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Unit II

Lesson 10
Business Ethics and Bribery

BUSINESS ETHICS

The moral question of what is right and/or appropriate poses many dilemmas for domestic
marketers. Even within a country, ethical standards are frequently not defined or always
clear. The problem of business ethics is infinitely more complex in the international
marketplace because value judgments differ widely among culturally diverse groups. What is
commonly accepted, as right in one country may be completely unacceptable in another
Giving business gifts of high value, for example, is generally condemned in the United
States, but in many countries of the world gifts are not only accepted but also expected.
For U.S. businesses, bribery became a national issue during the mid-1970s with public
disclosure of political payoffs to foreign recipients by U.S. firms. At the time, there were no
U.S. laws against paying bribes in foreign countries, but for publicly held corporations the
Securities and Exchange Commission's (SEC) rules required accurate public reporting of all
expenditures. Because the payoffs were not properly disclosed, many executives were faced
with charges of violating SEC regulations.

The issue took on proportions greater than that of nondisclosure because it focused national
attention on the basic question of ethics. The business community's defense was that payoffs
were a way of life throughout the world: if you didn't pay bribes, you didn't do business.
Consider this situation: Suppose your company makes large, high-priced generators for
power plants and a foreign official promises you a big order if you slip a million dollars into
his Swiss bank account. If you are an American and you agree, you have committed a felony
and face up to five years in prison. If you are German, Dutch, French, or Japanese, among
others, you have merely booked another corporate tax deduction-the value of the bribe-and
you have the contract as well. In fact, French tax authorities actually have a sliding scale of
acceptable "commissions" paid to win business in different countries. The Asian deduction is
15 percent, although that drops to between 8 percent and 11 percent in India, where
apparently it costs less to buy officials. It is important to note that bribes usually violate the
laws in the countries where the bribery takes place, and that in countries where bribes can be
deducted as a business expense the laws clearly state they apply only to transactions outside
that country.

The decision to pay a bribe creates a major conflict between what is ethical and proper and
what is profitable and sometimes necessary for business. Payoffs are perceived by many
global competitors as a necessary means of accomplishing business goals. A major complaint
of U.S. businesses is that other countries do not have legislation as restrictive as does the
United States. The United States advocacy of global ant bribery laws has led to an accord by
the 29 member nations of the Organization for Economic Cooperation and Development
(OECD) to force their companies to follow rules similar to those that bind U.S. firms. It may
be some time before the accord becomes binding, however, since each of the member
countries will have to ratify the treaty individually.

In Latin America, the-organization-of American States (OAS) has -taken a global lead in
being the first to ratify an agreement against corruption. Long considered almost a way of
business life, bribery and other forms of-corruption now have been criminalized. Leaders of
the region realize that democracy depends on the confidence the people have in the integrity
of their government, and that corruption undermines economic liberalization. The actions of
the GAS coupled with those of the GECD will obligate a majority of the world's trading
nations to maintain a higher standard of ethical behavior than has existed before.
Unfortunately, India, China, and other Asian and African countries are not members of either
organization.

Exhibit 5- Transparency Intemational1997 Corruption Perception Index*


2 (Selected Countries 1997 & 1996)

Country CPI 1997 CPI 1996 Country CPI 1997 CPI1996


Denmark (1) 9.94:1: 9.33 Italy (30) 5.03 3.42
Finland (2) 9.48 9.05 S Korea (34) 4.29 2.96
Norway (7) 8.92 8.87 Brazil (36) 3.56 2.96
Singapore (9) 8.66 8.80 China (41) 2.88 2.43
Switzerland (11) 8.61 8.76 India (45) 2.75 2.63
U.S. A(16) 7.61 7.66 Mexico (47) 2.66 550
France (20) 6.66 6.96 Russia (49) 2.27 2.58
Czech Rep. (27) 5.20 5.37 Nigeria (52) 1.76 0.69

The actions of the GECD and GAS also reflect the growing concern among most trading
countries of the need to bring corruption under control. International businesspeople often
justify their actions in paying bribes and corrupting officials as necessary because "corruption
is part of their culture," failing to appreciate that it takes "two to tango" -a bribe giver and a
bribe taker.

Since 1993 an international organization called Transparency International (TI) has been
dedicated to "curb[ing] corruption through international and national coalition encouraging
governments to establish and implement effective laws, policies and anti-corruption
programmes." Among its various activities, TI conducts an international survey of
businesspeople, political analysts, and the general public to determine their perception of
corruption in various countries. In the 1997 Corruption Perception Index (CPI), shown in
Exhibit 5-2, Denmark, with a score of 9.94 out of a maximum of 1-0, was perceived to be the
least corrupt and Nigeria, with a score of 1.76, as the most corrupt. TI is very emphatic that
its intent is not to expose villains and cast blame, but to raise public awareness that will lead
to constructive action. As one would expect, those countries receiving low scores are not
pleased; however, the effect has been to raise public ire and debates in parliaments around the
world-exactly the goal of TI.

Bribery: Variations on a Theme


While bribery is a legal issue, it is also important to see bribery in a cultural context in order
to understand different attitudes toward bribery. Culturally, attitudes are significantly
different among different peoples. Some cultures seem to be more open about taking bribes,
while others, like the United States, are publicly contemptuous of such practices but are far
from virtuous. Regardless of where the line of acceptable conduct is drawn, there is no
country where the people consider it proper for those in position of political power to enrich
themselves through illicit agreements at the expense of the best interests of the nation. A first
step in understanding the culture of bribery is to appreciate the limitless variations that are
often grouped under the word bribery. The activities under this umbrella term range from
extortion through subornation to lubrication.

CROSSING BORDERS 8

The Loser Wins When Mah –jongg and Bribery Meet


A fashionable way of disguising bribes, payoffs, of gifts in both business and political circles
in Japan is to purposely lose when playing Mah –jongg or golf. If you can lose skillfully, your
services may be in demand. Losing at Mah – jongg and golf are classic examples of indirect
but preferred ways the Japanese use when it comes to greasing palms.
Mah – jongg is a Chinese table game played with ivory titles, having rules similar to
gin rummy. Gambling is a minor crime in Japan whereas bribery is a major one. To skirt the
law, Japanese business people invite officials or others to a discreet, high class restaurant or
club that provides a salon for private Mah – Jongg games. Executives of the bost company
bring along young employees noted for their abilities to deftly lead their opponent to a
successful win at a substantial loss for themselves. If your guests prefer golf to Mah – jongg,
no problem. They can have a golf game with the company’s reverse pro” that is a duffer who
specializes in hooking and slicing his way to sure defeat.

Bribery and Extortion. The distinction between bribery and extortion depends on whether
the activity resulted from an offer or from a demand for payment. Voluntarily offered
payments by someone seeking unlawful advantage is bribery. For example, it is bribery if an
executive of a company offers a government official payment if the official will incorrectly
classify imported goods so the shipment will be taxed at a lower rate than correct
classification would require. On the other hand, it is extortion if payments are extracted under
duress by someone in authority from a person seeking only what they are lawfully entitled to.
An example of extortion would be a finance minister of a country demanding heavy
payments under the threat that a contract for millions of dollars would be voided.

On the surface, extortion may seem to be less morally wrong because the excuse can be made
that "if we don't pay we don't get the contract" or "the official (devil) made me do it." But
even if it is not legally wrong, it is morally wrong-and in the United States it is legally and
morally wrong.

Subornation and Lubrication. Another variation of bribery is the difference between


lubrication and subornation.37 Lubrication involves a relatively small sum of cash, a gift, or
a service given to a low-ranking official in a country where such offerings are not prohibited
by law. The purpose of such a gift is to facilitate or expedite the normal, lawful performance
of a duty by that official. This is a practice common in many countries of the world. A small
payment made to dock workers to speed up their pace so un-loading a truck take few-hours
rather than all day is an example of lubrication.

Subornation, on the other hand, generally involves giving large sums of money, frequently
not properly accounted for, designed to entice an official to commit an illegal act on behalf of
the one offering the bribe. Lubrication payments accompany requests for a person to do a job
more rapidly or more efficiently; subornation is a request for officials to turn their heads, to
do their jobs more quickly, to not do their jobs, or to break the law.
A third type of payment that can appear to be a bribe but may not be is an agent's fee. When a
businessperson) is uncertain of a country's rules and regulations, an agent may be hired to
represent the company in that country. For example, an attorney may be hired to file an
appeal for a variance in a building code on the basis that the attorney will do a more efficient
and thorough job than someone unfamiliar with such procedures. While this is often a legal
and useful procedure, if a part of that agent's fees is used to pay bribes, the intermediary's fees
are being used unlawfully. Under U.s. law, an official who knows of an agent's intention to
bribe may risk penalties of up to five years in jail. The Foreign Corrupt Practices Act (FCPA)
prohibits U.S. businesses from paying bribes openly or using middlemen as conduits for a
bribe when the U.S. official knows that part of the middleman's payment will be used as a
bribe. There are many middlemen (attorneys, agents, distributors, and so forth) who function
simply as conduits for illegal payments. The process is further complicated by legal codes
that vary from country to country; what is illegal in one country may be winked at in another
and legal in a third.

The answer to the question of bribery is not an unqualified one. It is easy to generalize about
the ethics of political payoffs and other types of payments; it is much more difficult to make
the decision to withhold payment of money when the consequences of not making the
payment may affect the company's ability to do business profitably or at all. With the variety
of ethical standards and levels of morality that exist in different cultures, the dilemma of
ethics and pragmatism that faces international business cannot be resolved until the
anticorruption accords among the OECD and OAS members are fully implemented and
multinational businesses refuse to pay extortion or offer bribes.

The Foreign Corrupt Practices Act has had a positive effect. The Secretary of Commerce has
stated that bribery and corruption cost U.S. firms $64 billion in lost business in just one year,
the implication being that had there been no FCPA there would have been no lost business.39
Even though there are numerous reports indicating a definite reduction in U.S. firms paying
bribes, however, the lure of contracts is too strong for some companies. Lockheed
Corporation made $22 million in questionable foreign payments during the 1970s. For
example, the company pled guilty in 1995 to paying $1.8 million in bribes to Dr. Leila Takla,
a member of the Egyptian national parliament, in exchange for Dr. Takla to lobby
successfully for three air cargo planes worth $79 million to be sold to the military. Lockheed
was caught, fined $25 million, and cargo plane exports by the company were banned for three
years. Lockheed's actions during the 1970s were a major influence on the passing of the
FCPA. The company now maintains one of the most comprehensive ethics and legal training
programs of any major corporation in the United States.
It would be naive to assume that laws and the resulting penalties alone will put an end to
corruption. Change will come only from more ethically and socially responsible decisions by
both buyers and sellers and governments willing to take a stand.
CROSSING BORDERS 9

Time : A Many Cultured Thing


Time is cultural, subjective, and variable. One of the most serious causes of frustration and
friction in cross cultural business dealings occurs when counterparts are out of sync with
each other. Differences often appear with respect to the pace of time, its perceived nature,
and its function. Insights into a culture’s view of time may be found in its sayings and
proverbs. For example:
“Time is money. “ United States
“Those who rush arrive first at the grave.” Spain
“the clock did not invent man.” Nigeria
“if you wait ling enough, even an egg will walk.” Ethiopia
”Before the time, it is not yet the time; after the time, it’s too late.” France
The precision of clocks also tells a lot about a culture. In a study on how cultures keep
time, the researcher found:
Clock are slow of fast by an average of just 19 seconds in Switzerland.
When a man in brazil was queried about the time, he was more than three hours off when
he said it was “exactly 2:14.”
When the researcher ask the time in Jakarta, he was told by a postal employees in the
central post office that he didn’t know the time but to go outside and ask a street vendor.

Ethical and Socially Responsible Decisions


To behave in an ethically and socially responsible way should be the hallmark of every
businessperson's behavior, domestic or international. It requires little thought for most of us
to know the socially responsible or ethically correct response to questions about knowingly
breaking the law, harming the environment, denying someone his or her rights, taking unfair
advantage, or behaving in a manner that would bring bodily harm or damage. Unfortunately,
the difficult issues are not the obvious and simple right or wrong ones. In many countries- the
international marketer faces the dilemma of responding to sundry situations where-there is no
local law, where local practices appear to-condone a certain-behavior, or where the company
willing to "do what is necessary" is favored over the company that refuses to engage in
certain practices. In short, being socially responsible and ethically correct is not a simple task
for the international marketer operating in countries whose cultural and social values, and/or
economic needs are different from those of the marketer.

In normal business operations there are five broad areas where difficulties arise in making
decisions, establishing policies, and engaging in business operations: (1) employment
practices and policies; (2) consumer protection; (3) environmental protection; (4) political
payments and involvement in political affairs of the country; and (5) basic human rights and
fundamental freedoms. In many countries, the law may help define the borders of minimum
ethical or social responsibility, but the law is only the floor above which one's social and
personal morality is tested. The statement that "there is no controlling legal authority" may
mean that the behavior is not illegal but it does not mean that the behavior is morally correct
or ethical. "Ethical business conduct should normally exist at a level well above the minimum
required by law" or "controlling legal authority." In fact, laws are the markers of past
behavior that society has deemed unethical or socially irresponsible.

There are three ethical principles that provide a framework to help the marketer distinguish
between right and wrong, determine what ought to be done, and properly justify his or her
actions. Simply stated they are:

Principle Question
Utilitarian ethics Does the action optimize the "common
good" or benefits of all constituencies?
Rights of the parties Does the action respect the rights of the
individuals involved?
Justice or fairness Does the action respect the canons of
justice or fairness to all parties involved?

Answers to these questions can help the marketer ascertain the degree to which decisions are
beneficial or harmful, right or wrong, or whether the consequences of actions are ethical or
socially responsible. Perhaps the best framework to work within is defined by asking: Is it
legal? Is it right? Can it withstand disclosure to stockholders, to company officials, to the
public?

One researcher suggests that regardless how corrupt a society might be there are core human
values that serve as the underpinning of life, no matter where a person lives. Participants in
43 countries and more than 50 faiths were given 17 values and asked to rate each as a core
value. Five values-compassion, fairness, honesty, responsibility, and respect for others-were
the most often selected regardless of cuIture.49 The researcher suggests that an action should
only be taken if the answer is no to the question, "Is the action a violation of a core human
value?" When people are clear about their own values and can identify the principles and core
values that make up ethical behavior, they have the tools for looking at potential decisions
and deciding whether or not a decision is ethical.
CULTURAL CONSIDERATIONS IN INTERNATIONAL MARKETING:
A classroom simulation
JAMES B. STULL
San Jose state University
With the constant increase of multinational companies (MNCs), foreign investments, and
international negotiations, the need for smooth interpersonal transactions and business
strategies also grows. Practices taken for granted in one country face varying degrees of
probability of achieving desirable results in another. For example, if a Saudi Arabian host
offers an American visitor a cup of coffee, the American stands a better chance of preserving
friendly relations if he accepts the Saudi's offer. Politely refusing-a cup of coffee may be
acceptable behavior in the United. States, but to a Saudi it may be an insult, as the offer of a
cup of coffee is an expression of Saudi hospitality and a symbol of one's honor. An American
visiting a Latin American country may arrive at his host executive's office for a 10 A.M.
appointment at 9:55 A.M. However, the host may not appear until 11 A.M. While the Ameri-
can may be fuming at having to wait over an hour, his host may feel no need to apologize to
the American as this is normal practice in this host's business environment. .
This simulation' is designed to illustrate how the sensitive businessperson may be the'
one who approaches another culture by attempting to adopt the viewpoint of that particular
culture.

COMPONENTS OF CULTURE

Culture is a complex pattern of consistent behaviors which can be broken into components
for the purposes this exercise, let’s consider those proposed by Vern Terpstra in his first
edition of the cultural entities and values, social organization, education, technology, political
systems, and legal systems.

Language

Language reflects the philosophy and lifestyle of a group of people. It also conditions
people to think and behave in certain ways. Eskimos have more than twenty five words for “
snow” but no word for “ war.” Arabs have over 6,000 words for camel, its parts and
equipment. The Arabic word for "citizen" translates roughly as "one who performs Allah's
will." Nearly one-half of English is made up of scientific and technological terms. A clock
"runs" in the United States, while it "walks" in some Spanish-speaking countries. People who
study languages learn much more about other people than merely how they speak. Language
may be the most reliable indicators of other components of a culture; it can tell us a great deal
about how other people live and think as well.

Religion

If religion provides people with a sense of why they are on this earth, it may
consciously and subconsciously dictate how they conduct their lives. Attitudes, values, and
behavior can often be traced to religious philosophies. Although numerous religions existent
of the world fits into six basic religious categories: animism (primitive religions), Hinduism,
Buddhism, Islam and Christianity. Judaism is found primarily in Israel.
Attitudes and Values

A people's attitudes and values about certain topic are important to that society's economic
development and its people's behavior. Of particular concern are attitudes and values about
time, work-and achievement, wealth and material gain. Religions plays major role in their
development. The tenets and canons followed by most religions often contain prescriptions
and proscriptions about greed and the attainment of wealth and material items.

Social organisation
People organize activities and role relationships consistent with other cultural values
and expectations. Important considerations include a culture’s origin and history, family
relationships, friendships, class structure, governmental powers, social and reference groups
(including labor unions,) gender roles, supervisor subordinate relationships, and more.

Education
Educational systems are culture-specific, promulgating norms as a vein of cultural existence.
Studies show a high correlation between educational enrollments in secondary and higher
levels of education and a country's economic development. Diffusion of innovations into a
culture depends heavily on literacy, which typically leads to better communication systems,
new ideas, new ways to solve problems, increased technological development, improved
labor forces, and more.

Technology

The artifacts, material symbols, problem-solving techniques, quantitative systems, managerial


styles, and other intellectual tools reflect the educational and technological development of a
culture. Studies show high positive relationships between per capita incomes and per capita
energy' consumption; high gross domestic products and manufacturing; and low gross
domestic products and agriculture. Also characteristic of technologically developed cultures
are more urban dwellers; high per capita expenditures on education; more cars, radios,
televisions, and telephones; more scientists, engineers, and, technicians; and higher ex-
penditures for research and development. Technology determines how a country uses its land,
labor, capital, and education. It also leads to further technologic innovation.

Political Systems

Political-environments both within and between countries are major considerations when
conducting international business. Politicians exercise controls over resources and how
people use them. Religious groups, labor unions, and multinational companies are also
clearly political. Multinational corporations (MNCs) are always at risk politically when they
enter a foreign arena to conduct business. The MNC may be forced to take severe action
because of sudden changes in a host country’s environment, including competing political
philosophies, social unrest, lobbying independence, war, and new international alliances

Legal Systems

Laws are rules of a culture established by authority, society, or custom. They reflect the
attitudes of the culture; they may be written or unwritten. Most of the world fits into one of
the following legal systems: common, civil, communism, Islam, or indigenous. Some of the
legalities an MNC must consider include location, structure, finances, money, taxes, property,
antitrust, and transportation. Additional considerations might involve controls over importing,
exporting, patents, trademarks, competition, and controls over the host country imposed by
still other nations.
Economic forces such as employment, income, gross national product, foreign exchange
risk, balance of payments, and commodity agreements also affect international business. One
must also look at the country's population, climate, geography, natural resources, ecological
systems, and plant and animal life. You may wish to add these variables to the simulation, but
they are not discussed in detail here.

Simulating International Business

This simulation was originally designed for a fifteen-week, two seventy-five-minute sessions-
per week marketing class, with approximately forty students per section. It can easily be
adapted to fit the needs of any group.
Simulation are a popular, widely used method of teaching and training people in the
development of various skills. Discoveries about aircraft in flight have been made in wind
tunnels. Astronauts train for space flight through simulations. Airplane pilots and automobile
drivers learn on simulators. Law students experience trial conditions through moot courts.
First aid personnel practice cardiopulmonary resuscitation on inflatable dummies. Security,
safety, and medical personnel train to deal with various hazards and obstacles through fire,
lifeboat, and air raid drills, disaster training, and other forms of simulation.
Simulations are also used widely in management training machine and interpersonal
simulations have given trainees ideas about what to expect and how to react to probable
leadership situations.
A simulation is an operating model of real life in which participants a can experience much of
what would happen without suffering many of the negative consequences.
Here is one way to successfully experience the benefits of this simulation.

Week 1 : you will be assigned to a research group to find out as much as you can
about one of the following variables: language, religion, attitudes and values, social
organization, education, technology, political systems, and legal systems. An
excellent source of information for this phase of the simulation is Vern Terpstra, The
Cultural Environment Of international Business, Cincinnati: South-Western, 1978.

Weeks 1-5: Your group should pace itself and prepare to present your research
findings to the class sometime during weeks six through nine. You should develop
ways for your audience to actually experience your concept or component as it is ex-
perienced in other cultures.

Weeks 6- 9: Your group will present your findings daringness class period. Plan for
one concept to be presented each class period. Be sure to take notes and participate in
this phase, as the information will be used during the next module, weeks 10-1 5.

Weeks 10-15: On the first day of this phase you will be assigned to a new group. One-
member from each of the research groups from the first nine weeks will be assigned
to a culture group, so that each culture group and an expert on each of the separate -
components making up that culture. Each new group will function as a business
organization representing one-of the following five -cultures: Bwana, Feliz, Leung,
Koran, and Dharma.
Bwana- This African republic is slowly beginning to trade with the rest of the world. Its
level of technology is far-behind countries such as Japan, Germany, Great Britain, and the
United States. Bwana is rich with gems, ivory, and precious metals, but its primary language
is Swahili, although some English is spoken in the capital city, Zulu. Organised religion has
made little impact on this tiny nation. Most of the people are animistic, believing that spirits
inhabit everything; people worship volcanoes, the moon, rubber trees, and waterfalls. A very
traditional slowly emerging country, Bwana still relies on tribal laws that have been handed
down through generations. Children can get a formal education in ht capital city, but most of
the people live in rural villages where tribal leaders determine what needs to be learned.

Feliz This Central American country is constantly in the world news. Guerrilla warfare leaves
Feliz politically unstable. Although the official language is Spanish, dozens of pre-
Columbian dialects are spoken in rural villages. Catholicism is the primary religion: however,
some pre-Catholic animism still exists as the local brufo or shaman is frequently seen waving
incense pots and chanting at village churches. Some technological advancements have been
made in the capital and two other large cities. Exports include rum, sugar, rice, lumber, and
motor vehicles. Tourism is strong on the Caribbean coast, where fishing is extremely popular
and politics seem not to exist. In the cities, many children complete their secondary
education. Village children typically receive no formal education. Civil law is followed in
Feliz.

Leung- Leung is located in Asia. Cantonese is spoken throughout the country. The Lounges
people revere education and encourage their children to learn as much as they can, but the
country's economy makes it, virtually impossible for the education to be put to use. Most of
the children receive a solid education, but formal training is limited to trade schools and tech-
nology centers. The average citizens believes in the country, but many lounges leave to seek
opportunities elsewhere; A significant number of those who have been educated and trained
in Western countries are beginning to return to help develop their native land. Leung exports
rice, wheat, corn, cotton, and textiles. It produces steel, iron; coal, and some machinery. Re-
cent ventures have resulted in foreign-owned high technology computer assembly plants
being set up and operated near the port cities. The people follow the teachings of Confucius,
Buddha, and Tao Communism has been the main form of government since the 1920s, but
the younger generation want to see change soon. Some free trade zones have, emerged in the
past few years allowing merchants to experience other coun tries’ ways of doing business.

Koran- Koran is situated in the middle east, in a very dry desert region. The country has
produc4ed and exported oil since 1938, and is also abundant with fertilizer, petrochemicals,
and cement. Koran enjoys a strong' fishing industry. Desalinization plants have helped Koran
provide water for agriculture and industry. Because of its success with oil the per capita in-
come is one of the highest in the world. However, other levels of technology are low. Some
areas of the country are run down and the people are extremely poor. Koran imports a great
deal from the rest of the world. The primary language is Arabic. Islam is the only religion
with Muslims following the word from the holy book, The Koran. The oil industry has
modernized part of the country, but Islam dictates that Muslims adhere to tradition.

Dharma: Dharma, a former British colony, is located on the Indian subcontinent. The people
speak Hindi, through some 200 different dialects may be heard. Most Dharmese practice
Hinduism. Education is very important to the Dharmese people, and they make great
sacrifices to be sure that their children go to school. The economy is historically poor. The
main exports are rice, legumes, tea, and tapioca. Children often leave Dharma to study in
England, Canada, or the United States, and they tend not to return to their homelands except
to visit their families. The government is primarily socialist, with strong ties to the English
common law system.
Although these cultures are, obviously fictitious, they are intentionally similar to real cultures
so that you can make reasonable inferences that will help you succeed in this simulation.

Procedure for Weeks 10-15 You will need to go through the following steps to
complete the phase of the simulation:

1. Each culture must consult, its own specialists to develop a clear understanding of its own
identity regarding each component. Focus on developing specific verbal and nonverbal
language norms which will be observed during negotiations with other cultures. This may
take a few class days.

2. Study the other cultures to gain some familiarity with their cultural components. Research
real cultures that you perceive as similar so that you can make reasonable inferences about
life in the fictitious culture.

3. Your overall goal is to market a product, product line, service, or idea to the other culture.
Your success will depend on how well you know the other culture and how well you adapt
your business and marketing strategies to each.

4. You must identify a product, service, or idea that you believe is compatible with your own
culture and that you could market successfully to the other culture. You don't have to invent
something.

5. Develop business and marketing strategies that you believe will be sensitive to the
idiosyncrasies of each, other culture.

6. You will negotiate with each other culture persisting-until a contract has been settled or
until you perceive that a stalemate has been reached.

7. Discuss the simulation, focusing on bow you felt and what you learned while you were
simulating international business.

8. Your instructor may modify this simulation to meet the- needs of your particular class.
NISSAN MICRA, DENMARK
DEBORAH FAIN
New York University

INTRODUCTION

In 1992 the Micro, Nissan's smallest car, cost $20,000 U.S. dollars in Denmark. That made it
the most expensive car in its class. The price of the new model was up 20 percent from one
year ago. Historically, only 35.4 percent of Micra owners buy another Micra. The reason
usually given is price.
Moreover, due to the continuing recession, car sales in Denmark were at their lowest level in
thirty years. Only 9,000 small cars are sold each year, in a good year, in Denmark.
To make the problem even more difficult, marketing costs had increased by at least 10
percent in each of the past five years.
Nissan Denmark addressed this situation by developing and executing a truly
innovative database marketing program. They were able to do this because they had very
little to lose and much to gain:

“First given the economic situation described above, no one inside or outside the company
expected success, so a loss would not cause great concern.
Second, even a small success would be greeted with great satisfaction.
Third, management was willing to take a chance on a really bold program because the
situation was becoming quite critical.”

Working with their advertising agency, management decided that the only way to reverse the
trend was to develop and execute an ongoing relationship building campaign, specifically
targeting currently satisfied customers.
This new program was in addition to the ongoing print campaign, the objective of
which had been awareness of the Nissan Micra product. This campaign had been running in
Denmark for several years. The advertising agency brought in a research firm and a direct
marketing agency to assist in development and execution of the new relationship-building
campaign.

OBJECTIVES

Nissan Denmark had several objectives, some short-term and others long-term. The key was
using a test drive to motivate previous or current Micra owners to purchase a new Micra.

Short-Term Objectives
The first short-term objective was to sell 200 Nissan Micras through a test drive program.
The second was to reduce the average marketing cost below the current $400 per car.
Obviously, both of these objectives were important to demonstrate that the Micra
remained a practical choice for Danes purchasing a new car. However, Nissan Denmark and
the agency were also looking ahead to the, longer term, since any innovative program was
certain to be expensive relative to staying with the current program. The long-term objectives
were set to guarantee Nissan Micra’s future, and even Nissan's overall future, in Denmark.
Long Term objectives

The first long-term objective was to develop an ongoing communications/ relationship


maintenance program for current micro owners. The second was to develop ongoing
methodology to target the highest sales potential customers.

By accomplishing these long term objectives, Nissan could develop targeted mailings
to get potential buyers to test drive a new Micra, or other Nissan models, as part of an
ongoing promotional program.
Nissan actually accomplished all of its objectives, both short and long term, by the
following steps, which were carefully organized and managed.

ORGANISING THE TEAM

By hiring both a direct marketing agency and a respected market research firm, Nissan and its
general advertising agency ensured that whatever program was developed would be based on
a higher level of expertise than the ad agency alone would have been able to provide to the
client.
Together all four team members-client, general agency, direct marketing agency and
research firm-developed marketing questions hypotheses, and an initial approach to the
problem.

Assignments
1. Generate list of marketing questions and hypotheses
2. Develop a strategy outline and a mailing plan.
3. Prioritize the mailing and develop a data-driven plan.

This case was prepared as a basis for classroom discussion rather than to illustrate effective
or ineffective handling of a business situation.

BENEATH HIJAB
Marketing to the veiled women of Iran
JEFFREY A. FADIMAN
San Jose state University

Hijab means modest dress, and that is how Muslim women cover themselves. To Muslim
women wearing hijab, one of the most annoying questions asked by Western women is;
"Why?"
In defense of the practice, Mahjubah: The Magazine for Moslem, Women (an English-
language journal published in Iran for foreign distribution) ran an article examining hijab
from the perspective of Muslim women. According to the article, men and women are
physically and psychologically different. Muslim women are equal to men but not the same
as men. Each sex has its own rights and place in society. Women wear hijab to because they
weak but because of the high status given to them by Allah and because of their desire to
adhere to Islamic morality such, 'hijab’ means more than an outer garment; the heart must be
modest as well.
Muslim women, on the other hand, often-wonder why Western women wear skimpy, skin-
tight dresses that are impractical arid uncomfortable. Why must western women be slaves to
appearance, forever listening to the media about how to be glamorous? Why must they have
to look beautiful for strangers to ogle them in public places? Why do western feminist groups
want to turn women into men? Muslim women wonder whether such questioning of gender
roles is a sign of strength or actually a sign of weakness.

QUESTIONS

Assume that Iran’s new leaders now welcome U.S. businesses, requiring only that the
members of each firm respect the religious, ethical, and moral beliefs of the nations. Consider
that before the Ayatollah Khomeini’s revolution, Iran’s respect revolution, Iran's women
showed enormous and increasing interest in a wide range of U.S. goods often wearing them
"beneath the hijab," in deference to the opinions of Iranian men. Then came Khomeini, label-
ing the United States "the Great Satan." As a consequence, Western goods became equated
with religious evil. Now the market has opened once more, after a drought of years.

How can you reawaken that demand? How can you stimulate the demand for Western goods
(or. services) among Iranian women without generating anxiety on the part of Iran's (all male)
religious and secular authorities?
Your, responses to this question should take the form of an essay, suggesting a
number of specific measures that might be taken. The essay should include your responses to
the following:
I. Product selection What type of product (goods or service) could you, as marketing director
of a small U.S. firm, attempt to test, market to the female population of Iran’s Describe in
detail. Justify your choice of product.
2. Segment market Which segment of the market should you target as an initial clientele
describe in detail, including sex, age, social class, residential pattern (rural, suburban, urban),
and so on. Justify your choice of segment.
3. Product modification In what ways should the product (or service) be modified to
stimulate demand by women, particularly those who continue to wear the black 'chadur,
thereby conforming to hijab either by preference or in deference to male authority? Justify
your modifications.
4: Product image In what ways must the product image be modified to conform to Iranian
religious, ethical, and moral norms, considering that these are entirely imposed by men.
Justify your modifications (note: although upper- and middle – class women often do their
own shopping, lower class and more traditional middle class women do not. Their husbands,
fathers, and other men shop for them, and the man involved selects what seems appropriate to
him. The problem is how to market products or services that entice women, without thereby
alienating their men.) Also consider media selection, potential distribution outlets, point-of-
purchase strategies, and so on.
5. On-site project head Considering both the legacy-of hostility that Iranians feel toward
America and their long-range fascination with' Western goods, what type of individual would
you select to launch this first-time effort within the country? Assume his or her professional
qualifications to be adequate, but describe those personal characteristics (sex, age,
appearance, temperament, language potential, special skills, etc.) that the ideal candidate
should possess to deal with Iranians. Once you have described your ideal candidates, consider
this question: based on the data available to you at this moment, who among your classmates
would appear to be the best selection Justify your choice.
As you write your essay, you should consider specifics about Iranian distribution out lets.
Iran’s cities, like many in the Middle East, can be described as three communities in one:

Modern core Department stores, specialty shops; luxury goods (pre-Khomeini) elitist,
Western oriented -clientele; also patronized by middle class.
Traditional core Middle Eastern marketing patterns--open bazaars, with separate sections for
specialists (e.g., street of the silversmiths, etc.), family go-downs, (small general stores)
clustered along tiny street; lower-middle-class, "traditional," and urban worker clientele.
Worker zones Concentric circles around both cores, each less wealthy than its predecessor,
extending outward until they blef1d into the rural villages, from which the cities draw their
food.

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