Group 2 : Ethics And AirbusGroup Member : Shakeela, Ng Wun Shi, Ali & Ralph Yew 17 July 2010 MKT 5708 – International Marketing Facilitator: Mr. Liew Kok Hong MKT 5708 1
Table of Contents1. Introduction & Business Issues 2. Who Benefits and Who Suffers from Ethical Lapses of Airbus?3. Response of Public Relations Staff of Airbus4. What steps from Boeing to counter such competition 5. How Boeing and Airbus behaves in marketing their aircraft around the world?6. If France adopted OECD convention on bribery, would the outcome be different?7. Suggestions 8. Conclusion & Thoughts to ponder! 2
Introduction Business Issues•Casestudy Intense Competition – Boeing, Intense Competition – Boeing, Lockheed, Airbus and McDonnell Lockheed, Airbus and McDonnellBusiness ethics is the study of business situations, Douglas- Douglas-activities, and decisions where issues are right orwrong are addressed. How do you differentiate Airbus accused of giving bribe to Airbus accused of giving bribe tobetween "Doing what is right" and "Doing the right get business orders get business ordersthing the right way"? International politics and sosio-cultural play a big role in the International business. The International unethical The International unethical leadership management issues leadership management issues due to the impacts of socio-culture due to the impacts of socio-culture•Airbus and politics in International and politics in InternationalStarted in 1970. Airbus is an unwieldy confederation market. market.of four European (France, UK, Spain, Germany)aerospace firms. Airbus is 80 percent owned by the The challenges of business topublicly traded European Aeronautic Defence and sustain in a competitive unethicalSpace Company, and 20 percent by British international market dominated by socio cultural politics.Aerospace. The final assembly lines used by Airbus “TRADE WAR”are in France, Germany, Spain, for the Airbus A400 and China for the A320 series. 3
Who benefits from Airbus lapses in ethics •Competitor like Boeing, Bombardier and Embraer may benefit in short term due to Airbus lapsesKuwaiti Kickbacks India Ink- Benefitted ALAFCO’s El Fekih and KAC’s Al - Benefitted Rajiv Gandhi and his Indian AirlinesMishari & Airbus for the first few planes purchased. associates and of course Airbus Ind.- Suffered by Airbus because they lost the deal / - Because they received a large sum of unaccountedorders when Mallah provided the watchdog’s and kickbacks from Airbus for the purchases made inMinistry of Finance full details of ALAFCO’s orders 1985. Gandhi’s file on this order vanished.for the cargo planes. - Later in year 2000, Airbus suffered when it lost a- Why? Because Mishari’s plans to bypass formal deal when the Indian Government has declined thegovernment approval by forming ALAFCO has purchase of 43 Airbus planes worth $2 billion.failed and when the Ministry of Finance knew he full - Why? This is mainly due to the noncompliance anddetails they cancelled the orders. . unwillingness of Airbus and the French government to cooperate to answer the CBI (Central Bureau Investigation) questions.Syrian Scandal- Benefitted Airbus because the purchase were Mounties and Banksmade for $240 million. - Benefitted Karlheinz Schreiber, Airbus Senior-Why? – Because Airbus denied paying off the VP in France, some people in Shell companySyrian officials. subsidiary International Aircraft Leasing (IAL) and- Suffered by Syrian Air as it has incurred big the Canadian PM Brian Mulroney and Airbus Ind.financial lost. The three men (former minister of - Suffered by Air Canada as it took a long time forforeign affair, former transport minister and the investigation took place.middlemen Munir Abu Khaddur) also had to pay a - Why? Because for a long time no has come frontfine of $268 million and sentenced to prison for 10 to expose the corruption they found. This is mainlyyears. because it involved the Canadian prime Minster. 4
Who suffers from Airbus lapses in ethics•First airbus suffers because after this scandal customers willmake deals very carefully with airbus , and also it made badreputation in international marketing for itself.•Second the Canadian government because the people loosedtheir trust to them .•Third the middleman (s) , after that they couldnt easily work ininternational marketing•Other airlines and state government for purchases and largepayments made to Airbus ie lost of Sabena Air. 5
Response from Public Relation on Airbus lapsesThe Public Relation staffs should make- proper researches on the truth of the criticism and make correctivestatement in the same articles to protect save the image of Airbus.-provide press releases including comments clear and enforceableguidelines for the way in to defend itself from this sort of competition withBoeing. Providing Damage Control assistance.-Promote Airbus CSR activities to create a better image of Airbus,develop biofuel that could be used by 2030. This flight and the companyslong term efforts are considered big strides towards environmentallyfriendly aero planes.-Other CSR activities such as Airbus should have build new Aerospace &aeronautical design Engineering schools and provide free tuition fees toboost its image. Students of this school can be bonded for some yearswith Airbus and given jobs in Airbus later. 6
How Boeing Deal with Competition•Building Boeing reputation as Bribery Free Company.•Ensure All the Aircraft is build with quality and value for price.•Transparent in all the business deal and prevent unfair dealing.•Develop more advance aircraft which is more efficient, fasterand reliable.•Boeing use US Government to coercive influence decision making ofbuyers (purchases of aircraft for exchange of US services)•Uses spy intelligence methods to obtain information of Airbus lapses anduse the info to threaten the purchaser of disclosing the unethical deals.•Boeing used GATT to come up with the OECD convention on anti-bribery 7
Difference between Boeing and Airbus MarketingBoeing-Competitive price and quality & Influence power of US GovernmentReason-Long history in the market-Big customer based, achieve Cost efficiency-A lot of country relied on US Government on the economy and securityAirbus-Offer high “commission” to middleman & politiciansReason-Middleman able to influence or even make decision for thestate politicians 8
The OECD convention on briberyThe OECD convention on combating bribery, would HAVE AGREED AS FOLLOWS:Article 1 - The Offence of Bribery of Foreign Public Officials1. Each Party shall take such measures as may be necessary to establish that it is a criminaloffence under its law for any person intentionally to offer, promise or giveany undue pecuniary or other advantage, whether directly or through intermediaries, to a foreignpublic official, for that official or for a third party, in order that theofficial act or refrain from acting in relation to the performance of official duties, in order to obtainor retain business or other improper advantage in the conduct of intl busines2. Each Party shall take any measures necessary to establish that complicity in, includingincitement, aiding and abetting, or authorisation of an act of bribery of a foreign public official shallbe a criminal offence. Attempt and conspiracy to bribe a foreign public official shall be criminaloffences to the same extent as attempt and conspiracy to bribe a public official of that Party.3. The offences set out in paragraphs 1 and 2 above are hereinafter referred to as “bribery offoreign public official” ECU MKT 5708 9
How would that be different for Airbus if France adopted OECD convention on anti-bribery•Airbus will have to toe the line in all its international business dealing if Franceadopted OECD convention on anti-bribery.•Airbus’s reputation and scandal in the Air Canada could have been avoided.•Airbus would have to report to their ethnic committee in all international dealing andthe move result in good corporate governance.•The competition would have no reason to attack Airbus’s business practices ofusing middlemen and lobbyist to secure new overseas Government’s contract•Airbus sales would have dropped badly and lost millions of dollars. Most of thecountries would have purchased Boeing in order to get US Government favors.•Due to the lost in business Airbus would have to retrench its workers.•Airbus would not have produced its latest ’s A380.•Airbus will always be the number two successful airlines after Boeing. 10
SuggestionsA good leadership in Airbus Industrie will make the company morestronger, although the involvement of socio-cultural to politics isprominent to obtain big orders.Elimination of middleman is a must to cut down on unnecessary payingof kickbacks and bribes to the polititions and top level managementpeople. There will be no more seaside villas in Mexico or big shoppingplaza’s in Kuwait for corrupted men.Instead establish agents with standardized minimal commissionpayments to the appointed agents. Agents who will abide with standardagents and suppliers manufactures’ rules.Improve the technology quality and performance in order to cut downon turn-around time will bring more profits to Airbus.Promote Go green environment clean air and less carbon emission bio-fuels. Create a good image and brand building.
Conclusion Bribery and corruption have a very detrimental effect on an economy and the World Bank has estimated that 0.5% Companies need to of GDP is lost through corruption each continuously maintain integrity year. and transparency when expanding their international Engaging in corrupt practices also business to new geographic creates a very unfavourable business market if they want their environment by encouraging unfair business to sustain for a long term. advantage and anti-competitive practices. As well as allowing organised crime to flourish, corruption is one of the primary obstacles to the economic development of a country; it undermines the rule of law, weakens trust in public institutions and challenges democratic principles. 12
Thoughts To Ponder! The Boeing and Airbus quests for dominance have been quite a roller-coaster ride for both with no end in sight. The history of their competition provides a good case study for best-practices in strategic planning. Although businesses must compete fairly and honestly but again it is a question of doing the right thing the right way, so what is the right thing and the right way? Bribing and receiving kickback are a norm life style & culture in many countries. So are we to follow their socio-culture? Some country men want business to be as “If you go to Rome do as the Romans do”. So if you want to do Business and survive the roller coaster ride, there are times you have to do what the Roman do in their country. Follow the ride and their political socio-culture???.