Business Ethics Thesis

TABLE OF CONTENTS
Introduction2
CHAPTER 1. The evolution of business ethics from past to future prospects

1.1 What is business ethics
1.2 An overview of the history of business ethics
CHAPTER 2. Business ethics and international companies

2.1 Ethical versus unethical behaviours
2.2 Main ethical issues in international corporations
CHAPTER 3. Business ethics and cultural differences

3.1 Core values and cultural differences in international corporations
3.2 How cultural differences affect business ethics
CHAPTER 4. Case Study: Starbucks Company

4.1 Short history and company presentation
4.2 Starbuckss commitment to business ethics
4.3 The companys Standards of Conduct
4.4 Business ethics and international cultural differences
4.5 Customer survey
4.5.1 Executive resume
4.5.2 Research purpose and hypothesis
4.5.3 Methodology
4.5.4 Results
4.5.5 Survey conclusions
Conclusion
Annexes
Introduction
1
My thesis, entitled Business ethics and international cultural differences, aims to
provide a deep understanding of the matter of business ethics, by emphasizing the importance
of promoting an ethical behaviour on the individual, organizational and international level,
and the business success that comes when choosing to respect and embrace cultural
differences.
This paper is structured in three main chapters (The evolution of business ethics-from past
to future prospects, Business ethics and international companies, Business ethics and cultural
differences), and a fourth one which represents a case study of the Starbucks Company, each
of them having its own subchapters. I began by defining the study of ethics, business ethics
and other important concepts related to them, and then provided an overview of the evolution
of ethics.
The second chapter is concerned with examples of ethical and unethical behaviours in an
organization, plus the main ethical issues that multinationals may encounter when operating
internationally.
The chapter entitled Business ethics and cultural differences focuses on types of
cultures, their main characteristics and differences between them, and also emphasizes the
importance of accepting cultural diversity for the success of business operations.
The reason I have chosen the Starbucks Company for my case study part is the fact that
besides being a faithful and satisfied customer of theirs, I have always been interested in their
ethical policies, in what they do differently in order to guarantee the good performance of
their business, and whether they are perceived as being ethical by their customers. In this
sense I presented a short history about the company, Starbuckss main programs and practices
that demonstrate the companys commitment to 100% ethical sourcing, their standards of
conduct and also talked about how Starbucks manages cultural differences and the way it
adapts its business operations to local demands. Moreover, I wanted to test whether customers
see the company as being ethical or not, through an online survey of 46 respondents.
My motivation for choosing this theme, Business ethics and international cultural
differences, mainly came from my curiosity to understand the role of ethics in the success of
business operations, to learn more about the positive or negative contribution of multinational
companies to the increase or decrease of societys overall utility, how cultures manage to look
above differences and create successful partnerships and to observe different behaviours
coming from countries that have distinct historical and traditional background, and which
have evolved through different beliefs, values and standards.
Moreover, I consider this subject of great importance to my future desired career, since
my goal is to work in a multinational company. I thought that understanding business ethics
2
will make a big difference in the way I perceive my job in such an organization, since
knowing the main principles of an ethical workplace environment can affect my positive
contribution to the company, and possibly enhancing its performance.
Chapter 1
The evolution of business ethics - from past to future prospects
1.1 What is business ethics
3
Moral experiencethe actual possession and exercise of good characteris necessary truly
to understand moral principles and profitably to apply them.
-Aristotle, Ethics
Firstly, as a definition, ethics is the discipline that examines ones moral standards or
the moral standards of a society to evaluate their reasonableness and their implications for
ones life.1 The word ethics comes from the Greek ethos (habit, character).2
Ethics is a type of normative study. A normative study is an investigation that tries to
reach normative conclusions- that is, conclusions about what things are good or bad or about
what actions are right or wrong. [] ethics is the study of moral standards whose explicit
purpose is to determine as far as possible which standards are correct or supported by the best
reasons, and so it tries to reach conclusions about moral right and wrong and moral good or
evil.3
Morar, V. (2006) speaks about three levels of general ethics in his book thique des affaires:
rationalit, reciprocit, responsabilit: ethics of normative values or ethics of first degree,
ethics of second degree or meta-ethics (ethics of moral language) and the applied ethics
(which is concerned with phenomena like environment issues or abortions). By definition,
meta-ethics talks about the nature of ethics and moral reasoning. Discussions about whether
ethics is relative and whether we always act from self-interest are examples of meta-ethical
discussions4, whereas applied ethics attempts to deal with specific realms of human action
and to craft criteria for discussing issues that might arise within those realms5.
Velasquez, M. (2014) states that a persons moral standards are shaped by factors like the
society in which he/she lives, his/her level of education, the people he/she is surrounded by
(family and friends), television, magazines, religious influences or law. In return, these moral
standards dictate a persons actions, depending on their belief of what is morally good or what
1 VELASQUEZ, M. (2011) Business Ethics, Concepts and Cases, 7th Edition, Santa Clara University, p.
2IAMANDI, I., and FILIP, R.(2008) Etic i responsabilitate social corporativ n afacerile internaionale,
Bucureti : Editura Economica , p. 18
3 VELASQUEZ, M. (2011) Business Ethics, Concepts and Cases, 7th Edition, Santa Clara University, p. 13-14
4 Touro institute in conjunction with Carnegie Mellon, History of Ethics, p. 29
5 Touro institute in conjunction with Carnegie Mellon, History of Ethics p.30
4
is morally bad. Some examples of moral standards would be Stealing is bad or Treating
each other equally is good.
Although the study of ethics is related to religion and law, they are quite different. While
religion practices and beliefs are imposed by God and are mandatory, the individual is not
obliged by any law or superior force to act morally, and he can choose his behaviour by free
will. Juridical norms are imposed only in some situations, whereas moral norms should
always be applied, no matter the situation.
On the other hand, there are the non-moral standards (also called conventional
standards), that include the standards of etiquette by which we judge peoples manners as
good or bad, the rules of behaviour set by parents, teachers, or other authorities, the norms we
call the law by which we determine what is legally right and wrong, the standards of language
by which we judge what is grammatically right and wrong, the standards of art by which we
judge whether a painting or a song is good or bad, and the sports standards by which we judge
how well a game of football or basketball is being played6.
However, the focus of this paper is on the field of business ethics, which is a particular form
of ethics. Velasquez, M. (2014) defined business ethics as a specialized study of moral right
and wrong that concentrates on moral standards as they apply to business institutions,
organizations, and behaviour.7 In this way, companies must have certain standards and values
that are reflected in the organizations goals and strategies to success. Like Solomon, R.
(1994) said, it is also, within business itself, keeping in mind what is ultimately important
and essential and what is not, what serves our overall career goals and what does not, what is
part of business and what is forbidden to business, even when increased profit- the most
obvious measure of business success- is at stake. 8 But business ethics is not only about
corporations, it also refers to charities, not-for-profit organizations, or government
organizations.
Crane, A., and Matten, D. (2010) say business ethics is an oxymoron, meaning that business
and ethics are two contradictory concepts: to say that business ethics is an oxymoron
suggests that there are not, or cannot be ethics in business: that business is in some way
unethical (i.e. that business is inherently bad), or that it is, at best, amoral (i.e. outside of our
6VELASQUEZ, M. (2011) Business Ethics, Concepts and Cases, 7th Edition, Santa Clara University, p. 10
8ELEGIDO, J. (1996) Fundamentals of Business Ethics, Ibadan, Spectrum, p. 2
5
normal moral considerations)9. This refers to the companies that prioritise their main objective
of maximizing profit over acting morally. Examples of such unethical behaviours of
organizations include pollution, corruption or the maltreatment of sweatshops workers.
However, although these unethical behaviours exist in some companies today, the importance
of ethics in business is crucial for achieving success, since partnerships cannot properly
function without ethical values like trust or respect.
Brenkert, G. and Beauchamp, T. (2009) analyse business ethics from two different
perspectives: from a philosophical orientation (and this concerns categories of moral
problems like rights, justice or obligations) and from a business orientation (regarding the
multiple relationships that are formed by business processes, like the relationship that exists
between the employees, or the relationship between the CEO and an employee).
It is important to note that business ethics exists at five interdependent levels: at the
individual ethical level, at the organizational ethical level, at the national ethical level, at the
cultural ethical level and at the international ethical level (Iamandi, I. (2008))10.
Organizational behaviour (often abbreviated OB) is a field of study that investigates the
impact individuals, groups, and structures have on behaviour within organizations, for the
purpose of applying such knowledge toward improving an organizations effectiveness.11
Everybody is responsible for the ethical behaviour in an organization, every single person, no
matter its function, from the lowest paid employee to the manager of the firm. Thus, in order
to behave in an ethical and moral way, an individual must pay attention to his actions, since
his behaviour can have negative consequences on those around him. A moral issue is present
where a person's actions, when freely performed, may harm or benefit others12 and an ethical
decision represents a decision that is both legal and morally acceptable to the larger
community13.
9 CRANE, A., and MATTEN, D. (2010) Business Ethics, 3rd edition, United States: Oxford University Press, p.
4
10 IAMANDI, I., and FILIP, R.(2008) Etic i responsabilitate social corporativ n afacerile internaionale,
Bucureti : Editura Economica, p. 29
11 ROBBINS, S., and JUDGE, T.(2014) Organizational behaviour, 16th Edition, Global Edition, Pearson
Higher Education, p. 42
12 JONES, T.(1991) Ethical decision making by individuals in organizations: an issue-contingent model, The
Academy of Management Review, Vol. 16, No.2 , p.367
6
The moral standards of an individual are firstly shaped in his early years, when he borrows
the beliefs of what is good and what is bad from family, social circles, church, television,
internet or school. As he grows up, the person begins to develop himself personally, learns
more about its unique personality and starts building its own values and beliefs, which are
used in order to achieve its life goals. The same is for companies and organizations, which
differentiate themselves from other firms by holding on to their standards, regardless of the
circumstances.
Ethics is a very important matter in the business environment, since its absence can lead to
sabotages, conflicts, lying, consumer boycotts and disrespect between business partners or
between the employees of a company, or affecting long-term connections with various
customers, the majority of studies have found a positive relationship between socially
responsible behaviour and profitability, some have found no such relationship. 14 Its
importance is given by that fact that ethics determine what decisions should be taken in an
organization, the values and standards on which the firm is built on, and how decisions can be
in line with these standards.
1.2 An overview of the history of business ethics
Modern times come with a new perspective over the world that we live in. People from
the present era are very different from the ones in the past, mainly in terms of thinking, and
thus, having distinct perceptions about the way they should act and behave. Change firstly
comes from within, so science and philosophy have played a major role in restoring people
their mind freedom. In other words, they built a new path towards evolution and growth.
The discoveries in science that happened gradually, in the recent decades, have oriented
mankind towards acting more intelligently and becoming a more civilized world. Although
people became more united thorough the time and more determined to work with each other,
there is still a long path to a completely evolved world.
The history of business ethics involves years of changes in terms of cultural

differences and religion, progress and philosophy. The first mentions of ethics have been
13 JONES, T.(1991) Ethical decision making by individuals in organizations: an issue-contingent model, The
Academy of Management Review, Vol. 16, No.2, p.367
7
made a long time ago by philosophers in Ancient Greece whom work is still valued today.
Socrates (470-399 BC) was the first philosopher to refer to values of what is good and what is
bad, and its ideas were taken and developed by Plato (428-347 BCE), who sees reality as two
states of mind, the state of being and becoming. Being is a present state, characterised by
values of goodness and justice, while becoming is rather concerned with changing
perceptions and feelings.
Aristotle (384-322 BCE), discussed economic activities, commerce, and trade. He
makes normative judgments about greed, or the unnatural use of ones capabilities, in the
pursuit of wealth for its own sake. Aristotle provides the first recorded definition of justice
and fair treatment of all parties in a transaction 15. He argued Platos beliefs, considering that
being and the key to a life a fulfilment is living in contemplation, but with moments of
leisure that benefit us and keep us in a good state of mind. His philosophy of life was that any
action or behaviour of an individual is guided by the ultimate goal of achieving happiness.
The orator and philosopher Cicero (107-44 BCE) shares the same opinion as Aristotle,
that peoples thirst for profit-making and wealth is unlimited, and this comes out from his
paper named De Officiis, where Cicero expresses his thoughts regarding morality and
fairness in cases of trade: "Those who buy from merchant and sell again immediately should
also be thought of as demeaning themselves. For they would make not profit unless they told
sufficient lies, and nothing is as dishonorable as a falsehood"16.
An important moment in the history of ethics was marked by the early Christian
period, beginning with the birth of Jesus. A new religion evolves, which introduces the
concepts of sin and free will, heaven and hell, and the belief that this world is a test for future
punishment and reward.
In the 13th century, Aristotles work is translated into Latin and is discussed by the philosopher
St. Thomas Aquinas (1225-1274), in his writings.
The transition from Medieval to Modern Philosophy was made by the changes brought
by two important historical periods, the Renaissance (14 th-16th centuries) and the Reformation
(the Luthers 95 Theses from 1517). The first is characterised by the development of money
economies, while the latter ended in schism and religious separation. Writers of the modern
perspective over ethics were Thomas Hobbes (1588-1679), David Hume (1711-1776) or
Immanuel Kant (1724-1804). For Immanuel Kant, actions that are characterised by moral
15 O.C. Ferrell and Linda Ferrell, Historical Developments of Business Ethics: Then to now, p. 4
16 CIULLA, J. (2011) Is business ethics getting better? A historical perspective, Business Ethics
Quaterly 21:2, p. 337
8
value are those which come from an autonomous will, which follow only its own
principles17.
In the 18th century, the economist, moral philosopher and Scottish professor, Adam Smith,
also considered the father of economics, talks about morality and self-interest in his book
entitled The Wealth of Nations. As a strong believer in capitalism, Adam Smith formulated
the theory of the invisible hand. Also called The father of capitalism, Adam Smith
considered that individuals should be let free to decide what they want to do, and to take
actions according to their own self-interest, because this way, they can contribute more than
the government to the benefit of the society. Adam Smith believed that by following their own
interest, people are acting as if they are led by an invisible hand, which represents the major
force in the marketplace. In other words, the economist accepted the existence of morality in
business, but with the condition that the freedom of self-interest also comes with fair
behaviour: Every man, as long as he does not violate the laws of justice is left perfectly free
to pursue his own interest his own way, and to bring both his industry and capital into
competition with those of any other man, or order of men.18
The 18th and 19th centuries were characterised by the utilitarian practices adopted by British
moral philosophers like Jeremy Bentham (1748-1832) or John Stuart Mill (1806-1873) who
applied The principle of utility to the British law system. Benthams principle of utility (1)
Recognizes the fundamental role of pain an pleasure in human life, (2) approves or
disapproves of an action on the basis of the amount of pain or pleasure bought about i.e.,
consequences, (3) equates good with pleasure and evil with pain, and (4) asserts that pleasure
and pain are capable of quantification ( and hence measure)19.
The beginning of 20th century was marked by G.E.Moores Principia Ethica (1903), Sir
David Rosss The right and the good (1930), C.L.Stevensons Ethics and Language
(1944), Kurt Baiers The moral point of view (1957) etc. Here, it is important to mention
John Rawlss work, which, through its A theory of justice (1971), formulated two principles
of justice, meant for a moral society: the first principle is that every person should have an
Bucureti : Editura Economica, p. 26-27 care a luat din Kant, Immanuel, Critica ratiunii pure, traducerea N.
Bagdasar, Editura IRI, 1995
18 Adam Smith, The Wealth of Nations, ed. R. H. Campbell and A. S. Skinner (Oxford:
Oxford University Press, 1976; reprinted Indianapolis: Liberty Classics, 1981), I, ii, 2. ( dar
luat din Ronald Duska, Business ethics: oxymoron or good business? , Business Ethics
Quarterly,Vol. 10, No. 1, Globalization and the Ethics of Business (Jan., 2000), pp. 111-129
19 Robert Cavalier- History of Business Ethics, p. 32
9
equal right to a basic system of liberties, and the second one refers to the economic and social
inequalities that exist and need to be changed in a way that is fair for everyone.
It was not until 1970s that ethical commercial policies became important in the
business world. In the previous years, companies did not value ethics as much as they do
today.
Business ethics firstly began to develop in the United States of America and in
Western European countries like Great Britain, France or Italy when it became subject to
many publications and articles in the field. Since the 1970s, schools in the United States
began teaching courses on CSR (Corporate Social Responsibility), as a response to the
increasing concern over business ethics.
Nowadays, with the new business context and with the opportunities for partnership,
business ethics has also drawn the attention of less developed countries and the countries from
Central and East Europe, which used to be under communist regimes.
Chapter 2
Business ethics and international companies
2.1 Ethical vs. unethical behaviours
Organizations are diverse. They try to differentiate themselves from other companies, not
only to build a strong and beneficial internal environment and to improve their performance,
but also to create competitive advantage at a national and international level.
With a market-oriented economy, an increasing globalisation and a growing
competition coming from less developed countries, big and small companies need to focus on
building competitive advantage. In order to create competitive advantage, an organization
must concentrate on giving value to its clients, through its decisions, operations and products.
Besides improving its performance in the external environment, it is important for a company
to develop successful relationships between its employees, and also with its business partners.
In short term, companies must focus on creating conditions for an ethical workplace and good
partnerships.
10
An ethical climate refers to respect, fairness and trust, adopted through the individual
and group behaviour in the organization. In this way, the ethical foundation of an organization
is built on core values like upholding the highest ethical standards, helping people grow,
embracing change, focusing on business results and the success of its customers, good
management of scarce natural resources, protection of employees health and safety,
supporting diversity and treating each other with respect and dignity and choosing what is
best for the company when making decisions.
Let me exemplify this by discussing the case of Technip, a French construction and
engineering company from 1958 which exists in 48 countries, but has the main headquarters
in the capital of France, Paris. The companys CEO, Thierry Pilenko, talks about their
guidelines, The Golden Book, and mainly about a specific part of it, which is Business
ethics. This section is composed by a set of rules that provides the employees of Technip
with knowledge about the companys core values and ways to behave in the internal and
external environment of the firm. In his opinion, these rules are meant for the success of the
company and their continuous growth. Examples of their core principles, which they name
responsibilities towards our business partners, would be the full protection of their image
and the image of their customers, the information regarding their customers and suppliers has
to be provided in a legal way, respect towards cultural diversity in the business processes by
accepting local customs, giving honest information, or promoting fairness, honesty and
integrity in the relationship they have with their business partners. One of their strengths is
integrity, since Technip is known for its commitment to respect the national and international
laws, for its country or the countries in which it operates. In order to comply with the
standards, the employees of Technip must respect integrity practices like asking for help and
helping others (through socializing, advising) or train others and be trained. In order to be
sure that employees behave according to organizations rules, Technip has specific
organizational bodies concerned with ethics: The Ethics and Compliance Committee (focuses
on internal ethics), The Group Compliance Officer (concerned with international anti-
corruption laws) and Regional Compliance Officers (sends a local contact for everyday
operations). As in any company, ethical procedures are taught through training sessions.
The ethical environment is created by employees, but also by managers who create
trustworthiness when they listen carefully to employees needs. They have the ethical
responsibility not only to listen, but also to provide their employees with clear means of
communication. Through open communication, goodwill and empathy for its employees, a
leader is halfway to a skillful, hard-working, devoted, happy and satisfied workforce.
11
Managers must be role models for the employees, to provide them with positive examples and
help them develop through their work, at both individual and organizational level.
Without communication and business ethics, the company has to deal with poor team
performance, employee dissatisfaction (some employees feel they are treated unfairly and
unequal compared to other employees, leading to a loss in productivity) and employee
retention problems, since talented people who are not appreciated and have the feeling that
they are not growing inside the company choose to leave the organization.
Figure 1: Positive ethical values of leadership
Source: Adapted from http://leadingincontext.com/category/ethical-organization/
In order to encourage their employees, ethical managers usually use recognition and
reward systems or performance evaluation programs. Such systems reveal the employees
core abilities and the way they bring value to the company.
Elegido, J. (1996) argues that the three key ingredients of an ethical behaviour that
guarantee the business success are: The relevant question is whether consistent ethical
behaviour, of itself, contributes positively to business success. It seems clear that it does so by
fostering three key ingredients of that success. Ethical behaviour contributes to the good
reputation of a firm and other parties being ready to trust it, and it promotes employee
commitment to the success of the firm. Besides contributing to business success there factors
12
also have the highly desirable characteristic of not being easily imitable and therefor can
provide a sustainable competitive advantage.20
On the opposite side, companies can promote unethical behaviours. As mentioned at

the beginning of the paper, some may say that business ethics is an oxymoron, that business
and ethics cannot be bound together, and this belief has its roots in the various problems
created by companies throughout the years: the maltreatment of sweatshop workers, the
polluting of rivers with chemicals or bribes given to government.
An example of such an unethical behaviour would be fraud. According to a global

fraud study from 2014, entitled Report to the nations on occupational fraud and abuse,
made by ACFE (Associations of Certified Fraud Examiners), fraud is responsible for
organizational losses in an amount of 5% per year. The main focus of the study is the
occupational fraud, which by definition is The use of ones occupation for personal
enrichment through the deliberate misuse or misapplication of the employing organizations
resources or assets21. Occupational fraud is an example of a universal unethical behaviour,
which can exist in any company, at any time. Even so, there are measures to prevent such
behaviours, through proactive control measures (internal audits, management review,
employee monitoring) and passive control measures (law enforcement, external audit).
The 2014 Report represents the results of more than 100 countries analysed, from 9
regions (United States, Sub-Saharan Africa, Asia-Pacific, Western Europe, Eastern-Europe
and Western/Central Asia, Canada, Latin America and the Caribbean, Southern Asia, Middle
East and North Africa), from a total of 1483 cases of occupational fraud. Although the most
cases of fraud were reported in the United States (646), the Eastern Europe and
Western/Central Asia region suffered the greatest loss of $383,000. As the Table 1 shows,
each region had a different number and percentages of cases of fraud, but they are all similar
not only in the circumstances they happened, but also in the characteristics that each of these
implied organizations had. As stated by the research paper, there are three types of
occupational fraud: corruption, financial statement fraud and asset misappropriation.
20 Elegido, J. (1996) Fundamentals of Business Ethics, Ibadan, Spectrum, p. 19
21 ASSOCIATION OF CERTIFIED FRAUD EXAMINERS. (2014) Report to the nations on occupational

fraud and abuse, USA, p. 6
13
Tabel 1: Geographical location of victim organizations
Source: Adapted from Report to the nations on occupational fraud and abuse (2014)
[http://www.acfe.com/rttn/docs/2014-report-to-nations.pdf]
The study made by ACFE demonstrates that small businesses (with fewer than 100
employees) seem to be more affected by fraud. As illustrated in Figure 1, corruption
represents the main type of occupational fraud which affects corporations, in a percentage of
33.0% for the small businesses, compared to 39.5% for the big companies (having over 100
employees). Although private companies can experience fewer losses from fraud than the
larger corporations, the first ones are much more affected by this unethical practice.
Figure 2: Size of victim organizations

Source: Report to the nations on occupational fraud and abuse (2014) [http://www.acfe.com/rttn/docs/2014-
report-to-nations.pdf]
14
An important information reported by the ACFE study was that the majority of people
responsible for frauds were the employees (42.0% in 2014), followed by managers (36.2%)
and owners/executives (18.6%), but the least were the ones causing the biggest losses for the
analysed companies ($500,000). The report shows that 52% of them had ages between 31 and
45, mostly were male (66.8 %), and the majority of them had been employed for between 1
and 5 years (41%).
Concerning the educational level, those committing fraud with a university degree had
committed more damage than those who only had some university education and those who
only graduated from high school. The connection between the educational degree and
possibility for fraud would be the fact that the executives usually have graduated from at least
one university, and implicitly, possess more technological knowledge and skills.
2.2 Main ethical issues in international corporations
Ethical issues or ethical dilemmas, as they are often called, involve problem-solving
situations when the rules governing decisions are often vague or in conflict22. The main
ethical issues that can exist in/between organizations can be both discussed at a national and
international level.
For example, Velasquez, M. (2014) sees technology as one of the factors responsible for
creating ethical problems. The information technology that we use today has gone through
many stages and changes that affected the operations of business throughout the time. During
the Agricultural Revolution, humans created the farming technologies that helped them to
have a constant and considerable supply of food, which made them to have the first
businesses of trade and commerce. These first operations of trade and commerce however,
brought the first ethical dilemmas: whether there is fairness in trade or how to set a good
price.
The second stage of technological development occurred during the Industrial
Revolution of the 18th century, which brought the electromechanical machines that helped
humans to ship and sell large quantities of goods within national borders. At this point in time,
organizations had to mobilize the big number of people who worked in the factories
22FERREL, O.C. and FRAEDRICH, J., and FERREL (2014) Business ethics: Ethical decision making and
cases, 10th edition, p.137
15
producing those large quantities of goods, and this is how the maltreatment of workers was
born.
The technology that we use today helps us transfer information in numerous ways,
through Internet, mobile phones, wireless communications and other devices, process that
leads to the intensification of the globalization process. As a result of these rapid changes in
technology, businesses had to learn to adapt themselves more rapidly to deal with a more
risky and uncertain marketplace and to upgrade their operations to e-commerce.
In the international context however, the main ethical issues are related to
globalization, differences among nations and ethical relativism.
As defined by Velasquez, M. (2014), globalization is the worldwide process by which
the economic and social systems of nations have become connected facilitating between them
the flow of goods, money, culture and people 23. Globalization is a phenomenon that has both
advantages and disadvantages. Some of the outstanding benefits would be that globalization
allows nations to specialize in producing goods and services and trading them in a more
efficient way (for example Italy is specialized in fashion and footwear), for goods that are not
locally produces, or facilitates foreign direct investments of the multinational companies in
less developed countries, with less costs, and improving the standards of living of the host
countries.
On the other hand, globalization has increased the inequality between developed and
developing countries, since the more developed one are trading high-value products.
Moreover, globalization can diminish culture and tradition, since people have such a
great variety of foreign goods and services at their disposal. In Romania, for example, people
nowadays may prefer eating KFC or watching an American comedy movies than, lets say,
learning how to dance the traditional dans popular.
Iamandi, I. (2010)24 sees the process of globalization as an opportunity for moral
relativism, defined as the theory that there are no ethical standards that are absolutely true
and that apply or should be applied to the companies and people of all societies 25. In other
words, different countries have different practices and different customs, in the sense that
what is considered morally good in one country, can be viewed as something bad in another
23 VELASQUEZ, M. (2011) Business Ethics, Concepts and Cases, 7th Edition, Santa Clara University, p. 29
24 IAMANDI, I. (2010) Responsabilitatea sociala corporative in companiile multinationale, Editura

Economica, p.
25 VELASQUEZ, M. (2011) Business Ethics, Concepts and Cases, 7th Edition, Santa Clara University, p. 33
16
one. As professor Dragos Bgu (2015) was saying, even if some moral principles are
different from society to society, the fundamental moral principles are the same 26, but some
customs and traditions are unacceptable: acts of vengeance, usually death, committed by male
family members against female family members, who are held to have brought dishonor upon
the family (usually for reasons such as refusing to enter an arranged marriage, being in a
relationship that is disapproved by their relatives). 27 Although it is important for
multinational companies to respect local customs and laws, there are some universal norms
which should be applied, no matter the tradition, and also norms should always be in
accordance with human rights.
Moreover, when operating abroad, multinational companies have to choose between
two policies: either respecting their national ethical code, or adapting their practices to the
traditional methods of the host country. Iamandi I. (2010) considers that both alternatives have
their advantages and disadvantages. Regarding the first policy, multinational companies have
the advantage of maintaining their reputation and prestige when choosing to respect their
national ethical code, but the disadvantage of not being allowed to enter markets that ask for
more flexible policies. With the second policy, the advantage would be the profits obtained on
the foreign markets, while the disadvantages would be the public reactions from the home
countries and the corruption that exists in less developed countries.
Ethical issues may exist when a multinational company has a different system of law
and follows other moral values in its home country, which are not compatible with the
legislation and the moral standards of the country where business operations are conducted.
This happens when there are countries with very poor legal systems, and multinational
companies take advantage of their situation, by promoting unethical practices like child labor,
violation of humans rights, bribes to the government or selling products which are banned in
their domestic market.
Finally, Iamandi, I. (2008)28 states that usually in scientific papers about business
ethics, there are some categories of ethical problems that usually appear in the international
context:
Bribery and corruption
26 BGU, D. (2015), Business Ethics course, Bucureti: ASE
27 BGU, D. (2015), Business Ethics course, Bucureti: ASE
Bucureti : Editura Economica , p. 80
17
Problems regarding the employment of the workforce and those related to the
employees
The relationships with the governments of the host countries
The effects on the natural environment
Marketing practices and the consumer protection
The impact on the economies and on the level of development of the host countries
Relationships with the home countries
The cultural impact of transnational operations
Chapter 3
Business ethics and cultural differences
3.1 Core values and cultural differences in international corporations
This chapter focuses on the core values and main cultural differences that exist between
international corporations, in countries that evolved through contrary religions and implicitly
contrasting beliefs, different history and traditional backgrounds, diverse opinions about how
business should be conducted and about life in general, distinct laws, different human rights
policies and different languages. Since business relies on building partnerships, understanding
other cultures is vital.
Ethics in the international economical business is that part of business ethics which
has as activity object the moral problems which appear at an international level; as part of
applied ethics.29
Cultures are diverse, meaning there are many types of cultures. An example would be
monochronic and polychronic cultures. Monochronic cultures cultivate the sequence of the
events (activities are carried out on one another), and the profound concentration on events30
whereas pohychronic cultures cultivate the simultaneity of events (there are many events
Bucureti : Editura Economica, p. 74
30 ERBNESCU, A. (2007) Cum gndesc i cum vorbesc alii; prin labirintul culturilor, Polirom,
p.
18
which are happening simultaneously), the distributive attention and the superficial
concentration on the event).31 In monochronic cultures (China), punctuality is very
important, whereas in polychronic ones (The United States), they are more fluid with time. If
there is a meeting between two business people, one from China and one from the USA, if the
second arrives late, it exists the possibility that his behaviour to be taken as a lack of respect,
and create a negative impression for the Chinese person. In the Middle East however, waiting
for somebody is a cultural habit, and a form of respect.
Different elements of culture have led to the creation of so called robust cultures: A robust
culture in a cohesive enterprise is committed to a deep and abiding shared purpose. Its
robustness is highly dependent on unifying cultural tapestry woven over time as people
cooperate and learn together. It is woven from the interplay of a set of interlocking cultural
elements: History yields values. Values create focus and shape behaviour.32
In order to understand why and how people from different countries take their
decisions, it is important to consider Geert Hofstedes cultural dimensions. The former IBM
employee and management researcher, Geert Hofstede, made a study in order to compare the
cultural values and differences. His research was based on four dimensions of comparison,
and a fifth one which was added later: power distance, individualism, masculinity/femininity,
uncertainty avoidance and long-term orientation.
Geert Hofstedes approach to cultural dimensions can be a good instrument for

determining which countries are more inclined into adopting ethical behaviours, since the
each of the five criteria implies different views over how business should be conducted. For
example, masculinity and power distance can create false expectations, since the power
distance dimension is associated with the means used by the society in relations between
individuals, which are unequal, and cultures characterised by masculinity have values like
subordination or indifference towards people.
Hofstedes approach into studying national cultures and conclusions have been cited
by Vitell, S., Al-Khatib, J., Rexeisen, R. and Rawwas, M. (2005): Hofstede (1980, 1991)
suggests that societies differ along four cultural dimensions: power distance, uncertainty
avoidance, individualism, and masculinity/femininity. Specifically, he has characterized the
31 ERBNESCU, A. (2007) Cum gndesc i cum vorbesc alii; prin labirintul culturilor, Polirom,
p.
32 DEAL, T., and KENNEDY, A. (1999) The New Corporate Cultures: Revitalizing the Workplace After
Downsizing, Mergers, and Reengineering, Perseus Books Group, USA, p.
19
Arab countries as high (86/100) on power distance (deep division on wealth and power,
limited interaction and movement between social classes), somewhat high (68/100) on
uncertainty avoidance (rules and procedure designed to limit risk and uncertainty, intolerance
for abnormal ideas and behaviours), average (50/100) on masculinity vs. femininity
(competition and performance are somehow valued), and somehow low (36/100) on
individualism (tight social frameworks, loyalty to family, friends and the organization).33
Every culture has another perspective over the matter of business ethics. In the
United Kingdom, for example, ethical preoccupation has mainly been for areas like the food
industry, the drug industry, foreign investment or overseas trade in the last decades, and now
there is a change in the public ethical concern towards the business environment. On the other
hand, the concept of business ethics does not literally exist in the Middle East countries, but
there are two words related to it: El-Mahayne (professional morality) in Arabic and etika
ba'asakim (ethics in business) in Hebrew. For the Middle East countries, since some of them
are less developed than those from West, the main concern is not on business ethics, but on
economic development and growth.
The importance of understanding cultural dimensions lays on the fact that they are strongly
connected to business ethics, since every culture has its own expectations and values. For
example, The Arabs decisions in business matters are influenced by personal connections,
favouritism and nepotism. On the other hand, the people in Western Europe and North
America are more individualists as a nation, more independent and autonomous, by placing
individual achievements on top of personal relationships. Irina Iamandi (2008) quotes Popa,
I., Filip, R., p. 271, saying that in occidental cultures, moral norms are situated in a
contingent domain with the juridical one (Occidental Europe), while in the oriental world
ethical standards are imposed, rather through tradition and through the force of common
beliefs. In the Occident, ethical responsibility is individual and any deviation from the norm is
sanctioned with social or professional movement (through the force of the public opinion,
mass-media) and in the case of an infraction, there is punishment. In the Orient, ethical
responsibility is in assembly of the members of a community, and the devious behaviour is
punished depending on circumstances; social integration of the individual prevails over its
exclusion.
33 Scott J. Vitell, Jamal A. Al-Khatib, Richard Rexeisen, Mohammed Rawwas- Inter-

country differences of consumer ethics in Arab countries (2005), p. 497-498
20
Moral values are usually shaped by religion and national beliefs, and since culture
developed in a different way, they can have contradictory opinions over what is generally
believed to be morally good. For example, while bribery and corruption are considered by
the majority to be unethical, German people see corruption as a business and bribery is taxed.
Another example of how tradition and religion shape peoples beliefs and virtues,
would be India, which, compared to the European countries does not favour capitalism. Indian
people believe in an economical system which produces goods that help individuals develop
their physical and spiritual selves, by excluding goods like alcohol, weapons or dangerous
meds.
3.2- How cultural differences affect business ethics
DEFINITION OF CULTURE&CULTURAL DIVERSITY
The problem with cultural diversity is that some act morally, while others do not.
According to Shaw, B. (2000), morality rests on religion 34. Religion affects our behaviours
because it represents the obedience to the Will of one or many Gods, under the belief that God
is right, whatever he thinks is good or bad for us. Shortly, religious people consider that
anything is right, if God says so. But God is a matter of personal belief, since religions have
their own God (Allah, Zeus), and have other opinions over moral norms. However, religion is
not the only factor that determines the behaviour of a person, but also external factors like
education, tradition and national beliefs.
Scholtens and Dam (2007) say Culture, as a body of learned behaviours common to a
given human society, has a predictable form and content and shapes behaviour and
consciousness within society from generation to generation35. Nevertheless, culture has a
determinant role in business ethics due to its contribution in shaping behaviours and ways of
thinking.
34 Tabish, A., G. (2009) Comparing standards of business ethics in USA, China, Jamaica and Pakistan.
Pakistan Journal of Commercial and Social Sciences [Online]. Vol. 3, p. 49. Available from:
http://www.jespk.net/publications/24.pdf. [Accessed: March 4th 2015].
21
Because new emerging markets and growing globalisation affect organizations by
increasing interdependencies between them, this can create ethical issues because of the
cultural differences that exist between domestic and international markets. That is because
businesses operate in nations that have different laws, beliefs, level of development or
governments. Cultural conflicts usually appear when the business partners have different
ethical standards.
Cultural diversity can become a problem in strong cultures. By definition, in a strong

culture, the organizations core values are both intensely held and widely shared 36. In other
words, an organization that has a strong culture is not open towards accepting new employees
which bring different values to the company. On the contrary, the newcomers are pressured to
comply with the companys core beliefs and values.
In order to develop a good functioning of the business and to guarantee its best
performance, leaders need to have a clear understanding of culture and ethics in other
countries, but also on their technology, economics or finance. It is a very important step in the
decision-making process when considering opening a new business in another market. On the
other hand, the local parties have to accept and understand how international business works.
Successful business owners are well aware of these differences, in order to get to know the
local clients better, to understand their way of thinking and thus, provide them with what they
need.
Because of the abundant resources, the Arab countries have always been a magnet for
foreign direct investment from the developed Western countries. In order to conduct
successful business operations in a country that is totally different from a cultural point of
view, the Western countries have to pass various ethical challenges, coming from trade, target
consumers and competition. The big cultural differences create the impression for foreigners
that Middle East is far from being ethical. An example would be the fluid pricing bargaining,
which may seem unfair to a person belonging to a country with fixed prices.
By adopting ethical standards from each market, business owners can gain trust from
stakeholders, and increase their revenue, sales, trade and the volume of production.
35 cultural values and international differences in business ethics, Bert Scholtens and Lammertjan
Dam, 2007, p. 7
36 ROBBINS, S. and JUDGE, T.(2014) Organizational behaviour, 16th Edition, Global Edition, Pearson Higher
Education, p. 499
22
Organisational factors represent the key to managing cultural diversity. Examples of
the principal organisational factors are Customer Service, Knowledge Management,
Organisational Development and Human Resource Management. The central business
function is the Organisational Development process, which is concerned with strategic
planning for the business.
With cultural understanding and acceptance, companies improve their international

relations and increase their opportunities to enter overseas markets, through mergers &
acquisitions, joint ventures or franchises, improve their effectiveness in the recruitment
process and are more successful in their relationship with foreign managers. In addition to
that, cultural diversity is beneficial to the workplace environment, because of the transfer of
skills, technology, experience and knowledge between local and foreign employees, so it
provides the employees with new ways of learning and developing themselves personally and
professionally.
However, implementing an ethical behaviour is not always easy. Cultural differences

can have a big impact on business ethics, since there can be cultural variations in
communication, rules or cultural norms. For example, some U.S. corporate ethics programs
reflect typical American cultural norms like individualism, whereas collectivist organizations
have different communication styles.
If we take the example of Singapore, although being one of the richest countries in
diversity, with a percentage of 35% of non-natives and half of its population born in foreign
countries (Indians, Chinese, Malayans etc.), Singapore has developed very rapidly in the last
decades. One of Singapores software companies, Muvee Technologies, proves that accepting
and embracing cultural differences is a major factor in creating comparative advantage, by
having 50 employees from 13 different countries. The companys success is guaranteed
through the attention given to its foreign employees, by helping them to accommodate with
the new environment and encouraging socialization. Muvee Technologies Company focuses
on creating a favourable workplace for its people, by building, for example, open offices
without partition walls, for all the employees, including the CEO ( to encourage the
interaction between them).
Currently, social individualism, the ethics of competition and the ethics of share
ownership are facing issues in Britain. One problem concerning the business environment in
Britain is that it does not appear as a positive image to the society, and it is still reluctant to
23
discussing in explicit terms the ethical issues of its activities and to make it public, probably
because of the fear of wakening controversies and negative feelings from society.
Today, business ethics in China faces some issues regarding the present economic
system ( free market versus government regulation, keeping a fair level of social securities
and a fair competition, promoting economic growth while assuring social development, the
problem of pollution for the companies, the transition of organization ownership from the
public sector to the private one, problems regarding the international business conduct
( maltreatment of workers and unacceptable labor conditions in other countries, the
competition between national and foreign firms etc), ethical management issues
( discrimination between men and women, different treatment of employees, careerism etc).
An important issue in understanding how cultural differences affect business ethics

would be Corporate Social Responsibility (CSR), defined by Irina Iamandi ( 2010) as the
contribution that company must have to the development of the modern society37.
Although every organization has its own principles of CSR, in order to be considered
social responsible, a company needs to comply with the international values of CSR. Since
CSR is concerned with the social responsibility of an organization, it is related to moral
behaviour, and thus, business ethics. In this way, the social responsibilities that companies
take nowadays would be constantly improving work conditions, reducing pollution or
consumer protection. An example of CSR initiative would be green labels, which consist in
protecting the environment through labelling certain types of products that are less harmful to
the environment. Germany, for example, has been using green labels under the Blue
Angel logo of the United Nations Environmental Programme since 1978, to over 3500
products.
Regarding the multinational companies, they have the social responsibilities to

promote economic development and to maintain the ethical standards and norms when
performing foreign business operations. They must not only respect the foreign laws and
methods of conducting business, but also form their standards with regard to the workforce,
the environment and the human rights.
37 IAMANDI, I. (2010) Responsabilitatea sociala corporative in companiile multinationale, Editura

Economica, p.
24
CASE STUDY: STARBUCKS
4.1 Short history and company presentation
Starbucks represents the company that revolutionized the American shop market, being the
largest coffee store chain in the world. The first Starbucks store was opened in 1971 in Seattle
Washingtons Pike Place Market. Today, according to the organizations site, Starbucks owns
more than 21,000 coffee stores in 66 countries in January 2015 and it continues to expand
globally. Besides high quality coffee, the company sells bakery products and various teas.
The companys logo is inspired from the Greek mythology, and it features a twin-
tailed mermaid, and the name from the Herman Melvilles Moby Dick novel.
In 1982, Howard Schultz becomes the director of retail operations and marketing. In
1983, he brought Starbuck to a new level, after taking a trip to Italy and finding inspiration in
their coffee community environment. This way the brand that we know today took form.
Starbuckss real success began when it was acquired in 1987 by Il Giornale, an Italian
bistro owned by Scultz, and changes its name to Starbucks Corporation. By the 1990s, the
company expands its headquarters in Seattle and owns over 100 stores.
By 2000, total stores were 3501, expanding in locations like Japan (which was the first
store outside North America), Singapore, Philippines, England, Malaysia, New Zealand,
Taiwan, Thailand China, etc, and opened the first licensed airport Starbucks store, the first
drive thru location, began selling cold drinks (Frappuccino), and acquired Tazo Tea. In 2001,
ethical coffee-sourcing guidelines are introduces, as a proof for the companys interest for
consumers and ethical operations.
By 2005, Starbucks acquires other two companies: Seattle Coffee Company and Ethos
Water. At this point, Starbuck owns 10,241 stores.
In 2008 Howards Schultz becomes again Starbuckss chief executive officer and
launches the first online community. By 2010, the coffee store is provided with free unlimited
wifi and Starbucks VIVA Ready Brew Coffee is launched.
25
In the recent years, the company has focused on developing its ethical conducts, by
initiating a farming research and development and huge learning center in Costa Rica, as
regard to their mission to ethically source 100% their coffee by 2015.
4.2 Starbuckss commitment to business ethics
According to Starbuckss official site, their business methods are committed to 100%
ethical sourcing. The companys interest for business ethics began to develop more than 15
years ago, when they partnered with Conversation International, in order to develop Coffee
and Farmer Equity (C.A.F.E.) Practices.
C.A.F.E. Practices (coffee and farmer equity) represents a buying system, built on four
characteristics: Social Responsibility, Quality, Economic Transparency and Environmental
Leadership. These practices are concerned with adopting an ethical behaviour not only
towards the coffee farmers they are working with, by providing them with compensations and
rewards for the good work, and putting effort into creating a strong lasting bond with them,
but also towards consumers, by assuring that the Starbucks products they are offering are of
the highest quality, and sold at a good price, and towards the environment, by following strict
social and environmental standards.
Evaluation of these practices are made by third parties, which have the role of
verifying whether workers are provided with safe and fair working conditions, or that the
companys operations do not affect the environment, by reducing chemicals and respecting
biodiversity. SCS Global Services is the member that supports Starbucks in the verification
process of its C.A.F.E. Practices.
26
Figure 3: C.A.F.E. Guidelines standards
Source: http://www.starbucks.com/responsibility/sourcing/coffee#
Moreover, Starbuckss interest for business ethics also manifested through the creation
of Farmer Support Centers, meant for lowering the cost of production and helping their
farmers to gain expertise, to reduce pest chemicals and constantly improve the quality of the
coffee beans, by developing their harvest methods, through milling processes and soil
management. Some of the locations of these Farmer Support Centers are: San Jose, Costa
Rica (2004); Kigali, Rwanda (2009), Yunnan, China (2012) and Costa Ricas Global
Agronomy Research & Development Center (2013).
In order to maintain a long-term supply of high-quality Arabica coffee, besides Farmer

Support Centers and C.A.F.E. Practices, the company invested in providing their farmers with
loans, in order to strengthen the business. In total, the number of investments made by
Starbucks through all these programs exceeds $70 million.
Beside Starbuckss preoccupation for its farmers, the company also wants to ensure
that it keeps its leading position on the market through its high quality products. High-quality
is like Starbuckss signature, since the brand is widely known for this characteristic. On their
official website, they explain the process of collecting the coffee beans, where they come
from and what makes them of high-quality. According to their brief brochure over the topic,
27
the coffee beans are carefully selected from higher altitudes, where there are denser, with
more flavour beans, only when they are at their peak.
The ethical sourcing commitment for quality does not only apply for coffee, but also
for the other products that Starbucks are offering: tea, cocoa and manufactured goods. In such
way, Starbucks began working with the Ethical Tea Partnership in 2005 and supported tea-
growing communities through the Community Health and Advancement Initiative project
with Mercy Corps. As regarding the cocoa, Starbucks designed the Cocoa Practices
program that is meant for the producers and consumers, to better understand the process of
selecting high quality cocoa beans. These practices are also verified by trained and authorized
members of SCS Global Services. Starbucks also set high standards for the suppliers of the
manufactured goods (the merchandise, the furniture of their stores), in order to be sure they
sell and own only ethically produced goods.
Moreover, Starbuckss commitment for conducting ethical business is demonstrated by

the global ethical business standards they follow, and also their own principles and standards
of conduct.
Starbucks is part of the international network of organizations called UN Global

Compact that supports the following 10 universal principles:
1. Business should support and respect the protection of internationally proclaimed

human rights.
2. Business should ensure that they are complicit in human rights abuses.
3. Business should uphold the freedom of association and the effective recognition of the
right to collective bargaining.
4. Business should support the elimination of all forms of forced and compulsory labor.
5. Business should support the effective abolition of child labor.
6. Business should support the elimination of discrimination of employment and
occupation.
7. Business should support a precautionary approach to environmental challenges.
8. Business should undertake initiatives to promote greater environmental responsibility.
9. Business should encourage the development and diffusion of environmentally friendly
technologies.
10. Business should work against corruption in all its forms, including extortion and
bribery.38
38 www.starbucks.com
28
Regarding the workplace, Starbucks is committed to respecting its employees and the
basic human rights through the Global Human Rights Statement, which is addressed to all
Starbucks partners in all the countries in which it operates.
An ethical workplace is also guaranteed through the companys equal employment

opportunities and the support they are given to their partners. For example, Starbucks, in
association with ASU (Arizona State University) developed the College Achievement Plan in
October 2014, a project that offers full tuition coverage for all four years of bachelor degree in
electrical engineering, business or retail management. As Starbucks chairman, president and
CEO, Howard Schultz declared: We cant be a bystander and we cant wait for Washington.
And I strongly believe that businesses and business leaders must do more for their people and
more for the communities we serve39, they are helping employees who cannot afford to
achieve their educational degree, without having the obligation to continue their career at
Starbucks after finishing studies. Also, the company offers career opportunities for veterans
and military spouses, through the Armed Forces Network (AFN), and is committed to provide
as many jobs for USA, since it is experiencing an unemployment crisis, through its
partnership with Opportunity Finance Network (OFN).
Moreover, the Starbucks Equal Employment Opportunity Policy-U.S. clearly states

that All partners and applicants will be treated fairly, without regard to race, color, religion,
sex, national origin, age, disability, sexual orientation, marital status, veteran status, gender
identity and expression, genetic information, or any other basis protected by local, state, or
federal law. This Policy applies with regard to all aspects of ones employment, including
hiring, transfer, promotion, compensation, eligibility for benefits, and termination40.
International cultural diversity is strongly respected by the Starbucks Company, since

diversity and inclusion are two of their main values. In order to create a diverse workforce and
partner with people from different cultures, Starbucks developed 7 Starbucks Partner Network
Groups.
Steps towards improving their business practices with regards to environmental

protection and conservation have been made through recycling and reducing waste (Starbucks
uses reusable cups and developed recycling programs at each store) water and energy
39 www.starbucks.com
40 Starbucks Equal Employment Opportunity Policy www.starbucks.com
29
conservation (they managed to reduce water consumption by over 23%, installed Energy
Management systems in 4000 stores and made steps into using sources of renewable energy).
Finally, Starbucks has developed Animal Welfare-Friendly Practices (by eliminating

the use of artificial growth hormones, assuring the responsible use of antibiotics to support
animal health etc.), Starbucks Global Anti-Bribery Standard (to impede employees from
receiving or offering bribes), Conflict Minerals Disclosure (to make sure their suppliers of
furniture, equipment and merchandise that can be found in the Starbucks store are produced in
an ethical manner and according to social responsibility standards), Starbucks supplier code
of conduct ( that comprises the universal ethical principles that need to be respected by the
suppliers of Starbucks) and Starbucks Disclosure in Compliance with California Transparency
in Supply Chains Act of 2010 ( that is addressed to manufacturers and large retailers in
California who are required to eliminate slavery and human trafficking).
4.3 The companys Standards of Conduct
Starbuckss main mission is to inspire and nurture the human spirit-one person, one cup, and
one neighbourhood at a time.
In order to fulfill this mission, the company established some universal principles that
are used in the international environment to make sure Starbucks employees are acting
ethically at work. These principles (or values) are focused on six factors that maintain
Starbuckss brand reputation and guarantee its success all over the globe: the coffee (to
improve peoples lives by offering high-quality coffee), the customers ( not only offering
them services, but also creating connections with the customers), the partners ( treating
partners with dignity and respect), the neighbourhood ( become part of the community where
a Starbucks store is placed), the stores ( creating relaxing and friendly-environmental stores, a
perfect place for meeting friends) and the shareholders.
These principles and rules are also called Standards of Business Conduct, and they
are made public through their Business Ethics and Compliance guideline. Business Ethics
and Compliance offers guidance and understanding over the business practices, behaviours
and main values of the Starbucks Company, and it is addressed mainly to Starbucks partners,
but also to customers.
30
Figure 4
Source: Business Ethics and Compliance-Standards of Business Conduct (www.starbucks.com)
Business Ethics and Compliance guidance is comprised of four main chapters

(Workplace Environment, Business Practices, Intellectual property and Proprietary
information and Community involvement), and the core values presented are illustrated by
Figure 4.
According to the brochure, the workplace environment at Starbucks refers to how they
treat each other (equal opportunities in hiring, environment free of harassment, bullying and
discrimination), how employees treat their customers (with respect and dignity), embracing
diversity (full equity and inclusion), workplace health safety, and security (to follow all safety
rules and practices), Starbucks Quality and Customer Protection, standards regarding
substance abuse and weapons on the property of the company and rules regarding wage and
hour (following all applicable wage and hour laws).
The Business practices section refers to the compliance with laws and regulations
(in the countries in which they operate), interaction with the government (it is prohibited to
offer any kind of payments or gifts to a local government official), truthful sales practices and
31
advertising, fair competition (not discussing issues like pricing, production or markets with
competitors, not setting resale prices or adding a third party to breach an existing agreement).
The Intellectual Property and Proprietary Information is about Starbucks

confidential information (that needs to be used only for the company purposes and the
employees are not allowed to share the technologies, the marketing plans, the recipes or the
internal communications of Starbucks with someone from outside the company), other
intellectual property (like ideas, software programs or any inventions that are created by
partners on Starbucks property belong to the company), books and records (all partners must
ensure the accuracy and integrity of Starbucks corporate records 41 and the use and retention
of company records (Starbucks Information Management Policy states that partners will
manage information in such a way that supports the needs of the business while ensuring
efficiency, security and compliance with any legal or regulatory requirements42.
The Community Involvement section talks about the environmental mission

statement (Starbuckss commitment of achieving environmental leadership through
understanding environmental issues, developing environmental responsibility, creating change
through innovative ideas and also encouraging partners to support their mission), personal
activities ( Starbucks employees should separate their personal activities to the workplace),
political activities ( it is prohibited to share any personal or political belief around Starbucks
premises) and public relations ( information about Starbucks should be disclosed by an
appropriate party, and not by employees).
41 Business Ethics and Compliance www.starbucks.com, p. 21
42 Business Ethics and Compliance www.starbucks.com, p. 20
32
4.4 Starbucks survey
4.4.1Executive resume
The main objective of the survey was to match the conclusions (real facts) with the
hypothesis, by determining whether Starbucks respects its commitment towards ethics. This
subject of matter is viewed through the perspective of 45 respondents, based on their personal
opinions and experiences.
The majority of the respondents chosen were aged 18-25, because in my opinion, is
the most representative segment of people as present consumers, but also as future fidel
clients and Starbucks employees. Moreover, this was the most active and numerous category
of people that I have encountered during my visits to the local Starbucks.
-educatie
4.4.2 Research purpose and hypothesis
This survey aims to focus on the ethical practices and behaviours of the Starbucks
Company in Romania, whether their universal principles and values towards consumers are
well known, respected and put into practice by its business partners and whether the company
manages to make a difference in the perceptions of its consumers, through their 100%
commitment to ethical conduct.
Before starting to interpret the results, I thought about the hypothesis. The Business
Ethics and Compliance guideline represents the main source for the hypothesis, since it
focuses on the main standards and values of the Starbucks company that need to be promoted
by all business partners, no matter the country in which it operates. Expectations regarding the
responses of the respondents were related to the ethical behaviours and services towards
consumers (high quality products and coffee, lack of discrimination or verbal/physical abuse,
respect, integrity, dignity and lack of offensive jokes or comments on behalf of the Starbucks
staff) and whether consumers and well aware of the Starbuckss commitment to 100% ethical
33
sourcing and whether their principles of conducting business have a positive impact on
consumers perceptions.
4.4.3 Methodology
Regarding the survey methodology, the selected sample consists of 45 respondents of

different age groups and different educational degrees.
Since the main purpose of the survey was to test Starbuckss ethical conduct in
Romania and to see the consumers opinions on it, the methodology used was a qualitative
one.
The respondents filled in the survey through an online platform, both from home (for
those harder to reach and with less time) and in my presence, by giving the answers directly
on my tablet, while enjoying some Starbucks products at their store locations.
The survey structure consists of 10 different types of questions(text, multiple choice,

checkboxes, and scale) which can be divided in two parts: the first two questions refer to the
profile of the consumer (age and educational degree), while the following 7 questions are
focused on business ethics and behaviours (whether the respondent has ever been to a
Starbucks coffee shop, what he/she appreciates more about the shop, whether Starbucks is an
ethical or unethical company based on his/her perception and why he/she considers so, a
question that asks to rate the Starbucks products and services on a scale from 1 to 10, and two
questions related to examples of ethical and unethical behaviours that the respondent may or
may not have assisted to).
4.4.4 Results
The survey results showed that the majority of the respondents belonged to the age
group 18-25 (78.3%), while 0% were under 18, 13% were between 25-40 and 8.7% were over
40 years old.
Regarding the educational degree, 45.7% have a Highschool degree, 43.5% a

University degree, 10.9% a Master Degree, while none of the respondent had Doctoral studies
or other educational degrees.
34
The question regarding whether the respondents have been or not to a Starbucks coffee
shop (at least once) had a 100% yes answer, since the survey focuses strictly on Starbucks
consumers.
The majority of people (73.9%) said they appreciate most about Starbucks the quality
of the coffee, while 58.7% said they enjoy the design of the coffee shops, 52.2% of them the
atmosphere and the people, 28.3% chose the good reputation of the company, 21.7% the
employees behaviour, 6.5% of them responded with none of the above and 4.3% mentioned
Starbuckss ethical sourcing programs.
65.2% of the respondents considered Starbucks to be an ethical company, while the

rest (34.8%) said it is not ethical.
For those considering Starbucks as an ethical company, these were some of the reasons
for their positive responses, regarding the company CSR, their quality products, the way
Starbucks treats its employees, suppliers and consumers or the way Starbucks adapts to local
markets: the employees treat the customers correctly and they satisfy their wishes,
Starbucks has quality coffee, their products are in accordance with the law in what is
concerning a coffee shop, all wear the same clothes, in all coffee shops you go and ask for
the order and you feel like you have the freedom to choose while you are sitting in the crowd
and you hear other persons preferences; friendly staff, they are smiling at you, they respect
their clients and treat them good, they show what they tell, they treat well their
employees, their consumers and the environment, it adapts to local markets and culture or
Starbucks has a good reputation in the industry coffee and I think the company is an example
of ethics because they support good practices in their relation with the coffee suppliers and
they provide quality services.
87 % of the respondents answered Neither of them to the question about

encountering any of the listed unethical behaviours at the Starbucks coffee shop, while none
of the respondents has ever witnessed offensive jokes or comments on behalf of the Starbucks
staff, 6.5% of them said they noticed lack of respect for the consumers on behalf of Starbucks
personnel, 2.2% answered lack of connection between Starbucks employees and customers,
2.2% said they encountered discrimination at Starbucks and 2.2% chose verbal/physical
abuse.
35
Regarding the question with rating the Starbucks products and services on a scale
from 1 to 10, 30.4% found them very satisfying, while 28.3% rated them with 9, 21.7% with
8, 4.3% with 7, 6.5% with 6, 6.5% with 5 and 2.2% with 3.
Most of the respondents found quality products as a characteristic of the local

Starbucks (76.1%), 43.5% said high level customer service, 28.3% responded free of
harassment, bullying and discrimination as a characteristic, other 28.3% of them said high
integrity, respect and dignity, while 13% responded none of the above.
4.4.5 Survey conclusions
In conclusion, the hypothesis set at the beginning of the presentation was close to the
real facts, since the respondents answers mostly confirmed the expectations that Starbucks is
an ethical company. According to their responses, more than half of the respondents (65.2%)
consider Starbucks to be an ethical company, 87% of them never encountered any of the
following unethical behaviours at Starbucks (offensive jokes or comments from Starbucks
staff, lack of connection between Starbucks employees and customers, discrimination,
verbal/physical abuse, lack of respect for the consumers on behalf of the Starbucks
personnel), most of them (30.4% and 28.3%) rated Starbucks products and services with 10
and 9, respectively.
Moreover, the majority of them said they appreciate most about the Starbucks
Company the quality of the coffee (73.9%) and the atmosphere and people (52.2%), proving
that delivering quality products and promoting ethical behaviours can change the perceptions
of the consumers.
4.5 Business ethics and international cultural differences
The Starbuckss global success has always been a result of the companys ability to
embrace cultural diversity, to have cultural empathy, to adapt its operations to local demands
and conditions and the companys willingness to respect the law and the traditions of the host
country.
With over 21,000 stores opened in 66 countries (January 2015) REFERINTA,

Starbucks has managed to successfully expand its business on continents with different
cultures and historical backgrounds, with nations of different customs, traditions, laws and
36
customers needs. While the globalisation phenomena has facilitated the entry of the company
on some markets that are less conservative and traditional, the strong cultures, the countries
that are more powerful and more determined to stick to their traditions and local customs,
have been more challenging for Starbucks.
However, Starbucks proved that even the nations that seem to be most challenging can
become a big source of profits. The companys strategy to adapt the Western model to local
demands has been a real success for countries in Asia (Japan, Singapore, Thailand, China,
Indonesia, India etc.). China, for example, seemed to be a not so profitable market for a
coffee-based company, since their tradition is strongly related to drinking tea. One factor that
contributed to Starbuckss success on this market was the fact that the company introduced
special beverages and new flavors, based on ingredients that respect the Chinese peoples long
history of drinking tea, like the green tea. Moreover, they adapted the design of the coffee
stores to the local buildings and to the Chinese architecture, created bigger stores in order to
allow the Chinese customers to relax and enjoy a quality time with friends and families, and
the Starbucks management is known for its manifested interest towards its clients families.
Besides these, the company managed to make profits in China by having higher prices for its
products in this market (20% more than other markets). The redesigning of the Starbucks
stores and adaptation to local requirements of the company products and services also proved
to be successful strategies in other Asian countries (like Japan, Singapore), but also in
countries from Europe or Middle East.
Other challenging markets for Starbucks have been some countries like France or Italy,
the nations that created the coffee culture and are known for their great contribution to its
development. Although there is still a large segment of people in France, for example, that
prefer their local coffee shops, Starbucks is making efforts into changing their stores to better
suit consumers tastes and needs, by adding space to their locations.
Although Starbucks is an ethical company at its core, there were cases that questioned
the ethical business conduct of the company. An example would be the case when, back in
2000, Starbucks built a store in the Forbidden City of Beijing, a place of great importance for
the Chinese people, a traditional treasure and one of the worlds great heritage sites. Although
the store was closed seven years later, in 2007, as a result of the negative reactions of some
Chinese people, who saw this action as an attempt for cultural imperialism of the U.S., and a
possible threat to their tradition and culture.
37
Depass, D. (2011) also made a study over the battle over trademark certification
between Starbucks and Ethiopia from 2005. The ethical practices of the company were
questioned because Despite Starbucks commitment to offering Fair Trade prices and other
farmer empowerment initiatives, Ethiopian farmers do not get much money for their labor 43.
The main problem was that the Ethiopian government wanted to gain visibility in the market
through licensing agreements, by trademarking three of its coffee producing regions, but it
could not do so because of the former application of Starbucks to trademark Shirkina Sun-
Dried Sidamo in 2004. Although Starbucks did not want to withdraw his application at the
beginning, In June 2006, Starbucks dropped its application for Shirkina Sun-Dried Sidamo.
This came two weeks after the NCA filed a letter of protest to the U.S. Patent and Trademark
Office, opposing the trademarking of all three Ethiopias regions. The NCA, whose
Government Affairs committee was chaired by Starbucks vice president, Dub Hay, argued that
the names could not be trademarked because they were commonly used to refer to coffee. 44
In the end, Starbucks has accepted to help farmers through opening of a new agronomic
center, and also has accepted to promote Ethiopian coffee in its stores.
43 Depass, D (2011), Starbucks vs. Ethiopia : Corporate Strategy and Ethical Sourcing in the Coffee
Industry, Kenan Institute for Ethics, Duke University, p. 7
44 Depass, D (2011), Starbucks vs. Ethiopia : Corporate Strategy and Ethical Sourcing in the Coffee
Industry, Kenan Institute for Ethics, Duke University, p. 8
38
Annexes
1. What is your age group?*

Under 18
18-25
25-40
Over 40
2. What is you highest educational degree?*

Highschool
University
Master
Doctoral studies
Other
3. Have you ever been to any local Starbucks coffee shop?*

Yes
No (end of survey)
4. What do you appreciate most about Starbucks?*

The quality of the coffee
The ethical sourcing programs
The design of the coffee shops
The atmosphere and the people
The employees behaviour
Its good reputation
None of the above
5. Can you say Starbucks is an ethical company based on your experience with them?*
Yes
No
6. If yes, shortly tell us why.
*Text box*
7. Have you ever witnessed any of the following behaviours at your local Starbucks?*
Offensive jokes or comments from Starbucks staff

Lack of connection between Starbucks employees and customers
Discrimination
Verbal or physical abuse
Lack of respect for the customers on behalf of Starbucks personnel
Neither of them
39
8. Please rate on a scale from 1 to 10 the products and services offered by your local
Starbucks*:
Still place for improvement 1 2 3 4 5 6 7 8 9 10 Very satisfying
9. Which of the following characteristics do you associate with your local Starbucks?
High level customer service
Quality products
Free of harassment, bullying and discrimination
High integrity, respect and dignity
None of the above
Annexes 1: Starbucks survey on ethical standards of business conduct in Romania
Source: https://docs.google.com/forms/d/15nzawDY5vZqLNsHh2mnWy6G8h4i3phStquKi448PQE/viewform
40
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PAGINA PT PRIMA REFERINTA
All successful business owners are aware that of the fact that we live in a civilized
world today, which needs to have a well-defined system of ethics in order to work
properly. Therefore, since the business world is mainly built on partnerships,
companies must develop certain characteristics (like fairness and trustworthiness),
which represent the fundamentals of ethics.
42

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TABLE OF CONTENTS

CHAPTER 1. The evolution of business ethics from past to future prospects

CHAPTER 2. Business ethics and international companies

CHAPTER 3. Business ethics and cultural differences

CHAPTER 4. Case Study: Starbucks Company

1.1 What is business ethics

4 Touro institute in conjunction with Carnegie Mellon, History of Ethics, p. 29

5 Touro institute in conjunction with Carnegie Mellon, History of Ethics p.30

8ELEGIDO, J. (1996) Fundamentals of Business Ethics, Ibadan, Spectrum, p. 2

1.2 An overview of the history of business ethics

The history of business ethics involves years of changes in terms of cultural

19 Robert Cavalier- History of Business Ethics, p. 32

2.1 Ethical vs. unethical behaviours

Figure 1: Positive ethical values of leadership

Source: Adapted from http://leadingincontext.com/category/ethical-organization/

On the opposite side, companies can promote unethical behaviours. As mentioned at

An example of such an unethical behaviour would be fraud. According to a global

20 Elegido, J. (1996) Fundamentals of Business Ethics, Ibadan, Spectrum, p. 19

21 ASSOCIATION OF CERTIFIED FRAUD EXAMINERS. (2014) Report to the nations on occupational

Figure 2: Size of victim organizations

2.2 Main ethical issues in international corporations

24 IAMANDI, I. (2010) Responsabilitatea sociala corporative in companiile multinationale, Editura

26 BGU, D. (2015), Business Ethics course, Bucureti: ASE

27 BGU, D. (2015), Business Ethics course, Bucureti: ASE

Business ethics and cultural differences

3.1 Core values and cultural differences in international corporations

Geert Hofstedes approach to cultural dimensions can be a good instrument for

33 Scott J. Vitell, Jamal A. Al-Khatib, Richard Rexeisen, Mohammed Rawwas- Inter-

3.2- How cultural differences affect business ethics

DEFINITION OF CULTURE&CULTURAL DIVERSITY

Cultural diversity can become a problem in strong cultures. By definition, in a strong

With cultural understanding and acceptance, companies improve their international

However, implementing an ethical behaviour is not always easy. Cultural differences

An important issue in understanding how cultural differences affect business ethics

Regarding the multinational companies, they have the social responsibilities to

37 IAMANDI, I. (2010) Responsabilitatea sociala corporative in companiile multinationale, Editura

4.2 Starbuckss commitment to business ethics

In order to maintain a long-term supply of high-quality Arabica coffee, besides Farmer

Moreover, Starbuckss commitment for conducting ethical business is demonstrated by

Starbucks is part of the international network of organizations called UN Global

1. Business should support and respect the protection of internationally proclaimed

An ethical workplace is also guaranteed through the companys equal employment

Moreover, the Starbucks Equal Employment Opportunity Policy-U.S. clearly states

International cultural diversity is strongly respected by the Starbucks Company, since

Steps towards improving their business practices with regards to environmental

40 Starbucks Equal Employment Opportunity Policy www.starbucks.com

Finally, Starbucks has developed Animal Welfare-Friendly Practices (by eliminating

4.3 The companys Standards of Conduct

Source: Business Ethics and Compliance-Standards of Business Conduct (www.starbucks.com)

Business Ethics and Compliance guidance is comprised of four main chapters

The Intellectual Property and Proprietary Information is about Starbucks

The Community Involvement section talks about the environmental mission

41 Business Ethics and Compliance www.starbucks.com, p. 21

42 Business Ethics and Compliance www.starbucks.com, p. 20

4.4.2 Research purpose and hypothesis

Regarding the survey methodology, the selected sample consists of 45 respondents of

The survey structure consists of 10 different types of questions(text, multiple choice,

Regarding the educational degree, 45.7% have a Highschool degree, 43.5% a

65.2% of the respondents considered Starbucks to be an ethical company, while the

87 % of the respondents answered Neither of them to the question about

Most of the respondents found quality products as a characteristic of the local

4.4.5 Survey conclusions

4.5 Business ethics and international cultural differences

With over 21,000 stores opened in 66 countries (January 2015) REFERINTA,