International Businesses and the Need to Harmonize Global Policies with Local Regulations

Globalization, Localization, and Glocalization

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.

Some Real World Examples

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.

Hiring and Firing of Workers and Local Labor Laws

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.

Closing Thoughts

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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International Business