978-1259578113 Chapter 5 Solutions Manual Part 1

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OPENING CASE: Making Toys Globally

Summary

The opening case explores the prevalence of lead and other poisonous heavy metals in children’s

toys, particularly those made in China. Although the use of lead in house paint, toys, and

cookware was banned by the U.S. Consumer Product Safety Commission in 1978, China did not

agree until 2007 to begin removing lead from toys it makes and enforcement of the ban is

difficult. Despite increasingly strict regulations and voluntary limits on lead content by the toy

industry, experts warn that rule violations are common and that it can be nearly impossible to

distinguish between safe and unsafe toys. With over 80 percent of the toys sold in the United

States being manufactured in China, lead poisoning from contaminated toys remains a significant

threat to children. Discussion of the case can revolve around the following questions.

1. Why do U.S. toy companies continue to import potentially unsafe toys from China and

elsewhere? Discuss the advantages and disadvantages of importing toys from other countries.

Because of low labor costs and relatively lax enforcement of safety regulations in China, toys

2. Should U.S. businesses that import unsafe toys be held responsible for any harm caused to

children from ingesting lead or other heavy metals? Why or why not?

Student responses to this questions will vary. Some may argue that toy companies can reasonably

3. Do regulations against lead in imported toys work? What other measures might be taken to

improve the safety of children’s toys?

Although stricter regulations against lead in toys have brought increased attention and scrutiny to

the issue, evidence suggests that approximately one-third of all new toys contain unsafe heavy

metals. Governments in countries that export toys have little incentive to enforce safety

CRITICAL THINKING AND DISCUSSION QUESTIONS

QUESTION 1: A visiting American executive finds that a foreign subsidiary in a poor nation has

hired a 12-year-old girl to work on a factory floor, in violation of the company’s prohibition on

child labor. He tells the local manager to replace the child and tell her to go back to school. The

local manager tells the American executive that the

child is an orphan with no other means of support, and she will probably become a street child if

she is denied work. What should the American executive do?

ANSWER 1: This question, which illustrates a potentially very real ethical dilemma facing

QUESTION 2: Drawing upon John Rawls’s concept of the veil of ignorance, develop an ethical

code that will (a) guide the decisions of a large oil multinational toward environmental

protection, and (b) influence the policies of a clothing company in the potential decision of

outsourcing its manufacturing process.

ANSWER 2: John Rawls suggests that a decision is just and ethical if people would allow for it

QUESTION 3: Under what conditions is it ethically defensible to outsource production to the

developing world where labor costs are lower when such actions also involve laying off

long-term employees in the firm’s home country?

ANSWER 3: This question is likely to stimulate some lively discussion, particularly if students

QUESTION 4: Do you think facilitating payments (speed payments) should be ethical?

ANSWER 4: Students will probably be divided on this question, and a lively debate should

QUESTION 5: A manager from a developing country is overseeing a multinational’s operations

in a country where drug trafficking and lawlessness are rife. One day, a representative of a local

“big man” approaches the manager and asks for a “donation” to help the big man provide

housing for the poor. The representative tells the manager that in return for the donation, the big

man will make sure that the manager has a productive stay in his country. No threats are made,

but the manager is well aware that the big man heads a criminal organization that is engaged in

drug trafficking. He also knows that the big man does indeed help the poor in the rundown

neighborhood of the city where he was born. What should the manager do?

ANSWER 5: Students will probably approach this question in very different ways. Some

QUESTION 6: Milton Friedman stated in his famous article in the New York Times in 1970 that

“the social responsibility of business is to increase profits.” Do you agree? If not, do you prefer

that multinational corporations adopt a focus on corporate social responsibility or sustainability

practices?

ANSWER 6: Student responses will vary. Friedman’s argument, also known as the Friedman

QUESTION 7: Reread the Management Focus feature on Unocal and answer the following

questions:

a. Was it ethical for Unocal to enter into a partnership with a brutal military dictatorship for

financial gain?

b. What actions could Unocal have taken, short of not investing at all, to safeguard the human

rights of people impacted by the gas pipeline project?

ANSWER 7:

a. Unocal made its investment in Myanmar just as many other companies were leaving the

b. Students will probably be familiar with the notion that even if something is not explicitly

CLOSING CASE: Bitcoin as an Ethical Dilemma

Summary

The closing case describes the rise of bitcoin, a virtual currency introduced in 2009. Bitcoins are

produced by “miners” who devote significant amounts of computational power to solving

complex mathematical equations. Although it is a purely digital currency with no real value,

bitcoin has seen enormous swings in value based on supply and demand. The currency has

generated controversy because of its ambiguous ethics. Economist Paul Krugman has called it

“evil” because it is not a stable store of value like other currencies. Some critics have suggested

that the main purpose of bitcoin is to undermine governments’ ability to monitor and tax

transactions, which in turn makes it easier to use the currency for illegal activities. Proponents of

bitcoin suggest that it is a simple, efficient currency that can be used anywhere around the world

without the need for complex exchange processes or other barriers to economic activity.

QUESTION 1: Do you think bitcoins are approaching being unethical monetary instruments

without technically carrying a value similar to “real” money?

ANSWER 1: Student responses will vary. Paul Krugman’s argument that bitcoins are evil

QUESTION 2: If bitcoins are used to buy drugs, firearms, or other products that are considered

illegal in the country in which the bitcoins are being used, does that make bitcoins unethical?

ANSWER 2: Student opinions will vary. If bitcoins in any way make it easier to purchase illegal

QUESTION 3: Do you think the bitcoin system is “evil” as Paul Krugman suggests? Is it similar

to a Ponzi scheme?

ANSWER 3: Student answers will vary. Some students might consider bitcoin unethical, or even

QUESTION 4: Do you think that bitcoins were created as a weapon intended to damage central

banking and money-issuing banks?

ANSWER 4: Student answers will vary. It seems unlikely that bitcoin was created with the

purpose of damaging the system of central banking in mind. Yet it may very well have been

MHE INTERNATIONAL BUSINESS VIDEO LIBRARY

Please click here to visit our International Business Video Library on Pinterest, which is updated

on a monthly basis. While there, be sure to “like” the clips that work well for you, and add notes

that might be helpful to your colleagues.

INCORPORATING globalEDGE™ EXERCISES

Use the globalEDGE™ site {http://globalEDGE.msu.edu/} to complete the following exercises:

Exercise 1

Promoting respect for universal human rights is a central dimension of many countries’ foreign

policy. As history has shown, human rights abuses are an important concern worldwide. Some

countries are more ready to work with other governments and civil society organizations to

prevent abuses of power. Begun in 1977, the annual Country Reports on Human Rights Practices

are designed to assess the state of democracy and human rights around the world, call attention

to violations, and – where needed – prompt needed changes in U.S. policies toward particular

countries. Find the latest annual Country Reports on Human Right Practices for the BRIC

countries (Brazil, Russia, India, and China), and create a table to compare the findings under the

“Workers Rights” sections. What commonalities do you see? What differences are there?

Exercise 2

The use of bribery in the business setting is an important ethical dilemma many companies face

both domestically and abroad. The Bribe Payers Index is a study published every three years to

assess the likelihood of firms from 28 leading economies to win business overseas by offering

bribes. It also ranks industry sectors based on the prevalence of bribery. Compare the five

industries thought to have the largest problems with bribery with those five that have the least

problems. What patterns do you see? What factors make some industries more conducive to

bribery than others?

Answers to Exercises

Exercise 1

The report can be accessed by searching for the term “Country Reports on Human Rights

Practices” at http://globaledge.msu.edu/ResourceDesk/. The Country Reports on Human Rights

Practices is the only source in this search, and is published by U.S. Department of State. This

Exercise 2

The report can be accessed by searching for the term “Corruption Perceptions Index” at

End of Part Case Notes

Part Two

Siemens Bribery Scandal

1. What explains the high level of corruption at Siemens? How did managers engaged in

corruption rationalize it?

Answer: Most students will probably suggest that the high level of corruption at Siemens is a

2. What do you think would have happened to a manager at Siemens if he or she had taken a

stand against corrupt practices?

Answer: Since Siemens appears to have viewed bribery as a necessary part of securing the

3. How does the kind of corruption Siemens engaged in distort competition?

Answer: Many competitors of Siemens complained that the company’s practices made it difficult

for them to compete. By having an unfair advantage with government officials who awarded

4. What is the impact of corrupt behavior by Siemens on the countries where it does business?

Answer: Siemens’ continual willingness to bribe government officials in order to win contracts

5. If you were a manager at Siemens and you became aware of these activities what would you

have done?

Answer: Students will probably respond to this question in different ways. Many students will

probably take the ethical high road and claim that they would have taken a stand against the