TOPIC 7 : ETHICS AND CORRUPTION IN THE GLOBAL MARKETPLACE AND CONTEMPORARY ISSUES IN INTERNATIONAL BUSINESS Prepared By : Miss Noorsyalina Nordin INTERNATIONAL BUSINESS BUS 3233
TOPIC OUTLINE: After studying this topic, student should be able to : Identify the basic concept and definition and origin of corruption Explain the drawbacks of corruption Describe the types of corrupt practices Discuss the Islamic perception toward corruption and the role of Islam in fighting corruption Discuss the global internet market and green business
7.1 BASIC CONCEPT AND DEFINITION Values determine what is right and wrong and doing what is right or wrong is actually the core concept of ethics. To behave ethically is to behave in a manner consistent with what is right or moral ( Shamsul, Norlelawati, Syed Ashrene, Nuryusmawati & Carol Tan, 2011) Ethics is different in ethical values, judgement, culture and morality in different countries in the world, this will unintentionally give rise to differences in ethical perspectives of what is correct and not moral ( Shamsul et al, 2011)
BASIC CONCEPT AND DEFINITION ( cont..) In economy, corruption is payment for services or material which the recipient is not due, under law. This may be called bribery, kickback or baksheeh (Mohd Shehu, 2012) Corruption has different dimension: economic, social, environmental as well as ethical. The definition of „corruption‟ depends on the context in which it is being used ( Mamoun Abuarqub,2009)
BASIC CONCEPT AND DEFINITION ( cont..) Corrupt behaviors can be divided into two categories; one that is undertaken by the person in charge of a public office such as fraud and embezzlement and the second category which involves an exchange between one or more persons such as bribery and extortion (Myint,2000) Corruption can be triggered by forms of institutional inefficiency, bureaucracy, political instability and weak legislative and judicial system (Mauro,1998)
7.2 THE DRAWBACKS OF CORRUPTION 1.Corruption undermines economic development by creating distortion and inefficiency 2.Corruption destroys the structure and pattern of economic development and reduce the efficiency of economic activity 3.A country with abundant resources but high government intervention will have the tendency to get involved in corrupt practices 4. Corruption reduce the return on investment and leads to slow economic growth. 5. Corruption reduces the government‟s income (tax revenue)
Corruption Perception Index Ranking 2014 Source: Adapted from Transparency International, http://www.transparency.org Retrieved Date: 17h May 2016 Denmark is the first rank country with 9.2 score corruption index Malaysia at 50 rank country with 5.2 score corruption index Somalia at 176 rank country with 0.8 score corruption index Rank Countries Scores 1 Denmark 9.2 2 New Zealand 9.1 3 Finland 8.9 4 Sweden 8.7 5 Norway 8.6 6 Switzerland 8.6 7 Singapore 8.4 8 Netherlands 8.3 9 Luxembourg 8.2 10 Canada 8.1 50 Malaysia 5.2 166 Eritrea 1.8 167 Libya 1.8 168 Uzbekistan 1.8 169 Turkmenistan 1.7 170 Iraq 1.6 171 South Sudan 1.5 172 Afghanistan 1.2 173 Sudan 1.1 174 Korea (North) 0.8 175 Somalia 0.8
7.3 TYPES OF CORRUPT PRACTICES 4.Piracy and Counterfeit 2.Smuggling 1.Bribery 3. Money Launderi ng
7.4 ISLAMIC PERCEPTION TOWARD CORRUPTION AND THE ROLE OF ISLAM IN FIGHTING CORRUPTION ROLE OF ISLAM IN FIGHTING CORRUPTION ISLAM PERCEPTION TOWARD CORRUPTION O my people gives full measure and full weight with equity and defraud. Not people of their things and commit not inequity in the earth causing disorder”(Al-Quran,11:85) “ Adapted from: Mohammed Shenu. ( 2012, February 23rd ). The Role of Islam in Fighting Corruption in Our Society. Paper presented at the Code of Conduct Compliance Training for CEOs of MDAs at Institute, Karu Abuja
7.4 ISLAMIC PERCEPTION TOWARD CORRUPTION AND THE ROLE OF ISLAM IN FIGHTING CORRUPTION (cont..) “And swell not thy check (for pride) at men nor walk in insolence through the earth; for Allah leaveth not any arrogance boaster”(AlQuran,31:18-19) “Do not swallow up your property among yourselves by false means nor offer it as a bribe to the people in authority so that you may swallow up other people’s property unlawfully while you know” (AlQuran 2: 188) Whose from you is appointed by us to a position of authority and he conceals from us a needle or something smaller than that, it will be misappropriation (of public funds) and (he) will (have to) produce it on the day of judgment” (Sahih Muslim No 847) “Beware of bribery for verily it is a sheer infidelity and the briber will not even smell the fragrance of paradise” (Prophetic Hadith) “ Adapted from: Mohammed Shenu. ( 2012, February 23rd ). The Role of Islam in Fighting Corruption in Our Society. Paper presented at the Code of Conduct Compliance Training for CEOs of MDAs at Institute, Karu Abuja
7.5 THE GLOBAL MARKET AND GREEN BUSINESS 7.5.1: E-COMMERCE : THE GLOBAL INTERNET ECONOMY •The adoption E-Commerce has facilitated sound business relationship between manufacturers and customers Abdulghader, Ahmed, Dalbir & Ibrahim (2012) •Consumer to business (C2B) transaction involve reverse auction which empowers consumer to influence transaction. Abdulghader et.al (2012) •E-commerce form of business transaction encompasses buying and selling over the Internet through computer mediated network Goldstein & Connor (2012) •About 80% of the E-Commerce transaction are of this type and have been assumed to grow faster than the B2C segment Johnson (2010) •E-commerce industry had diversified enormously from electronic fund transfers (online shopping and internet banking) to electronic exchange of data in which companies transfer documents such as purchase order or invoices Mahadevan (2000) & Joseph (2004)
7.5 THE GLOBAL MARKET AND GREEN BUSINESS (cont..) 7.5.2: BENEFITS OF E-COMMERCE Benefits Research/ Literature Tangible Benefits 1.Business efficiency (Fraser et al.2000;Lee 2001;Riggins,1999) 2.Increased automation of processes (Fraser et al.2000; Dan et al,2001) 3.Transformation of traditional market chain (Fraser et al,2009) 4. Retained and expanded customer base ( Fraser et al,2000;Rahul,Biju and Abraham 2001;Turban, et al, 2000) 5.Reduced operations costs ( Kent and Lee,1999;Grover and Ramanlal,2000;Kare Silver, 1998;Furgusson, 1999) 6.Acquisition of a niche market (Riggins, 1999;Rahul et.al 2001 Benefits Research/ Literature Intangible Benefits 1.Enhancing well-being and education of customers (Whinston et.al.1997;Lee 2001) 2.Consumer loyalty (Lee 2001;Hoffman et al.1999;Coulson,1999) 3.Competitive advantage (Kalakota et.al 1999;Hoffman et.al.1999;Straub, 2000;Kare Silver,1998) 4.Convenient shopping Hannon, 1998; Winner,1997) Adapted from: Kuzie, Fisher & Scollary. ( 2002,June 6-8). Electronic Commerce Benefits, Challenges and Success Factors in the Australian Banking and Finance Industry. Paper presented of ECIS, Gdansk Poland.
7.5 THE GLOBAL MARKET AND GREEN BUSINESS (cont..) 7.5.3 MALAYSIAN GOVERNMENT INITIATIVES FOR E-COMMERCE AND SNAPSHOT E-COMMERCE ACTIVITY IN MALAYSIA Malaysia was among the pioneers in Asia to introduce a single federal ministry of Energy Communication and Multimedia (Danial & Sadeeq, 2012) E-commerce in Malaysia a master plan has been develop with four key focus areas which include to increase confidence in online trading, preparation of regulatory framework, build a digital subscriber and introduce and electronic payment system (Noor, 2011) International Data Corporation (IDC) survey by 2007 the overall E-commerce spending in Malaysia has grown to US$22.3 billion (Khan, Dominic & Alangir, 2009) According to the news article in 2010, Malaysian spent RM1.8 billion on online shopping (HO, 2011)
7.5 THE GLOBAL MARKET AND GREEN BUSINESS (cont..) Source: Danial Hassan & Sadeeq Ali,. (2012). Exploring ECommerce Activity in Malaysia: Challenges and Opportunities. Journal of Economics and Sustainable Development. Vol (3). No10 pp48-53
7.6 THE IMPACT OF E-COMMERCE ON INTERNATIONALIZATION OF SMEs The impact of E-commerce on Internationalization of SMEs 3.Close the gap with other multinationals 1.Provides a level paying field to small business 2.Acts a facilitator of internationalization for SMIEs Source: Shamsul Baharin, Norlelawati, Syed Ashrene, Nuryusmawati & Carol Tan.,(2011). International Business, An Introduction. 2 nd Edition. Mc Graw Hill
7.6 THE IMPACT OF E-COMMERCE ON INTERNATIONALIZATION OF SMEs (cont..) Common reasons for not using E-Commerce Percent No value for current line of business 44.4 Do not have access to expertise for the creation of the application ( internal or external) 16.7 Do not have access to expertise for the maintenance of the application (internal or external) 22.2 Too costly to create and maintain 16.7 Others 22.2 Source: Kalinga Jagoda (2010). The Use of Electronic Commerce by SMEs. Entrepreneurial practice review. Vol 1 (3) pp 36-47 Frequency of use of Ecommerce Applications
7.6 THE BROADER ROLE OF ECOMMERCE IN INTERNATIONAL BUSINESS 1.E-commerce helps to simplify trading procedures 2.E-commerce assists in reducing bureaucracy and language problems 3.E-commerce technology permits commercial transactions to take place on website 4.E-commerce allows SMIEs to integrate more effectively into the supply chain 5.E-commerce provided the cost savings and efficiency and available to all sectors Source: Shamsul Baharin, Norlelawati, Syed Ashrene, Nuryusmawati & Carol Tan.,(2011). International Business, An Introduction. 2 nd Edition. Mc Graw Hill
7.7 GREEN BUSINESS 7.7.1 DEFINITION OF GREEN BUSINESS Green business or sustainable business involves engaging in business activities that results in no negative impact on the global or local environment, community, society or economy ( American Marketing Association) Green business is any organization that participates in environmentally friendly or green activities to ensure that all processes, operations, products/services and manufacturing activities adequately address current environmental concerns while maintaining profit Many green business ideas by global companies have successfully contributed to sustainable environment and become profitable in many ways to enterprise. Top 10 global companies in Green rankings ( Newsweek) : 1.International Business Machines (IBM) 2.Hewlett-Packard 3.Johnson & Johnson 4.Sony 5.GlaxoSmithKline 6.Novartis 7.Deutsche Telekom 8.Panasonic 9.HSBC Holdings 10.Toshiba
7.7 GREEN BUSINESS (cont..) Top 10 Green Companies with Green Initiatives in Malaysia (KLUE Magazines ,2009) 1. DiGi 2. Sime Darby 3. Shell Malaysia 4. Panasonic Malaysia 5. YTL Group of Companies 6. Malaysia Airlines 7. Canon Malaysia 8. AEON Co (M) Bhd 9. HP Malaysia 10. Green Selipar Examples of Green Business successful DiGi- “Deep Green” campaign Panasonic MalaysiaGreen Products (energy efficient) AEON Co (M) Bhd –JUSCO No Plastic Bags & Use Reusable Shopping Bag Source: YTL homepage. Retrieved Date 20th June 2013 http://www.ytlcommunity.com
7.7 GREEN BUSINESS (cont..) 1.Three (3) Environmental steps – 3R (Reduce, Reuse, Recycle) 3.Develop new greener business policies than traditional competition 5. Honesty and transparency in green business policies. 4.Long term commitment toward environmental principles 2.Replace demand for nongreen or nonsuitainable one 5 CRITERIAS SUCCESSFUL GREEN BUSINESS Source: Shamsul Baharin, Norlelawati, Syed Ashrene, Nuryusmawati & Carol Tan.,(2011). International Business, An Introduction. 2 nd Edition. Mc Graw Hill
7.7 GREEN BUSINESS (cont..) 7.7.3 GREEN BUSINESS OPPORTUNITIES 1.Develop ways that help to contribute to green growth on a small or large scale E:g Developed a new way of cleaning clothes using less that 2% of the water and energy of a conventional washing machines 2.Using green advertising agencies to develop campaigns, promoting green practices, offering green products and brands and engaging their customers through various “green" promotion E:g Earth Day Promotions 3. Help find eco-friendly alternatives E:g Biodegradable full-sized garbage bag 4. Manufacturer types of products that necessitate the gradual but continual reduction of products of service and replace with products of consumption E:g Canon used toner cartridges and Nokia used cellphones and cellphones batteries
7.7 GREEN BUSINESS (cont..) 7.7.4 BENEFITS GREEN BUSINESS 1.More companies making “green growth “ as their top business agenda 4. Satisfaction and contribution to make the world a better place Source: Shamsul Baharin, Norlelawati, Syed Ashrene, Nuryusmawati & Carol Tan.,(2011). International Business, An Introduction. 2 nd Edition. Mc Graw Hill
7.7 GREEN BUSINESS (cont..) 7.7.5 GREEN BUSINESS STRATEGIES 1.Focusing on existing or latent green attributes in a company‟s current business portfolio 2.Acquring or buying someone‟s else green brand 3.Architect strategy involves building a strategy of developing and innovating new offerings Source: Shamsul Baharin, Norlelawati, Syed Ashrene, Nuryusmawati & Carol Tan.,(2011). International Business, An Introduction. 2 nd Edition. Mc Graw Hill
7.7 GREEN BUSINESS (cont..) EXAMPLE WAYS TO ENCOURAGE GREEN WORKFORCE DEVELOPMENT Ecopreneurist homepage. Retrieved Date 28th June 2013 http://ecopreneurist.com/2011/07/2 7/build-a-green-business-and-helpothers-go-green-as-a-certified-ecoconsultant/y.com
ISSUES NEED TO ADDRESS WHEN IMPLEMENTING GREEN STRATEGIES 1.Ensure green goals fit with company‟s objectives 2. Evaluate each strategic optiongreen product and brand development 4. Evaluate the company‟s green resources and capabilities Source: Shamsul Baharin, Norlelawati, Syed Ashrene, Nuryusmawati & Carol Tan.,(2011). International Business, An Introduction. 2 nd Edition. Mc Graw Hill 7.7 GREEN BUSINESS (cont..)