Wal-Mart's Chinese Suppliers

Topics: Ethics, Business ethics, Foreign Corrupt Practices Act Pages: 3 (831 words) Published: May 8, 2012
Wal-Mart's Chinese Suppliers
Bill Reagor
Mid-Continent University
International Business
Week Two
MGT 6013
Dr. Sila Tuju

Wal-Mart's Chinese Suppliers

Question One

Is it legitimate for an enterprise like Wal-Mart to demand that its suppliers adhere to a code of ethics? What are the benefits of this practice to Wal-Mart? What are the cost? Wal-Mart is the world’s largest retailer, and with that distinction there is an obligation to act as an example to the world. Wal-Mart does have a legitimate right to demand that its suppliers adhere to a code of ethics. Actually they have a legal obligation under the Foreign Corrupt Practices Act to demand that their suppliers adhere to a code of ethics (Hill, 2011, p. 123). If the suppliers fail to adhere to the rules then Wal-Mart can be fined. These penalties are no little slap on the wrist, fines of several millions have been recorded. Insuring that these Chinese corporations comply can be difficult because many companies there have a low appreciation of the importance of anticorruption compliance and because many of them are state owned or controlled (Grime & Guo, 2009, p. 23). Demanding that Chinese suppliers adhere to a code of ethics can cost Wal-Mart in many ways. There is the higher cost of goods purchased due to higher production cost associated with compliance. There is also the risk of not being able to purchase the goods at all if the corporation gets banned from doing business with Wal-Mart due to repeated violations. The benefits that Wal-Mart can gain due to this practice can range from the reduced risk of being fined to being able tell the rest of the world that acting in an ethical manner is a requirement for doing business with them.

Question Two

Wal-Mart is known for constantly demanding the very lowest prices from its suppliers. How might this impact upon ethical behavior at it suppliers? It is well known that Wal-Mart demands the...

References: (Grime R Guo B 2009 Conducting anticorruption due diligence in M&A deals)Grime, R., & Guo, B. (2009). Conducting anticorruption due diligence in M&A deals. China Business Review, 36(4), 22-25.
(Hill C W 2011 Ethics in international business)Hill, C. W. (2011). Ethics in international business. In B. Gordon (Ed.), International business: Competing in the global marketplace (8th ed., pp. 123-149). New York, New York: McGraw Hill.
(Luchs M G Naylor R Irwin J R Raghunathan R 2010 sustainability liability: Potential negative effects of ethicality on product preference)Luchs, M. G., Naylor, R., Irwin, J. R., & Raghunathan, R. (2010). The sustainability liability: Potential negative effects of ethicality on product preference. Journal of Marketing, 74(5), 18-31.
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