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Purchasing Ethics

Shivom Yadav

Westcliff University

SCM 601 Purchasing and Inventory Management

Prof. Axit Raj Poudyal

November 12, 2023

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Scenario 1

Answer number a:

Navigating the acceptance of gifts from suppliers poses a multifaceted ethical challenge,

prompting numerous companies to establish explicit policies in response. Accepting presents is

appropriate or inappropriate depending on the kind of gift, how much it is worth, and any

specific rules the organization may have. When deciding on an ethical position on this issue,

several factors are taken into justification (Liu, 2020).

1. Potential for Bias: Accepting gifts from suppliers may create a perception of bias or

favoritism, raising concerns about the objectivity of business decisions. It could influence

the recipient to show preferential treatment to the supplier, potentially compromising the

integrity of the procurement process.

2. Company Policies: Many companies establish clear policies regarding the acceptance of

gifts from suppliers. These guidelines are intended to guarantee impartiality, openness,

and the avoidance of conflicting interests. For businesses to continue operating ethically,

employees are frequently obliged to follow these regulations.

3. Value of the Gift: Companies may set thresholds for the value of acceptable gifts.

Smaller, token gifts may be deemed less likely to influence decision-making, while

larger, more expensive items may raise ethical concerns.

4. Transparency and Disclosure: Even if a company allows employees to accept certain

gifts, transparency and disclosure are often crucial. Employees may be required to report

any gifts received to their superiors, allowing for oversight and addressing any potential

conflicts proactively.
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5. Relationships outside the Workplace: In cases where a personal relationship exists

between an employee and a supplier, additional caution may be necessary. Personal

relationships can complicate professional decisions and may require disclosure to

mitigate potential conflicts.

Answer number b:

1. Google:

 Google has a comprehensive Code of Conduct that covers various aspects of

ethical behavior, including interactions with suppliers and other business partners.

 The company typically emphasizes transparency and integrity in business

dealings.

 Check Google's official website for the most recent and specific information.

2. Apple:

 Apple is known for having a strict Supplier Code of Conduct that outlines the

expectations for suppliers, including ethical behavior.

 Apple's Code of Conduct for employees likely addresses issues related to gifts

and relationships with suppliers.

 Refer to Apple's official website or corporate governance documents for the latest

information.

3. Microsoft:
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 Microsoft is likely to have a Code of Conduct that addresses ethical

considerations and business relationships.

 The company places importance on maintaining high ethical standards in its

interactions with suppliers and other partners.

 For the most accurate and current information, check Microsoft's official website

or corporate governance documentation.

To find the latest information on their gift acceptance policies (Filippidou & Moussiades, 2020):

 Visit the companies' official websites and look for sections on corporate governance,

code of conduct, or ethical guidelines.

 Search for specific keywords related to gifts, vendor relationships, or supplier

interactions within these documents.

Answer number c:

Certainly, cultural attitudes toward accepting gifts and potential issues like bribery can

vary significantly from one country to another (Fort & Noone, 2000). Let's explore the cultural

differences in accepting gifts/bribes in China and Germany:

China: The custom of exchanging presents is ingrained in Chinese culture and is essential to

establishing and preserving connections. Present-giving and receiving are frequently regarded as

acts of kindness, appreciation, and respect. It's crucial to comprehend the interpersonal dynamics

and the environment, though.

Accepting Gifts:
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 Accepting gifts is generally considered appropriate and is a common practice in business

and social settings.

 Refusing a gift outright may be seen as impolite, so it is common for individuals to

accept gifts graciously.

Bribery Concerns:

 While gift-giving is culturally accepted, bribery is illegal and frowned upon.

 The line between acceptable gifts and bribery can sometimes be blurry, and

understanding the appropriate value and context is crucial.

 Building personal relationships is often integral to business success in China, but bribery

is generally condemned and can have legal consequences.

Germany: In Germany, a country with a strong emphasis on legal and ethical standards, the

approach to accepting gifts is generally more cautious. The business culture is characterized by a

high value placed on transparency, compliance, and following rules.

Accepting Gifts:

 Accepting gifts in business settings is often subject to strict rules and regulations,

especially in larger corporations.

 Employees may be prohibited from accepting gifts of significant value to prevent any

perception of impropriety or conflict of interest.

 There is a focus on maintaining a clear boundary between personal and professional

relationships.
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Bribery Concerns:

 Germany has stringent anti-bribery laws, and bribery is considered a criminal offense.

 Companies in Germany emphasize compliance with legal and ethical standards, and there

is a strong commitment to anti-corruption measures.

 Business relationships are built on competence, reliability, and adherence to legal

principles rather than personal connections.

Understanding and respecting these cultural differences is crucial for individuals and

businesses engaging in international interactions. It's essential to navigate the nuances of gift-

giving and bribery prevention while respecting the cultural norms and legal frameworks of each

country.

Answer number d:

Cultural differences in attitudes toward accepting gifts and bribery can significantly

impact supply chain decisions in the context of the increasing globalization of business

operations (Vidrova, 2019). Here's how these differences may come into play:

1. Relationship Building vs. Strict Adherence to Rules:

 In countries where relationship-building through gift-giving is a common practice,

such as China, supply chain decisions may involve building strong personal

connections with suppliers and partners. This can influence negotiation styles and

the importance of maintaining positive relationships for long-term collaboration.

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 In contrast, in countries like Germany, where there is a focus on strict adherence

to rules and legal standards, supply chain decisions may prioritize transparency,

legality, and ethical considerations over personal relationships.

2. Risk of Bribery and Corruption:

 Cultural differences in attitudes toward bribery impact supply chain decisions,

especially in regions where bribery may be more culturally accepted. Companies

operating in such areas need to implement robust anti-corruption measures to

ensure compliance with global ethical standards and legal requirements.

 Global companies may adopt strict anti-bribery policies that apply uniformly

across their supply chain, irrespective of the cultural norms in specific regions.

3. Compliance with Global Standards:

 As supply chains become more globalized, companies often need to adhere to

international standards and regulations. This requires a harmonized approach to

ethics, compliance, and governance across diverse cultural contexts.

 Implementing a global code of conduct that reflects universally accepted ethical

principles can help ensure consistency and compliance throughout the supply

chain.

4. Supply Chain Transparency:

 Cultural differences also play a role in the level of transparency expected in

business dealings. In regions with a high emphasis on transparency, supply chain

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decisions may prioritize open communication, clear documentation, and the

avoidance of any perception of impropriety.

 In regions where cultural practices may involve less transparency, companies

need to implement measures to enhance visibility and accountability within their

supply chains.

5. Navigating Cultural Nuances in Negotiations:

 Supply chain decisions often involve negotiations with suppliers, and

understanding cultural nuances is critical. This includes recognizing appropriate

gift-giving practices, communication styles, and relationship-building approaches.

 Companies operating globally may invest in cross-cultural training for their

supply chain teams to enhance their ability to navigate diverse cultural landscapes

effectively.

In summary, as globalization increases, companies need to strike a balance between

respecting cultural differences and adhering to global ethical standards. This involves developing

supply chain strategies that consider local customs while maintaining a commitment to

transparency, compliance, and ethical business practices on a global scale.

Scenario 2

Answer number a:

The behavior described in the scenario, where a buyer uses their position to pressure a

supplier to change their equipment by leveraging the potential contract award, is commonly

referred to as “bid manipulation’ or “bid rigging”. Bid manipulation involves actions that
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manipulate the competitive bidding process to achieve a specific outcome. In this case, the buyer

is conditioning the award of the contract on the supplier making a specific change in their

operations, namely, replacing equipment from a competitor with equipment from the buyer's

company (Piest & Schreck, 2020).

Whether this behavior is considered unethical can be subjective and may depend on

various factors, including industry practices, legal regulations, and individual perspectives. Here

are arguments for both sides:

Unethical:

1. Coercion and Unfair Influence: The buyer is using their position to coerce the supplier

into making a significant investment (replacing equipment) to secure the contract,

potentially taking advantage of the power dynamic.

2. Potential Violation of Fair Competition: This behavior may be seen as undermining

fair competition by not evaluating and awarding contracts based solely on merit, quality,

and cost but rather on non-business-related factors.

3. Lack of Transparency: The request for equipment change could be considered as

introducing nontransparent and arbitrary criteria into the bidding process, which goes

against principles of fairness and openness.

Not Unethical:

1. Business Negotiation Tactics: Some may argue that such negotiations are common in

business, and buyers often have specific preferences or requirements that suppliers need

to meet to secure contracts.

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2. Protecting Intellectual Property: The buyer might argue that they are concerned about

the potential sharing of sensitive information with a company that has close ties to a

competitor. This could be seen as a legitimate concern for protecting intellectual

property.

3. Market Dynamics: In certain industries, such negotiations might be viewed as standard

practice, and companies may be expected to adapt to meet the preferences of major

clients.

Scenario 3

Answer number a:

The actions of the purchasing manager, Ben Gibson, described in the scenario, raise

ethical concerns, and they may also have legal implications (Ko, Ma, & Kang, 2019). Let's

analyze both aspects:

Legal Implications:

1. Rebidding the Contract: Generally, rebidding a contract is legal if it is done

transparently and follows fair and competitive procurement practices. However, the

legality may depend on the terms of the existing contract with Southeastern Corrugated

and whether there are stipulations regarding the duration and renewal of the contract.

2. Intentional Use of Non-serious Contenders: Intentionally including non-serious

contenders in the bidding process, as described by Jeff, may be seen as manipulative and

could potentially be viewed as a violation of fair business practices. Depending on the

specifics, it might raise legal concerns.

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3. Emphasizing Price as the Sole Determining Factor: While price is a legitimate factor

in the bidding process, emphasizing it to the exclusion of other relevant factors may be

considered unfair, especially if there are quality or performance considerations that

should be taken into account.

Ethical Implications:

1. Personal Animus and Bias: Ben's decision to rebid the contract seems to be driven by

personal animus toward the Southeastern Corrugated salesman rather than objective

business considerations. Allowing personal feelings to influence business decisions raises

ethical concerns.

2. Intentional Use of Non-serious Contenders: Intentionally using suppliers who are not

serious contenders, as mentioned by Jeff, can be seen as manipulative and may be

considered unethical. It goes against the principles of fairness and honesty in the bidding

process.

3. Emphasizing Price over Quality: If Ben prioritizes price over quality without

considering the overall value of the product or service, it may be viewed as an ethical

lapse, especially if the corrugated boxes are critical to Southeastern's processes.

In summary, while the legal aspects may depend on the specific contractual arrangements

and industry regulations, the actions described in the scenario raise ethical concerns. Personal

animus influencing business decisions, intentional use of non-serious contenders, and prioritizing

price over relevant factors all contribute to an environment that may be considered unethical.

Businesses are generally expected to conduct procurement processes with transparency, fairness,

and integrity, considering both legal requirements and ethical principles.

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Scenario 4

Answer number a:

In analyzing Scenario 4 using the four variables mentioned organizational environment,

cultural environment, personal environment, and industry environment, we can gain insights into

the ethical considerations involved in the decision-making process (Martínez & Skeet, 2021):

1. Organizational Environment:

 Issue: The organizational environment in this scenario is characterized by a

potential conflict of interest. Dave Cox, the manager, appears to have a personal

connection (brother-in-law) to one of the suppliers, Micron, which might

influence his recommendation.

 Ethical Perspective: Sharon, as a buyer, needs to make decisions that are in the

best interests of Visionex Inc. The potential conflict of interest within the

organizational environment raises ethical concerns about fair and unbiased

supplier selection.

2. Cultural Environment:

 Issue: The cultural environment at Visionex Inc. may be influenced by the

perceived actions of the manager, Dave Cox, in steering business toward a

supplier with a personal connection.

 Ethical Perspective: The cultural environment should foster transparency,

fairness, and ethical conduct. If there is a perception of favoritism or unethical

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behavior, it could erode trust within the organization and impact the ethical

climate.

3. Personal Environment:

 Issue: The personal environment of Dave Cox includes his familial connection

(brother-in-law) to Micron, potentially influencing his preference for that

supplier.

 Ethical Perspective: Personal relationships should not unduly influence business

decisions. Employees, especially those in decision-making roles, should prioritize

the best interests of the company over personal connections to maintain ethical

standards.

4. Industry Environment:

 Issue: The industry environment may be affected if decisions are made based on

personal relationships rather than objective criteria such as price, quality, and

delivery.

 Ethical Perspective: The industry environment typically values fair competition

and objective supplier selection based on merit. Any deviation from these

principles may be viewed unfavorably within the industry.

Ethical Considerations:

 Transparency and Fairness: Sharon should prioritize transparency and fairness in the

supplier selection process, ensuring that decisions are made based on objective criteria

that align with Visionex's best interests.

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 Avoiding Conflicts of Interest: Dave Cox should be aware of and actively avoid

situations where personal relationships could create conflicts of interest. Disclosures and

recusals may be necessary to maintain ethical standards.

Conclusion

While not all gifts from suppliers are inherently unethical, companies often implement policies to

establish clear boundaries and mitigate the risks associated with accepting such gifts. Respecting

these guidelines encourages accountability and openness while assisting in the upkeep of a just

and moral company environment. Employees must be cognizant of and abide by the policies of

their organization in this regard. In conclusion, the ethical considerations in this scenario

highlight the importance of maintaining integrity, transparency, and fairness in the

organizational, cultural, personal, and industry environments. Sharon, as a buyer, should

navigate these considerations to ensure ethical decision-making that aligns with the best interests

of the company.
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References

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Fort, T. L., & Noone, J. J. (2000). Gifts, Bribes, and Exchange: Relationships in NonMarket

Economies and Lessons for Pax ECommercia. Cornell International Law Journal, 33(1),

516-545. doi:https://core.ac.uk/download/pdf/216741788.pdf

Ko, C., Ma, J., & Kang, M. (2019). The effect of ethical leadership on purchasers’ unethical

behavior in China: The moderating role of ethical ideology. Journal of Purchasing and

Supply Management, 24(4), 1-22. doi:https://doi.org/10.1016/j.pursup.2019.01.002

Liu, K. (2020). Study on ethical gift-giving practice in corporates. Academic Journal of Business

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G67jo1.pdf

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pervasive within organizations. Bus Horiz, 64(1), 83-92.

doi:10.1016/j.bushor.2020.09.008

Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2021). Purchasing &

supply chain management (7th ed.). Cengage Learning

Piest, S., & Schreck, P. (2020). Contests and unethical behavior in organizations: a review and

synthesis of the empirical literature. Management Review Quarterly, 71(1), 679-721.

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Retrieved from https://link.springer.com/article/10.1007/s11301-020-00197-3

Vidrova, Z. (2019). Supply chain management in the aspect of globalization. Globalization and

its Socio-Economic Consequences, 74(1), 1-10. Retrieved from https://www.shs-

conferences.org/articles/shsconf/pdf/2020/02/shsconf_glob2020_04031.pdf