniques like linear regression to find the relationship between two economical variables. The econometric techniques are useful in finding the elasticity between commodity price and customer’s demand.  Another use of the techniques would be for production cost. In production cost the technique test the relation between the firm’s output and production factors like cost of labor, rent, capital and machinery.

Daniel Gross author of the book “Dumb Money: How Our Greatest Financial Minds Bankrupted the Nation” stated that economists and business leaders are realizing that economic models (like econometric) are helpful to predict the future when enough past data is available; but they fail to predict when major turnaround in the past performances occur. Daniel calls the phenomena as “pro forma disease” when economist depend too heavy on the data to predict the future. Daniel gives an example when a market is growing 10% for the past 4 year, the economist would predict another 4 years of 10% growth. Daniel claims that many economical models use resent years data without incorporating enough past data to that shows major turnarounds in the economy.

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References:

Ball, R. (2001). The theory of stock market efficiency: accomplishments and limitations. In The new corporate finance: where theory meets practice (3rd ed., pp. 20-33). New York: McGraw-Hill Irwin.

econometrics. (2009). In Encyclopædia Britannica. Retrieved February 28, 2009, from Encyclopædia Britannica Online:  http://www.britannica.com/EBchecked/topic/178298/econometrics

Gross, D. (2009, February 27). Slate on washigtonpost.com. The Washington Post. Retrieved February 28, 2009, from The Washington post Web site: http:/​/​www.washingtonpost.com/​wp-dyn/​content/​discussion/​2009/​02/​26/​DI2009022602876.html

Ma, Y., Tang, A., & Hasan, T. (2005, Summer/Autumn2005). The stock price overreaction effect: evidence on NASDAQ stocks. Quarterly Journal of Business & Economics44(3/4), 113-127.

Offerman, T., & Sonnemans, J. (2004). An experimental investigation of recency and the hot-hand effect. Scandinavian Journal of Economics, 106(3), 533-554.

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To Hedge Or Not To Hedge…?

Exchange rate

Exchange rate

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Hedging is trying to reduce the risk in the commodity price fluctuation. A factory may need raw material to produce widgets. The raw material could be imported from different country using different currency. The price of the material and the currency can change during the year. The factory can cut the risk of price fluctuation by buying the foreign currency now, or buy the full amount of raw material and store it in the warehouse. By this action the factory would secure the raw material at the market value now and continue its production at the calculated material price. The change in future prices should not affect its production or profit margin. This is called hedging and can save the company from unnecessary lose due to price fluctuation.

Currency hedging is required to manage the volatility in foreign exchange rate. Daimler-Benz (DB) reported its largest market loss in its 109 year history because of the dollar exchange rate change (Stulz, 2001). The lost was caused by Daimler-Benz management decision of not hedging although one of Daimler-Benz‘s subsidiaries has 16 billion Deutsch Marks in dollars that decreased 14% in value against the Deutsch Mark (Stulz, 2001).

Mercedes

Mercedes

I thought of adding some useful definitions to impress you! Forward currency markets enable the companies to lock the buying and selling exchange rate by a contract agreement, usually with a bank, specifying the amount of currency, at and exchange rate on the date of contract (Madura, 2003). Forward markets have contracts tailored to the company’s need and delivery date: these contracts are self-regulated contract without security deposit (Madura, 2003). Future market contracts have standardized size and delivery date and require small security deposit.

Many companies were hedging before the last rescission  hit the world market. They bought foreign currencies or stocked raw materials for their industry.  What do you think happened to those companies? Should they hedge now since the world market is picking up?

Madura, J. (2003). International financial Management (7th ed.). Mason, Ohio: South-Western.

Stulz, R. (2001). Rethinking risk management. In The new corporate finance: where theory meets practice (pp. 411-27). New York: McGraw-Hill Irwin.

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Dubai…the brand name!

Two men walk past the Burj Dubai on Sunday, the eve of the world's tallest skyscraper's official opening.

Burj Khalifa (Burj Dubai)

Dubai was the dream land for many people because of the accelerated development and the strong commercial foundation the city made for itself. During the glory days, I checked with several clothing stores owners in the market and most of them said that they sell most of the displayed items in less than a week. The real estate market was booming to the point where the average price for an apartment was $2,700 per square foot!

The past 18 months were economically difficult for many investors around the world. Most of the motivational speakers and wise people tell us to look at the bright side of the matter and I would like to talk about it in this blog. Every summer we hear about the forest fire in many locations around the world. The good thing about this natural forest fire is eliminating the plantation over growth that consume the available resources. The forest would start from zero to grow new plants and trees to become a newly build forced (and maybe better than before). The good thing about the economic recession is eliminating the weak businesses and overwhelming initiatives in the world market. The strong businesses will buy the weak and mismanaged business to rise again as a stronger and well-integrated enterprise.

Proposed height of the Burj Dubai compared to ...

Image via Wikipedia

Until the end of 2007, Dubai was a brand name known around the world similar to many famous cities. Like many brands, Dubai had a major setback during the recession that exposed many fragile businesses and their supporting services. The chain effect of losing some businesses dragged down with it the good and strong companies in Dubai. Last year Dubai celebrated Atlantis Hotel opening by spending on the fireworks more than what China spent on the last Olympics opening. Dubai celebrated the world tallest building “Burj Dubai” yesterday quietly to the point where some observers equated the event with Dubai’s economical situation, just “Quiet”.

Last summer I took advantage of a competitive offer made by Kuwait Airways to stay at Atlantis hotel for a weekend. Economically, Dubai has a long way to go (minimum one year) to recover from the deep recession it is going through now. So this summer I recommend that you look for a good family vacation in Dubai were the prices are low and the service is excellent.

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