MNC’s need to understand the mindset of the emerging economies. A product that works in the developed world may not work in the developing world.

Similarly advanced and current labor/employment laws in a home country may not deem fit in the host country. The key is to balance the laws with the host country’s economic development plans that addresses issues of manpower & labor, training, R&D transfer, innovation, standard of living, health, safety and environment etc.

Here’s a thought to chew on:

“What is legal may not necessarily be moral”.

Issues have evolved within the overall context – from child/forced labor and the working conditions in developing world to the current challenge of greening of the supply chain in those very countries.

Here are some negative examples to illustrate:

  • In the 90’s Nike faced a lot of flak for employing child labor in its supplier factories in Pakistan, and failed to address the issue properly.
  • Mattel’s example of Lead in the paint from the toys coming from Chinese factories was major issue reflecting the quality standards there.
  • Shell’s case in Nigeria – Shell even though complying with the local laws, which were quite antiquated from western standards (long abolished in the US), was not creating a positive impact.
  • Levi’s faced an incident of child labor in the 90’s in one of its supplier factories in Bangladesh. They took some positive action in that regard – Levi’s paid for the education of those children and gave the option to come back and work after reaching working age.
  • And the most recent Apple’s supply chain issues in Chinese factories

Here are some examples of a positive impact:

  • Microsoft chose India as the first offshore R&D center outside of USA.
  • Patagonia’s best factory in terms of quality is in Hanoi, Vietnam
  • Gap has factories in a place called Lusutu, Africa where 1 in every 3 workers is HIV +ve. They can’t avoid this fact – and they have addressed it as part of their overall social corporate responsibility.
  • Starbucks works in African countries where they source their coffee from – help farmers with new shade growing practices, drip irrigation techniques etc.

Making a fortune at the Base of Pyramid?

Then, there is whole business opportunity at the Base of the Pyramid (BOP) in developing countries, which is increasingly being seen as an opportunity to co-create business models and products that not only serves the BOP needs but also becomes an ideal incubating place for tier 1 disruptive technologies (in words of Stu Hart).

That BOP is the breeding ground of the 21 st century is demonstrated by GE. GE was able to innovate new medical equipment to be sold in India and China at much reduced costs as they removed much of the frills from the same machines sold in developed countries at much higher prices.

Also read Behind our sleek ipads and iphones – China & CSR

Sometimes MNC’s are criticized for exploiting poor people by selling them stuff they don’t really need – but now companies have the opportunity to build BOP businesses that are mutually beneficial to both companies and the local communities. Innovations are occurring at BOP and trickling up – instead of the other way round. Grameen Bank (Micro credit) in Bangladesh is a classic example.

Project Shakti by Unilever in India is a classic BOP example in which women are empowered. SC Johnson in Africa and Dupont in India have set up BOP programs and business models.

But for companies, is there really a fortune at the base? Not really! Co-creation projects may takes years if not decades to materialize and start paying back.

Fortune or not,  MNC’s have a fantastic opportunity to expand into emerging economies and make a positive impact due to their rising middle class and their consumption patterns…aping the west. And that is where I feel the problem lies. I see growth happening all over India – world class shopping malls, management institutes, training centers, luxury brands, consumer electronics et all- but it is all in isolation, in pockets. We also have open drains, slum dwellings, homeless children right besides these institutions. I had written about it in one of my earlier posts “Is India’s growth Sustainable?” and captured also it on a slideshow.

So, the question evolves:

Do MNC’s now also need to be morally accountable as well (apart from being legally responsible)?

Here is a link to some of the MNC’s that have large exposure in working in the emerging/developing markets.

Related reads:

If you benefited from this post, why not email it to a friend or share it on Twitter or Facebook via the share button below. Thanks for taking the time!