International business ethics (Nike).

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Topics

• Ethical issues of international business life• Culture and business ethics• The ethical dimensions of the international business

operations • Discrimination and bribery in the international business

life– Law on the International Corruption – Ethical issues related to the productsThe ethical dimension of international price setting.

Ethical issues of international business life

• In international business partners have different– Value systems, – Ethical norms.

• The business man operating in international context should be aware not only – About their own cultural norms and culture,

but to be open towards other cultures and norms and well.

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Ethical issues of international business life 2.

• Differences in values could cause ethical problems..

– We should examine how the cultural differences could lead to ethical conflicts in business.

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Ethical issues of international business life 3.

• The most often ethical problems arising in international context– The effect of international companies, – Discrimination and bribery in international

business, – Issues related to products and prices.

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Culture and business ethics

• Because most of the problems arise due to the cultural differences it is important to define the meaning of culture and its relation to the business ethics.

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Culture and business ethics 2.• Culture is broadly understood as,

– objects produced by man, – Things, – Theories and values.

• Culture contains– The language, – religion, – law,– politics, – education, – Social settings– Values and ethical norms.

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Culture and business ethics 3.

• Every nation has its own culture, that has common elements with other countries.– However participants of international business life

encounter many different problems that are arising from the diversity of the cultures.

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Culture and business ethics 4.

• Cultural diversity is in the linguistic diversity.. – For example problems arising from translation

could significantly make hard the understanding of business mans.

– Just think about the problems that could be caused when a translator is not familiar with the professional language of a field that is used.

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Culture and business ethics 5.

• There are problems arising when translating a slogan for example:

"Come Alive with Pepsi" Vagyis

"Kelj életre a Pepsivel".

• In German translation this meant “Stand up from the grave!"

• In Asia: “Bring back your ancestors from death„10

Culture and business ethics 6.

• The differences in body language could cause problems as well. (for ex. yes and no in Bulgaria)

• The usage of body language is less conscious so more difficult to control (information from body language).

• Our face expressions, postures, motions could send unwanted messages to our partners that are easy to misunderstand.

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Culture and business ethics 7.

• Let`s see the proximity between the partners engaged in a discussion.

• The proximity– In northern Europe and in the Anglo-Saxon

countries is higher than – In South American and Arabic countries. This

difference could bring inconveniency in a negociation.

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Culture and business ethics 8.

• Nodding signifies NO in some countries and in England just means that our partner heard us (but is not necessarily agreeing with us).

• The time management could differ significantly. IN Germany and Japan punctuality is important, while in Mediterranean countries time is managed with less strictness.

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Culture and business ethics 9.

• Religious traditions could cause further problems. – An English fast-food chain did a market research in India before

introducing its hamburgers in the market, thus finally used other meet instead of beef.

– Because in India the Hindi religion forbids the use of beef meets for its followers.

– In Egipt and other Mohamedan countries there are huge holidays in between June and September because of Ramadan.

– In Mediterranean countries siesta time could cause unpredicted business breaks.

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Culture and business ethics 10.

• Praying carpets

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The ethical dimensions of the international business operations

• International companies are world wide companies that are operating without any ties to some nation or country or region.

• Companies like Shell, the General Electric, Siemens, IBM, General Motors – are characterized by word wide investment, production and sharing strategy.

• Those companies usually set up holding companies with an annual income overpassing the GDP of some small or developing countries.

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The ethical dimensions of the international business operations 2.

• Because of their financial power they are often subject to ethical critics. Which could be very diverse.

• Developed countries are criticizing them, because– They are setting up their labor -needy production plants in undeveloped

countries where the wages are lower and the environment protection less strict.

– Because of the use of high technology and automatization they use less and less man power, thus contributing to the raising unemployment.

– They are contributing to the increasing gap between the rich and poor countries with their activities.

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The ethical dimensions of the international business operations 3.

• Most ethical critics of the multinational companies has to do with the use of human workforce and that of the natural resources.

• One of those is the raw material bought cheep and the huge difference in the product final price.

• Ex: Black diamante – movie.• Fair trade movements.

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The ethical dimensions of the international business operations 4.

• Some critics accentuate that the multinationals are taking advantage of the host country working power without paying fair wages. – This is a very complex issue, as multinationals usually pay higher

wages than the local companies, thus the locals complaining that the multinationals are draining the good work force from them.

– Thus working for multinationals are complaining because of the mismatch between the high requirements and the low payments. (in Hungary Opel- and Suzuki factory.)

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The ethical dimensions of the international business operations 5.

• Multinational companies often use the latest technology that local companies cannot afford, thus fall behind in competition.

• They can afford to pay higher wages to their employee because of their higher efficiency.

• They use less man-power also because of the use of technology.

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The ethical dimensions of the international business operations 6.

• The multinationals enjoy tax- and other subsidies from the governments because they are setting up jobs.

• They are able to use different tax/lowering tricks due to their international characteristics:

• By relocating their incomes among different subsidiaries in a way that more profit to be obtained in countries where the tax is less.

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The ethical dimensions of the international business operations 7.

• Multinationals have the possibility to organize wide marketing and advertising campaigns.

• And have possibilities to set up wider commercial gift actions as well.

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The ethical dimensions of the international business operations 8.

• All those lead that the multinationals are criticized because of unfair competition in many countries and some are trying to take actions against it (buy local actions).

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The ethical dimensions of the international business operations 9.

• In India the government rejected the import of American agricultural machines. They argued that as a consequence the unemployment in agronomy would become higher.

• They decided that for the purposes of the local economy is better not to use the foreign exchange reserves to buy agricultural machines. With slow investment the employment would be higher.

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The ethical dimensions of the international business operations 10.

• Multinational companies are not unethical because of their nature, but their force and size can scare the undeveloped countries.

• That is why they should be more aware of the cultural problems that could arise due to their operations.

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Discrimination in international business

• In democratic countries discrimination based on– race, – gender, – Religion or– Other differences are forbidden by the law. – However there could happen, although they are

less often than in less developed countries.

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Discrimination in international business 2.

• In the American car market the Japanese car makers market share went up to 30%, Honda being the leader.

• In fair market conditions it is obvious that the best product wins the market, that is a better quality and satisfies more the needs of clients.

• Honda has better market positions than Chrysler. The fair strategy would be from the part of the Chrysler to analyze the success factors of the Honda (like less energy consummation).

• Instead Chrysler is filling the ads with discriminatory and xenophobe adds about its main competitor.

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Discrimination in international business 3.

• Some elements of their negative campaign:

“Would be good to remember 1945 when America and the whole world despised Japan. Wood be good to remember, that Japan

would be nowhere without the American generosity, humanity, forgiveness and yes, tolerance. “

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Discrimination in international business 4.

• The elements of discrimination are justified in some societies based on cultural customs, values and religious lessons.– In Japan and Latin-America for example women

are rarely part of the business life.– In Middle East foreign business women are not

welcomed as business negotiation partners, because women are not considered to be part of the business life.

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Discrimination in international business 5.

• Ethical problems arised from the South African apartheidpolitics as well.

• Many multinational companies as General Motors and Coca-Cola ceased their business activity in the same time in South Africa.– Some opposed this practice arguing that their leaving is causing

problem to the black population, as they are the subjects of the dismissals caused by the closure.

– While they can show a good example with their practice by developing the capacities of work-force and fair promotion of the black workers.

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Bribery in international business

• In many countries bribery is a common business behavior.

• In Middle East, India, Pakistan is called baksis, in Germany lubricating money, in Italy small envelope.

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Bribery in international business 2.

• Why they are paying and accepting bribes<• Two categories; – Because of the location of the company, – Because of the host country.

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Bribery in international business 3.

• Home countries considerations – why they give– Bribery is considered to be a custom cost in some countries, – There is no other way to do business in some countries, – In many countries there is no possibility to set up a successful

business without intermediaries, – The market competition is high and fast growing in international

business life,– the management wants to see results, – It is easy to hide such operations through the Swiss banks

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Bribery in international business 4.

• Host country considerations – why they receive: – The lure of the easy money, – Low wages– Everybody wins, the other part is forcing to pay.– Many times is considered to be a sign of

appreciation and friendship.

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Law on the International Corruption

• In USA they accepted in 1977-ben the Foreign Corrupt Practices Act (FCPA), which is prohibiting for the American companies to pay bribes for foreign government officials for business purposes.

• For such an act companies could be fined with 1 million USD and the managers imprisoned for 5 years.

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Law on the International Corruption 2.

• However the act makes possible the payment of small amounts of money.

• They accepted that sometimes it is needed to pay those small gifts in order to make the foreign government officials to do their jobs.

• Those allowed kickbacks could be:

1. Promotion amounts2. Intermediary commission3. The support of political forces4. Payments for important people

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Law on the International Corruption 3.

1. Promotion amount is a small amount of money or a gift for officials in charge for speeding up the administration

2. It is useful in India, where no case is solved without it. In Italy the import and export of the things is fastened with a small envelope.

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Law on the International Corruption 4.

2. Intermediary commission. • Is payed to an intermediary that is helping

the solution of a business in a non usual manner, the amount is more than the normal commercial amount.

• The intermediary often asks that the money to be payed in a foreign country (third country) bank account.

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Law on the International Corruption 5.

3. Support of the political forces. Those are legal but are payed to obtain certain business privileges.

4. Payment for important people that are helping to get tax relief, a business contract, overpassing the competitor

The payments are done true a foundation or in a third foreign country bank account.

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Ethical issues about the products

• In developed countries they prohibited the selling of some products considered to be harmful to the health of the consumers.

• Some companies still are selling those in other countries where there is no prohibition. (For example GMO products, milk with high hormone and antibiotic constituents.)

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Ethical issues about the products 2.

• It is the case of pesticides. • The manufacturers are arguing that in the war

against the hunger the benefits of the products are higher than their harm caused.

• Naturally the companies would like to profit from the selling of those products.

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Example - Nestlé

• Sometimes it happens that one product use well in one country becomes harmful in other in lack of reading competencies of hygiene conditions.

• For example the Nestle kinder foods that are supplements for regular eating are used with no harm in most of the countries.

• However when they were sold in Africa as substitutes for breast feeding, many baby died.

• It turned out that the moms being analphabets could not read the indications, furthermore they mixed the powder with contaminated water.

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Nestlé case

• It also happened that they added to much water thus the powder was not sufficiently feeding

• The Nestlé was also criticised because used a very agressive advertising campaign, presenting the breast-feeding as a primitive custom.

• Due to international pressure the company changed its advertising practice and supplied with new, clearer explanations the products.

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The ethical dimension of international price setting

• The differences in price setting could be and are usually sustained by to the differences in tariffs and transportation costs (Lidl).

• However using different prices could cause ethical dilemmas and could violate the law.

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The ethical dimension of international price setting

• If the price is to low, not covering even the costs of the product, it is called dumped price.

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Dumped price - causes

– Penetration in a new market and to get a big market share– Narrow domestic market for rational production size – Products that are technological obsolete in home market,

still valuable in other countries.

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3 Models of Management Ethics

Three Types Of Management Ethics

Three Approaches to Management Ethics

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Three Models of Management Morality and Emphasis on CSR

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Moral Management Models and Acceptable Stakeholder Thinking

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Making Moral Management Actionable

Important Factors• Senior management• Ethics training• Self-analysis

Functional areas of Business Ethics

• HRM• Finance• Sales and marketing• Production or service• Supplier/Customer relations• Property, intellectual property

Ethical Tips for Organizations• Develop a code of ethics.• Communicate code and bake it

into culture top-down. • Treat ethics as a process.• Create open lines of

communication.• Set good examples.• Educate employees – frame issues

through storytelling. • Value forgiveness.

Benefits of Managing Ethics in the Workplace

• Improves society.• Maintains a moral course in

turbulent times.• Cultivates employee teamwork,

productivity, morale and development.

• Acts as an insurance policy.

Benefits of Managing Ethics in the Workplace (cont’d)

• Establishes values for quality management, strategic planning and diversity management.

• Promotes strong public image.• It is the RIGHT thing to do!

Ethical Tips for Individuals

• Establish personal values.• Be aware of ethical events.• Develop critical thinking

techniques.• Be reflective.• Make it a priority every day.

“The simple step of a simple courageous man is to not take part in the lie, not to support deceit. Let the lie come into the world, even dominate

the world, but not through me.”

-- Alexander Solzhenitsyn

Four (4) useful theories to analyze ethics

• Individualism• Utilitarism• Kantianism• Virtue theory

Theories - Individualism

• According to Individualism (Friedman's Economic Theory), Friedman says, "The only goal of business is profit, so the only obligation that the business person has is to maximize profit for the owner or the stockholders."

Theories - Utilitarianism

• The major goal is to maximize the overall happiness.

• All actions are aimed at something good.

Theories - Kantianism

• Act rationally, do not act inconsistently in your own actions or consider yourself exempt from the rules.

Theories – Virtue Theory

If a business acts in a way that fits the virtue characteristics it is acting rationally.

The four characteristics are courage, honesty, self-control, and justice. Courage represents risk taking and willingness to take a stand for the right ideas. Honesty is represented in agreements and falling through with those agreements. Self-control represents good decisions and reasonable expectations. Justice represents hard work and fair practices.