978-0134324838 Chapter 4 Solution Manual Part 1

QUESTIONS:

4-1. Give examples of unethical or unsustainable behavior that firms in the food

and beverage industry might undertake.

● Endangering water supplies

4-2. What types of sustainable practices has Coca-Cola adopted over time?

■ Water Neutral Strategies

● Invested millions to develop superior wastewater treatment facilities.

● In arid areas, programs were implemented to replace all of the extracted

■ Health Focus Strategies

● Alternatives- Offers no-calorie or low-calorie beverages

■ Energy Reduction Strategies

■ Pollution Reduction Strategies

● Uruguay- Coke uses hybrid electric trucks to deliver product in

● North America- Coke operates hundreds of hybrid delivery trucks,

● Europe-Hybrid program is being expanded

● Belgium- uses 100% geothermal energy

●Technology improvements– vending machines to reduce harmful

greenhouse gases

■ Product Packaging Life-Cycle Management

4-3. In what ways does Coca-Cola help improve the lives of those who live in

developing economies and emerging markets?

■ Coca-Cola’s Manual Distribution Center (MDC) program helps advance economic

development in poor countries.

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4-5. Most countries lack adequate laws or enforcement to deal with bribery and other

forms of corruption. Why is this? How do countries benefit from a strong rule of law that

minimizes corruption?

■ Corruption is the abuse of power to achieve illegitimate personal gain.

■ Bribery and corruption are extreme forms of unethical behavior.

■ There is a negative correlation between transparency and corruption:

i.e. high transparency low corruption;

■ Emerging economies and developing markets are characterized by weak laws regarding

corruption and lack of enforcement. MNEs are attracted to countries with a strong rule of law

that minimizes corruption and unethical behavior because it enables a level playing for all

4-4. What does the case suggest is the value of ethical behavior? What did

Siemens gain by introducing controls to minimize the likelihood of corruption?

(LO 4.1; LO 4.2; AACSB: Application of knowledge)

The case and the chapter suggest the following:

Business Case for Ethical Behavior:

● It is simply the right thing to do

● It is often prescribed within laws and regulations.

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● It cultivates high-quality employee recruitment/retention and fosters employee

perception, loyalty and goal attainment

● It promotes a strong corporate reputation.

● It fosters better linkages with suppliers

● It facilitates smoother relations with foreign governments

■ When the bribery caught up with Siemens, it was embarrassing, expensive in terms of

fines, and their most important competitive advantage- i.e. their reputation had been

4-6. Do you think Siemens was penalized enough for its corruption? Why or why not?

What can governments or other organizations do to discourage firms and others from

engaging in corrupt behavior?

■ There is no one right answer here.

■ Economic development experts, environmentalists, and human rights activists would argue

no, Siemens was not penalized enough for its corruption. Activists argue that firms should avoid

operating in repressive regimes so that they avoid encountering questionable ethics. So when a

■ On the other hand, a business proponent might argue just the opposite, that ethics is relative

and not universal. Thus, when in Rome, do as the Romans do – if bribery is the accepted and

What can governments or other organizations do to discourage firms and others from

engaging in corrupt behavior?

Governments/organizations need to institute stronger anti-corruption laws and penalties for

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4-7. Some argue that because ethical standards are lax in many countries, Siemens and

other firms must pay bribes in order to obtain new business. Do you agree with this

view? Stated differently, when doing business around the world, is it generally better to

emphasize normativism or relativism? Justify your answer.

■ Ethical Relativism- Ethical truths are not absolute but differ from group to group- When in

Rome, do as the Romans do.

■ Ethical Normativism- (Universality) – Ethical behavioral standards are universal, and firms

■ Balance- Most international firms strike a balance between relativism and normativism-

V. END OF CHAPTER QUESTIONS

● TEST YOUR COMPREHENSION

4-8. Distinguish between ethics and corruption in international business.

■ Ethics is the moral principles/values that govern the behavior of people, firms, or

governments. When considering international business, we must also address the fact that

ethical standards vary around the world.

4-9. Describe typical ethical problems that firms encounter in international

business.

■ Ethical challenges are encountered in global sourcing and in the procurement of

products/services from suppliers located abroad, e.g. human rights and environmental issues.

■ Examples of ethical problems:

◘ Falsify/ misrepresent contracts or financial statements

◘ Pay/accept bribes, kickbacks, or inappropriate gifts

◘ Tolerate sweatshop conditions, child labor or other employee abuses

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4-10. What is the Corruption Perceptions Index and how can a manager use it to assess

international risk?

■ Corruption – The abuse of power in order to achieve illegitimate personal gain

■ Exhibit 4.3 – Corruption Perceptions Index- on a scale of 1 to 100- lists a sample of countries

and their perceived levels of corruption.

■ Foreign Direct Investment:

◘ High in countries with minimal corruption-

◘ Low in countries with rampant corruption-

■ There is an inverse relationship between transparency and corruption:

High transparency low corruption;

And between corruption and economic development:

Widespread corruption hinders economic development

■ Corruption harms the poorest in societies.

4-11. What is intellectual property? What industries are most affected by threats to

intellectual property?

■ Intellectual property- ideas/works created by individuals/ firms that are proprietary, intangible

assets including:

◘ Discoveries and inventions

◘ Artistic, musical, and literary works

◘ Words, phrases, symbols, and designs

■ Ethical violation- Illicit use of intellectual property, common in international business

Intellectual property rights-

The legal claim through which the proprietary assets of firms and individuals are protected from

unauthorized use by other parties

■ Examples- Trademarks, copyrights, and patents

Intellectual property infringement: Piracy and Counterfeiting

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■ 2015- Counterfeited and pirated products:

◘ Internationally traded- $1 trillion annually

◘ Domestically produced and consumed- $600 billion annually

IMPACT OF COUNTERFEITING AND PIRACY: MACRO and MICRO PERSPECTIVES

■ Examples-

◘ Kenya, counterfeit batches of the medicine Zidolam were distributed to patients

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•International Trade

•Foreign Direct Investment

•Company Performance

◘ Fake versions of Johnson & Johnson’s OneTouch test strips, which diabetes

◘ Many people have died due to consumption of counterfeit goods.

Exhibit 4.4– Highlights the top 2014 U.S. COUNTERFEIT COMMODITIES seized

● Watches/Jewelry- 30.5%

● Handbags/Wallets- 28%

● Consumer Electronics/Parts- 13.2%

● Apparel/Accessories- 9.3%

● Pharmaceuticals/Personal Care- 6%

● Footwear- 4%

● Computers/Peripherals- 2.2%

● Optical Media- 1.5%

● Labels/Tags- 1.5%

● Toys- 0.7%

● All Other Commodities- 3.1%

■ Most counterfeited goods are jewelry, consumer electronics, and pharmaceuticals.

■ 2014- Seizures:

 4-12. What advantages do firms gain from behaving according to high ethical

standards?

4-13. What is an ethical dilemma? Give an example of an ethical dilemma that MNEs

encounter abroad.

■ Ethical dilemma– a predicament with major conflicts among different interests, where the

■ Example-

◘ Colombia – You visit a factory to discover the use of child labor in the plant. You are

4-14. Distinguish relativism and normativism. Which one should the firm apply in its

activities?

Relativism and Normativism: Ethics from two distinct perspectives

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■ Ethical Relativism

● When in Rome, do as the Romans do.

■ Ethical Normativism- (Universality)

● Ethical behavioral standards are universal, and firms and individuals should seek to

uphold them consistently around the world.

Relativism

A Japanese multinational firm adhering to the position that bribery is wrong might

Normativism

Managers of the Japanese multinational firm who believe bribery is wrong will

■ Balance- Most international firms strike a balance between relativism and normativism,

incorporating both- balancing corporate values developed in the home/host countries.

■ In countries with questionable ethical norms- maintain superior ethical standards- to

■ In pursuit of ethics, CSR, and sustainability a firm should undertake systematic and ongoing

4-15. What is corporate social responsibility (CSR)? How does it differ from general

ethical behavior?

■ Global Corporate Social Responsibility (CSR) means meeting or exceeding the ethical,

legal, and commercial expectations of stakeholders, i.e. being a socially responsible

corporate citizen in the host country. Making a profit is the main commercial expectation of

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Country

Differences CSR

EthicsCSR

Ethics

■ CSR implies a proactive ethical approach where firms seek not to maximize profits, but to

■ Ethics is the moral principles/values that govern the behavior of people, firms, or

■ Ethics and CSR intersect for each country, such that country differences continually impact

4-16. Why is CSR important to the internationalizing firm?

Linking Ethics, Corruption, and Responsible Behavior

■ Exhibit 4.2 – illustrates the Pyramid of Ethical Behavior

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■ CSR implies a proactive approach to ethical behavior in which firms seek not necessarily to

■ Core CSR values include avoiding human rights abuses, upholding the right to join or form

The Value of CSR

■ Business Case for CSR:

◘ CSR is simply the right thing to do

 4-17. What is sustainability? How might the firm undertake sustainability in its

value-chain activities?

Visit MyManagementLab for suggested answers.

4-18. Describe the five standards managers can use to examine ethical dilemmas.

■ Five standards that managers can use to examine ethical dilemmas:

● Utilitarian approach, the best ethical action is the one that provides the most

● Rights approach, the decision maker chooses the action that best protects

● Fairness approach suggests that everyone should be treated equally and

●Common good approach suggests that actions should be based on the

● Virtue approach argues that ethical actions should be consistent with certain

4-19. What steps can the firm take to develop its orientation to CSR and sustainability in

international operations?

■ CSR and sustainability require the international firm to go Deep, Wide and Local in building a

culture of appropriate worldwide behaviors.

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4-20. Describe the steps in the framework for ethical conduct.

A FRAMEWORK FOR MAKING ETHICAL DECISIONS

■ Exhibit 4.8 – Framework for Arriving at Ethical Decisions– presents a five-step framework

for arriving at ethical decisions.

1. Identify the problem

■ Acknowledge the presence of an ethical problem.

■ Ask questions such as:

●Is there something wrong?

2. Examine the facts

■ Determine the nature and dimensions of the situation.

■ Have all the relevant persons and groups been consulted?

3. Create alternatives

■ Identify potential courses of action.

■ The goal is to arrive at the best decision or most appropriate course of action.

■ Any decision should be comfortably explained to your mother, a respected

colleague, a valued mentor, or defended on television.

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4. Implement course of action

■ Put the chosen plan into action.

5. Evaluate results

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