Business Culture in India

“like the relationship between a ship and the sea which engirds it and carries it, which threatens it with storm and shipwreck, which has to be crossed but which is yet alien and distant.”

Peter Drucker (1954)

Business culture of country plays role of connectivity between business and society

relationship between business and society is

•It is important that a person visiting the country has an idea of

the business culture of India for forming any kind of business

associations with Indians.

The 'namaste' forms an important part of Indian etiquette

•. A proper understanding of culture and business etiquette would not

only demonstrate a respect for India but will also create a feel good

factor amongst the prospective clients.

•In India guests are treated with utmost respect and courtesy.

•The notion of time, time management, punctuality is still an

anathema in India

•India, Companies follow the hierarchical system and decision

making is usually from the top to bottom

What is ethics?

Ethical Situations

• Ethical Dilemma

• Ethical Lapse

What is Ethical Behavior?

• Competing Fairly and Honestly

• Communicating Truthfully

• Not Harming Others

Factors Influencing Ethical Behavior

• Cultural Differences

• Knowledge

• Corporate Behavior

The 4 Concepts of Ethics

•Relativism

• Egoism

• Utilitarianism

• Deontologism

•There is no universal standard by which morality can be judged

•What is correct for one society may be wrong for another

•Ethics and morality are relative

Relativism

Egoism

• One ought to act in his or her own self interest

• Ethical behavior is that which promotes one’s own self interest.

• Does not mean should not obey laws -only do so if in self interest

Utilitarianism

• The morality of an action can be determined by its consequences

• An action is ethical if it promotes the greatest good for the greatest number

Deontologism

• Derived from the Greek word for Duty

• Actions are not justified by their consequences. Factors other than good outcomes determine the rightness of actions

Utilitarianism Vs. Deontologism

•Utilitarianism - The ends justify the means

•Deontologism - It is the means which are important

Social Responsibility in Business

Early20th Century

MaximizeProfits

Middle20th Century

Provide Jobsand Pay Taxes

Early21st Century

Balance Ethicsand Profits

The application of general ethical concepts to the

unique situations confronted in business.

It asks what is right or wrong behavior in business

and what principles or rules can be used as

guidance in business situations.

Business Ethics means conducting all aspects of

business and dealing with all stakeholders in an

ethical manner…

• Globalization has brought about greater involvement with ethical considerations and most importantly achieving competitive advantage through business ethics.

• Globalization and business ethics are linked as they affect a company’s ability to commit to its shareholders, in particular to external investors, and preserve the trust needed for further investment and growth.

GLOBALIZATION AND BUSINESS ETHICS

Business Ethics as

Competitive Advantage

• As the speed of comparable tangible assets acquisition accelerates and the pace of imitation quickens, firms that want to sustain distinctive global competitive advantages need to protect, exploit and enhance their unique intangible assets, particularly integrity (building firms of integrity is the hidden logic of business ethics).

• “behavior that is trusting, trustworthy, and cooperative, not opportunistic, will give the firm a competitive advantage.”

• Sustainable global competitive advantage occurs when a company implements a value-creating strategy which other companies are unable to imitate.

• For example, a company with superior business leadership skills in enhancing integrity capacity increases its reputation capital with multiple stakeholders and positions itself for competitive advantage…

Cont….

• Business ethics as competitive advantage involves effective building of relationships with a company’s stakeholders based on its integrity that maintains such relationships.

Cont….

• An integrity approach to business can yield strengthened competitiveness: it facilitates the delivery of quality products in an honest, reliable way. This approach can enhance work life by making the workplace more fun and challenging. It can improve relationships with stakeholders and can instil a more positive mindset that fosters creativity and innovations among the stakeholders.

• The purpose of ethics is to enhance our lives and our relationships both inside and outside of the organization

Cont…..

Three Pillars of Modern Business

“Business ethics, Professionalism and Corporate Governance”

Profit : Measure of Success

•No doubt profit is the yardstick to measure the success of every business enterprise

BUT

•a modern business corporation cannot run its business operations solely with a profit motive, but as an enlightened corporate citizen to serve the varying needs and aspirations of different segments of society.

“I do not believe that we should make such as an awful profit on our cars. A reasonable profit Is right, but not too much. So it has been my policy to force the price of the car down as fast as production would permit, and give the benefits to the users and the labourers (meaning workers) with surprisingly enormous profits to ourselves”.

Henry Ford

“If corporations run their business with the sole aim of gaining more market share or earning more profits, they may lead the world with economic , environmental and social ruin. If they work together for the common good they can bring food to the poor, peace to war torn areas and renewal to the natural world. It is our obligation as business leaders to join together to build a foundation for world peace and prosperity”. Mr. Ryuzaburu Kaku

Profitability & Morality

•People frequently seem to believe that a profitable company

must necessarily be unethical.

but

It is unethical, NOT to make profit. as

•Misutilises scarce national resources, can not pay back

creditors, does not make wealth for its shareholders, make huge

liabilities, upsets the economy, promotes inefficiency and most

importantly, can not, at any cost discharge its social

responsibility, meet its welfare commitments and jeopardises the

future of its employees. it has no business to force its employees

into economic insecurity, which is highly unethical

• But how much profits to make, the means and methods of

making it, and at what cost- that is the ethical question.

• Business can play a very significant role in the modernisation

and development of the country, if it chooses to do so, this will

first require it to come out from its narrow mentality and even

narrower goals and motives.

Profit maximization: A social objective

• Business and Society have been interdependent

• Profit’ is like oxygen to the business and a lifeline to all.

• Profit, in simple layman‟s parlance refers to excess

of Income over Expenditure or Excess of Revenue

over Costs.

• Business history is replete with instances of the mindless obsession with profit maximization has led to the collapse of corporations like Enron, WorldCom, Union Carbide etc. On the other hand corporations demonstrating social concerns have stayed, survived, and thrived in the long run.• need to mould the motive of businessmen towards profit maximization with social concern.

The Changing Business Paradigm and Ethical Dilemmas

• operations in more than one country

•ability to shift the operations sometimes enables the multinationals

to escape the social controls that a single nation might attempt to

impose on the multinational and can allow the corporation to play

one country against another.

•Transfer of raw material

• transfer of technology

Ethics at Market Place

• Free market concept

• The moral aspects of a market system depend crucially

on the competitive nature of the system.

• Pricing strategy and its effect on social morality.

Three major moral values:

i) leading buyers and sellers to exchange their goods.

ii) maximize the utility of buyers and sellers by leading

them to allocate, use and distribute their goods with perfect

efficiency, and

iii) bringing about these achievements in a way that

respects buyers‟ and sellers‟ right of consent

Business Ethics & External Environment

The process of producing goods forces businesses to engage in

exchanges and interactions with two main external environments

– the natural environment and a consumer environment

The natural environment

• Pollution

• Resource depleting

A consumer environment

•product quality

•advertising

Business Ethics & internal Environment

The process of producing goods forces businesses not only to engage

in external exchanges, but also to coordinate the activities of the

various internal constituencies that must be brought together and

organized into the processes of production.

The ethical issues raised by these internal conflicts

•job discrimination, forms of discrimination.

sexual discrimination

racial discrimination

•the issue of conflicts between the individual and the organization.

Corporate Objectives

“Corporate should work like a honeybee, which takes the nectar of a flower without the flower being losing its shape and fragrance and provides honey for the wellbeing of the society.” Rig-Veda

• To achieve a planned, orderly and consistent growth in a competitive

environment and a free market economy, a company must try to

improve its methods of production, processes and systems by using

updated and relevant technologies using its vast financial and human

resources judiciously.

• Spiritual health of an organisation is based on internal and external

connectivity. Level of cohesion, co-operation, partnership ,community

involvement and social responsibility are important indicators to

measure the spiritual health of a company.

Corporate Scandals & Malpractices

Ethics And Business: Objections

•People taking objections to bringing ethics into business argue that persons involved in business should single mindedly pursue the financial interests of their firm and not side track their energies or their firm’s resources into doing good works.

•„loyal agent‟s argument‟, which suggests that

a manager engaged in certain illegal or unethical conduct be

excused because he did it not for

himself but to protect the interests of his company.

•The third kind of objection is that to be ethical it is enough

for business people merely to obey the law. Business ethics

is essentially obeying law.

A Case Study : Profitability with Morality•Mr. Suresh B. Hundre (65), Chairman and Managing Director of

Polyhydron Private Limited (PPL),Belgaum, an entrepreneur

running his business for more than 25 years, who has given his

people operational freedom and liberated them in a "Business

Ashram".

•There was continuous problem of cash flow due to long

pending payments from the customers; also the inventory was

very high leading to high pressure on working capital

management.

THE PROBLEM

found the cash flow problem also resulted in non-compliance of

the statutory and regulatory requirements

Analysis

Solution

• change the system radically using ethical means

Recommendations

Management of Quality, Leadership, Vision & Core Values

• should decide to comply with all the laws and pay the taxes on time

• not to pay any bribe, as he is not a willful defaulter. The customers were not given any credit, and the business to be done only on payment.

• scrap the material store and establish a transparent supplier management system.

• take a policy decision that he would not entertain any price bargain with the customer and start following a transparent discount policy, known to all.

•Quality should be a matter of character building rather than

adherence to product or process specifications

•The proposed Vision statement

"To create an island of excellence through focus on customer,

employee empowerment and continuous improvement ”

•The Mission statement reads as "To nurture an ethically managed organisation and not to exploitCustomers, Employees, Suppliers, Government, Society, and Nature

Organization Structure , Work Practices & People

•Only one level should exist between CMD and the workmen/operators. This level is of Shop Floor Co-coordinators who are expected to be facilitators; they coordinate various activities of the departments. There should no supervision, the supervisors should work as mentors and facilitators.

•The workmen should be empowered to stop production at any stage in case they notice any product which will not be accepted by the customer. The suppliers are also should be aware about this practice.

•The employees should follow a common code of ethics "Each of the employees is responsible for both the integrity and consequences of one's own actions."

Case of KFC

KFC entered India in 1995 and has been in midst of controversies since then. The regulatory authorities found that 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. Since the late 1990s, KFC faced severe protests by People for Ethical Treatment of Animals (PETA)

Violation of ethics in business

The chicken was brought by PETA (People for Ethical Treatment of Animals) activists, who carried placards reading, "Quit India" and "Stop Playing Fowl" (a pun on "Foul"). The chicken was placed at the centre and a peaceful protest was held against the alleged ill treatment of birds in KFC's poultry farms. Media persons were called to give the demonstration a wide coverage (Refer Exhibit I for a visual on the protest by PETA activists).

Explaining the rationale behind the protest, Bijal Vachcharajani, special projects coordinator of PETA, said, "Ours is the . Just as 61 years back our leaders gave a call for colonizers to quit , we too are saying we will not tolerate cruel multinationals."5

Protest Against KFC

On August 20, 2003, a five-foot tall chicken complete with an

ensemble of feathers and beak hobbled on a pair of crutches

outside Kentucky Fried Chicken's (KFC) Indian outlet in

Bangalore.

Issues:

» Understand the significance of cultural, economic, regulatory and ecological issues while establishing business in a foreign country

» Appreciate the need for protecting animal rights in developed and developing countries like India

» Understand the importance of ethics in doing business

» Examine the reasons for protests of PETA

» Identify solutions for KFC's problems in India

How ethics is maintained in business organizations.

Infosys

Mission Statement“To achieve our objectives in an environment of fairness, honesty and courtesy toward our clients, employees, vendors and society at large’

Infosys from 1981 up to date .

Ethics and corporate governance in Infosys.

Experts review

"As a Statement of purpose, maximising of profit is not only

unsatisfying, it is not even accurate. A more realistic statement

has to be more complicated. The corporation is a creation of

society whose purpose is the production and distribution of

needed if the whole is to be accurate: you cannot drop one

element without doing violence to facts.“

V.B. Dys in "The Social Relevance of Business

Tom Chappell, co-partner and CEO of Tom’s of Maine“We believe

• both human beings and nature have inherent worth and deserve our respect.• In products that are safe, effective .• our company and our products are unique and worthwhile and that we can sustain these genuine qualities with an ongoing commitment to innovation and creativity.• that we have a responsibility to cultivate the best relationships possible with our co-workers ,customers , owners, agents, suppliers and our community.• In providing employees with a safe and fulfilling work environment and an opportunity to grow and learn.• that our company can be financially successful while behaving in a socially responsible and environmentally sensitive manner”.

Conclusion

• Change in the values, environments of business based on the

expectation of society has alerted business houses to realign its

priorities. The changing economic, political, legal and social

environment has also made the business and businessmen to

consider the ethical approach to business.

• An ethically responsible organization is one, which has

developed a culture for caring for the people and for the

betterment of society as a whole. Ethics has a considerable

influence on the economy for efficient and smooth functioning.

• It is difficult to understand business or business society

relationships, without knowledge of the ethics. Business

ethics is what society expects from business.

“Corporate Houses can earn Profit

with Morality”

Thank you

Presented by

Nitin Bhapkar

Prasad Deshpande