Consider the video regarding bribery and Case 6.4 involving IKEA. Develop a paper that addresses the following:
1. By not succumbing to the prevailing attitude, â€œWell, you either bribe or you donâ€™t do business there,â€ Ikea found an end-run, a creative solution to international businessâ€™s ubiquitous eitherâ€“or conundrum: To bribe or not to bribe. However, what issues did Ikea miss in its analysis of the situation?
2. Ikea discovered in 2010 that one of its executives responsible for leasing the generators was accepting kickbacks for awarding those contracts. Although Ikea fired the executive, determine what issues can arise from this conduct.
3. Compare and contrast this case with Hartonoâ€™s experiences in Indonesia. Your answers should not simply be your opinion. For each response, support your thoughts with scholarly research that you can cite in order to validate your responses.
Support your paper with minimum of three scholarly resources. In addition to these specified resources, other appropriate scholarly resources, including older articles, may be included.
Length: 5-7 pages, not including title and reference pages
Your paper should demonstrate thoughtful consideration of the ideas and concepts presented in the course by providing new thoughts and insights relating directly to this topic. Your response should reflect scholarly writing and current APA standards.
TEDx Talks. (2012). Business without bribery: Dharsono Hartono at TEDxJakSel [Video File].
The Influence of Culture on Ethics
- In its analysis of the situation, IKEA failed to understand business ethics challenges brought about by cultural differences around the world. IKEA was on the verge of opening a store in Russia, but came face to face with the challenges of imparting its strong business ethos in a foreign land including its zero-tolerance policy on corruption. Business ethics relate to moral foundations that function as a guide to a business including its functions as well as processes. in fact, business ethics are mean to determine and employee’s actions with respect to undertaking her or his mandate. Nevertheless, the company had a problem with power supply and was approached by a local utility firm wanting bribe to supply power. The situation just revealed an entrenched culture in Russia in which kickbacks are the order of the day when one wanted to be dug out of a hole. In fact, it seems that IKEA presumed the business environment to be similar to United States or that of other places for that matter. The company is multinational and was always likely to encounter challenges of operating in a culturally different environment. In essence, multinational corporations such as IKEA have normative demands that are made of them including the need to propagate business ethics for the common good. IKEA missed to realize that Russian society and the world in general expected it to instigate transformation of the status quo, which dictated that bribe was a condition to conduct business in the country.
It can be said that multinational corporations operating around the world carry the responsibility of transforming not only its economic status, but also the people. This means that a multinational firm ought to uphold its values in virtually all business dimensions including when faced with dilemma with respect to business ethics. IKEA was faced with the need to demonstrate to the Russian community that corruption had no place in its business model and operations had to be conducted in the right manner. This is irrespective of the status quo in the country, as the need to do social good surpasses the pressure to conform. The decision-making process when going global, thus, needs to consider the differences in business environment to ensure that a multinational firm meets it responsibilities (Whelan, 2012). Evidently, IKEA failed on this front and was left exposed to forces leading to corruption even as it faced the problem of power supply. Russia has been associated with corruption for long time and it has always been identified as the biggest challenge faced by businesses in the country. In fact, petty corruption has been found to be prevalent in the country as the business environment often faces rather inconsistent application of regulations as well as a lack of transparency. The challenges also include when dealing with powerful and manipulative local actors that have undoubtedly contributed to increased corruption levels. Nevertheless, IKEA should have analyzed the situation and perhaps enacted stricter measures prior venturing into the market to ensure that its managers would uphold the business ethics that have served to drive the firm forward.
- Indeed, the challenges of operating internationally for IKEA were evidenced when it was revealed that one of its managers was involved in graft. The solution to its power supply challenge had emerged as renting diesel generators, and the manager tasked with this responsibility had veered off course by accepting kickbacks from the local rental firm (Jennings, 2014). The decision was made to terminate the manager’s contract. Nonetheless, the conduct by the manager had far-reaching effects. For instance, the fact that the company had been involved in corruption painted the picture that it was not adhering to business ethics that it holds dear. The issue is that the firm’s image as a stem model against corruption was negatively affected and recovering was not going to be a straightforward process. Worth noting, is that the society, which constitutes businesses’ clients, expects a business to honor its responsibility with respect to business ethics. In fact, a company is expected to be involved in the fight against corruption and the fact that the manager of IKEA was involved in it presents a bad image. It can be said that the company faces a challenge not only in the manner in which to transform its image positively, but also in swaying the public into accepting the transparent ways of doing business. More so, the conduct by IKEA manager led many to question the company’s guidelines and or policies on corruption. The firm is renowned for its stringent stance against corruption, and having its senior official implicated was always going to make things difficult as far as attracting public support against the culture of corruption is concerned (Nikishenkov, 2010). After all, the company’s power to instigate a campaign against corruption is negatively affected when it is evidenced that itself is involved in graft. Acting ethically is all about distinguishing what is considered wrong and right. Subsequently, there is expectation that the firm makes the right choice, and being involved in corrupt deals will always raise eyebrows as far as policies are concerned.
The culture of corruption, is seemingly entrenched in the society to an extent that the firm has given in to it. The conduct can also lead to untrustworthiness on the part of the company. In fact, its relationship with stakeholders including the public was always going to take a hit following the revelation of involvement in corruption. As aforementioned, the society places expectations on various institutions in the society and any perceived failure to observe such responsibilities is likely to contribute to sour association with the key stakeholders. Suffice to say, this negatively affects the company’s aspiration to penetrate the Russian market and be successful. Worth noting, is that companies often enact codes of behavior to guide its employees to act ethically. Thus, IKEA’s manager involvement in corruption means that its policies as well as codes of behavior needed to be reviewed. More so, there were gaps that contributed to the situation the firm found itself. It can be said that the need to put the house right heightened even as IKEA fired the manger implicated with graft.
- IKEA’s case in Russia can be compared and contrasted with Hartono’s experiences in Indonesia. More so, the two cases reveal the challenge presented by cultural differences on multinational corporations. The two companies found out that different people or markets had their own beliefs and such beliefs as well as values affected their business operations. For instance, the business ethics that the corporations had hold at heart were facing a fresh challenge in that it needed to incorporate culture differences. In the case of IKEA, it can be said that the business ethics did not look to reinforce the need to avoid corruption and the outcome was that the company found itself pressurized to accept the status quo. In fact, one of its managers in the foreign market ended up succumbing to the pressure leading to his engagement in corruption. The culture in Russian business environment allowed corruption to be perpetrated and seemingly had become common. Perhaps, the business ethics for the two firms needed to be reviewed to ensure that such cultural differences would not permeate the companies’ business processes and functions. Rather, the companies needed to act as agents of change and possibly impart their business ethics throughout the Indonesian and Russian societies. Altogether, the two societies come across as similar because corruption is replete and multinational firms are faced with the challenge of overcoming the hurdle. On the other hand, the two cases can be contrasted in that IKEA is facing a business environment replete with corruption and Hartono is facing bureaucracy problems making his project in Indonesia stall altogether. It can be said that Hartono’s case has more to do with a dysfunctional system of government in Indonesia than business ethics. This is because he realizes that the government in Indonesia perhaps benefits from the bureaucracies leading to corruption, and thus it seems that there is unwillingness on its part to fight corruption (TED, 2012). In fact, most institutions and individuals are known to be reluctant to utilize business ethics when they are benefiting from such unethical behavior as corruption. In sum, business ethics are crucial component of any business and upholding them is key for multinational corporations.
Jennings, M. (2014). Business ethics. USA: Cengage Learning.
Nikishenkov, O. (2010). IKEA case exposes bribe culture in Russia. Retrieved from http://themoscownews.com/news/20100223/55414629.html
TED. (2012). Business without bribery: Dharsono Hartono. Retrieved from
Whelan, G. (2012). The political perspective of corporate social responsibility. Business Ethics Quarterly 22:4.