Culture, Ethics and Norms

Subject: International Business (MB811)

Presented by: Parth R Shah 11MBA091 Shweta Purohit 11MBA076 Abhishek Rathod 11MBA080 Nikita Shah 11MBA089

Flow of Presentation
Introduction Case 1: Wal-Marts Failure in South Korea Case 2: KFC in India Case 3: Global challenges faced by Nike

Introduction
In concept, business ethics is the applied ethics discipline that

addresses the moral features of commercial activity.

International business ethics has taken on a new urgency with

the

emergence

of

globalization.

Low

transaction

and

communication costs, driven by advances in computer and telecommunication technologies, have made the global market,

once a metaphor truly global.

 The first school is relativism that supports the maxim when in

Rome, do as the Romans do

The second school with a moral imperialist perspective that argues

that people should apply their own cultural ethical values when operating anywhere around the world.
Moral imperialists argue for the maxim when in Rome, do as you

would at home
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 The third school of thought is universalism, which of

course refers to normative ethical standards, or universal

guidelines that transcend national boundaries and cultural differences . when in Rome or anywhere else, do as we and the Roman agree to do

CASE ON CULTURE
Wal-Marts Failure in South Korea

Background of Wal-Mart
Wal-Mart is the worlds largest retailer, operating in 15

countries with 6500 stores

Wal-Mart is North Americas largest retailer It has a market share of an estimated 20 percent of the entire

U.S. retail market

Wal-Marts global expansion has been achieved through a

combination of investments, acquisitions of existing stores etc

Wal-Mart in South Korea

Wal-Mart in South Korea was established in

August 1998
Wal-Mart

had acquired four stores and six

undeveloped sites in South Korea

Wal-Mart had high hopes for the long-term

potential from South Koreas operations

Reasons for failure

South Koreans believe that Wal-Mart failed in South

Korea primarily due to Wal-Marts inability to

understand consumers
South Korean consumers were used to shopping more

the

shopping

preferences

of

local

frequently than most Americans

 They may not purchase things at once, but they will

usually buy at least one item

Some other strategies like the distribution, product mix,

and pricing strategies were also some other reasons for its failure

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Distribution
Wal-Mart outlets in South Korea were placed outside

instead of in the cities

South Koreans, however, were used to easily accessible

shopping facilities without the need to travel

Many South Koreans would not shop at a Wal-Mart

because they did not like how the store was set up.
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Product Mix
South Koreans have different consumer

preferences

than North Americans

South Koreans like fresh vegetables and fresh food rather

than dry products

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Pricing
Wal-Marts EDLP strategy led to Korean consumers

perceived Wal-Mart stores as a cheap marketplace with poor quality products

Wal-Mart's stores in Korea lost about $10 million in 2005

on sales of $720 million

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 On

May 22, 2006 Wal-Mart became another

multinational that failed to adjust with the taste of

South-Korean consumers

Wal-Mart sold its 16 stores to Shinsegae for $882

million

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Lessons from Wal-Mart

Wal-Marts exit from the South Korean market showed

that the American way of marketing did not translate

well in every market
More knowledge of the environment and competition

could have provided Wal-Mart with a greater understanding of the culture and their different needs

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KFC in India

Background
KFC was founded by Harland Sanders (Sanders) in the

early 1930s, in Corbin, Kentucky, US.

KFC now stretches worldwide with more than 13,000

restaurants in more than 80 countries and territories

UK, Australia, South Africa, China,USA, Malaysia and

many more
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KFC's Entry in India

Foreign fast food companies were allowed to enter India during

the early 1990s due to the economic liberalization policy of the

Indian Government. KFC was among the first fast food

multinationals to enter India
KFC opened its first fast-food outlet in Bangalore in June 1995 Upper middle class population, with a trend of families eating

out. It was considered India's fastest growing metropolis in the 1990s.

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Problems for KFC

KFC's chickens did not adhere to the Prevention of

Food Adulteration Act, 1954.

Chickens

contained

nearly

three

times

more

monosodium glutamate (popularly known as MSG, a

flavor enhancing ingredient) as allowed by the Act

Severe protests by People for Ethical Treatment of

Animals (PETA)
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 KFC was targeting higher class income group in

India
Protest

of Indian farmers and government

pressure

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 "The chicken they serve is full of chemicals, and the birds

are given hormones, antibiotics and arsenic chemicals to fatten them quickly." - Nanjundaswamy.
It was unethical to promote highly processed 'junk food' in

a poor country like India with severe malnutrition

problems

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 The growing number of foreign fast food chains would

deplete India's livestock, which would adversely affect its agriculture and the environment
Non-vegetarian

fast-food restaurants like KFC would

encourage Indian farmers to shift from production of basic crops to more lucrative varieties like animal feed and meat,

leaving poorer sections of society with no affordable food

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Re- entry of KFC in India

In 2003 it made a quiet re-entry into the Indian market. The strategies like targeting higher income group level. But at

the same time providing menu which can be afforded by the

middle income group level
Came up with menu like hot crispy chicken which contains

Indian spices which Indian people like, and veg-snackes and veg zinger, rizo rice
They are adhering the rules of food corporation of India and

PETA and expanding business successfully

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Learning
Understand the significance of cultural, economic,

regulatory and ecological issues while establishing business in a foreign country

Understand the importance of ethics in doing business

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Nike - Successful Global Business

Introduction
Nike a global brand created in 1972

Products offered, like the customized options available in

the Nike store online, Nike Sportswear, Nike Women, Nike Basketball, and Nike Football
company outsourced its manufacturing plants to several

countries in order to lessen costs and become more efficient

in productivity
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Cultural, legal and ethical issues

Factory workers were forced to work exceptionally

long hours to fulfill quotas and had to follow strict

rules during work for below minimal pay
A mere $1.60 a day to Vietnam factory workers when

the living wage is at least $3 a day

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 Failed to provide a safe working environment

Workers with skin or breathing problems had not been

transferred to departments free of chemicals and that

more than half the workers who dealt with dangerous chemicals did not wear protective masks or gloves

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 Failure to follow child labor laws by hiring children

who were not allowed to work and forcing them to work overtime for below minimal pay

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Efforts by Nike
Numerous

governmental organizations have worked with Nike to ensure safe and ethical business practices and to monitor the sweatshops Nike established overseas

Nike was forced to change its operational and

strategic plans drastically in order to remain successful and appease labor and civil rights unions

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Learning
The case of the Nike demonstrated how difficult it can

be for a business to become global because of the different rules and regulations established by that country

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