Jextra Case

Jextra Neighborhood Stores Case synopsis This report analyzes the estimable dilemma characterd by Jextras state manager, Tom Chong, who was responsible for Neighbourhood Markets in Malaysia. Jextra Stores was a Hong Kong based bon ton that fermentd retail stores in China, Hong Kong, Philippines, Malaysia, Thailand, Singapore, and Vietnam. In 2005, the alliance successfully entered Malaysia, operating super foodstuffs d avow the stairs the name of Neighborhood Markets (Inkpen, 2010). Jextra identified a promising site in Klang, near the capital of Kuala Lumpur, to open a refreshing supermarket (Inkpen, 2010).Mr. Chong needs to tax a proposal made by the city manager of Kang, which might be considered bribery. In this case, Mr. Chong faces favorable and honorable challenges that whitethorn affect the comp whatsoevers operations, performance, and belligerentness in the region as wholesome as Mr. Chongs c argonr. The major social issues include those related to natural rightfulness, culture, and ethical motive. The report similarly analyzes anti-bribery degeneracy en scraped by the U. K graft symbolize and the U. S. irrelevant Corrupt Practices Act (FCPA).The report concludes with recommendations to Jextra much(prenominal) as seeking proper profound advice, machineing an impressive assembly line principle of conduct, providing inter- heathen and ethics training to managers, victimisation a geocentrism commence and conducting an cozy investigation for the Malaysian category manager. Analysis affable, Ethical, or licit Challenges International firms operating overseas often face social challenges because they operate in markets with contrasting juristic and political trunks (Daniels, Radebaugh, & Sullivan, 2010, p. 111).Each rural area has a heavy system that provides the rules that regulate behavior, the processes by which laws are enforced, and the procedures used to resolve grievances (Daniels, Radebaugh, & Sullivan, 2010, p. 111). In the case of Malaysia, the country relies on a dual effective system based on common law and theocratic law. English special K law is based on tradition and judicial precedents (stare decisis). This type of legal system is used in, among differents, U. S. , U. K. , India, Canada, Hong Kong, Australia, and New Zealand (Daniels, Radebaugh, & Sullivan, 2010).Malaysia to a fault relies on Muslim law (or Sharia), which is based on religious precepts and beliefs. Muslim law prevails in Turkey, Kuwait, Indonesia, Saudi Arabia, Iran, etc. (Daniels, Radebaugh, & Sullivan, 2010). In developing countries, such as Malaysia, immaterial companies and managers, such as Mr. Chong, may encounter legal risks due to the legal poser and the effectiveness of the legal system (Ling & Hoang, 2010). In recent years, Malaysia has opened its market towards liberalization of trade and services and globoseization (Tahir & Ismail, 2007).Like another(prenominal) emerging markets, such as Mexi co, China, India, and Brazil, Malaysia represents an attractive market. However, MNEs are bound to face legal challenges in emerging markets because they overhear an inadequate commercial infrastructure, weak legal system, and inquisitive environment (Pearson, 2011a Pearson, 2011b). For instance, Malaysian civil and commercial laws regarding concern liquidatements for social purposes are non make believe. It is a common practise out in Klang and Kuala Lumpur to make social contributions for community images, such as grooms and roads (Inkpen, 2010). Additional legal issues that Mr.Chong may face in Malaysia are the insufficient legal infrastructure for enforcing legal judgment and uncertainty and unfairness of court justice (Ling & Hoang, 2010, p. 157). In Malaysia, the regulations regarding foreign investment lack transparency (Inkpen, 2010) and at that place had been many cases of bribery involving popular ordaineds. Malaysia has a graduate(prenominal) tendency toward rottenness, which refers to the misuse of entrusted power for private wee-wee (Daniels, Radebaugh, & Sullivan, 2010, p. 191). concord to the TI Corruption Perception Index (2010), Malaysia was ranked 4. on of a scale of 0 (to a greater extent identically to pay bribe) to 10 (less like to pay bribe) (Daniels, Radebaugh, & Sullivan, 2010). Russia, Peoples Republic of China and Italy precede Malaysia in terms of frequency and size of bribes (Daniels, Radebaugh, & Sullivan, 2010). Mr. Chong knows about recent cases of corporate bribery in Malaysia and in the retail industry. There had been scandals regarding foreign investors who bribed public officials or financed government programs to obtain business privileges or competitive vantage (Inkpen, 2010).Moreover, there was a recent case of bribery involving a Jextras country manager in the Philippines. More likely, this manager also encountered similar ethical dilemmas like Mr. Chong. Some individual factors that may nourish driven him to act unethically in the Philippines could have been pres achieved from the company to expand and apply competitive advantage in the region. Alternatively, he might have alone wanted to advance his career as a country manager, lacked of ethics or did not know the local laws regarding bribery.Additionally, he might not have pull ind or requested support from the top way regarding the social and ethical issues raised in the Philippines. Mr. Chong, as an experienced manager, should have anticipated that he would encounter legal and ethical risks in Malaysia. Mr. Chong face major challenges due to the weak legal framework and wide expand corruption in Malaysia. Additionally, Mr. Chong is not familiar with Malaysian domestic law and International law. For instance, Mr. Chong does not know whether accepting the Mayors stretch forth would breach Malaysian law.It is against the International law to offer money, directly or indirectly, to officials of foreign governments (in this case the Mayor of Klang), to obtain a business advantage (help Jextra with the landing zone) (Inkpen, 2010). According to Daniels, Radebaugh, and Sullivan (2010), it is crucial for foreign firms and managers that operate overseas to be familiar with domestic law and supranational law. Moreover, Mr. Chong does not know the legal policies of his home country, and therefore, if contributing to obtain a business benefit would be considered illegal in Hong Kong, if it were not done the right channel (Jextra Social Fund).Jextra Social Fund provides financing for educational and social projects (Inkpen, 2010). However, Mr. Chong is not sure whether he should go through this channel to make the contribution in order to expedite the zoning process. Additionally, Jextras seam Code does not help Mr. Chong to make a decision regarding this matter. Mr. Chong is not sure whether financing the primordial school in Klang would be against Jextras Business communicate Code. Jextras Business Con duct Code states employees could not offer benefits to threesome parties in connection with business matters (Inkpen, 2010, p. 3). However, Mr.Chong does not know if the contribution would really benefit the community or individuals, such as the Mayor of Klang or his sister the sister of the Mayor is a member of the school board. Mr. Chong also faces challenges with regard to the differences of culture between Malaysia and his home country, China. Research shows that individuals from different cultures may face challenges in infra(a)standing the behavior and values of others in the soldiery country. Thus, this can cause a heathenish clash (Tahir & Ismael, 2010). However, China and Malaysia are culturally close, so it can be expected that Mr.Chong adjust more easily than if he were to do business in countries with more cultural distance, such as France, U. S. or Germany (Daniels, Radebaugh, & Sullivan, 2010). Both, Malaysia and China present many similarities regarding its cultu re. ground on Hofstedes cultural dimensions theory, two countries have a high degree of power distance (PDI), collectivism, masculinity (MAS), and high uncertainty debarance (UAI). (Daniels, Radebaugh, & Sullivan, 2010). Additionally, Mr. Chong may have a different level of ethical sensitiveness than its counterparts in Malaysia (Chan & Cheung, 2012).People from different cultures have different ethics, which are influenced by their beliefs and cultural values (Chan & Cheung, 2012). Other challenges that may rise are problems regarding communications. As tell by Daniels, Radebaugh, and Sullivan (2010), cross-border communications do not always translate as intended (p. 67) and can lead to misunderstandings. For instance, Mr Chong is not sure about what the Mayor meant when he asked to pay for the primary school whether he asked to pay the full cost of the school or just a part (Inkpen, 2010). terminate the Mayors RequestsAccepting the Mayors offer and financing the project wi thout using the right companys channel (Jextra Social Fund) would be illegal. It also might go against Jextras corporate culture and Business Conduct Code. graft is wrong and unethical, and as noted by Daniels, Radebaugh, and Sullivan (2010), it affects both company and country economies (p. 192). Research shows that high levels of corruption have a strong correlation with low levels of per capita income and low national growth rank (Daniels, Radebaugh, and Sullivan, 2010). Having another bribery scandal would erode Jextras reputation and image.It would compromise the legitimacy of the company worldwide and its operations (Daniels, Radebaugh, and Sullivan, 2010). It is challenging for foreign managers to avoid bribe payments when these are regarded as a usual business practice in the host country (Daniels, Radebaugh, and Sullivan, 2010). Even though, it would be easier for Mr. Chong to just pay the bribe to the Mayor of Klang and fall back on the standard of cultural relativism (D aniels, Radebaugh, and Sullivan, 2010, p. 195). As a manager, Mr. Chong should act responsibly and ethically, nd in conformance with local law, corporate culture and International law. The vanquish approach for Mr. Chong would be to report to the Regional Operating Officer responsible for Malaysia, Singapore and Thailand and to the CEO, and chief financial officer of the Supermarket and Hypermarket Divisions of the company in Hong Kong (Inkpen, 2010). Definitely, Mr. Chong should consult this issue with top management. Jextra and Mr. Chong should also receive legal advice from a reputable law firm in Malaysia regarding the integrity of the Mayors offer, and if accepting the offer would constitute an offense under the U.S. Foreign Corrupt Practices Act (FCPA) and the U. K. grafting Act. If it does constitute bribery, then the best option for Mr. Chong would be to reject the mayors offer and depart through formal channels to get the zoning approval (Inkpen, 2010). U. S. FCPA and t he U. K. bribery Act Even though Jextra is based in Hong Kong, the company is not exempt from the extraterritorial reach of the U. K Bribery Act and the U. S. Foreign Corrupt Practices Act (FCPA) (Arnold & porter Advisory, 2012). The FCPA refers to legislation enacted in 1977 that outlaws bribery (Arnold & Porter Advisory, 2012).It makes illegal bribery payments by U. S. companies to political parties and foreign officials. This legislation applies to operations in the U. S. and transnational operations as well, and to companys employees and their agents foreign (Daniels, Radebaugh, & Sullivan, 2010). Not only U. S citizens, U. S companies or issuers of securities on US exchanges (Arnold & Porter Advisory, 2012, p. 3) are potentially liable under the FCPA, but also individuals of any nationality that make bribery payments to any foreign government official while staying in the U.S. (Arnold & Porter Advisory, 2012, p. 3). There is lack of consistency in the provisions of FCPA. Fo r instance, it is not legal to pay to public officials to facilitate business transactions (referred to as facilitating payments or grease money) (Daniels, Radebaugh, & Sullivan, 2010, p. 194). However, payments must be made to officials who are directly responsible for the transactions. In 1988, the FCPA enacted a new amendment that excludes grease money from bribery (Daniels, Radebaugh, & Sullivan, 2010, p. 194).In that case, under the FCPA, if Jextra finances the primary school through the Social Fund and make the payments directly to the Mayors sister in order to expedite the landing zone, it may not be unlawful. The payments should be made to someone who is directly involved with the primary school, such as the Mayors sister or other member of the school board and cannot be made to the Mayor directly. The U. K. Bribery Act became effective on July 1, 2011 and as the FCPA, it has a vast territorial reach (Arnold & Porter Advisory, 2012, p. 3).The Bribery Act provides legislatio n regarding acts of bribery, and makes it an offense for companies that do not pr up to nowt bribery (Arnold & Porter Advisory, 2012). The jurisdictional reach of the Bribery Act is wider when companies or individuals with a close relationship to the U. K. Additionally, under the Bribery Act, foreign individuals who commit bribery overseas while residing in the U. K could also be prosecuted, commit offenses (Arnold & Porter Advisory, 2012). Foreign companies, such as Jextra, can be also subject to FCPA scrutiny even though its business activity has little relation with the U.S. and the company mainly operates in Asia. Non-U. S. companies could be found liable for conduct outside the U. S. that constitutes an offense under U. S. Criminal law (Arnold & Porter Advisory, 2012). FCPA incorporates extraterritorial provisions in its legislation. Therefore, as noted by Arnold and PorterAdvisory (2012), it is important that MNEs, consider the potential liability under the FCPA to which their operations may be exposed (p. 3), whether conducting business in the U. S. or outside. Mr. Chong should act in compliance with the FCPA and Bribery Act.Managers are responsible when corruption is afoot and need to be vigilant with their actions. In addition, Jextra is responsible for ensuring that its anti-corruption measures retaliate both jurisdictions (Arnold & Porter Advisory, 2012, p. 6). In todays global economy, international companies, such as Jextra have may worldwide connections through its suppliers and subsidiaries. under the Bribery Act, it could be established some type of association, for instance through a Jextras parent company or subsidiary, so that if the company was to commit bribery it could still be prosecuted in the U.K. Therefore, Jextra and Mr. Chong should be super cautios and take into consideration that both the Bribery Act and the FCPA may have direct impact on the companys operations even if the company has little connection with U. K and U. S. (Arn old & Porter Advisory, 2012, p. 6). Chongs Recommendations to Jextra Malaysia lacks of a developed legal system and has a risky business environment, which make it challenging for foreign companies, such as Jextra, to conduct business in an ethical, fair, and responsible manner.Chongs recommendations to Jextra include seeking proper legal commission regarding Malaysian commercial and civil laws, and payments to government officials. An additional recommendation is to implement an effective internal business principle of conduct. A clear code of conduct would mitigate some of the problems that Mr. Chong faces. The code should set global policies for Jextras employees and any individual working for the company (Daniels, Radebaugh, & Sullivan, 2010). The code of conduct should not only be communicated to all Jextra s employees, but also to its suppliers and contractors.Additionally, the code of conduct should ensure that its policies are carried out. For instance, Jextra should make employees sign a write agreement conforming that they read and understood the code of conduct (Daniels, Radebaugh, & Sullivan, 2010). Additionally, Jextra should strike managers to go through a formal program that teaches them the companys ethical code of conduct. It is vital for Jextra to implement the right measures and procedures, as well as strictly enforce these measures, to prevent bribery and other unethical behaviors among its employees.This would help the company to avoid potential prosecution and civil judicial proceeding under the FCPA and The Bribery Act. A third recommendation would include an internal investigation regarding Mr. Alam conduct. As a category manager, Mr. Alam may be using his position in the company for personal gain (Inkpen, 2010). Mr. Chong as a supervisor of Mr. Alam need to ensure that Mr. Alam is not taking bribes or gifts from suppliers, or benefitting his father-in-law. An additional recommendation include inter-cultural training for Jextras man agers assigned abroad.When conducting business overseas, it is imperative that managers receive adequate training regarding the legal and political environment, international law, and national culture of the host country. Managers should also receive training in ethics to avoid unethical conduct. Additionally, when conducting international business, geocentrism is a good approach. According to Daniels, Radebaugh, & Sullivan (2010) geocentrism requires firms to balance informed knowledge of their own organizational cultures with home- and host-country needs, capabilities and constraints (p. 4). Jextra should integrate its own company practices, Malaysian practices, and new practices as well (Daniels, Radebaugh, & Sullivan, 2010). Conclusions and Lessons Learned sound policies, which include domestic law and international law, play a major role in determining how global companies can conduct businesses abroad (Daniels, Radebaugh, & Sullivan, 2010). International firms should act respo nsibly and ensure that its employees act in conformation with the domestic law where they operate and do not commit any offense under the FCPA and Bribery Act.By acting ethically, companies can create competitive advantage, shared value, and avoid being perceived as unethical and imperious by the local and global communities (Daniels, Radebaugh, & Sullivan, 2010 Porter, 2010). As a potential global manager I learned that it is crucial for global firms to set clear codes of conduct, ensure compliance with the codes (training, auditing programs), and enforce the policies in the code (Daniels, Radebaugh, & Sullivan, 2010).However, foreign managers leave behind still face ethical dilemmas when working in a different legal and political environment. Managers need to be knowledgeable about cultural, legal, political, and ethical factors in order to succeed in their assignment overseas (Daniels, Radebaugh, & Sullivan, 2010). Therefore, managers should receive adequate inter-cultural tra ining and counseling about the host countrys values, norms, legal and political system. Managers should be a role model for other employees by showing cultural awareness and ethical behavior.