A Paradigm Shift in Technology - Cloud Computing

Introduction:

In 1977, the first computer was sold to a private person - the commodore PET. Back then, only few people considered that millions of lives and processes would fundamentally change. Most people were rather confused by the emerging electronic technology. Eventually, most people took the initiative to understand and work with the computer. Only few that do not know either do not have access to this technology or are unable to learn it. Lives changed, operations efficiency increased, and communication was redefined.

Today, only thirty-five years later, it is expected that the computing industry will undergo a major paradigm shift. The  technology, which is considered to be responsible for this change is called ‘cloud computing’. Just as in the 1970’s there is a great amount of people today who are not aware of this new technology. Since it is new and complex, its advantages and disadvantages that it will bring to society are highly unknown - this may become a problem. Hence, this paper will reveal what cloud computing is, how it works, and what effects it will have on society.

Technology is one of the most innovative industries in the world. Innovations in this sector truly do have the power to change our lives. Creations such as; Facebook, cell phones, and the portable music player have definitely changed the world we live in. However as soon as one product comes along and revolutionises the market within a very short amount of time it is becoming outdated.

In the 90’s it was seen as very cool to have a cell phone, in the 2000’s and iPod was the must have product. However having this product now does not matter, you need to have the most up to date version of these products to be seen as up to date. It is amazing that not 10 years after these completely revolutionary products were released the original market changing products are now completely outdated.

History of Cloud Computing:

Even twenty years before the first computers were sold to the public, Herbert Grosch predicted, that  instead of using a computer in every one's home, it would be a lot more beneficial to use massive central data centers instead (Ryan, Merchant, & Falvey, 2011). The idea of cloud computing is not new. But today, through the emergence of the Internet, it becomes available and attainable. In 2006, Amazon released the Amazon Web Service which was a key development in cloud computing. Only four years ago, in an article published by Gartner, the potential for cloud computing “to shape the relationship among consumers of IT services, those who use IT services and those who sell them” has been clarified. Today, the largest IT corporations on the planet fight for the dominant position in cloud computing. Google is offering purely web based office features already, whilst Apple is integrating the same services across its hardware devices since one year. The paradigm shift triggered by cloud computing is a currently ongoing process, and not to be underrated in its importance. It is hard to say whether we are currently at the peak, or just at the beginning of the process but in 30 years from now we will know - just as in the 70s when the first Commodore was sold. We will most certainly look back on today’s time, and see how important the 21st century was.

What is cloud computing and what does it mean today?

Cloud computing refers to the provision and management of applications, information, and data, delivered as a service, where the hardware and software is called a cloud (Armbrust et al., 2010). There are three main types of cloud computing, namely infrastructure as a service (IaaS), platform as a service (PaaS), and software as a service (SaaS). The first form is the most basic model of cloud computing and providers offer computers, storage, firewalls, networks, etc. In the PaaS, providers offer the computing platform, usually including a database, web server, and development tools. In SaaS, cloud providers install, operate, and manage the application software in the cloud. The users then access the cloud from so called cloud clients. In essence, cloud computing provides a way of accessing computing services independent of your location or the hardware you use. Users no longer have to store information and data on their computers or mobile devices because that information can be easily accessed via the Internet. Further, this means that users no longer have to download and install software on their computers, freeing up internal memory and simultaneously reducing energy consumption and costs (www.independent.co.uk, 2010).

Most of us already use cloud computing in one way or another like on a personal or business oriented basis. A good example is Google mail: Google mail provides its users with access to their e-mails all over the world, no matter whether they have their own computers or laptops with them. Since a cloud is accessible from anywhere and the e-mail service is stored in the cloud, it is completely independent from a user’s physical location. This basically makes local storage place redundant. Storing files, such as photos, videos, or documents on your computer, imposes restrictions and makes it impossible to access them except from your own computer. Storing them in a cloud, however, gives you the freedom to access them from anywhere. this is the shift that technology has made in this cloud computing era. From accessing emails from around the world to everything on your hard drive. One downside of this kind of storing is that user put their lifes “out there”, somewhere in the Internet and the security of your data might be a concern. Security and ethical issues will be discussed in more detail in a later section.

Cloud computing also brings along some advantages to companies and businesses that use it. For example, it enables working in virtual offices and facilitates collaboration between employees in different countries. Using Google docs for example, employees can work on the same piece of work simultaneously and directly see any changes that are made. Since nowadays more and more companies are organizing projects on a global scale, cloud computing is a vital tool to simplify communication and team work among employees in globally dispersed locations (Siebdrat, Hoegl, and Ernst, 2009).

Since companies can buy cloud computing capacity when they need it and how much they need, it is a very convenient and can reduce costs for companies as they do not need physical devices anymore (www.technobuffalo.com, 2012).

A Technological Paradigm Shift - Cloud Computing:

When IBM and Apple started selling their first computers to the public, the major focus was to bring as much computing power to the individual as possible. Every household and company had its own hard-drives and processors. The pioneers of cloud computing predict, that this will soon be over. No more hard drives and processors at the individual level? How should that be possible? Billions of dollars have been earned in the past and continue on into the future.

Cloud computing seeks to centralize all processing and file storage tasks to a huge central server farm. In a century in which the Internet is almost considered a commodity, at least in the more developed nations, computing power and storage space do not have to be with the individual anymore. After all, most computers in peoples homes are on idle mode most of the time. Most of the computing power is absolutely unnecessary. Hence, from a technological standpoint, the paradigm shift is predicted to take all the processing speed and storage capabilities away from the individual. Instead, it will be integrated into a gigantic server farm. The only device that the user will need in the end, is a screen which provides fast access to the Internet. It can be imagined in the following way: Instead of storing your groceries and valuables into your own storage room at home, you simply put it into a massive storage house which a company provides to you. This is where the philosophical dilemma begins.

    

A Philosophical Paradigm Shift:

How sure can you be, that the company to whom you gave your valuables to treats them confidentially and with integrity. After all, if the company that stores your data could do a scan on what you store in their space. They could easily figure out what your purchasing patterns are, when and where basically. It could then sell those information to the little store around the corner who would then know how to approach you in order to sell his goods. With the rise of cloud computing, our personal hard drives and even physical filing cabinets are set to be a thing of the past. We hear a lot about the disadvantages of these storage methods, however, if you keep all your personal files in a cabinet in your house you know exactly who has access to your documents without exception. As soon as these files go online, you can never be 100% sure who is looking. Hackers are not the only worry at who could be viewing your files without permission, as the company in which you are trusting to store your files could theoretically have access to them. There have been recent conflicts with companies such as Google on their privacy policy over allegedly scanning people’s e-mails. Scanning consumers e-mail can prove a very useful tool. It was found in 2007 that 40% of Americans sent  an e-mail to a company telling them what they thought of their product. (Fleishman-Hillard, A. 2007) By way of scanning these e-mails, this allows companies to target consumers with advertisements based on their preferences and opinions on certain products.  With concerns over some of the biggest names in computing’s privacy policies, this casts a shadow of doubt over the whole industry. This is especially seen when the companies do not go a huge way to reassure their consumer as seen in this quote;

“Nothing you do ever goes away, and nothing you do ever escapes notice. There isn’t any privacy, get over it” (Vincent Cerf, 2008)

However, with the new younger generation who have much more trust in the Internet cloud computing is still set to take over as our means of storage.

On the other hand we live in an aging population with more and more people over 50 logging on and even spawning the term “silver surfer”. The older generation are much more wary of having their details online  or putting any information about themselves on sites such as Facebook so thinking they will be willing to give up their physical storage space and store their entire online identity in a “cloud” after a lifetime of using physical storage spaces is unlikely it will see mass adoption.

Implementation of Cloud Computing in Businesses

Amazon is one of the most well known users and integrators of cloud computing. Amazon has created and used web services, a half-dozen services including the Elastic Compute Cloud, for computing capacity, and the Simple Storage Service, for on-demand storage capacity. Google another well known innovator for cloud computing programs and services.  Their biggest innovation includes Google Apps, which offers a set of online office productivity tools including e-mail, calendaring, word processing and a simple Website creation tool; Postini. Google Apps was the company's attempt to branch out beyond the consumer search market and become a player in the enterprise. Google unveiled the enterprise version of Apps in February 2007 in a competitive strike against rival Microsoft (Brodink, 2009). Microsoft, a smaller player in the cloud computing game, has created a operating system and developer services called Azure. Software companies such as Epicor, S3Edge and Micro Focus are among the early customers using Azure in creating cloud apps.  These are just a few examples of real life implementation of business using cloud computing.  Understanding these features can help developers to quickly adopt the appropriate technologies and develop their clouds effectively. (Antonopoulos and Gillam, 2010)  

              

Is Cloud Computing Secure?

Many businesses, organisations, and educational systems started relying on cloud computing for storing, backing up, and sharing data amongst employees. but we must ask ourselves, is cloud computing secure and reliable enough?

Due to the growing importance of this phenomenon, different solutions have been enforced in order to protect all the data of different customers gathered and stored.

In comparison to traditional computing, which usually backs up data during the night, cloud computing saves at the end of each transaction. In this way if a hardware device malfunctions or in general if something fails in the system, it is possible to restore all files with the latest updating.

For clients who doubt the security of the data transfer between the cloud and the computer which accesses it, an encryption is applied to the data before submitting it. This is done in order to protect the files from the many different servers that can try to access the data. Finally, everybody can run its own back-up. These are safety measures to help ensure cloud computing stays safe and belongs to the initial user.

Because of the huge risk of losing data or being hacked, providers take the security issue with much more concern. As time goes on, even more stringent measures will be taken in order to protect this system - eventually public policy will have to deal with online security matters.

Companies providing cloud security have even stated that it is safer than most enterprises. However every kind of security that we have been told is unbreakable has been broken; Gmail was hacked not long ago, Wikileaks managing to leak documents from the US government, and PlayStation network was also hacked and shut down in the last year. For every genius security program created, there will always be equally very intelligent hackers working to tear down these security walls. And especially when the prize of breaking into a cloud computing server will have such a sizeable reward. This is a scary thought as cloud computing will hold basically our whole online identity which to hackers is extremely valuable. Whole identities could be stolen  as a matter of fact.

Cloud computing is one of the technological waves of the future. But what about legal offices and law firms? Legal ethics consideration must be done even for lawyers using this digital database. Is it secure for all clients’ data, to store all their information in it? How can the individual customer be sure that their own data will never be taken and used for other purposes and by other people then their own lawyer? This is the security issue that the ABA Commission on Ethics 20/20 is arising from the use of this technology. Instead of presenting a list of restrictions to all the lawyers regarding the confidentiality related obligations while using this system, Bar associations, so far, have opted to offer more guidance on what to look for in a cloud computing provider.

              

http://www.infoq.com/articles/state-of-cloud-applications

The Future of Cloud Computing

It is believed today that the hype for cloud computing has driven its popularity, but what is the actually driver behind it that will be able to continue for years? One factor that is driving the demand for cloud computing is the explosive growth of data in recent years. According to projections by Century Link, by 2015, the world will see a four-fold increase in the amount of data being created and replicated. Once this happens there needs to be a way to store this data safely and allows multiple users to access and use. As time passes, and technology progresses as well, cloud computing will become better, faster, and smarter. There is plenty of room for cloud computing in the computer infrastructure. This is ongoing building idea which is new that there is bound to be failure in which the next years will be testing years to work out all the bugs. Once a greater population uses this technology bugs will become more apparent and should be able to be fixed. In order to create security and trust when using the cloud, there must be regulations set up to enforce such rules in which single sign-on, and identity-based security will be used (Cantu, 2011). Many companies have found that when switching to cloud computing there has been reduction in IT services and reduction in capital costs. But the most important factor in using this technology is efficiency. According to Forbes, it is estimated that, “by 2020, U.S. organizations that move to the cloud could save $12.3 billion in energy costs and the equivalent of 200 million barrels of oil.” With oil prices on the rise this could be a real cost saver for companies. Industry analyst Krishnan Subramanian says in coming years that there will be a convergence of mobile, cloud and social media. These are the three most important medias we have in the 21st century and they could all potentially converge into one multifaceted complex package.  

Cloud computing is the new generation in technology and data housing. In the next few years it will be become more user friendly in which all consumers can use and enjoy.

Cloud Computing and Business Model Innovation

It is widely known that the cloud computing is, and will be, disruptive in the technological world. Yet today few companies realise the great importance of this system for the business model innovation of their enterprises. Managers can be distinguished in three different categories depending on their proneness through the topic and their willingness to change. They are optimizers, innovators and disrupters. In the following part we will hence analyze how different manager personalities may use cloud computing to innovate their business model:

Optimizers are those who would exploit the new system offered by cloud computing to enhance and slightly modify the value chain, their customers, and their value proposition. They prevent the high risk linked to a failure due to a different structure from the one they are used to: they would rather realise lower market share and revenues than work in an uncertain environment. With this approach it is possible to increase the flexibility and the efficiency of the company offering the customer different experiences linked to the trial of the product, or projecting broader sets of products or additional services, share the resources and give them more opportunities.

Innovators on the contrary are ready to change their structure through the use of the cloud system. This is done by modifying the revenues system and even changing their role in the industry and entering in similar business too. This combines elements of the value chain to gain competitive advantage. This will lead to a greater ability to attract customers because of the highly innovative solution and to create a deeper integration between client and company.

Finally, disruptors are the one that creates new needs, so new business, new market and consequently new approach. Usually doing so, they will rise a need in people’s mind and their company is the only one able to provide the necessary product to satisfy them. The result is that they will not only be the first mover, but they will capture the unique competitive advantages due to that and so very high revenues.

These three different characters are distinguished by different behaviours.

Talking about the customer value proposition and the value chain, those three characters will have different positioning.

The optimizers would enhance the proposition, the service currently offered, and improve the value chains increasing efficiency and improving the ability to collaborate and to partner; the innovators would extend their products and channels offer, while they would transform the value chain by not only increasing but even modifying their capabilities, in order to enter in a new industry or to change their positioning in the present business; the disruptors would invent an entirely new proposition and consequently would create expressly a value chain for the industry.

Competition to Cloud Computing

It is the same story with data storage; the storage units get smaller and the storage gets bigger; we went from a cassette tape to CD-ROMs to Hard Drives and extremely small USB sticks. Today the USB sticks and Hard Drives available can carry large amounts of data and are extremely portable as hard drives can fit easily into your bag or a USB sticks can be the same size as a French fry so there is no real problem with these methods of storage. However Giovanni Dosi argues that in the technology industry exists “Technology push” and “Demand pull” factors (Giovanni Dosi, 1982) meaning that even though there is no problem with the products that are on the market consumers always want new gadgets and tech companies are continually trying to innovate so as the cloud is the newest innovation; cables and hard drives which we have spent years relying on to store and transfer our data will be marketed as inefficient at doing the job they have done so well in the last decade or so and pushed entirely out of the market. There will come a time when you will be unable to buy these products and cloud storage will essentially be the only option.

Conclusion:

Without a doubt, cloud computing will change the way in which humans interact with technology. As with every big change, much uncertainty will follow. We are currently in a time when the majority of individuals are only now discovering cloud computing and its potential power and influence. However, it is forecasted that in just a few years time cloud computing will be a technological norm and the need for expensive hardware will most likely decrease whilst the need for internet capacity will increase. In such tough economic times all businesses are looking for anyway in which to cut their overheads, getting rid of this costly hardware could very well be one of them aiding in the mass uptake of cloud computing .

Computing power will be more centralized and so will data storage. The ethical problems that centralized data storage may bring, are at hand and will certainly play a major part of the industries future but may also affect political decision making and public policy. There are many risks but also great benefits to be expected.

What we now know is that in a very close future many systems will be based on it: from companies to groups of individuals with some feature in common. Unless it can be proved that cloud computing is definitely not a secure approach to store information, it is likely to become a database of worldwide importance.

The idea and concept of cloud computing will in fact take time for people to understand and use this technology. The younger generation will have more motivation to use cloud computing as will generations to follow.However the older generation will most likely be slower in the uptake of cloud computing due to their greater caution of storing information online.

References:

Antonopoulos, N. Gillam, L.  (2010, Aug 3) Cloud Computing: Principles, Systems and Application.

Armbrust, M., Fox, A., Griffith, R., Joseph, A.D., Katz, R., Konwinski, A., Lee, G., Patterson, D., Rabkin, A., Stoica, I. & Zaharia, M. (2010). A View of Cloud Computing, Communications of the ACM, Vol.53, Iss.4, p.50-58.

Briefs, W. (2011, February 24). Cloud Computing and Client Confidentiality – An Ethics Clearing on the Horizon? Retrieved March 09, 2012, from Web Marketing for Lawyers: http://adviceco.com/blog/legal-news/cloud-computing-and-client-confidentiality-an-ethics-clearing-on-the-horizon/

Brodink, J. (2009, May 18). 10 cloud computing companies to watch. Retrieved from

http://www.networkworld.com/supp/2009/ndc3/051809-cloud-companies-to-watch.html

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Cantu, A. (2011, December 20). The History and Future of Cloud Computing. Retrieved March 10, 2012 from: Forbes,http://www.forbes.com/sites/dell/2011/12/20/the-history-and-future-of-cloud-computing/

Fleishman-Hillard, A. (2007). Rethinking Corporate Social Responsibility. National Consumers League Study, 11.

Fujioka, J. (2012, January 30). Et ics of Cloud Computing for Lawyers, Security and Tips, Subject of New ABA Book. Retrieved March 09, 2012, from abaNOW: http://www.abanow.org/2012/01/ethics-of-cloud-computing-for-lawyers-security-and-tips-subject-of-new-aba-book/

Geelan, G. (2011, November 23). Retrieved March 10, 2012 from Cloud Computing Journal, http://cloudcomputing.sys-con.com/node/2040343

Giovanni Dosi. (1982). Technological Paradigms and Technological Trajectories. Research Policy. p147-162.

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Plummer , D. C., Cearley, D. W., & Smith, D. M. (2008, June 19). Cloud Computing Confusion Leads to Opportunity. Gartner , 1-4.

Ryan, P. S., Merchant, R., & Falvey, S. (2011). Regulation of the Cloud in India. Journal of Internet Law, XV (4), 1-13.

Siebdrat, F., Hoegl, M., & Ernst, H. (2009). How to manage virtual teams. MIT Sloan Management Review, Vol.50, Iss.4

Source Seeker. (2008). Vint Cerf explains privacy remarks. Available: http://www.networkworld.com/community/node/30723. Last accessed 12/03/12

Technobuffalo (2010). 5 examples of cloud computing. Retrieved March 10, 2012 from: http://www.technobuffalo.com/internet/five-examples-of-cloud-computing/

The Independent (2012). What is cloud computing and how do I use it?. Retrieved March 10, 2012 from:

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"At least we can work!" - Ethical thoughts on globalization

 An overview of Nike’s business:

Nike, previously known as Blue Ribbon Sports, is one of the most important brands for sports equipment. There are more than 700 shops around the world and offices located in 45 countries outside the United States.

Most of the factories are situated in Asia (around 800,000 people work for them), but actually no product is made under the brand Nike there. The company has many contracts with local factory owners for the manufacturing. Nike claims to be in the business of “marketing shoes”, not in producing them, but it establishes the design, the materials and the price for the different products.

 

Nike’s Ethical Commitment:

As the biggest shoe company in the world, Nike describes itself as an industry leader. Their Code of Conduct states: "in the area of human rights... in the communities in which we do business, we seek to do not only what is required, but what is expected of a leader."

Sweatshops - An ethical problem:

Due to some stories about working life in its factories in the 1990’s, the brand has been accused for child labour, bad working conditions, low wages, and forced overtime. In some cases, there were reports of physical abuse issues as well as exposure to dangerous chemicals and poor air quality.

Nike used to try to avoid responsibility for factory conditions by saying they were "just the buyer".  But this in fact pointed out to the media their lack of attention in respecting human rights.

According to the Boston Globe, “Based on interviews with more than 4,000 workers in Indonesia, the report… found widespread verbal and physical abuse, shockingly high rates of sexual harassment, forced overtime, denied sick leave, inadequate access to medical care, and two reports of worker deaths”.

The main reason why the company decided to expand its business in countries like Vietnam, Indonesia and China is due to the fact that there are no regulations regarding living conditions.

What a Sweatshop Looks Like:

The Educating for Justice group showed that between 50 and 100 percent of Nike factories require more working hours than those permitted by the Code of Conduct. In 25 to 50 percent of factories, workers are required to work 7 days a week, and in the same percentage of factories, workers are still paid less than the local minimum wage.

In Indonesia during 1999 Nike raised the salary to 265,000 Rupiah (US$30) after the government imposed regulations to increase the minimum wage per month to 231,000 Rupiah (US$26). Even if the company fixed a salary higher than the one legally established, the money that it provided its workers were not enough to guarantee them acceptable living conditions. “If I don’t work overtime, I can’t survive”, says Baltazar at PT Hasi Nike factory in Jakarta. He worked an average of 40 overtime hours a week. The idea of someone working  that many hours of overtime a week, just to survive, should not be acceptable in the twenty first century. In fact, thanks to a study by Global Exchange, it has been proven that at least 332,000 Rupiah per month are necessary to provide the basic needs to a person. Due to the fact that each worker must cover the needs of his family, a minimum of 664,000 Rupiah per month is necessary. How can that be acceptable when we are talking about Nike, a company with such high profits that could afford twice the wage without increasing the price of the product?

Camera crews went into a sub contractors factory, Hytex Apparel, in Malaysia and uncovered how terrible working and living conditions were. Recruiters would go into countries like Bangladesh and bring over desperate men and women that were willing to work in the factory which were promised a ‘better life for both you and your family.’ Upon arrival their passports were confiscated, and were charged a arrival fee (equivalent to one years pay). If they wanted to leave they had to pay back their ‘debt’. This was impossible and therefore they were unable to leave. They were then forced to sign a contract which was in a different language then their own. Living quarters were 26 men per room with one common toilet and trough which were connected to the area where food was made. After this news cast was released Nike was quick to react and claimed they had not idea under which conditions these people lived. It was ‘unexpected’ and they said they would relocate and move workers. This is only one example of many factories that supply Nike.

From 1998 Nike made many changes in their factories in order to improve the health related issues in its plants. They substituted some petroleum based products with water based ones and provided better training for the workers, which in the end was not sufficient. The factories didn’t respect the US Occupational Health and Safety Administration (OSHA) standards: the company kept forcing its workers to be overexposed to hazardous chemical products, heat and noise and respiratory problems were still an issue.

Can Child-labor be Morally Accepted?

One of the most debated issue is Nike’s use of child labour in product manufacturing. Some practices that are unethical in one environment can be acceptable in another. This means that it might be acceptable for children in Vietnam to work in factories, while in the United States this is not. As Cavett Goodwin (2007) already mentioned that there is no set definition of CSR to which all agents follow. So the question is - is it acceptable for Nike, being an American based company, to adopt the labour regulations of the country they operate in? Or should they keep the same standard as home? Is it ethical to make them manufacture products that will be sold all over the world, even in countries with different culture and that condemn this practice?

Some experts argued that a possible way to end child labour is to buy more often whatever children produce. This will mean more products sold, more revenues for the company and so higher wages for the workers, increasing the level of income per family and so benefiting the families of the children as well as the nation.

If the number of goods sold increase, wouldn’t it be more probable for a company to exploit the idea of using children labour? If sales rise and the salary of children is very low profits will have a sharp increase. As a consequence using child labour will turn out to be a good choice and will be even more encouraged, causing a boost in birth rates, slavery and sweatshops. If this will be the case, the black market of children will have a big boom, not leading the children issue to an end.

The Moral Conflict:

Is it unethical deciding to set new plants where costs for the workforce are lower, or is it ethical if we are doing that in developing countries? It could be ethical because it encourages investment and improves living standard conditions. But in the end does this positively affect the living conditions? Are the low wages only low in comparison to the averages in the developed countries, or are they very low even for the Asiatic world? Is this a collaboration with new countries or exploitation?

It is understandable to set new plants in those countries for the cost advantage, but how can a huge company like Nike decides to start the business there. Is it because of the few and weak protective labour laws? How can the fact that the workers can’t form independent trade unions, attract a business?

We all live in one world. However, across this whole world, there’s a whole spectrum of religions, cultures, and customs.So what is acceptable in one country could very easily be considered unethical and unacceptable in another country. This poses somewhat of a problem to companies such as Nike. They operate in so many countries across the world in which their values must be consistent across their whole organisation.

The biggest conflicts arise between the Western countries, in which cultures are for the most part simila,r and the Asian countries, in which they have dramatically different cultures. Countries such as Japan, even though entering the global market and being a big player in globalisation, still have very unique characteristics on how they do business. Due to different nations having such unique business characteristics then the ethical views of these businesses obviously differ. For example bribery is very much illegal and frowned upon in the Western Nations however in countries such as China this is widely accepted as a natural part of business (Minxin, 2007).

“In some countries, bribery is part of the fabric of life and no business can be transacted without it. Without knowing whom to pay to grease the wheels, companies face frustration and failure” (Pitta et al, 1999). Managers in companies in the Western world if found to be involved in bribery would most definitely be fined and face jail time, whereas their counterparts in Asia may be given a verbal warning or just have the matter ignored. This makes proper ethics very difficult to define as Nike operates across all of these countries and therefore must consider all views.

Confucianism is an important part of life in many Asian cultures, it has had a huge effect in China and its influence has even extended to other nations such as Korea, Japan and Vietnam. These teachings are centred on how we should live our lives and relationships are a central part of this (Religionfacts.com, 2010).

Relationships are hugely important in many Asian countries especially in business. However, in Western countries relationships are much less important in business as people are much less collectivist.

The graph here shows that the top three countries in terms of individualism are America, Australia and U.K. whereas some of the most collectivist societies are Taiwan, Cambodia and South Korean. These are all Eastern-Asian countries showing that there is not just a difference in how these countries do business but also that there is a difference in how people view everything even the relationships with their family.

Further, we can look at what cultures actually value. As you can see from the table Japan and the Arab countries are much more about being together, whereas the US values individualism much more highly.

Age also appears to be a big factor in Japan and the Arab countries and this doesn’t even get a mention from the USA. (Elasmawi & Harris, 1993)

The dilemma of managers: Locally adapt or enforcing own values:

Nowadays, most large multinational companies have factory sites in Asian and other less developed countries in order to benefit from cheap labor and increased profits. The moral dilemma that many managers face when setting up a subsidiary in those countries lies in the decision whether to adapt and adhere to local working and ethical standards, or to employ their own. In some Asian countries child labor and poor working conditions might be acceptable, but in the western part of the world people do not appreciate such conditions and neither should MNCs. As described by Thomas Donaldson (1996), no culture’s ethics are better than any others’, suggesting that there are no international rights and wrongs concerning ethics. Further, there is also no international consensus on standards of business conduct. However, there are some core moral rules that should guide each and every one of us, namely to respect the human dignity, to respect basic rights, and to be a good citizen. These values apply to the western as well as non-western countries and especially countries that set up operations in less developed countries which should respect these values. Therefore, in our opinion foreign companies that have operations in less developed countries should adhere to western standards, even if that means reduced profits due to slightly higher wages and better working conditions. It is morally not justifiable to let workers work in sweatshops and die because they have limited access to medical care or make them work more than eighty hours per week in order to survive. Our values and ethics are strongly influenced by the particular culture we grow up in. So for managers in large companies, it should be natural to conduct business according to western standards. They have to respect the respective local traditions, but should not exploit local workers in order to boost profits.

Moreover, multinational companies should reconsider the incentives there are sending to their subcontractors and responsible managers. If they only focus on profit maximization, sooner or later they try to save money by mistreating workers. Instead, they should emphasize ethical and sustainable operations. This should be done especially when more advanced companies, such as Nike, with superior knowledge enter low cost less developed countries. Unfortunately, this is not always the case. The workers in one of Nike’s subcontractors in Malaysia, for example, faced very poor working conditions and worked overtime in order to make a living. Since Nike claims to be a social responsible corporation, they should at least check the factories from which they source their products and make sure that all of their business partners comply with certain working standards. If customers were aware of the conditions of the workers and knew that, for example child labor was used in the production process, people who are against child labour would consider buying a alternative products to Nikes as a result of a difference of interests. In the 90's this is what exactly happened to Nike as a result of this information of child labour went Nike went public.

Summary:

The example of Nike has shown that a multinational company has to deal with issues which go far beyond regular business practices. In today's society, ethical and moral issues determine a companies success more than ever. The problem is that different cultures interpret moral and ethical behavior much differently. Often the views collide, and it is difficult to find common ground.

Nevertheless, we argued that a multinational company needs to take full responsibility for its actions. As Chase-Dunn (2001) stated, “The modern world-system has always been, and is still, multicultural, the growing acceptance of western values of rationality, individualism, equality , and efficiency is an important trend of the twentieth century” Hence a multinational enterprise should aim to integrate its home-countries moral and ethical values as much as possible. It is wrong to exploit people in an underdeveloped country for the benefit of western consumerism.

EXAM RELEVANT EXTENSION

IGSC would like to thank our fellow students for the in-depth and thought provoking comments and we would like to give some feedback on some of the points which really stuck out to us when reading back over the comments.

A good point brought up by a fellow student who talked about when human rights groups raised public awareness on labour conditions in the 90’s in Africa. As a result many corporations pulled their operations out of Africa causing many individuals to lose their jobs causing poverty starvation etc. For them, at the time, their job was very important and crucial for survival. As a western nation we worry about conditions and they worry about having a job. They don’t know the standards that are set in the western nations so they believe that this is normal.

Another comment made reference to how we should consider that in some of the poorest counties, like Indonesia, when Nike puts in a factory that even though the living standards are not up to western standards they are improvements to what they were living before. Just because the standards are not up to what we could consider acceptable, doesn’t mean that the workers are in poor conditions. It is all relative. Also the media has a huge impact on what is done about these issues. People only hear and see what is really going on in these factories because of what they see on the TV and read in the news. But in reality, does the media put a spin on the real story? Do they exaggerate the truth in order to get a good story and ratings? This is something to think about when analyzing the impact these MNC have on these countries.

Furthermore implementation of extraterritorial laws is possible. This is when a nation attempts to apply its laws to activities outside its own territory. Many MNC operate from less developed countries because of their relaxed laws and regulations. It may be more ethical and moral thing to try to implement and enforce an extraterritorial law, but then this would defeat the purpose of operating in a different country. If same regulations and laws were imposed then why would they spend the extra money to move to a different country? They could then just use the labour supply available in their home country.

The team was impressed that Nike has implemented and created a whole team to cover social responsibility in the countries it operates in. Taken from nike.com 
“Corporate & Social Responsibility; What We Offer
If you have a vision for the brand and a heart dedicated to improving the future of the world around us, a job in Corporate and Social Responsibility may be the perfect fit. As CR practices expand, we see the positive impact we can have in our world. Working in Corporate and Social Responsibility at Nike means you thrive on finding solutions, using creativity and harnessing innovation. From auditing overseas factories and setting and measuring ambitious climate neutrality targets to tackling waste throughout the manufacturing process, we work both within and across business units to get to the root of problems. Learn more about the jobs in Corporate and Responsibility with Nike today.”
So when a blogger quotes that Nike is currently being egotistic this is found to be false. Post mid 2000’s Nike has taken a stance against the allegation and tried to improve their credibility and status.

Another interesting point which was made was that if child labour was abolished today this could be more detrimental to the individuals affected by child labour than if it was allowed to continue, this team in fact agrees with this fact.

If child labour was outlawed right now many families would be left unable to support themselves and be left starving, even though it is a terrible decision to make but this team felt that it was important for a family to be able to eat an survive rather than the child receive an education. However in the 21st century this choice should never have to made and child labour must be eradicated not through immediately banning this form of labour but through MNC’s working with the governments of these nations and coming up with a strategy together so that children of poor families can receive an education in order to give them a shot at a real career while not leaving their family with no food through some form of government initiative. Sadly this team is aware that this will be no easy task to complete and will take a considerable amount of time.

Lastly the final point brought up in which we wold like to address stated foreign-owned and subcontracting manufacturing companies in low cost labour countries today tend to pay higher wages than local firms. This is in fact true in some cases and this was in fact mentioned in one our earlier blogs; it was found that individuals working in the foreign owned factories such as Nike could be earning three times as much as those working in the government run factories and after three years in foreign owned factory employment could actually be able to afford a car in order to drive to work. The data found to support this was from one occasion in Vietnam and by no means can we generalise across all foreign owned factories that they will pay higher wages and have better working conditions than the local factories but on some occasions yes this is indeed true.
On a final note we must not forget that on the occasions in which foreign owned factories do outperform their local counterparts this is only on a relative basis and the conditions and pay are still far from the desirable level in which many employment rights campaigners are looking for.



Works Cited

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