BUS503-A Foundations of Management

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Work Cited

Cusmano, L., Mancusi, M., & Morrison, A. (2010). Globalization of Production and Innovation: How Outsourcing is Reshaping an Advanced Manufacturing Area. Regional Studies, 235-52. Dickey, H., Watson, V., & Zangelidis, A. (2011). Job Satisfaction and Ouit Intentions of Offshore Workers in the UK North Sea Oil and Gas Industry. Scottish Journal of Political Economy, 607-33. Goodman, J. L. (2000). Webster's New World Pocket Dictionary. Cleveland: Wiley Publishing, Inc. Harrington, A. (2012). The Bribery Act - one year on. Financial Management, 50-53. Huang, W., Green, J., & Day, J. (2008). Outsourcing and the Decrease of IS Program Enrollment. Communications of the ACM, 101-4. James, G. (2011, August). U.K. Bribery Act Requires New Precautions for Global Companies. Journal of Accountancy, pp. 28-30. Kaikati, J., & Label, W. A. (1980). The Foreign Antibribery Law: Friend or Foe? Columbia Journal of World Business, 46-51. Kletzer, L. (2005). Globalization and job loss, from manufacturing to services. Economic Perspectives, 38-46. Liu, X., & Tu, Y. (2008). Capacitated production planning with outsourcing in an OKP company. International Journal of Production Research, 5781-95. Maton, J. (2010). The UK Bribery Act 2010. Employee Relations Law Journal, 37-45. Weber, J. (2007). Bribery: Not Only Wrong, But Costly Too? Academy of Management Perspectives, 86-87.

Literature Review

BUS503-A Foundations of Management: Does bribery encourage the US to continue product outsourcing to developing countires?

“The Bribery Act one year on” by Anthony Harrington writes about how organizations have had a year to come to terms of the UK Bribery Act. He begins on the fundamental assumption that “having adequate procedures in place to prevent bribery [are] the best defense mechanism” (50).

Jonathan Middup, a partner and head of anti-bribery and corruption for Ernst & Young in the UK reinforces that when he states, “The underlying view of the Act is that the more Western companies play the bribery game, the harder it is to eradicate it. There needs to be a zero tolerance of bribery and this is what the Act sets out to achieve” (50). “Companies need to grasp the fact that the UK Bribery Act has subtle differences from the US FCPA, which came into force in 1977” (54). The FCPA accepts facilitation payments, which are defined as, “payments made to facilitate the movement of goods from the dockside of a foreign port. Under the UK Act anything that is not a recognized fee…the Act regards as simply bribery under a different guise” (50, 52). Catriona Munro, EU competition and regulatory services at lawyers Maclay, Murray & Spens says, “What we are emphasizing to clients is that your defense has to go beyond paper procedures. It has to involve a real effort to push anti-bribery training and awareness throughout the organization” (54).

“UK Bribery Act Requires New Precautions for Global Companies” by Gary James is a senior editor for the Journal of Accountancy.

Nearly three-quarters of the respondents to the Deloitte poll from the financial services, consumer and industrial products, technology, and banking among others, said, “They are unfamiliar with provisions in the U.K. Bribery Act” (29). “If a company is convicted of an offense under the U.K. Bribery Act, the only way it can avoid penalties is to prove that it had ;adequate procedures’ in place to prevent the crime” (29). Joe Zier, a leader in Deloitte’s FCPA consulting services practice lists five steps to address the Act as a recommendation to all the global enterprises in the UK: “Fully evaluate their entire operations to assess all of the new risks …provide thorough education and training …develop improved mechanisms for risk assessment and due diligence…realize that ‘one size no longer fits all’…conduct ongoing monitoring” (29).

Globalization Cusmano, Mancusi, and Morrison (2008); (Cusmano, Mancusi, & Morrison, 2008

The transaction cost approach therefore suggests that outsourcing to local suppliers is to be preferred when market relationships are less expensive at closer distance (237). as standardization and asset specificity evolve, international outsourcing concerns a wider range of functions and products, including apparently strategic activities, such as design and R&D. As products become more sophisticated and production relies on an increasing range of specialized technological understanding, firms can hardly develop internally all the capabilities and competences required to bring a product to the market (238). Especially in environments characterized by strong competition and short product life cycle, firms devote internal resources to strengthen their core business, while outsourcing non-core activities. It is to be expected that the regional or international dimension of the outsourcing process is related to the content of the activities concerned, and that those activities are (performed and) outsourced differently across industries, reflecting industry differences in terms of competitive factors, competitive strategies of the firms, and comparative advantages of the territories (242). it is found that it is foreign ownership of subsidiaries that positively affects the probability of international outsourcing (248). Overall, the present analysis indicates that international outsourcing is still a minor part of a wider fragmentation trend, which concerns mainly traditional sectors, such as Textile and Clothing (249). International outsourcing consists mainly of the externalization of production and assembling activities and seems to respond to efficiency-seeking strategies, which may positively affect regional dynamics.

“The Foreign Anti-bribery Law Friend or Foe” by Jack Kaikati, Associate Professor of Marketing and Wayne A. Label, Associate Professor of Accounting at Southern Illinois University, Edwardsville, wrote in the Colombia Journal of World Business

The Foreign Corrupt Practices Act (FCPA) of 1977 prohibits bribes to any foreign official, or foreign political party (directly or indirectly) made to influence an act or decision assisting an individual to obtain, retain, or direct business to himself. If the law if violated, the corporation is subject to a $1,000,000 penalty and any individual (officer, director, or stockholder) who willfully violates the provision of the law is subject to a $10,000 fine or five-year imprisonment or both. The Securities and Exchange Commission (SEC) and the FCPA say a payment to a foreign official to insure a contract in a country where such payments are encouraged is a bribe (46). They reference the FCPA in defining bribery when it states, “ a firm is prohibited from making or authorizing payments, offers, promises, or gifts for the purpose of ‘corruptly’ influencing action by the government or their officials in order to obtain or retain business for a company” (46). Another way of stating it, “the legal essence of bribery is a payment voluntarily offered for the purpose of inducing a public official to do or omit doing something in violation of his lawful duty, or to exercise his official discretion in favor of the payor’s request for a contract, concession or privilege on some other basis other than merit” (46). “Very few executives involved in overseas briberies have been fired, demoted, or even transferred” (49). “The value of such a law like the FCPA will be diminished unless other industrialized countries can be persuaded to adopt and enforce a similar law on their own multinational firms” (49). “The problem that remains to be corrected is not only how to stop American firms from continuing to make improper payments, but also how to stop their international competitors from doing so” (49). “Organizations such as the SEC do not exist in all industrial countries” (49). “In many countries, not only are foreign payments not outlawed, but they are encouraged…Canadian law stipulates that private Canadian firms should comply with laws of country in which they operate” (49). “The U.S. must make an all-out effort to…recapture world markets. In the long run this can only be done by stepping up research and development and by investing in equipment that will cut costs and upgrade products” (49). “Some multinational companies have decided to stop placing CIA agents disguised as corporate executives …fearing that its disclosure could harm the bank’s dealings and interests of its shareholders” (50).

Globalization & Job Loss (2005) Economic theory suggests that not everyone benefits from free trade: Positive economy-wide benefits result from the gains of the “winners” exceeding the losses of the “losers.” (38)

some of the most contentious issues regarding free trade concern the size of the costs associated with moving workers from import-competing sectors to other parts of the economy. Global outsourcing of services (or offshoring) is the services version of the globalized production that has become (almost) commonplace in manufacturing. the arrival of services outsourcing virtually guarantees that international trade and globalization will remain an important focus of public attention to job loss. trade-related job loss is commonly understood to mean job loss due to increasing imports, and a trade-displaced worker is a worker for whom increased imports have contributed to job loss. The appreciation of the exchange value of the dollar from 1981 to 1985 was particularly important for American manufacturing. The strong dollar made U.S. exports more expensive to buy and made imports cheaper (42). The characteristics that limit the reemployment of import-competing displaced workers are the same as those that limit the reemployment of all displaced workers: low educational attainment, advancing age, high tenure, minority status, and marital status (43). shifts in international investment and (information) technological change, are coming together to influence what is being called services outsourcing. Globalization, particularly in the guise of globalized production, is evolving and broadening from a manufacturing base into services.

IS Career Huang, Greene, and Day (2008); (Huang, Greene & Day, 2008)

By determining why students were convinced that IS graduates would not be able to fmd jobs due to ofTshoring, effective methods ofaddressing these factors could be developed (102). When asked for the primary information source regarding IS job loss, 46% of the students responded they heard this information from their parents, 31% from the news, and 17% from colleagues (classmates, friends, or faculty). when asked about the secondary source regarding the loss of jobs, 29% of students said they learned this from friends and 21% from the news. 88% of the students believed their parents and friends received this negative view about IS job prospects from the news. some positive news about the impact of offshoring on the U.S. job market. For example. Delta Airlines, with headquarters in Atlanta, outsourced 1,000 call-center jobs to India in 2003, but the $25 million in savings from the deal allowed the firm to add 1,200 domestic reservation and sales positions (103). Through constructive arguments and discussion, students realized that some IS jobs, such as basic programming, can be more easily outsourced. During group discussion sessions, the students were guided through an analysis of the role of IS in organizations, so that students could clearly realize that IS is critical in modern businesses. when facing the challenge of IS outsourcing, one optimal solution was to double major, combining IS and another business major such as finance or accounting, When asked for additional solutions, 45% recommended broadening their horizons by improving their skills and knowledge in business, 28% recommended understanding the industry better, and 27% responded with a desire to learn and improve interpersonal skills. The challenge created by offshore outsourcing to IS and CS education programs is so huge that many such programs, if not all, have experienced serious enrollment decreases in recent years (104).

“The UK Bribery Act 2010” by James Maton from Edwards Angell Palmer & Dodge, is a commercial litigator, examines in the Employee Relations Law Journal about the bribery legislation that was passes in the United Kingdom that has a significant impact on US companies with UK subsidiaries/operations.

“Applies to bribery in both the private and public sectors, and to facilitation payments, and contains a corporate offence of failing to prevent bribery by someone performing services on behalf of a commercial organization” (37). “an organization will be liable for a bribe paid on its behalf unless it can demonstrate that it had implemented adequate procedures designed to prevent bribery” (37). Maton states “a bribe could be the payment of money, another financial advantage, or a non-financial advantage, including, for example, lavish hospitality or gifts” (38). “This has been justified [corporate offences in the Act] on the basis of the need for the United Kingdom to demonstrate and monitor compliance with its international obligation to deter and punish corruption transactions taking place overseas” (40). A crucial element of adequate procedures to bribery situations are “a whistle-blowing system that allows staff safely and confidentially to report suspicions or knowledge of bribery, and which ensures that all reports are investigated” (42). An “offence of a failure to prevent bribery could also be committed where the bribe, and steps taken…occurred outside of the UK, and applies to foreign commercial organizations that carry on business in the UK” (43). If someone is prosecuted in defiance of the listed offences they are liable to 10 years in prison or an undefined fine. An organization is legally responsible to pay an unlimited fine. “The Serious Fraud Office (SFO) is actively encouraging companies to self-report discovery of bribery or corruption” (44). He closes on the basis that “anti-corruption and anti-bribery policies, systems, and controls are, effectively, a requirement of the Act. Vigorous enforcement by the US DOJ and SEC of the US FCPA…already make this essential for any companies trading internationally”

Capacitated Production (Liu and Tu, 2007) paper addresses a dynamic capacitated production planning (CPP) problem in small to medium-sized enterprises (SMEs) (5781).

These companies practise their businesses based on a manufacturing paradigm called one-of-a-kind production (OKP). Referencing Global Competition, Such a pressure drives manufacturing firms to be lean, agile, virtual, and global. Tu (1997) has characterized the OKP paradigm as: (1) high customization; (2) successful product development and production in one go; (3) optimal or rational utilization of technologies and resources; (4) adaptive production planning and control; (5) continuous customer influence throughout the production; (6) incremental process planning; (7) distributed control and inter-organizational autonomy; and (8) virtual company structure and global manufacturing (5782). There are three solutions to cope with the problem with CPP: (1) the excessive demands are postponed (i.e., the excessive demands are met in the future); (2) theexcessive demands are unmet (i.e. giving up the market opportunity); and (3) the excessive demands are met by ‘paying’ an extra cost through outsourcing. Many OKP companies are nowadays taking the last solution which is simply called outsourcing. It is claimed that outsourcing suppliers can achieve high quality and low cost, because they specialize in a related professional and business category.

“Bribery: Not only wrong but costly too” by James Weber, Professor of Business Ethics and Management from Duquesne University in Academy of Management Perspectives

Raymond Fisman, Columbia Business School and Jakob Svensson of Stockholm University conducted a study to answer the question: “does bribery negatively affect companies and their ability to generate optimal profit” (86). They had access to information from a reliable source in the Ugandan Manufacturers Association, a trustworthy business organization, who conducted the survey for the World Bank. Many research techniques were integrated to protect the information. Questions in the survey were constructed to avoid respondent self-incrimination, bribery leaning questions for consistency in answers, and two separate visits to safeguard the information. They found that, “the damaging effect of bribery is much larger that the retarding effect of taxation” (87) “some parts of the world bribery is a necessary—or at least an expected mechanism for doing business” (86) “it would be accurate to say that bribery had a more negative impact on firm growth rates than did taxation (86) “Bribes do cost and cost significantly—the greater the frequency or size of the bribe, the greater the loss of a firm’s growth potential (87). He concludes that, based on the Fisman and Svensson, “Business managers would do well to consider ways to avoid or minimize the payment of bribes…that satisfying a bribe request brings with it a correspondingly larger loss in company growth potential” (87).

Offshore UK Dickey, Watson, and Zangelidis (2011); (Dickey, Watson, and Zangelidis, 2011)

One means of retaining existing employees is to improve workers’ job satisfaction (607). Companies involved in oil and gas production in United Kingdom continue to suffer from a significant skills shortage (608). the industry faces an ageing workforce and a lack of new recruits, which constrains the industry’s ability to react to favorable economic conditions, such as increased demand and rising oil and gas prices. Competition from other industries for skilled workers and the less attractive aspects of offshore work (e.g. long working hours and time away from home) contribute to the offshore industry no longer being attractive to younger individuals. Job satisfaction is found to be a good predictor of quit intentions and therefore a close examination of job satisfaction may provide some useful instruments to human resource managers and related policy makers. Understanding what factors influence workers’ intentions to quit their job will help companies to retain existing employees by lowering the probability of workers leaving the company. individuals who received training may attract more outside offers, or alternatively, start their own business using the skills and experience they have acquired (617). With respect to job characteristics, the strongest influence on reported job satisfaction is the effect of working hours, where longer working hours are associated with lower overall job satisfaction (622). find that individuals in good financial condition, those whose skills are closely related to their offshore job, and those who received training in the previous 12 months are estimated to report higher levels of perceived job satisfaction (628). Giving consideration to the match between an individual’s skills/qualifications and the job at the time of recruitment may help to promote higher levels of job satisfaction once employees have been hired, and providing ongoing investment in employees’ skills, along with opportunities to gain promotion, will reduce the probability of workers leaving their employers.