Pegasus Case - International Ethics

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Pegasus Bribery Case
Pegasus International Inc. is a leading manufacturer of integrated circuits (chips) and related software for such specialty markets as communications and mass storage, as well as PC-based audio, video, and multimedia. With a focus on innovation, Pegasus is committed to "technology leadership in the new millennium." Its long-standing strategy has been to anticipate changes in existing and emerging growth markets and to have hardware and software solutions ready before the market needs them. The company has also made significant strides in next generation wireless communications. The systems and products of Pegasus' wireless business have been selling well in its already existing markets in the United States, Japan, and Europe. But, like any company, Pegasus is eager to grow the business. At a strategy session with the Wireless Division, Pegasus CEO Tom Oswald and division managers decide to explore the potential of expanding their business to China. Initial research indicates that China is likely to develop into a huge market for next generation wireless because its people do not currently have this capability and the government has made spending on developing wireless a priority. Improving wireless capability is really the only choice for China because of the high cost of burying the communications cables necessary in wired systems; further, in underdeveloped countries, copper wires are often stolen and sold on the black market. Subsequent research does raise one concern for Pegasus wireless managers. They tell Oswald, "We have this problem. China allocates frequencies and makes franchise decisions city by city, district by district. A 'payoff' is usually required to get licenses." The CEO says, "A lot of companies are doing business with China right now. How do they get around the problem?" His managers have done their homework: "We believe most other companies contract with agents to represent them in the country and to get the licenses....
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