BUSINESS LAW 1
The company should consider several aspects of U.S. law beforedeciding to conduct international business. For example, the ForeignCorrupt Practices Act (FCPA) forbids the payment of money or othervaluable things to public officials (Abikoff, Wood, & Huneke,2014). In this regard, an entity would be prosecuted if it offeredany incentives to obtain an unfair advantage. Facilitation paymentshould also not be used to acquire preferential treatment.Consequently, the company would be required to document all itsfinancial transactions to prove their adherence to legal guidelines(Abikoff et al., 2014). Any violations of FCPA would lead to finesand other restrictions.
Furthermore, the Export Administration Act (EAA) prohibits Americancompanies from engaging in unsanctioned business boycotts (Abikoff etal., 2014). Therefore, the firm must avoid obeying foreign laws thatconflict with U.S. policy. In addition, export control regulationshave been set to monitor the dissemination of research-relatedinformation. Periodically, the government may issue economicsanctions such as embargoes to specific regimes and countries. Also,business deals are prohibited with persons and entities categorizedas special designated individuals (Abikoff et al., 2014). Criminalpenalties are imposed on any company that engages in transactionswith blacklisted parties.
Moving business to Japan has several legal implications. AlthoughJapan has the third largest economy, it ranks poorly with regards tothe ease of doing business (TMF Group, 2016). Consequently, localresources are fundamental to the success of any venture. Japan has anexcellent reputation owing to its superior capacity for research anddevelopment (TMF Group, 2016). The country’s intellectual propertyrights make it an attractive destination for many companies. However,the company will have to negotiate several regulatory hurdles beforeacquiring a business license (JETRO, 2016). Moreover, propertyregistration in Japan takes considerable time due to the many legalprocedures. Enforcing contracts in the country costs a third of theclaim and can last for a year. Notwithstanding, resolving solvency inJapan takes the shortest time since the nation has the highestrecovery rate (TMF Group, 2016).
International business forms an integral part of the global economy.Granted, the U.S. boasts the world’s biggest economy (ACCJ, 2016).In fact, some states such as California can rival entire nations interms of economic growth and development. Nevertheless, the successof organizations such as Microsoft, Coca-Cola, and General Motorsproves that doing business abroad has several advantages (Ketchen,Edwards, Short, & Try, 2014). For example, establishingsubsidiaries in other countries increases access to new clients.Despite the economic stature of the U.S., it comprises less than 10%of the world’s population (Ketchen et al., 2014). Therefore, thecompany would have an excellent opportunity to increase its marketshare. Furthermore, some companies have saturated industries withinthe country`s market. Consequently, moving abroad provides anopportunity to reinvigorate sales. It is significant to consider thatmany corporations with a predominantly American identity have becomereliant on foreign sales. In 2011, European markets accounted forover 40% of McDonald’s revenue while the U.S. contributed only 32%(Ketchen et al., 2014). The fast-food chain has now developed into aninternational brand.
Besides, Japan has a high level of industrial development thatsupports a growing middle class. Hence, the purchasing power of itscitizens continues to rise (JETRO, 2016). Under these conditions,some companies such as GM have sold more products at higher rates inforeign markets compared to those in the U.S. Consequently, movingabroad presents an excellent means of increasing profitability andgrowing the company’s image (Ketchen et al., 2014). Overseasexpansion creates economies of scale that lead to cost advantages.The prices of raw materials would be significantly lower in Japanthan those in the U.S. Also, the relatively lower cost of labor wouldreduce the overheads. Setting up foreign offices empowers manyorganizations to acquire greater quantities of supplies than localfirms (Ketchen et al., 2014). Therefore, the company would possessleverage when conducting negotiations with suppliers.
Establishing subsidiaries in foreign markets helps a business todiversify its risk. Companies with operations in one country arepredisposed to greater business risk compared to those withmultinational branches. Adverse economic and natural conditions inone country could derail operations. For example, Japanese companiessuch as Honda, Nissan, and Toyota were not incapacitated during the2011 earthquake since they had penetrated foreign car markets(Ketchen et al., 2014). Otherwise, they would have become bankrupt.Furthermore, the regulations in particular countries may changesuddenly such that business activities become restricted. In such acase, it would help if an organization had operations in overseaslocations.
On the other hand, moving abroad exposes a company to political riskin the event of upheavals and government interference. In 2011, aseries of uprisings in the Arabian Peninsula caused plenty ofinstability (Ketchen et al., 2014). Consequently, companies withoperations in countries such as Libya and Egypt experienced severelosses. In some instances, local governments adopt hostile policiesthat isolate foreign entities. Some firms have even had their assetsseized by the government. Nationalization has occurred in countriessuch as Venezuela concerning cement and oil industries (Ketchen etal., 2014). Notably, Japan has relatively low levels of politicalrisk (ACCJ, 2016).
The decision to move abroad has various ethical implications. Forexample, offshoring upsets the local community when a company reducesnational capacities to pursue international expansion. In fact, somefirms have ended their local operations to create new offices incountries that provide cheaper labor. Granted, offshoring reduces thecosts of doing business. Nevertheless, many people are renderedjobless. In the 2000s, thousands of jobs were lost in Georgia whentextile factories implemented offshoring (Ketchen et al., 2014).Although Fortune Brands saved millions of dollars through relocation,the number of local employees dropped by over 1,000 (Ketchen et al.,2014). Consequently, the decision to move has ethical implications onthe local offices.
Conducting business abroad also presents ethical challengespertaining to customer service. A company may have plenty ofexpertise within a country such that it becomes impossible toreplicate their services elsewhere. Therefore, consumers in foreigncountries may not experience the same level of satisfaction incomparison to local clients. For example, Carbonite realized that itsoperations in India had weaker customer satisfaction than its callcenter in Massachusetts (Ketchen et al., 2014). In addition, somecompanies decide to establish foreign subsidiaries to benefit fromtax havens. It may be that other countries have lower rates ofcorporate tax and other deductions. Therefore, ethical issues ariseas to whether receiving tax exemptions and incentives could bejustifiable. Reducing their incidence to tax robs the Federalauthority of important sources of revenue.
Companies such as McDonald`s and KFC have managed to comply with theU.S. laws concerning overseas expansion. These entities assimilatedFederal statutes into their operations to limit instances ofnon-compliance (Ketchen et al., 2014). Furthermore, they appreciatedthe significance of local customs in the purchasing decisions oflocal populations. Potential compliance issues were addressed inadvance through seeking the guidance of American institutions. KFCand McDonald’s have sought clarifications from the U.S. Departmentof Justice concerning payments that could be misconstrued as bribes(Ketchen et al., 2014). Consequently, the corporation can weigh thelegal and ethical implications of conducting business internationallybefore deciding to move to Japan.
Abikoff, K. T., Wood, J. F., Huneke, M. H. (2014). Anti-corruptionlaw and compliance: Guide to the FCPA and beyond. Arlington, VA:Bloomberg BNA.
Japan External Trade Organization (JETRO). (2016, Jul. 20). Laws &Regulations on Setting up Business in Japan. Retrieved fromhttps://www.jetro.go.jp/en/invest/setting_up/laws.html
Ketchen, D. J., Edwards, J., Short, J., & Try, D. (2014).Mastering strategic management: Evaluation and execution.Victoria, Canada: BCcampus.
The American Chamber of Commerce in Japan (ACCJ). (2016, Jul. 20).Retrieved from http://www.accj.or.jp/
TMF Group. (2016, Jul. 20). Japan. Retrieved fromhttps://www.tmf-group.com/en/media-centre/resources/top-challenges/apac/japan