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Bachelors Program in Business Management (BBA) Year-II
Specialization: - Business
Administration
Note
:-
(i)
Attempt any four Cases
(ii) All Cases carry equal marks.
(ii) All Cases carry equal marks.
Case
1 :-
“
Left or Right?”
Rajinder Kumar was a production worker at
Competent Motors Limited (CML), which made components and accessories for the
automotive industry. He had worked at CML for almost seven years as a welder,
along with fifteen other men in the plant. All had received training in welding,
both on the job and through company-sponsored external programmes. They had
friendly relations and got along very well with one another. They played
volleyball in the playground regularly before retiring to the quarters allotted
by the company. They ate together in the company canteen, cutting jokes on each
other and making fun of anyone who dared to peep into their privacy during
lunch hour. Most of the fellows had been there for quite some time, except for
two men who had joined the ranks only two months back.
Rajinder was generally considered to be the leader of the group, so it
was no surprise that when the foreman of the department was transferred and his
vacancy was announced, Rajinder applied for the job and got it.
There were only four other applicants for the job, two from mechanical
section and two from outside. When there was a formal announcement of the
appointment on a Friday afternoon, everyone in the group congratulated
Rajinder. They literally carried him snacks and celebrated the event
enthusiastically.
On Monday morning, Rajinder joined duty as Foreman. It was company
practice for all foremen to wear blue jacket and a white shirt. Each man’s coat
had his name badge sewn onto the left side pocket. The company had given two
pairs to Raijnder. He was proud to wear the coat to work on Monday.
People who saw him from a distance went upto him and admired the new
blue coat. There was a lot of kidding around calling Rajinder as ‘Hero’, ‘Raja
Babu’ and ‘Officer’ etc. One of the guys went back to his locker and returned
with a long brush and acted as though he were removing dust particles on the
new coat. After about five minutes of horseplay, all of the men went back to
work.
Rajinder went back to his office to get more familiar with his new job
and environment there.
At noon, all the men broke for lunch and went to the canteen to eat and
enjoy fun as usual. Rajinder was busy when they left but followed after them a
few minutes, later. He bought the food coupon, took the snacks and tea and
turned to face the open canteen. Back in the left side corner of the room was
his old work group; on the right hand side of the canteen sat all the other
foremen in the plant all observed in their blue coats.
At that point of time, silence descended on the canteen. Suddenly both
groups looked at Rajinder anxiously, waiting to see which group he would eat
with.
QUESTIONS:
1.
Whom do you think Rajinder
will eat with? Why?
2.
If you were one of the
other foremen, what could you do to make Rajinder’s transition easier?
3.
What would you have done if
you were in Rajinder’s shoes? Why?
Case
2 :-
“Naughty
Rule”
Dr. Reddy Instruments is a medium-sized the
Industrial Estate on the outskirts of Hyderabad. The company is basically
involved with manufacturing surgical instruments and supplies for medical
professionals and hospitals.
About a year ago, Madhuri, aged 23, niece of the firm’s founder, Dr.
Raja Reddy, was hired to replace Ranga Rao quality control inspector, who had
reached the age of retirement. Madhuri had recently graduated from the Delhi
College of Engineering where she had majored in Industrial Engineering.
Balraj Gupta, aged 52, is the production manager of the prosthesis
dept., where artificial devices designed to replace missing parts of the human
body are manufactured. Gupta has worked for Dr. Reddy Instruments for 20 years,
having previously been a production line supervisor and, prior to that, a
worker on the production line. Gupta, being the eldest in his family, has taken
up the job quite early in life and completed his education mostly through
correspondence courses.
From their first meeting, it looked as though Gupta and Madhuri could
not get along together. There seemed to be an underlying animosity between
them, but it was never too clear what the problem was.
Venkat Kumar, age 44, is the plant manager of Dr. Reddy instruments. He
has occasionally observed disagreements between Madhuri and Gupta on the
production line, Absenteeism has risen in Gupta’s department since Madhuri was
hired as quality control inspector. Venkat secretly decided to issue a circular
calling for a meeting of all supervisory personnel in the production and twelve
quality control departments. The circular was worked thus:
Attention:
All Supervisors Production Quality Control Departments
A meeting is schedule on
Monday, Feb 20, at 10 a.m. in room 18. The purpose is to sort out
misunderstanding and differences that seem to exist between production and QC
personnel.
Sd. Venkat Kumar
Plant
Manager
Venkat
starred the meeting by explaining why he had called it and then asked Gupta for
his opinion of the problem. The conversation took the following shape:
Gupta:
That Delhi girl you recruited is a ‘fault finding
machine’ in our dept. Until she was hired, we hardly even stopped production.
And when we did, it was only because of a mechanical defect. But Madhuri has
been stopping everything even if ‘one’ defective part comes down the line.
Madhuri: That’s not true. You have fabricated the story well.
Gupta:
Venkat, our quality has not undergone any change in
recent times. It’s still the same, consistently good quality it was before she
came but all she wants to do is to trouble us.
Madhuri:
May I clarify my position at this stage? Mr. Gupta,
you have never relished my presence in the company. I still remember some of
the derisive remarks you used to make behind my back. I did take note of them
quite clearly!
Suresh
(another quality control supervisor): I agree with
Madhuri Venkat. I think that everyone knows that the rules permit quality
control to stop production if rejections exceed three an hour. This is all
Madhuri has been doing.
Gupta:
Now listen to me. Madhuri starts counting the hour
from the moment she gets the first reject. Ranga Rao never really worried about
absolute reject rule when he was here. She wants to paint my department in
black. Is not that true Riaz Ahmed?
Ahmed
(another production supervisor): It sure is Gupta.
Every time Maduri stops production, she is virtually putting the company on
fire. The production losses would affect our bonuses as well. How long can we
allow this ‘nuisance’ to continue?
Thirty minutes later Madhuri and Gupta were still lashing out at each
other. Venkat decided that ending the meeting might be appropriate under the
circumstances. He promised to clarify the issue, after discussion with
management, sometime next weel.
QUESTIONS:
1.
Should Venkat have called a
meeting to sort out this problem? Why or Why not?
2.
What do you say about the
rule calling for production to halt if there are more than three rejects in an
hour? Should it have been enforced? Explain.
3.
What do you feel is the
major problem in this case? The solution?
Case
3 :-
ABC
LIMITED
M/s. ABC Ltd. is a medium – sized
engineering company production a large-range of product lines according to
customer requirements. It has earned a good reputation as a quick and reliable
supplier to its customers because off which its volume of business kept on
increasing. However, over the past one year, the managing director of the
company has been receiving customer complaints due to delays in dispatch of
products and at times, the company has to pay substantial penalty for not
meeting the schedule in time.
The managing director convened an urgent meeting of various functional
managers to discuss the issue. The Marketing Manager questioned the arbitrary manner
of giving priority to products in manufacturing line, causing delays in
products that are in great demand and over-stocking of products which are not
required immediately. Production control manager complained that he does not
have adequate staff to plan and control the production function; and whatever
little planning he does, is generally overlooked by shop floor manager. Shop
floor manager complained of unrealistic planning, excessive machine breakdowns,
power failure, shortage of materials for schedule. Maintenance manager, say
that he does not get important spares required for equipment maintenance
because of which he cannot repair machines at a faster rate. Inventory control
manager says that on the one hand the company often access him of carrying too
much stock and on the other hand people are grumbling over shortages.
Fed up by mutual mud-slinging, the managing director decided to appoint
you, a bright management consultant with training in business management to
suggest way and means to put his “house in order”.
QUESTIONS:
1.
How would you examine if
there is any merit in the remarks of various functional managers?
2.
What, in your opinion,
could be the reasons for different managerial thoughts in this case?
3.
How would you design a system
of getting correct information about job status to identify delays quickly?
4.
List some scientific
decision aids that you may prescribe to improve the situation.
Case
4 :-
In
Search of Greener Pastures
Rohit joined ABC Ltd., a heavy engineering unit,
having a turnover of about Rs. 20 crores, in the junior management cadre as a
direct recruit. During his tenure with the company, Rohit proved to be a
dedicated and sincere worker which earned him quick promotions in the
organization. He had made a mark in whichever department he had worked and his
departmental heads were happy with his work. After serving the company for a
period of ten years, Rohit felt that there was no scope for further improvement
in his position and started applying for better jobs commensurate with his
experience. He finally succeeded in getting a job but his new employer wanted
him to join within one month. To this, Rohit pleaded inability, as he was
required to give three month’s notice to his present employer, as per company rules.
However, he said he would discuss the matter with the personnel manager and try
to reduce the period to one month by paying two month’s salary in lieu of the
required notice. Rohit accordingly, submitted his resignation to the present
employer and requested the departmental head to recommend his case to the
personnel manager for relieving him after one month. The departmental head,
said that he would discuss the matter with the personnel manager and try his
best to help him. However, the latter turned down Rohit’s request stating that
the rules require him to give three month’s notice and that the alternative
suggested by Rohit was not acceptable.
When Rohit learnt about the personnel manager’s response, he approached
his prospective employer to explain his difficulty, which was beyond his
control, and requested them to extend his joining period to three months. This
was acceptable by them, as a special case.
The departmental head took up Rohit’s case with the management and
suggested that in future, the officers who resigned may be permitted to give
one month’s notice and two month’s salary in lieu of a further two month’s
notice, if required, so as to ensure against any unnecessary delay in the work
of the department. But, the management refused to accept this proposal, stating
clearly that the company’s policy cannot be changed.
QUESTIONS:
1.
Did the management take a
correct decision in Rohit’s case under the circumstances?
2.
What steps should the
departmental head take to do not adopt an indifferent attitude towards their
work during the three month’s notice period?
3.
If you were in the position
of the management, how would you have handled the situation?
Case
5 :-
Ramesh
Publishing Company
Mr. Ramesh was the founder of a publishing company
specializing in accounting books. Within a short span of time, the company
prospered and grew very fast. Its sales rose from Rs 60,000 the first year to
Rs 6lakhs three years later. The editing, production and sales staff grew
almost as fast.
But the company was having problems, and
of late uncertainly and confused grew in the company. New people were making
decisions to the best of their ability but many of them did not fit together.
One of Mr. Ramesh’s key associates suggested that the company ought to have
better planning and certainly needed clear policies to guide decisions making,
but Mr. Ramesh was unimpressed. His response was that if he took time off to
plan and develop policies today, he might not have a company tomorrow, and that
he had no choice but to spend his time meeting today’s problems as they came
up.
QUESTIONS:
1.
If you were one of the
newer managers in the company and had taken a course in the basics of
management, what would you say to Mr. Ramesh?
2.
Outline exactly how would
you show him that planning and policy making are important to the company if it
has to grow effectively.
Case
6 :-
THE
Marquee Garment Retailer
I knew we were right, Neil Simon thought
himself as the steward brought him a glass of Cardhu single malt. The Whisky
felt good after week when he was allowed to drink nothing but champagne by his
hosts in India. Ah, but then they had reason to celebrate. Simon signaled to
the steward that he’d like a refill - he planned to take his time over the second
one – and thought about the week that had been.
Simon, the director-in-charge of international franchise operations at
Smith & Robin, a $8-billion marquee garment retailer, had arrived in India
exactly seven days back, with mixed feelings. He’d been at S&R Less the
eight months-he had been hired when the company decided to abandon its
twenty-year old strategy of expanding geographically through owned outlets as
against franchised ones-but he knew the India trip was one of those things that
could make or break his career.
This wasn’t his first visit to India. He’d visited it as a backpacker in
his second year at collage, then as a middle-level executive of a cola company,
and then again, soon after he joined S&R. It was during the last visit that
he noticed the kind of brand equity the company enjoyed in India. S&R was a
know name and there was huge demand for its offerings. The grey market did a
thriving business in both real S&R products, smuggled into the country, and
ersatz ones. So, he had gone back and made case for India.
“Let us go in now and seed the market and leverage our equity there
“He’d told the board. Convincing the board hadn’t made his job any easier.
Then, there were tales of poor infrastructure, horror stories about how foreign
investors were treated, and wholly inappropriate real estate options. Worse,
some members of the board weren’t fully convinced about the ‘franchise
strategy’, S&R had moved to. “I see that we are shutting three of our
profitable shops in London, “one of the board members Barbara Rutherford had
shifted. Fortunately for Simon, the chairperson lucy Walters had to come to his
rescue. “we decide that franchising was the best way to grow last year Barbara;
this meeting isn’t about that.
Finally, a compromise had been reached. S&R would enter the country
through one or two pilot outlets’. To Simon went the task of finding a suitable
franchise. That had been easy. The Kathuria family that ran S&R Malaysia
franchise had business interests in India, and it hadn’t taken Simon much to
convince them to take on the India franchise.
The two Kathuria-owned franchise store had opened in upmarket malls,
Delhi and Mumbai, the previous week and Simon had winged it down to be there at
the opening. The Mumbai outlet 7,000 square feet large; the Delhi one, 3,000
square feet. And both sold a range of garments for men and women, lingeries,
and toiletries-all imported , and all under the S&R brand name, in keeping
with the company’s policy of only selling the best quality products sourced at
the least possible cost at all its outlets.
The tariff regime in India made some prices look Ludicrous-a women’s
shirt cost over Rs2, 500; men’s jeans, Rs3,200-and made S&R, which was
perceived to be a high-end value-for-money brand into a premium one with
aspirational trimmings. Indeed, the only other stores that stocked merchandise
of compatable prices were boutiques devoted to designer wear.
|
|
|
Best-case Scenario
Worst-case Scenario
|
|
·
Indian customers continue
treating S&R as
an
aspirational brand.
·
The company is able to
sustain its premium pricing in India.
·
S&R repeats the Delhi-and
Mumbai-model in other metros.
·
The scalability across
centers makes S&R’s local franchise profitable.
|
·
The novelty factors
surrounding S&R’s launch wears off.
·
Customers start asking
questions about the super-premium positioning.
·
Sales plateau in the Delhi
and Mumbai stores.
·
The franchise shows no
interest in expanding a loss-making operation.
|
The India –strategy’s detractors at HQ had raised objections over the
size of the Delhi outlet (“S&R isn’t associated with cramped buying
spaces”) and the price-tags (“Indians aren’t dumb, you know). But Simon managed
to steer clear of the flak. The fact that leading consulting firms estimated
India’s organized retail business to zoom from Rs 5,500 crore in 2000, to Rs
35,000 crore in 2005, helped his cause.
Then, he had landed in India; the Kathurias had welcomed him like he was
royality; he had been allowed to drink nothing but champagne (“Here’s to the
stop reopening”; “ Here’s to our first sale”, “Here’s to our first individual
sale over Rs 100,000”….); and things had gone like a dream.
The launches had coincided with India’s equivalent of the Christmas
season-the festival of lights, they called it, Diwali. The two stores’ initial
stock had been sold out in three days flat. And the fact that some of the
products still carried their dollar prices-an oversight by the stores and a
full 40 per cent lower than their prices in Indian rupees, thanks to the
duties- hadn’t deterred shoppers. True, there appeared to be more demand for
lingerie and cosmetics, but the other products had takers too.
Simon was surprised by the reaction. He knew that he would have to wait
a few months to understand the real demand for S&R products in India. Only
once the initial novelty had worn off, would the company have better idea of
what Indian customers bought, and what they did not. He was also aware that
while the mere fact S&R products were available in the country could have
encouraged customers to overlook the 40 percent mark-up (thanks to import
duties), they’d soon move to the ‘value’ buying behaviour Indians were famous
for.
Simon had raised these issues at his last meeting with the Kathurias,
but they were still celebrating the phenomenal success of their opening gambit
and their only response had been to ply Simon with, what else, more champagne.
Still, he had to admit, it had been a good beginning.
Simon signaled the steward for another refill. What the heck.. he’d
earned it.
QUESTION:
1.
Has Smith & Robin
(S&R) chosen the right entry strategy for the Indian market?
2.
“S&R has taken a risk
in entering a market that is large, but offers little flexibility in terms of
price and business environment” Discuss.
3.
What kind of advance
planning and strategic thinking should go into S&R’s corporate planning
efforts so that the Indian consumer gets ‘value for money’?
Bachelors
Program in Business Management (BBA) Year-I
Note :- Solve any 4 case study
All case carries equal marks
Case
No : 1
PUBLIUS
Although
many people believe that the World Wide Web is anonymous and secure from
censorship, the reality is very different. Governments, law courts, and
other officials who want to censor, examine, or trace a file of materials on
the Web need merely go to the server (the online computer) where they think the
file is stored. Using their subpoena power, they can comb through the
server’s drives to find the files they are looking for and the identify of the
person who created the files.
On Friday June 30, 2000, however, researches at AT & T Labs announced the creation
of Publius, a software program that enables Web users to encrypt (translate
into a secret code) their files – text, pictures, or music – break them up like
the pieces of a jigsaw puzzle, and store the encrypted pieces on many different
servers scattered all over the globe on the World Wide Web. As a result,
any one wanting to examine or censor the files or wanting to trace the original
transaction that produced the file would find it impossible to succeed because
they would have to examine the contents of dozens of different
servers all over the world, and the files in the servers would be encrypted and
fragmented in a way that would make the pieces impossible to identify without
the help of the person who created the file. A person authorized to
retrieve the file, however, would look through a directory of his files posted
on a Publius – affiliated website, and the Publius network would reassemble the
file for him at his request. Researchers published a description of
Publius at www.cs.nyu.edu/waldman/publius.
Although many people welcomed the way that the new software would enhance
freedom of speech on the Web, many others were dismayed. Bruce Taylor, an
antipornography activist for the National Law Center for Children and Families,
stated : “It’s nice to be anonymous, but who wants to be more anonymous than
criminals, terrorists, child molesters, child pornographers, hackers and e-mail
virus punks.” Aviel Rubin and Lorrie Cranor, the creators of Publius,
however, hoped that their program would help people in countries where freedom
of speech was repressed and individuals were punished for speaking out.
The ideal user of Publius, they stated, was “a person in China observing abuses
of human rights on a day – to – day basis.”
Questions
:
1. Analyze
the ethics of marketing Publius using utilitarianism,
rights, justice, and caring.
In your judgement, is it ethical to market
Publius ? Explain.
2. Are
the creators of Publius in any way morally responsible for any
criminal acts that
criminals are able to carry out and keep secret by relying
on Publius ? Is AT & T in any way morally
responsible for these ?
Explain your answers.
3. In
your judgment, should governments allow the implementation of Publius ?
Why or why not ?
Case
NO. 2
A
JAPANESE BRIBE
In
July 1976, Kukeo Tanaka, former prime minister of Japan , was arrested on
charges of taking bribes ($ 1.8 million) from Locjheed Aircraft Company to
secure the purchase of several Lockheed jets. Tanaka’s secretary and
serial other government officials were arrested with him. The Japanese
public reacted with angry demands for a complete disclosure of Tanaka’s
dealings. By the end of the year, they had ousted Tanaka’s successor, Takeo
Miki, who was widely believed to have been trying to conceal Tanaka’s actions.
In Holland that same year, Prince Bernhard, husband of Queen Juliana, resigned
from 300 hundred positions he held in government, military, and private
organizations. The reason : He was alleged to have accepted $ 1.1 million
in bribes from Lockheed in connection with the sale of 138 F – 104 Starfighter
jets.
In Italy , Giovani Leone, president in 1970, and Aldo Moro and Mariano Rumor,
both prime ministers, were accused of accepting bribes from Lockheed in
connection with the purchase of $ 100 million worth of aircraft in the late
1960s. All were excluded from government.
Scandinavia , South Africa , Turkey , Greece , and Nigeria were also among the
15 countries in which Lockheed admitted to having handed out payments and at
least $ 202 million in commissions since 1970.
Lockheed Aircraft’s involvement in the Japanese bribes was revealed to have
begun in 1958 when Lockheed and Grumman Aircraft (also an American firm) were
competing for a Japanese Air Force jet aircraft contract. According to
the testimony of Mr. William Findley, a partner in Arthur Young & Co.
(auditors for Lockheed), in 1958 Lockheed engaged the services of Yoshio
Kodama, an ultra right – wing war criminal and reputed underworld figure with
strong political ties to officials in the ruling Liberal Democratic
Party. With Kodama’s help, Lockheed secured the Government
contract. Seventeen years later, it was revealed that the CIA had been
informed at the time (by an American embassy employee) that Lockheed had made
several bribes while negotiating the contract.
In 1972, Lockheed again hired Kodama as a consultant to help secure the sale of
its aircraft in Japan . Lockheed was desperate to sell planes to any
major Japanese airline because it was scrambling to recover from a series of
financial disasters. Cost overruns on a government contract had
pushed Lockheed to the brink of bankruptcy in 1970. Only through a
controversial emergency government loan guarantee of $ 250 million in
1971 did the company narrowly avert disaster. Mr. A. Carl Kotchian, president
of Lockheed from 1967 to 1975, was especially anxious to make the sales because
the company had been unable to get as many contracts in other parts of the
world as it had wanted.
This bleak situation all but dictated a strong push for sales in the biggest
untapped
market left-Japan. This push, if successful, might well bring in
revenues upward of $ 400 million. Such a cash inflow would
go a long way
towards
helping to restore Lockheed’s fiscal health, and it would, of
course, save the jobs of thousands of firm’s
employees. (Statement of Carl Kotchian)
Kodama eventually succeeded in engineering a contract for Lockhed with All –
Nippon Airways, even beating out McDonnell Douglas, which was actively
competing with Lockheed for the same sales. To ensure the sale, Kodama
asked for and received from Lockheed about $9 million during the period from
1972 to 1975. Much of money allegedly went to then – prime minister Kukeo
Tanaka and other government officials, who were supposed to intercede with All
– Nippon Airlines on behalf of Lockheed.
According to Mr. Carl Kotchian, “ I knew from the beginning that this money was
going to the office of the Prime Minister.” He was, however,
persuaded that, by paying the money, he was sure to get the contract from
All-Nippon Airways. The negotiations eventually netted over $1.3 billion
in contracts for Lockheed.
In addition to Kodama, Lockheed had also been advised by Toshiharu Okubo, an official
of the private trading company, Marubeni, which acted as Lockheed’s
official representative. Mr. A. Carl Kotchian later defended the
payments, which he saw as one of many “Japanese business practices” that he had
accepted on the advice of his local consultants. The payments, the
company was convinced, were in keeping with local “ business practices.”
Further, as I’ve noted, such disbursements did not violate American laws.
I should also like to stress that my
decision to make such payments
stemmed from my
judgment that the (contracts) …… would provided Lockheed workers with
jobs and thus redound to the benefit of their
dependents, their communities,
and stockholders of the corporation. I should like to emphasize that the
payments to the so-called “ high
Japanese government
officials” were all requested y Okubo and were not
brought up from my side. When he told me “ five hundred million yen is
necessary for such sales,” from a purely ethical and moral standpoint I
would have declined such a request.
However, in that case, I would most certainly have sacrificed
commercial success….. (If) Lockheed had not remained competitive by the rules
of the game as then played, we would not have
sold (our planes) ……… I knew that if we wanted our product to have a chance to
win on its own merits, we had to follow the functioning
system. (Statement
of A. Carl Kotchian)
In August, 1975, investigations by the U.S. government led Lockheed to admit it
had made $ 22 million in secret payoffs. Subsequent senate
investigations in February 1976 made Lockheed’s involvement with Japanese
government officials public. Japan subsequently canceled their billion dollar
contract with Lockheed.
In June 1979, Lockheed pleaded guilty to concealing the Japanese bribes from
the government by falsely writing them off as “marketing costs”. The
Internal Revenue Code states, in part. “ No deduction shall be allowed…..
for any payment made, directly or indirectly, to an official or employee of any
government …. If the payment constitutes an illegal bribe or kickback.’
Lockheed was not charged specifically with bribery because the U.S. law
forbidding bribery was not enacted until 1978. Lockheed pleaded guilty to
four counts of fraud and four counts of making false statements to the
government. Mr. Kotchian was not indicated, but under pressure from the
board of directors, he was forced to resign from Lockheed. In Japan ,
Kodama was arrested along with Tanaka.
Questions
:
1. Fully
explain the effects that payment like those which Lockheed
made to the
Japanese have on the structure of a market.
2. In
your view, were Lockheed’s payments to the various Japanese
parties “bribes”
or “extortions” ? Explain your response fully.
3. In
your judgment, did Mr. A. Carl Kotchian act rightly from a
moral point of view ? (Your answer
should take into account the effects of the payments on the welfare of the
societies affected, on the
right and duties of the various parties involved, and on the
distribution of benefits and
burdens among the groups involved.)
In your judgment, was Mr. Kotchian morally
responsible for his
actions ? Was he, in the end, treated
fairly ?
4. In
its October 27, 1980, issue, Business Week argued that every
corporation
has a corporate culture – that is, values that set a pattern
for its employee’s activities, opinions and actions and that
are instilled in
succeeding generations of employees (pp.148-60)
Describe, if you can, the corporate
culture of Lockheed and relate that culture to Mr. Kotchian’s actions.
Describe some strategies
for changing that
culture in ways that might make foreign payments less
likely.
Case
NO. 3
THE
NEW MARKET OPPORTUNITY
In
1994, anxious to show off the benefits of a communist regime, the government of
China invited leading auto manufacturers from around the world to submit plans
for a car designed to meet the needs of its massive population. A wave of
rising affluence had suddenly created a large middle class of Chinese families
with enough money to buy and maintain a private automobile. China was now
eager to enter joint ventures with foreign companies to construct and operate
automobile manufacturing plants inside China . The plants would not only
manufacture cars to supply China’s new internal market, but could also make
cars that could be exported for sale abroad and would be sure to generate
thousands of new jobs. The Chinese government specified that the new car
had to be priced at less than $5000, be small enough to suit families with
a single child (couples in China are prohibited from having more than one
child), rugged enough to endure the poorly maintained roads that criss-crossed
the nation, generate a minimum of pollution, be composed of parts that
were predominantly made within China, and be manufactured through joint –
venture agreements between Chinese and foreign companies. Experts
anticipated that the plants manufacturing the new cars would use a minimum of
automation and wuld instead rely on labor – intensive technologies that could
capitalize on China ’s cheap labor. China saw the development of a new
auto industry as a key step in its drive to industrialize its economy.
The Chinese market was an irresistible opportunity for General Motors, Ford and
Chrysler, as well as for the leading Japanese, European and Korean automobile
companies. With a population of 1.2 billion people and almost double
digit annual economic growth rates, China estimated that in the next 40 years
between 200 and 300 million of the new vehicles would be purchased by Chinese
citizens. Already cars had become a symbol of affluence for China’s new
rising middle class, and a craze for cars had led more than 30 million Chinese
to take driving lessons despite that the nation had only 10 million vehicles,
most of them government – owned trucks.
Environmentalists, however, were opposed to the auto manufactures’ eager
rush to respond to the call of the Chinese government. The world market
for energy, particularly oil, they pointed out, was based in part on the fact
that China , with its large population, was using relatively low levels of
energy. In 1994, the per-person consumption of oil in China was only one
sixth of Japan ’s and only a quarter of Taiwan ’s. If China were to reach
even the modes per person consumption level of South Korea , China would be
consuming twice the amount of oil the United States currently uses. At
the present time, the United States consumes one forth of the world’s total
annual oil supplies, about half of which it must import from foreign countries.
Critics pointed out that if China were to eventually have as many cars on the
road per person as Germany does, the world would contain twice as many cars as
it currently does. No matter how “ pollution – free” the new car design was,
the cumulative environmental effects of that many more automobiles in the world
would be formidable. Even clean cars would have to generate large amounts
of carbon dioxide as they burned fuel, thus significantly worsening the
greenhouse effect. Engineers pointed out that it would be difficult, if
not impossible, to build a clean car for under $5000. Catalytic
converters, which diminished pollution, alone cost over $200 per car to
manufacture. In addition, China ’s oil refineries were designed to produce
only gasoline with high levels of lead. Upgrading all its refineries so
they could make low-lead gasoline would require an investment China seemed
unwilling to make.
Some of the car companies were considering submitting plans for an electric car
because China had immense coal reserves which it could burn to produce
electricity. This would diminish the need for China to rely on oil, which
it would have to import. However, China did not have sufficient coal
burning electric plants nor an electrical power distribution system that could
provide adequate electrical power to a large number of vehicles. Building
such an electrical power system also would require a huge investment that the
Chinese government did not seem particularly interested in making.
Moreover, because coal is a fossil fuel, switching from an oil – based auto to
a coal – based electric auto would still result in adding substantial
quantities of carbon dioxide to the atmosphere.
Many government officials were also worried by the political implications of
having China become a major consumer of oil. If China were to increase
its oil consumption, would have to import all its oil from the same countries
that other nations relied on, which would create large political, economic and
military risks. Although the United States imported some of its oil from
Venezuela and Mexico , most of its imports came from the Middle East – an oil
source that China would have to turn to also. Rising demand for Middle
East oil would push oil prices sharply upward, which would send major shocks
reverberating through the economics of the United States and those of other
nations that relied heavily on oil. State Department officials worried
that China would begin to trade weapons for oil with Iran or Iraq , heightening
the risks of major military confrontations in the region. If China were
to become a major trading partner with Iran or Iraq , this would also create
closer ties between these two major power centres of the non-Western world – a
possibility that was also laden with risk. Of course, China might
also turn to tapping the large reserves of oil that were thought to be lying
under Taiwan and other areas neighboring its coast. However, this would
bring it into competition with Japan , South Korea , Thailand , Singapore ,
Taiwan , the Phillippines, and other nations that were already drawing on these
sources to supply their own booming economies. Many of these nations,
anticipating heightened tensions, were already puring money into their military
forces, particularly their navies. In short, because world supplies of
oil were limited, increasing demand seemed likely to increase the potential for
conflict.
Questions
:
1. In
your judgment, is it wrong, from an ethical point of view, for
the auto companies to submit plans for an automobile to
China ?
Explain your answer ?
2. Of
the various approaches to environmental ethics outlined in this
chapter, which approach
sheds most light on the ethical issues
raised by this case ?
Explain your answer.
3. Should
the U.S. government intervene in any way in the negotiations
between U.S. auto companies and the Chinese government ?
Explain ?
Case
NO. 4
WAGE
DIFFERENCES AT ROBERT HALL
Robert
Hall Clothes, Inc., owned a chain of retail stores that specialized in clothing
for the family. One of the Chain’s stores was located in Wilmington ,
Delaware . The Robert Hall store in Wilmington had a department for men’s
and boy’s clothing and another department for women’s and girl’s
clothing. The departments were physically separated and were staffed by
different personnel : Only men were allowed to work in the men’s department and
only women in the women’s department. The personnel of the store were
sexually segregated because years of experience had taught the store’s managers
that, unless clerks and customers were of the same sex, the frequent physical
contact between clerks and customers would embarrass both and would inhibit
sales.
The clothing in the men’s department was generally of a higher and more
expensive quality than the clothing in the women’s department.
Competitive factors accounted for this : There were few other men’s stores in
Wilmington so the store could stock expensive men’s clothes and still do a
thriving business, whereas women’s clothing had to be lower priced to compete
with the many other women’s stores in Wilmington. Because of these
differences in merchandise, the store’s profit margins on the men’s clothing
was higher than its margins on the women’s clothing. As a result, the
men’s department consistently showed a larger dollar volume in gross sales and
a greater gross profit, as is indicated in Table 7.11.
Because of the differences shown in Table 7.11 women personnel brought in lower
sales and profits per hour. In fact male salespersons brought in
substantially more than the females did (see Tables 7.12 and 7.13)
|
Men’s
Department
|
Women’s
Department
|
|||||
|
Year
|
Sales
($)
|
Gross
Profit
($)
|
Percent
Profit
($)
|
Sales
($)
|
Gross
Profit
($)
|
Percent
Profit
($)
|
|
1963
|
210,639
|
85,328
|
40.5
|
177,742
|
58,547
|
32.9
|
|
1964
|
178,867
|
73,608
|
41.2
|
142,788
|
44,612
|
31.2
|
|
1965
|
206,472
|
89,930
|
43.6
|
148,252
|
49,608
|
33.5
|
|
1966
|
217,765
|
97,447
|
44.7
|
166,479
|
55,463
|
33.5
|
|
1967
|
244,922
|
111,498
|
45.5
|
206,680
|
69,190
|
33.5
|
|
1968
|
263,663
|
123,681
|
46.9
|
230,156
|
79,846
|
34.7
|
|
1969
|
316,242
|
248,001
|
46.8
|
254,379
|
91,687
|
36.4
|
TABLE
7. 12
|
Year
|
Male
Sales per Hour
($)
|
Female
Sales Per Hour
($)
|
Excess
M Over F (%)
|
|
1963
1964
1965
1966
1967
1968
1969
|
38.31
40.22
54.77
59.58
63.18
62.27
73.00
|
27.31
30.36
33.30
34.31
36.92
37.20
41.26
|
40
32
64
73
71
70
77
|
As a result of these differences in the
income produced by the two departments, the management of Robert Hall paid
their male salespersons more than their female personnel. Management
learned after a Supreme Court ruiling in their favor in 1973 that it was
entirely legal for them to do this if they wanted. Wages in the store
were set on the basis of profits per hour per department, with some slight
adjustments upward to ensure wages were comparable and competitive to what
other stores in the area were paying. Over the years, Robert Hall set the
wages given in Table 7.14. Although the wage differences between males
and females were substantial, they were not as large as the percentage
differences between male and female sales and profits. The management of
Robert Hall argued that their female clerks were paid less because the
commodities they sold could not bear the same selling costs that the
commodities sold in the men’s department could bear. However, the female
clerks argued, the skills, sales efforts, and responsibilities required of male
and female clerks were “substantially” the same.
TABLE
7. 13
|
Year
|
Male
Gross Profits per Hour
($)
|
Female
Gross Profits Per Hour
($)
|
Excess
M Over F (%)
|
|
1963
1964
1965
1966
1967
1968
1969
|
15.52
16.55
23.85
26.66
28.74
29.21
34.16
|
9.00
9.49
11.14
1143
12.36
12.91
15.03
|
72
74
114
134
133
127
127
|
TABLE
7. 14
|
Year
|
Male
Earnings per Hour
($)
|
Female
Earnings Per Hour
($)
|
Excess
M Over F (%)
|
|
1963
1964
1965
1966
1967
1968
1969
|
2.18
2.46
2.67
2.92
2.88
2.97
3.13
|
1.75
1.86
1.80
1.95
1.98
2.02
2.16
|
25
32
48
50
45
47
45
|
Questions
:
1. In
your judgment, do the managers of the Robert Hall store have any
ethical obligations to change their salary policies
? If you do not think they should change, then explain why they have an
obligation to change and
describe the kinds of changes they should make.
Would it make any difference to your analysis
if, instead of two departments in
the same store, it involved two different Robert Hall
Stores, one for men and one for women ? Would
it make a difference if two stores (one for men and
one for women) owned by different
companies were involved
? Explain each of your answers in terms of the
relevant ethical principles upon which you are relying.
2. Suppose
that there were very few males applying for clerks’ jobs in
Wilmington while females were
flooding the clerking job market. Would this
competitive factor justify paying males more than females
? Why ? Suppose that 95 percent of the
women in Wilmington who
were applying for clerks’ jobs were single women with children who
were on welfare while 95 percent of the
men were single with no families to support. Would this need
factor justify paying females more than males ?
Why ? Suppose for the sake of argument that men were
better at selling than women; would this justify different
salaries ?
3. If
you think the managers of the Robert Hall store should pay their
male and female clerks equal wages
because they do “substantially
the same work” then do you also think that ideally each worker’s
salary
should be pegged to the work he or she individually performs
(such as by having each worker sell on
commission) ? Why ? Would a
commission system be preferable from a utilitarian point of view
considering
the substantial book keeping expenses it would involve ?
From the point of view of justice ? What does the
phrase substantially the same mean to you
?
Case
NO. 5
NAPSTER’S
REVOLUTION
Eighteen
– year old Shawn “NAPSTER” Fanning, then a freshman at Northeastern University,
dropped out of school and founded Napster Inc. (website was at
w.w.w.napster.com) in San Mateo, California in May 1999. Two months
earlier, working in his college dorm room, he had developed both a website that
let users locate other users who were willing to share whatever music files
they had in MP3 format on the hard drives of their computers and a software
program (called “Napster) that let users copy these music files from each other
over the Internet. When an early free version of the program he posted on
Download.com received more than 300,000 hits and was named “Download of the
week,” he decided to devote himself full time to developing his program and
website. The final version of his version of his program was officially
released August 1999, and in May 2000, with more than 10 million people – most
of them students on college campuses where Napster was especially popular –
signed up at its website, Shawn’s company received $ 15 million of start – up
funds from venture capital firms in California’s “Silicon Valley.”
Fanning grew up in Brockton , Massauchettes, the son of a nurse’s aid and the
stepson of a truck driver, in a family of four half-brothers and half-sisters.
He got the nickname “Napster” during a basketball game when a player commented
on his closely cropped sweaty head of hair. Fanning had taught himself
programming and had held several summer programming jobs.
The company Shawn helped establish gave the Napster program away for free and
charged users nothing to use its website to post the URL addresses where
personal copies of music could be downloaded. Nevertheless, a month
later, Shawn found himself embroiled in a legal and ethical controversy when
two record tables, two musicians (Metallica and Dr. Dre), and two industry
trade groups of music companies (the National Music Publishers Association and
the Recording Industry Association of America) filed suits against his young company
claiming that Napster’s software was enabling other to make and distribute
copies of copyrighted music that the musicians and companies owned.
On June 12, the two industry trade groups filed preliminary injunctions against
the company demanding that it remove all the songs owned by their member
companies from Napster’s song directories. According to the two groups, a
survey of 2555 college students showed a correlation between Napster use and
decreased CD purchases. College students were outraged, especially fans
of Metallica and Dr. Dre. Supporters of Napster argued that Napster allowed
people to hear music that they then went out and purchased, so Napster actually
helped the music companies. Music sales had increased by over $500
million a year since Napster had started to operate, but the music companies
claimed that this was a result of a booming economy. Supporters of
Napster also argued that individuals had a moral and legal right to lend other
individuals a copy of the music on the CDs that they had purchased. After
all, they argued, the law explicitly stated that an individual could make a
copy of copyrighted music he or she had purchased to hear the music on another
player. Moreover, according to Fanning, Napster was not doing anything
illegal, and the company was not responsible if other people used its software
and website to copy music in violation of copyright law any more than a car
company was responsible when its autos were used by thieves to rob banks.
Much of the music that was downloaded using Napster, they claimed, was in the
public domain (i.e.not legally owned by anyone) and was being legally
copied. The music companies countered that an individual had no right to
give multiple copies of their music to others even if the individual had paid
for the original CD. If everyone was allowed to copy music without paying
for it, they charged, eventually the music companies would stop producing music
and musicians would stop creating it. Other musicians claimed, however,
that Napster and the Web gave them a way to put their music before millions of
potential fans without having to beg the music companies to sponser them.
In March 2000, the band Metallica hired consultant PDNet to electronically “evesdrop”
on users who assumed they were anonymously accessing Napster’s website.
The following week the band’s lawyers handed Napster a list with the names of
300, 000 people that Metallica claimed had violated its copyrights using
Napster’s service and that Metallica now wanted removed from Napster’s
services. Fanning complied with the demand of Metallica, whose drummer,
Lars Ulrich, was one of his musical heros. “If they want to steal our
music,” said Ulrich, “ why don’t they just go down to Tower Records and grab
them off the shelves ?” Many young people protested that the bands should
not be alienating their own fans in this way. One fan posted a note on an
MP3 chat room : “Give me a break ! I have been dropping 16 bucks an album
for Metallica’s music since I was a teenager. They made a fortune off us
and now they accuse us of stealing from them. What nerve !” Howard
King, a Los Angeles lawyer for Metallica and Dr. Dre, stated that “I don’t know
Shawn Fanning but he seems to be a pretty good kid who came up with a
sensational program. But this sensational program has allowed people to
take music without paying ………. Shawn probably had no idea of the legal
ramifications of what he created. I’m sure the though never crossed his
mind.”
In August 2000, a federal judge in San Francisco , Marilyn Patel, responded to
the suit against Napster. Judge Patel called Shawn’s company a “monster”
and charged that the only purpose of Napster was to copy pirated music without
paying for it. The judge ordered Napster to remove all URLS from its
website that referenced material that was copyrighted.
Judge Patel’s ruling would have shut down the company’s website
immediately. But a few days later, an appeals court reversed Judge Patel
and allowed the company to continue operating. The reprieve was only
temporary. On Monday February 12, 2001 , the Ninth Circuit Court of
Appeals in San Francisco affirmed Judge Patel’s ruling. The company
attempted to circumvent the ruling by negotiating agreements with the music
companies that would pay them certain annual fees in return for withdrawing the
suit.
Napster was not the only software that allowed individuals to swap files from
One
personal computer to another over the Internet. The software program
named “Gnutella” let individuals swap any kind of files – music, text, or
visuals – over the Internet, but Gnutella did not operate a centralized index
like the website that Napster had established. Observers predicated that
if Napster was put out of business, numerous underground websites would be
created providing the kind of listing service that the company had earlier
provided on its website. Already a website named zeropaid.com provided
free copies of Gnutella and many other Napster clones that users could download
and use to share digital music files with each other. Unlike Napster,
these software products did not require a central website to connect users to
each other, making it impossible for music companies to find and target single
entity whom they could sue. Many observers predicated that Napster was
only the beginning of an upheaval that would revolutionize the music industry,
forcing music companies to lower their prices, make their music easily
available on the Internet, and completely change their business models.
Questions :
1. What are
the legal issues involved in this case, and what are the moral issues ? How are
the two different kinds of issues different
from each other, and how are they related
to each other ? Identify and
distinguish the “systemic, corporate and individual issues”
involved in this case.
2. In your
judgment, was it morally wrong for Shawn Fanning to
develop and release his technology to the
world given its possible consequences ? Was it
morally wrong for an individual to
use Napster’s website and
software to copy
for free the copy righted music on another
person’s hard drive ? If you believe it was wrong, then explain exactly why it
was wrong. If you believe it was
not
morally wrong, then how would you defend your
views against t he claim that such copying is
stealing ? Assume that it was not I illegal for an
individual to copy music using Napster. Would there
be anything immoral with
doing so ? Explain ?
3. Assume that
it is morally wrong for a person to use Napster’s website
and software to make a copy of copyrighted
music. Who, then, would be morally responsible for
this person’s wrong doing ? Would
only the
person himself be morally responsible ? Was
Napster, the company, morally
responsible ? Wash shawn Fanning morally
responsible
? Was any employee of Napster, the company,
morally
responsible ? Was the operator of the server or that portion
of the Internet that the person used morally
responsible ? What if the person did not
know that the music was copyrighted or did not think that it was illegal to
copy copyrighted music ?
4. Do
the music companies share any of the moral responsibility for
what has happened
? How do you think technology like Napster is
likely to change the music industry
? In your judgment, are these
changes ethically good or ethically bad ?
Case
NO. 6
WORKING
FOR ELI LILLY & COMPANY
Eli
Lilly, the discoverer of Erythromycin, Darvon, Ceclor, and Prozac, is a major
pharmaceutical company that sold $6.8 billion of drugs all over the world in
1995, giving it profits of $2.3 billion. Headquartered in Indianpolis ,
Minnesota , the company also provides food, housing, and compensation to
numerous homeless alcoholics who perform short-term work for the company.
The work these street people perform, however, is a bit unusual.
Before approving the sale of a newly discovered drug, the U.S. Food and Drug
Administration requires that the drug be put through three phases of tests
after being tested on animals. In phase I, the drug is taken by healthy
human individuals to determine whether it has any dangerous side effects.
In Phase II, the drug is given to a small number of sick patients to determine
dosage levels. In Phase III, the drug is given to large numbers of sick
patients by doctors and hospitals to determine its efficacy.
Phase I testing is often the most difficult to carry out because most healthy
individuals are reluctant to take a new and untested medication that is not
intended to cure them of anything and that may have potentially crippling or
deadly side effects. To secure test subjects, companies must advertise
widely and offer to pay them as such as $250 a day. Eli Lilly, however,
does not advertise as widely and pays its volunteers only $85 a day plus free
from and board, the lowest in the industry. One of the reasons that
Lily’s rates are so low is because, as a long time nurse at the Lily Clinic is
reported to have indicated, “ the majority of its subjects are homeless
alcoholics” recruited through word of mouth that is spread in soup kitchens,
shelters, and prisons all over the United States . Because they are
alcoholics, they are fairly desperate for money. Because they alcoholics,
they are fairly desperate for money. Because phase I testes can run
several months, test subjects can make as $4500 – an enormous sum to people who
are otherwise unemployable and surviving on handouts. Interviews with
several homeless men who have participated in Lily’s drug tests and who describe
themselves as alcoholics who drink daily suggest that they are, by and large,
quite happy to participate in an arrangement that provides them with “easy
money”. When asked, one homeless drinker hired to participate in a Phase
I trail said he had no idea what kind of drug was being tested on him even
though he had signed an informed – consent form. An advantage for Lilly
is that this kind of test subject is less likely to sue if severely injured by
the drug. The tests run on the homeless men, moreover, provide enormous
benefits for society. It has been suggested, in fact, that in light of
the difficulty of securing test subjects, some tests might be delayed or not
performed at all if it were not for the large pool of homeless men willing and
eager to participate in the tests.
The Federal Drug Administration requires that people who agree to participate
in Phase I tests must give their “ informed consent” and must take a “ truly
voluntary and a uncoerced decision.” Some have questioned whether the
desperate circumstances of alcoholic and homeless men allow them to make a
truly voluntary and uncoerced decision when they agree to take an untested
potentially dangerous drug for $ 85 a day. Some doctors claim that
alcoholics run a higher risk because they may carry diseases that are
undetectable by standard blood screening and that make them vulnerable to being
severely named by certain drugs. One former test subject indicated in an
interview that the drug he had been given in a test several years before had
arrested his heart and “ they had to put things on my chest to start my
heart up again.” The same thing happened to another subject in the same
test. Another man indicated that the drug he was given had made him
unconscious for 2 days while others told of excruciating headaches.
In earlier years, drug companies used prisoners to test drugs in Phase I
tests. During the 1970s, drug companies stopped using prisoners when
critics complained that their poverty and the promise of early parole in effect
were coercing the prisoners into “Volunteering”. When Lilly first
turned to using homeless people during the 1980s, a doctor at the company is
quoted as saying, “ We were constantly talking about whether we were exploiting
the homeless. But there were a lot of them who were willing to stay in
the hospital for four weeks.” Moreover, he adds. “Providing
them with a nice warm bed and good medical care and sending them out drug
– and alcohol – free was a positive thing to do.”
A homeless alcoholic indicated in an interview that when the test he was
participating in was completed, he would rent a cheap motel room where I’ll get
a case of Miller and an escort girl have sex. The girl will cost me $ 200
an hour.” He estimated that it would take him about two weeks to spend
the $ 4650 Lily would pay him for his services. The manager at another
cheap motel said that when test subjects completed their stints at Lily, they
generally arrived at his motel with about $ 2500 in cash : “ The guinea pigs
go to the lounge next door, get drunk and buy the house a round.
The idea is, they can party for a couple of weeks and go back to Lily and do
the next one.”
Questions
:
1. Discuss
this case from the perspective of utilitarianism, rights, justice
and caring. What insight does virtue theory shed on the
ethics of the events described in this case ?
2. “
In a free enterprise society all adults should be allowed to make
their own decisions
about how they choose to earn their living.”
Discuss the statement in light
of the Lily case.
3. In
your judgment, is the policy of using homeless alcoholics for test
subjects morally appropriate ?
Explain the reasons for your
judgment.
What does your judgment imply about the moral legitimacy of a free
market in labor ?
4. How
should the managers of Lily handle this issue ?
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