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International Legal and Ethical Issues In Business

International Legal and Ethical Issues In Business

admin / January 7, 2019

Introduction

Legal and ethical issues in any business practices are essential and vital aspects in determining the future prospect of the business. Most considerably, the legal factors will not only determine the going concern of the business but will also resolve the operations of the business by solving any conflicting factor which may arise.

On the other hand, ethics is an aspect which should never be dropped or ignored for the success of the business. Therefore, while addressing the international legal and ethical issues in decision making; an accord has to be reached which in this case is international.

The contract made between the different nations should be legal and the terms of the contract should also be enforced. Building on the contractual terms is a critical issue in deciding the right laws that will govern the business decisions. The decisions arrived at may at times be hindered by diverse obstacles which may either be external or internal (Gershman, 2008).

External factors in this case may be political and economical factors while the internal factors may comprise the environmental and the ethical issues. Therefore, this paper shall carry out a comparative analysis on two firms in different countries carrying out business transactions and the drawback that may influence their management decisions.

In this case analysis, we shall analyze Shell Company in USA, as one of the largest oil producing and importing company at international level and this will be compared to Topshop Company in the United Kingdom which is also viewed at the same.

Oil Production in USA (Shell Company)

United States has been at the forefront in the production and importation of oil and this has accounted for a greater contribution in boosting of the nation’s economic status.

Internationally, it has been accounted that U.S is the leading Oil producing Nation and in particular, Northern America has been affirmed to be on the lead. On the recent times, US is said to be consuming the largest volume of oil which has been approximated to be around 19.6 barrels in a day (Yeoman & Tench, 2009).

This has been accounted to be around 25% or more in the worlds’ total production capacity. This also account for the US to be on the lead in producing the largest portion of the carbon emissions. Though, there are some un-predetermined factors and predictions that in the coming years US will have exhausted its oil supply.

There is an increasing demand in the oil production and supply and this has been endorsed by the fact that the population growth rate is very rampant, thus the need for oil consumption. Oil consumption rate in US increases at the rate of 2% on annual basis.

This is merely being supported by a number of factors which may comprise of the higher population growth rate, new exploitation sites for the discovered resources, and a rise in demand of the resources to heighten the living standards of people (Yeoman & Tench, 2009).

Until the late 1970s, US was capable of producing and supplying oil for its own demand but this was not enough to back up the economy and meet the needs of its own people until it started importing oil. Since then, each year had a different production rate than the other and these was influenced by a number of different factors – both at national and international level.

However, some factors have risen hopes of discovering more offshore oil fields while others have saddened the idea and in most places offshore drilling has been prohibited and instead major deposits are being discovered. Some of the factors which have extensively influenced the decision making process of whether to continue in oil production or to kill the idea ranges from political, economic, ethical, and mainly the environmental factors.

The decision making process adhered to in enhancing the oil production may take a different angle as compared to other countries undertaking a different business idea. The decision making process may therefore be determined by the stated factors (T.R.C, et al., 2008).

In particular, Shell Oil Company is one of the leading oil producing companies in the United States. It also has some subsidiary basements, for instance Royal Dutch Shell which has been named as the leading multinational oil company and also the largest oil leading company. Apart from oil production, Shell Company also works with other companies in producing natural gas and marketing it. The company also markets for gasoline and petroleum products.

An approximate of 25,000 oil stations in US are shell branded. Shell is the market leader and also has some partnership with the Saudi –Arabian oil company. Shell Company has been partially independent since it commenced its operations as some of its Shares had been traded in Stock exchange.

However, it was able to buy back the shares and gain full independence by purchasing 30% of the shares that had been subscribed for the public interest. Shareholders were against the idea of buying back the shares but their hindrance did give birth to anything (Langeveld, et al. 2010).

Moreover, the Acquisition strengthened the company but this was also supported by some legal and economical factors. In essence, political, economical and ethical issues not only have adverse impacts but also have positive influence towards the quality decision reached upon by the management.

Topshop Clothes Company (United Kingdom)

Topshop is among the most recognized and bestselling clothes stores in UK, having the leading fashion brands within England and overseas. This company which basically deals with feminine fashion has 300 outlets in the UK and 130 in other countries. Topshop is the major supporter of London fashions Week, whereby they use this event to advertise their distinctive designs. This is facilitated by beauty pageants who catwalk wearing elegantly in their exclusive clothes collection (Plunkett, 2007).

Topshop is also enthusiastically involved in associations with young London designers who are in the process of making it the design and fashion industry. Such activities are among the reasons why Topshop has grown really fast since it has been at a position of publicizing its products with great ease. Essentially, its collaborations with fashion dealings have promoted its design collections at a greater extent.

According to Plunkett (2007), another factor that has contributed immensely to the drastic growth of Topshop Company is the fact that it has invested a lot in putting a wide network of its stores within and outside UK.These branches have made it possible for a big number of people to access its collections with a lot of convenience.

The diverse distribution of its products also makes it possible for the company to gather different views from its esteemed customers. The information gathered allows the company to be able to offer the people what they like hence making Topshop always at the top of other companies selling similar commodities.

The wide coverage on the broader part of it ensures that the business is capable of having a variety of consumers with different tastes and preferences which are as result of a range of determining factors. This aspect makes the corporation to incessantly sell its goods regardless of a possible recession in the market, hence setting its economic stature always at the frontline.

Apart from having the best reputation across the world, Topshop can easily suffer from a number of adversities that can be caused by political, economic, ethical and legal factors. These factors can have grand impact on its way decision making and management.

Comparative Analysis

The following is a comprehensive explanation of how the outlined factors can influence decision making and management of Shell Company and Topshop Clothes Company.

Political factors

Being a developed country, United States has fully grown in politics and thus the political affiliation may have both positive and negative influence on the decisions made by the management of a company. In essence, Shell Company has not been fully overridden by the United States politics since its formation.

The reason as to why the politics do not have a tremendous influence on the operations of Shell Company is simply because none of the companies both at the national and international level has a competitive effect as compared to Shell. This is because the management has managerial independence in carrying out the decisions regarding the operations of the company (Haller & Blochling, 2007).

Their independence is not interfered with as it has been well stipulated in the nation’s constitution. In comparison to Topshop Company in United Kingdom which mostly deals with women apparels, Topshop is adversely affected by the politics in the country.

Though, Topshop Company being recognized at both national and international level due to the great sales it is able to make, a slight trigger on its operations may lead to its downfall. This is also because of the poorly structured constitution which does not define anywhere on its protection on any company.

The welfare of Shell Company is also not interfered by the politics of the Nation since the country has been able to establish numerous branches almost all over the world as compared to Topshop Company which has limited branches due the strict restrictions the company harbors. Therefore, most of the countries may not be able to withhold the restrictions and thus may shy away from accepting the company (Plunkett, 2007).

Despite the fact that UK has a political background that is well rooted, a slight tremor of the legal and regulatory structure may lead to a major pullback in the operations of Topshop Company. Examples of political factors that have an impact on the wellbeing of this company include the, following: elections, labour laws, customer protection, ecological policies, competitive set of laws, global interaction, fiscal policies, and political stability.

The reason as to why the company’s operations lie tentatively under the control of this determinant is due to the fact that most of these policies are not well defined in the countries laws. This is contrary to Shell Oil Company in United States , whereby in the latter, political policies are clearly structured in its constitution. Hence, slight trembling of this factor seldom interferes with Shell’s decision making and management (Plunkett, 2007).

On the broader part, ecological policy has been the factor which has been very critical and has extensively affected the management decisions both within and without the country. In essence, ecological policy refers mostly to the environmental issues which are within the decisions of the politicians.

Therefore, if the government does not advocate for certain rules it would imply that the coming generations would be adversely affected since the amendments will not be very essential by then. Therefore, the decision making process in both countries may be similar in such critical times which may call upon for desperate measures in order to absorb the political evils.

Economic factors

Yeomans and Tench (2009) outline that the population growth trend in United States has increased at a very high rate; it has been accounted that the rate increases at 2% at annual basis.

The positive growth trends have significantly been contributed by the oil companies within the country, and in particular Shell Company, which accounts for a quarter of the total oil production within the country. Though, the company has a noteworthy contribution towards the economy, on the other hand, economical stability of the country is the main contributor towards the welfare of the company.

United States is known to be a powerful country and thus the world peace keeping country. This title has a great impact on the company’s managerial decision. This is because the decisions are made at the best capacity and in the right frames of mind since they are neither distracted nor interfered with. The economical factors may also be viewed in another perspective which ideally revolves around the economic status of a country, which is essentially described by the economic augmentation trends of the Nation.

The economic condition of UK can positively and negatively affect the welfare of Topshop company, in that a considerable alteration in its state can have a magnified manipulation on the company’s mode of decision making and management.

Some of the common examples of the above factors are as follows: taxation, volume of government expenditure, rate of employment availability, exchange rates, tarrifs, inflation and international trade balance. When these factors are not favorable they adversely hit on the operations of the company which are basically attached to the type of decisions that are made by the managerial committee (Jennings, 2008).

In this regard, both countries may balance on the managerial decisions since the economic conditions of any given country cannot be determined.

Therefore, one cannot fully say that the economic conditions of a country are favorable as compared to the other since they cannot be determined. It is said they are favorable depending on how well a country will be able to control and withheld the factors in order to favor the success of the business.

Ethical factors

Business ethics is a factor that has just cropped recently in the sense that most companies have started seeing the importance of incorporating such little known aspect in their day to day business operations. This feature makes a corporation to view and uphold the reputation of the business than having the stereotype profit-making perspective.

The new perception has also dictated most companies to have a concern on the ecological state, the welfare of the community around them, and its relationship with the employees. This has made most companies to have responsible and accountable approach in is dealings.

United States in this case has been one of the countries which have been influenced by ethics and in particular the Shell Company. Mostly the ethics are within the operations of the company but the influence is felt even at the international level (Yeomans & Tench, 2009).

Ethical factors in Topshop have a major take in the stability of the business in that any mistake regarding the interaction of the company with the environment, its customers or the personnel can afflict the interests of the corporation.

This is mainly due to the high level of public sensitivity towards such matters that might appear to be meaningless. The above observation is a clear indication that ethical issues in UK are a great concern especially on areas touching on the wellbeing of the society. On the other hand, shell Oil Company in the USA suffers less or not at all from such issues.

The ethics attributable in the Shell Company includes customer relationship, the mode of services offered and also the after sales services offered by the company. The ethics may also involve the company relates to the public at large and this may be determined by the kind of products offered. The products in this case should be of genuine nature and of right quality and quantity. Jennings (2008) advices that corporate social responsibility (CSR) must be observed by such big companies.

Ethics is a factor which will comprehensively determine the success of any business which is devoted to rise to greater heights. Therefore, both companies (Shell and Topshop) have embraced ethics in their operations and this has influenced the decisions made by the management.

Mostly, the decisions made are dependent on the customer’s responses towards the use of the products. Also the increased volume of sales in both countries has also been influenced by the ethics which has great impact on how the decisions are made.

The making of the decisions is also an ethical issue on itself as the decisions made should be favorable towards the welfare of the customers (Gershman, 2008).

Legal Factors

Legal factors generally entail the laws that govern people and their activities in a particular country. The laws are made by a legislative body which is guided by a law-forming methodology that is consistent with the constitution of the nation. These laws touch on almost every affair related to the country’s internal and international interactions.

Legal factors are a major cornerstone as far as decision making and management in businesses is concerned. Laws must be followed whenever any deal or development is to be executed in a business (Jennings, 2008).

The pressure of the above factors have a huge magnitude on decision making and management in Topshop clothes company in UK since the legal system in this country allows for beauracracy and intensive scrutiny on the operations of a trade. These is to ensure that traders follow the stipulated rules thus making it very difficult to operate a business in the UK since the legal system does not create a flexible atmosphere particularly when it comes to decision making and management.

Topshop is among the companies that faces this crisis. When it comes to Shell Oil Company in the USA, life is fairer because the legal system in this country is quiet favorable whereby it is not as harsh and demanding as that one in the UK. In essence, operating a business such as shell oil company that requires a versatile legal environment will be very smooth and efficient (Plunkett, 2007).

Conclusion

International and legal issues in business are important aspects in success of any business. Any business should ideally embrace them for its expansion not only at the national level but also on the global sense. Moreover, a company should be very sensitive on both the internal and external factor which may either contributes towards the success of the business or also bring drawbacks to the business.

This paper has analyzed Shell Company and Topshop Company in regards to management decision making in political, ethical, legal, and economic environment among other factors. These are the factors which have tremendously contributed towards the well being of both the companies in their respective countries besides being famous in terms of the sales they make on global sense.

However, while some factors may have some negative influence on the managerial decisions, the same may impact some positive influence on the other and vice versa. It is therefore of great importance if the management decisions are not interfered by all the factors hence improving the overall success of the businesses.

References

Gershman, S, (2008). Suzy Gershman’s born to Shop London: The Ultimate Guide for People Who Love to Shop Frommer’s Born to Shop London, Volume Suzy Gershman’s born to shop.13th Ed. Chicago: Frommer’s.

Haller, T & Blochlinger, A. (2007).Fossil fuels, oil companies, and indigenous peoples: strategies of multinational oil companies, states, and ethnic minorities: impact on environment, livelihoods, and cultural change, New York: LIT Verlag Munster.

Jennings, M, (2008). Foundations of the Legal Environment of Business Cengage Advantage Books, New York: Cengage Learning.

Plunkett, J, (2007). Plunkett’s Apparel and Textiles Industry Almanac 2007 (eBook): Apparel and Textiles Industry Market Research, Statistics, Trends and Leading Companies, Portsmouth: Plunkett Research, Ltd.

Langeveld, H, et al. (2010).The bio-based economy, bio-fuels, materials and chemicals in the post-oil era, Chicago: EarthSscan.

Transport Research Centre, et al. (2008).Oil dependence: is transport running out of affordable fuel? Chicago: OECD Publishing.

Yeoman’s, L & Tench, R, (2009). Exploring Public Relations. 2nd Ed. New York: Pearson Education.

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