Comparative Frameworks – Political, Legal, Economic Environments

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corruption scandals Chinese-government
02.11.2020
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GSK is a multinational company operating in over 150 countries and with over 90 manufacturing centers around the globe. The company has regional headquarters in the USA, China, Belgium, and the UK. The company trades in pharmaceuticals products, vaccines, and the consumer health products. The GSK successful streak, however, was close to the collapse following the allegation of corruption among its officials, namely with the doctors and the workers of travel agencies. After the revelation of the scandal, the Chinese court imposed a $489 million fine on the firm, which was the largest fine in the history of the country (Fox, 2016). Furthermore, the court convicted key suspects of the scandal for 15 months. The case of GSK reflects the measures executed by the Chinese government in the fight against corruption, especially those imposed on foreign companies. This paper will seek to address the GSK corruption scandal and the major target of foreign enterprises in the country.

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GSK did not create a corrupt environment in any way. Following the 18th National Convention, corruption has been a subject of close media attention in China. Corruption in this country has established its roots for a long time in virtually every sector of the economy with government officials soliciting bribes from businesspeople in return for lucrative deals. According to Hawkins (2012), even after high-profile anti-corruption drive, China has not made any significant changes to handle the problem. In fact, some studies have shown that corruption in its scope and character has become more entrenched in every industry with the increase in economic freedom. Therefore, GSK did not create a corrupt environment by any means, but was tried to navigate their way through the acts of corruption in the country instead. Although China has a long history of corruption, the company is to blame for the scandal. Being an international enterprise with headquarters located in several regions, it did not have an obligation to bribe the doctors in the hospitals to make extra sales. Apart from this, the strict anticorruption laws in the United States and the UK dictate that multinationals should not engage in any form of corruption as it has adverse effects on the economy.

Although currently the Chinese government makes tremendous efforts to reduce corruption level in the country, the local companies have for long been spared from the punishment. It is becoming apparent that the administration intends to implement the anti-corruption laws on the foreign companies. In the previous years, the Chinese government did not subject the local companies to the crackdown against corruption aiming to favor the domestic competitors. The main idea was to increases the chances that the local businesses succeed in the global market by centralizing political and economic power, thereby making it difficult for foreign firms to compete effectively (Walker, 2006). In addition, the change from the import model to the export model of the Chinese government has made the international companies easy targets for corruption. Therefore, it is obvious that GSK was the aim of corruption crackdown due to its status and location in a foreign country.

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Following the revelation scandal, GSK responded to the allegations by stating that the claims are far-reaching, and the company appreciates the whistleblowers’ efforts to forward the reports of corruption connecting its top managers. Moreover, the company confirmed its intentions to hire a group of independent experts to conduct a research on the privacy and security breach in the enterprise. The company, in its response statement claim its commitment to zero tolerance to corruption and to quality services and the immediate termination of working permits of the top managers involved in the corrupt deals. GSK reply to allegations of corruption was professional from my point of view. For instance, the insistence on the seriousness of the issue under analysis shows the company’s commitment to ensure transparency in all its deals. Besides thia, by mentioning the need for comprehensive investigations into the circumstances leading to the corruption, the company was put at a strategic point of making its international markets recognize the adverse impacts of crime. The dismissal of employees connected to the scandal in office indicates desperate efforts of the company to save its reputation and not to intrude into a free and fair investigation. Furthermore, when the corporation proclaimed its devotion to guarantee quality services and demonstrate no tolerance to corruption, it was beneficial to its name in terms of ensuring that the business maintains its customer base and its support of the Chinese government in the efforts to attain a crime-free country.

GSK continues to operate in China even after the notorious corruption scandal. However, the business did not return to its usual state, and the company has been forced to cut reduce the number of the sales representatives in the country. The cut follows the sales plunge in the country after the corruption scandal, so the enterprise in question was never able to resume its regular business. However, the expectations are high in the last quarter of 2016, when the sale of drugs is likely to return. The company foresees double-digit profits in 2017. GSK China has remained profitable even after the scandal and has launched new drugs, including vaccine Cervarix in the country (Lowe, 2016). The company’s future outlook in China looks quite promising. The adoption of technology and the cut in the sale representatives will make it possible for the GSK to monitor all working staff and minimize the bribery. GSK plans for scrapping the traditional sale-driven bonuses may be advantageousin eliminating bribery instances. Furthermore, the introduction of the iPads to watch the sales representatives and the doctor’s interaction is likely to guarantee the sustainable growth in the country. It is worth noting that corruption and bribery allegations remain the biggest hurdle for the company’s success in China.

China is becoming a less hospitable place for international companies for several reasons. First, because of the reversal of the situation, China has grown to have the second-largest economy after the US. The emergence of such advanced manufacturing industries as, for example, car manufacturing has made it internationally competitive on the market (Quentzel, 2014). Consequently, the government tends to neglect its multinationals to maintain its competitive edge as it no longer requires the technical expertise in the other countries. Second, China appears to be less attractive to the foreign companies due to the boom of entrepreneurship fueled by the private equity funds and venture capital. Jaeger (2014) argues that enterprise has resulted in a situation when the top executives of the foreign countries leave their positions and invest into their businesses instead. As a result, the emigration of highly skilled professionals has eroded the competitive edge of the multinationals and their position in China. The fact that local people hold key positions in the multinationals has triggered corruption which makes the foreign countries susceptible to illegal campaigns. Thus, the foreign countries would rather choose another country to avoid large fines for the companies practicing the vice. Therefore, targeting on the multinationals poses little risks but promotes local political gains.

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The emergence of China as an economic and political giant has brought with it more hindrances to successful international business. Nevertheless, it is critical for the business to exercise caution in its daily dealings. The political temperature at the moment is set to ensure multinational companies do not thrive as it used to be a few years ago. Therefore, as an entrant to the economy, it is essential to ensure that the company and its staff do not engage in any form of corruption. This widespread form of fraudulent conduct in the country and the need to eliminate some of the companies from the market have made cash handouts a main bait to foreign companies. The key to successful business is quality services or goods. Ensuring that the company meets the customers’ demands is the only way to deal with criminal activities in the country instead of resorting to bribing government officials or staffs to make more sales. In addition, it is advisable to invest in not fully developed areas, because it will be profitable to operate and will promote introduction of new products or the services to the Chinese people. Although GSK and other multinationals have been caught in the corruption scandals, it is important to remain committed to the objectives of the company’s unforeseen future. Staying faithful to the goals will guarantee continued operation and service to the Chinese people (Sanchez-Runde, Nardon, & Steers, 2013).

In conclusion, it is clear that corruption in China has emerged long time before the GSK company moved to the country. Therefore, there is no way the company could have created the corrupt environment. Although the company demands that one should not tolerate corruption, the company shoulders the responsibilityfor the scandal as it went against the same principles it had previously set. There is a growing concern regarding the Chinese government’s orientation toward the foreign companies. Although the government claims to fight corruption, local companies have continued operations even after damning reports on their involvement in corruption scandals. Hence, there is a need for multinationals to be carefull and avoid corruption at all costs. The companies need to establish strict measures to limit or remove cash from the systems to reduce the number of bribery cases.

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