Legal and Management Implications of Expanding Business Internationally

What pertinent aspects of U.S. law should the company be aware of in its goal to do business internationally?

a. Mexico is one of three countries that signed the North American Free Trade Agreement (NAFTA), in 2008, which led to all tariffs and quotas being eliminated of goods exports by the U.S. to Mexico and Canada (The North American Free Trade Agreement NAFTA)

b. The U.S. Export Administration Act of 1979 yields restrictions on goods and technology where the exportation in question would harm national security (McAdams, 2015).

c. Any merger, acquisition or takeover that might result in foreign control of a U.S. business possibly will be reviewed by the Committee on Foreign Investment in the United States (CFIUS) prior to consummation (Lavey, 2009)

Assess the legal implications of moving business abroad specific to each country. What are the advantages and disadvantages of each?

Advantages

a. Labor wages will be less in Mexico as most of the payroll taxes are not required to paid in Mexico or here in the US for the employee outside USA.

b. Mexico is a part of the NAFTA deal signed by the US and Mexico, that would have less tariffs as compared to other countries. (The North American Free Trade Agreement NAFTA).

c. Shipping or customs delays would not be as frequent with Mexico as it would be so with Japan, being closer to the US. The charges would also be less.

Disadvantages

a. Our company employee that would need to visit Mexico will only be able to obtain a commercial business visa and will only be able to stay a maximum of six months. (Mexico City-United States Diplomatic Mission, n.d.)

b. Another disadvantage to consider is that the skilled workforce is not as big as the unskilled workforce. Mexican government has made it a priority to focus on education to increase skilled workforce, but it might take time initially that might require frequent visit from our skilled workers to fill the gap.  (The Pros and Cons of Manufacturing in Mexico, Canada and the U.S., 2015)

What are the ethical implications involved in this business decision?

a.  The public image of the company could be harmed in the sense that issues may arise due to cheap labor that is received from Mexico, that takes jobs away from American people. This could cause a decrease in employee confidence with the company and increase their job security fear.

b. Our company has a responsibility to its employee to ensure that their rights are not violated and that they are receiving wages and benefits like American employees. Similarly, having cheaper labor should not change the way we treat our employees at any part of the world.

c. Ethical implications involved in doing business in Mexico include bribes, corruption, and corporate ethics. In Mexico bribes are paid more often than expected and can occur “at all levels of Mexican society and at many different degrees” (Iwan, 2006).

Explain how other domestic companies have managed to comply with the U.S. laws related to this business decision in the past.

a. Mexmode plant employees protested as they were getting worms in the food cafeteria. There were complaints about workers being paid extremely low wages, inedible food, and corruption among union leaders which sparked a protest that threatened the public image of Nike and Reebok (Thompson, 2001). 

b. Apple Inc. makes sure they comply with United States laws by making it open to everyone about the suppliers that they do business with in the USA and any other part of the world. Apple has even disclosed a detailed list of where all their goods are being manufactured. (Apple Supplier Responsibility List 2019, 2019).

c. Coca-Cola consulted with “International Securities Regulation Committee” to make sure they will not be violating any regulations or laws and will stay in compliance before they do any type of company expansion.

How did these companies address potential compliance issues?

a. Nike pushed the Mexmode leadership to “abide by corporate codes of conduct that guarantee fair conditions for workers” (Thompson, 2001). This resulted in workers getting raises, get better quality food, and child labor was removed from the plant. (Thompson, 2001)

b. Apple Inc. is very proactive in getting to any non-compliance issues that may arise. There is an Apple Supplier Code of Conduct that is maintained by the company that all suppliers must follow. Apple Inc. Code of Conduct for the business and employees is enforced throughout the company as well. (Apple Supplier Code of Conduct 2019).

c. Coca-Cola created a department whose responsibility was to make sure they stay within the compliance and regulation. Any issue reported will be addressed immediately and kept documented.

References

• Apple Supplier Responsibility 2019 (2019). Retrieved from
  • https://www.apple.com/supplier-responsibility/pdf/Apple-Supplier-List.pdf
• Apple Supplier Code of Conduct January 2019. Retrieved from
  • https://www.apple.com/supplier-responsibility/pdfs/supplier_code_of_conduct.pdf
• Iwan, L. (2006, November 07). Corruption, bribes, mordidas, tips – Doing business in Mexico. Retrieved October 22, 2017, from https://leeiwan.wordpress.com/2006/11/07/corruption-bribes-mordidas-tips-doing-business-in-mexico/
• Lavey, W. G. (2009). New regulations for the committee on foreign investment in the united states - disclosures of cyber security plans and dealings with sanctioned countries remain uncertain.  Business Law International.
• McAdams, T., Neslund, N., Zucker, K. & Neslund, K. (2015). Law, business, and society. New York, NY: McGraw-Hill Education.
• Mexico City, Mexico - United States Diplomatic Mission. (n.d.). Retrieved February 06, 2016,
  • from http://mexico.usembassy.gov/doing-business-local.html
• The Pros and Cons of Manufacturing in Mexico, Canada and the U.S. (2015). Retrieved August 2015, from https://insights.offshoregroup.com/the-pros-and-cons-of-manufacturing-in-mexico-canada-and-the-us
• The North American Free Trade Agreement (NAFTA). (n.d.). Retrieved October 22, 2017, from https://2016.export.gov/FTA/nafta/index.asp
• Thompson, G. (2001, October 07). Mexican Labor Protest Gets Results. Retrieved October 21, 2017, from http://www.nytimes.com/2001/10/08/world/mexican-labor-protest-gets-results.html