EVALUATING GLOBAL EXPANSION

Greenwich Industries entered the Latin American market in the 1950s by forming a joint venture with Industro Viejes in Santo Ignezeto to manufacture bicycle parts. The joint venture flourished in the 1960s, and Greenwich eventually bought out 100% ownership. The company earned steady profits from the Latin American subsidiary until a military junta overthrew the government in the late 1970s. The ruling generals expropriated all foreign owned companies, including the Santo Ignezeto bicycle parts plant.

Today Santo Ignezeto is ruled by a democratic government that has been in power for ten years. Industro Viejes has approached Greenwich about another joint venture. The government is offering an attractive incentive package to attract foreign investment.

You have been assigned to travel to Santo Ignezeto and begin planning and staffing.

1. What are the potential problems that face the new venture?

2. What are the potential advantages of this venture for the company?

3. Would you recommend entering the joint venture? Why or why not?

4. If Greenwich Industries partners with Industro Viejes, would you recommend hiring local managers or American managers for the top and middle management positions? Why or why not?

GAP’S EVOLVING VIEW OF ETHICS

In the 1990s, shoe and clothing retailers faced a flood of stories focusing on wage and safety violations in its overseas factories. Did Nike use child labor? Were Kathy Lee’s sweaters produced in “sweat shops?” Companies were forced to confront critics and repair the damage to their reputations.

The first reaction of Gap, the corporate parent of Old Navy and Banana Republic, was to clam up and go into fix-it mode. It built an elaborate monitoring system, which performs more than 8,500 factory inspections. But the company gradually realized that this internal monitoring system was not changing public and industry perceptions. Although Gap monitored 100% of its overseas factories for abuses, no one outside the company knew it.

Recently the company was targeted again when Domini Social Investments and other investors filed a shareholder resolution requesting greater transparency from the company. Gap was forced to publish a “social-responsibility” report. However, instead of producing a sanitized report glossing over the problems, Gap decided to produce a warts-and-all profile of the problems facing the company.

The report found persistent wage, health, and safety violations in most regions where it does business, including China, Africa, India, and Central and South America. The infractions ranged from failure to provide proper protective equipment to physical abuse. Although discoveries of the worst violations were rare, Gap reported that it had pulled its business from 136 factories and turned down bids from more than 100 others when they failed to meet its labor standards.

The clothing retailer also committed to making changes that are more sweeping. Most significantly, Gap has agreed to rethink accepted garment-industry business practices, which include unrealistic production cycles that drive such abuses as unpaid overtime.

Even the company’s harshest critics welcome the company’s candor. “Instead of dealing with a black box, we now have a window into data that can really help us make a judgment on how the company is progressing in handling of these issues,” says Conrad MacKerron, a director at As You Sow, a nonprofit shareholder advocacy group. “This will put pressure on other retailers to do the same.”

In 2006, Gap Inc. was named as one of the “100 Best Corporate Citizens” among major U.S. companies by Business Ethics magazine.

discussion questions 1. Are you impressed with the effort that Gap has made to respond to the need to have more worker

friendly suppliers? Would such information lead you to buy more goods from the Gap or are things like price and quality and value more important?

2. The Gap explored wage, health, and safety issues in its plants. What other issues might the company explore if it wants to assure the best working conditions possible?

3. If you were a stockholder in the Gap, would you be as impressed with its efforts to satisfy the needs of its workers? Would you be more interested in revenues and profits than good wages and working conditions? What concerns might a Gap employee working in one of its stores have because of its social stance?

FOREIGN ETIQUETTE TIPS

As more businesses engage in global trade, cultural pitfalls increase. Every day business deals are jeopardized or lost when foreign associates are offended by Americans unaware of other countries customs, culture, or manners. Sue Fox, the author of Business Etiquette for Dummies, provides the following tips for avoiding embarrassing gaffes.

Argentina: It is rude to ask people what they do for a living. Wait until they offer the information.

Bahrain: Never show signs of impatience, because it is considered an insult. If tea is offered, always accept.

Cambodia: Never touch or pass something over the head of a Cambodian, because the head is considered sacred.

China: As in most Asian culture, avoid waving or pointing chopsticks, putting them vertically in a rice bowl, or tapping them on the bowl. These actions are considered extremely rude.

Dominican Republic: When speaking to someone, failure to maintain good eye contact may be interpreted as losing interest in the conversation.

France: Always remain calm, polite, and courteous during business meetings. Never appear overly friendly, because this could be construed as suspicious. Never ask personal questions.

Greece: If you need to signal a taxi, holding up five fingers is considered an offensive gesture if the palm faces outward. Face your palm inward with closed fingers.

India: Avoid giving gifts made from leather, because many Hindus are vegetarian and consider cows sacred. Also, keep this in mind when taking Indian clients to restaurants. Don’t wink, because it is seen as a sexual gesture.

Japan: Never write on a business card or shove the card into your back pocket when you are with the giver. This is considered disrespectful. Hold the card with both hands and read it carefully. It’s considered polite to make frequent apologies in general conversation.

Malaysia: If you receive an invitation from a business associate from Malaysia, always respond in writing. Avoid using your left hand because it is considered unclean.

Mexico: If visiting a business associate’s home, do not bring up business unless the associate does.

Singapore: If you plan to give a gift, always give it to the company. A gift to one person is considered a bribe.

Spain: Always request your check when dining out in Spain. It is considered rude for wait staff to bring your bill beforehand.

Vietnam: Shake hands only with someone of the same sex who initiates it. Physical contact between men and women in public is frowned upon.i

Do you know of any more??

i Source: Gary Stoller, “Doing Business Abroad? Simple Faux Pas Can Sink You,” USA Today, August 24, 2007.