BUSINESS ETHICS

IDENTIFYING THE CULTURAL AND CONTEXTUAL

DIFFERENCE IN BUSINESS CONDUCT ACROSS THE
WORLD

UNDER THE GUIDANCE OF: DR. JAGANNATH MOHANTY

PRESENTED BY: GROUP 9:

ARSHREE SABAT (201912112)
JATIN KHANNA (201912065)
LAKSHAY JHALANI (201912070)
ROHIT KUMAR (201912085)
TUSHAR SOHALE (201912097)

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INTRODUCTION

Business customs and ethics vary significantly around the world. A sense of ethics is determined
by a number of social, cultural and religious factors. Ethical conduct also refers to the behavior
that is generally accepted within a specific culture. Some practices that are considered fine in a
region might not be considered good practices elsewhere.

As a business grows, diverse group of people come together. While diversity often enhances the
work environment, cultural differences in business can sometimes have an adverse impact too.
Having global business practices throughout the world and ignoring the local traditions and
practices in a region can lead to disruptions and dissatisfaction among some employees to work
effectively as a team or to handle business dealings with potential customers in other countries.

There are two approaches that can be taken when doing business in foreign countries. In business
ethics and conduct while dealing with foreign countries, people try to understand what the ethical
action is and what the normal practice might be. If these are not consistent, the focus is placed on
how to encourage ethical actions.

A business can operate internationally with the policies and procedures it has developed at home,
or it can adopt its own practices to the norms of each foreign country where it operates. When a
company goes abroad, it often discovers that business practices that would be illegal, or at least
frowned upon at home are often allowed or unofficially tolerated.

In many Latin American countries, for example, bribery and kickbacks are a regular part of
doing business. In some Asian nations, insider trading is not a crime. In many cultures, there are
no clear social rules preventing discrimination against people based on age, race, gender, sexual
preference or differently-abled persons. Even when there are formal rules or laws against
discrimination, they may not be enforced, as normal practice may allow people and companies to
act in accordance with local cultural and social practices.

The largest and most respected global companies, typically the Fortune Global 500, can often
make management and employment decisions irrespective of local practices. Most people in
each country will want to deal with these large and well-respected companies. The person
representing the larger company brings the influence of their company to any business
interaction. In contrast, lesser-known, midsize, and small companies may find that who their
representative is will be more important. Often lacking business recognition in the market, these
small and midsize companies have to rely on their corporate representatives to create the
professional image and bond with their in-country counterparts.

Cultural norms and practices may make life difficult for the company as well as the employees.
In some cultures, companies are seen as “guardians” or paternal figures.

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NORTH AND SOUTH AMERICA:
Here we will discuss about the cultural and contextual differences in business conduct across
North and South America.

In some countries, child labor is acceptable and normal. But the same thing is frowned upon in
the United States. Also, the 40-hour work week for salaried employees really does not exist
anymore in the US. Surprisingly, many people don’t use all of their paid vacation time. Hourly
employees often find themselves working overtime, trying to pick up the slack for reduced
employees. The financial crisis of 2008 only made things worse for American workers.

One very interesting thing about America is that the country is obsessed with quarterly reports -
one that forces managers to focus on Short Run, rather than Long Run.

Paying bribes is relatively common in many countries, and bribes often take the form of grease
payments, which are small inducements, intended to expedite decisions and transactions. In
Mexico, for example, a grease payment may help get your landlines installed faster—at home or
at work. More than 20 countries have reported significant increases in petty bribery since 2006.
The biggest increases were in some South American nations such as Chile and Colombia.

In the United States and other similar countries, connections are viewed informally and
sometimes even with a negative connotation as professionals prefer to imply that they have
achieved success on their own merits and without any connections.

Gift giving is not routine in the United States except during the winter holidays, and even then
gift giving involves a modest expression. Businesses operating in the United States send modest
gifts or cards to their customers to thank them for business loyalty in the previous year. Certain
industries, such as finance, even set clear legal guidelines restricting the value of gifts, typically a
maximum of $100.

In contrast, Asian, Latin American, and Middle Eastern cultures are quick to value connections
and relationships and view them quite positively. Connections are considered essential for
success. In Asia, gift giving is so ingrained in the culture, particularly in Japan and China, that it
is formalized and structured.

Brazilian managerial culture is characterized by paternalism, power concentration, and loyalty to

one’s in-group and leader. Social ethics is based on the strong preference for social cohesion,
which is cemented by loyalty to the group leader.

Another cultural trait which plays a central role in shaping the Brazilian business culture is
flexibility. Flexibility in business reflects a realization that “there is an 'intermediary path'
between what is and what is not allowed”. It is a way to find a middle path between what is
allowed by numerous laws and regulations, and what is practically possible and makes sense.

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FAR EAST ASIAN COUNTRIES:

Far East Asian countries generally refer to the group of East Asian countries where they have
similar business practices.

In Japan, where lifelong loyalty to the company was expected in return for lifelong employment,
the decade-long recession beginning in the 1990s triggered a change in attitude. Japanese
companies finally began to alter this ethical perception and lay off workers without being
perceived as unethical.

In Asia, gift giving is so ingrained in the culture, particularly in Japan and China that it is
formalized and structured. For example, gift giving in Japan was for centuries an established
practice in society and is still taken seriously. There are specific guidelines for gift giving
depending on the identity of the giver or recipient, the length of the business relationship, and the
number of gifts exchanged. The Japanese may give gifts out of a sense of obligation and duty as
well as to convey feelings such as gratitude and regret. Therefore, much care is given to the
appropriateness of the gift as well as to its beauty. Gift giving has always been popular in Japan.
In the past two decades, many countries have placed limits on the types and value of gifts while
simultaneously banning bribery in any form. In the United States, companies must adhere to the
Foreign Corrupt Practices Act, a federal law that specifically bans any form of bribery. Even
foreign companies that are either listed on an American stock exchange or conduct business with
the US government come under the purview of this law. However, there are still global firms that
engage in questionable business gift giving; when caught, they face fines and sanctions.

MIDDLE EAST COUNTRIES:

These countries are in the bottom 10 worldwide for corruption (according to the latest
transparency international corrupt practices index). Most of the countries in this region strictly
follow Islamic practices and their business practices have major influences of the same.

Most of the business conducted are based on personal relationship, are frequents visits and
interaction are required. Friendship and business are interlinked and in most cases mutual
benefits are the primary reason for a business to prosper.

Five day working culture is mostly prevalent in the week starting from Saturday. Friday is a
holiday as it has religious importance in this region. Modestly dressing for business meetings are

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the general norms. However an outsider (westerner) should not wear native clothing, they might
get offended by it.

Bribe is prevalent in Middle East as there is a problem of low wages. Payment structures are
simplified to offer a flat fees or salaries as opposed to commissions.

Women are under various restrictions. Discrimination on the basis of age, religion is also a
problem here as opposed to other parts of the world.

CONCLUSION:

There are still countless less visible gestures that some would argue are also unethical. For
example, imagine that an employee works at a firm that wants to land a contract in China. A key
government official in China finds out that you went to the business school that his daughter
really wants to attend. He asks you to help her in the admission process. Do you? Should you? Is
this just a nice thing to do, or is it a potential conflict of interest if you think the official will view
your company more favorably? This is a gray area of global business ethics. Interestingly, a
professional’s answer to this situation may depend on his or her culture. Cultures that have clear
guidelines for right and wrong behavior may see this situation differently than a culture in which
doing favors is part of the normal practice. A company may declare this inappropriate behavior,
but employees may still do what they think is best for their jobs.
Understanding cultural diversity in business is important to interacting with people from
differing cultures and countries.