International business ethics
(Nike).
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 products
The ethical dimension of international price setting.
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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.
5
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„
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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.
2.
3.
4.
Promotion amounts
Intermediary commission
The support of political forces
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
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Three Approaches to Management Ethics
6-18
Three Models of Management
Morality and Emphasis on CSR
6-19
Moral Management Models and
Acceptable Stakeholder Thinking
6-20
Making Moral Management
Actionable
Important Factors
• Senior management
• Ethics training
• Self-analysis
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HRM
Finance
Sales and marketing
Production or service
Supplier/Customer relations
Property, intellectual property
Functional areas of Business Ethics
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
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Individualism
Utilitarism
Kantianism
Virtue theory
• 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 - Individualism
• The major goal is to maximize the overall
happiness.
• All actions are aimed at something good.
Theories - Utilitarianism
• Act rationally, do not act inconsistently in your
own actions or consider yourself exempt from
the rules.
Theories - Kantianism
 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.
Theories – Virtue Theory