Jextra Neighborhood Stores Case Analysis
This report analyzes the ethical dilemma faced by Jextra’s country manager, Tom Chong, who was responsible for Neighbourhood Markets in Malaysia. Jextra Stores was a Hong Kong based company that operated retail stores in China, Hong Kong, Philippines, Malaysia, Thailand, Singapore, and Vietnam. In 2005, the company successfully entered Malaysia, operating supermarkets under the name of Neighborhood Markets (Inkpen, 2010). Jextra identified a promising site in Klang, near the capital of Kuala Lumpur, to open a new supermarket (Inkpen, 2010). Mr. Chong needs to evaluate a proposal made by the Mayor of Kang, which might be considered bribery. In this case, Mr. Chong faces social and ethical challenges that may affect the company’s operations, performance, and competitiveness in the region as well as Mr. Chong’s career. The major social issues include those related to law, culture, and ethics. The report also analyzes anti-bribery corruption enacted by the U.K Bribery Act and the U.S. Foreign Corrupt Practices Act (FCPA). The report concludes with recommendations to Jextra such as seeking proper legal advice, implementing an effective business code of conduct, providing inter-cultural and ethics training to managers, using a geocentrism approach and conducting an internal investigation for the Malaysian category manager. Analysis
Social, Ethical, or Legal Challenges
International firms operating abroad often face social challenges because they operate in markets with different legal and political systems (Daniels, Radebaugh, & Sullivan, 2010, p. 111). Each country has a legal system that provides “the rules that regulate behavior, the processes by which laws are enforced, and the procedures used to resolve grievances” (Daniels, Radebaugh, & Sullivan, 2010, p. 111). In the case of Malaysia, the country relies on a dual legal system based on common law and theocratic law. English Common law is based on tradition and judicial precedents (stare decisis). This type of legal system is used in, among others, U.S., U.K., India, Canada, Hong Kong, Australia, and New Zealand (Daniels, Radebaugh, & Sullivan, 2010). Malaysia also relies on Muslim law (or Sharia), which is based on religious precepts and beliefs. Muslim law prevails in Turkey, Kuwait, Indonesia, Saudi Arabia, Iran, etc. (Daniels, Radebaugh, & Sullivan, 2010). In developing countries, such as Malaysia, foreign companies and managers, such as Mr. Chong, may encounter legal risks due to the legal framework and the effectiveness of the legal system (Ling & Hoang, 2010). In recent years, Malaysia has opened its market towards liberalization of trade and services and globalization (Tahir & Ismail, 2007). Like other emerging markets, such as Mexico, China, India, and Brazil, Malaysia represents an attractive market. However, MNEs are bound to face legal challenges in emerging markets because they have an inadequate commercial infrastructure, weak legal system, and high-risk environment (Pearson, 2011a; Pearson, 2011b). For instance, Malaysian civil and commercial laws regarding business payments for social purposes are not clear. It is a common practice in Klang and Kuala Lumpur to make social contributions for community projects, such as schools and roads (Inkpen, 2010). Additional legal issues that Mr. Chong may face in Malaysia are the “insufficient legal infrastructure for enforcing legal judgment” and “uncertainty and unfairness of court justice” (Ling & Hoang, 2010, p.157). In Malaysia, the regulations regarding foreign investment lack transparency (Inkpen, 2010) and there had been many cases of bribery involving public officials. Malaysia has a high tendency toward corruption, which refers to “the misuse of entrusted power for private gain” (Daniels, Radebaugh, & Sullivan, 2010, p.191). According to the TI Corruption Perception Index (2010), Malaysia was ranked 4.4 on of a scale of 0 (more likely to...
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