Chinese Government

Jul 21, 2021 in Economics Essays

GlaxoSmithKline in China

1. Political, legal and economic climate in China is rather beneficial in regard to the running of the business. First of all, politically, China is a quite stable country with an established governmental order and high level of conformism that is inherent in its all parts mainly due to the peculiarities of religious beliefs of its residents. Chinese people are immensely hard-working, attentive, and scrupulous in their work routine; thus, they are perceived as perfect employees. Moreover, contrary to other states, namely the developed ones, China has implemented the laws that in fact enable labor rules, which are long prohibited in Western countries. Therefore, the companies that originated in these countries started to outsource their manufacture and production to the Asian countries to reduce labor and manufacture costs. Additionally, the country is quite monotonous in respect of its culture, which enables foreign countries to adapt to the local conditions much quicker than in other states. The businesses and enterprises that develop in this region mostly aim at the international corporations, and the infrastructure that is supported and developed by the Chinese government facilitates the investments into this country. On the other hand, the country’s business culture has long been known for its nepotism and bribery practice as the norms of running the business. In order to enter the market, international companies with an established reputation and values have to violate their morals and principles and adapt to the local rules, which is rather compromising in the majority of cases. At the same time, the government still has a number of tools to negatively affect the enterprises which might prevent the companies from entering the market.
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2. In accordance with the official account, the four workers and the CEO of the company have been detained for the suspicions of bribing the Chinese officials. In fact, legal accusations have been presented to them. In this case, it is quite hard to justify the deeds of the employees and the CEO of the company since the political and economic climate in China differs from the one that prevails in the Western countries, particularly in Britain where the company is based. As it is stressed in the case study, the company is one of the greatest pharmacological companies, which employs skilled workers and scientists and is critical to the British economy (Quelch and Rodriguez, 4). In China, however, it was confronted with the need to bribe officials and corrupt the system, as it was the established way of doing business in this country. Despite the values and principles that were inherent and important for the company for years, it had to violate them since there was no other way to omit the barriers that were created by the governmental officials. Obviously, the laws and rules that govern the country are out-of-date, and in some cases they contribute to the functioning of the deeply corrupted system. The decision to comply with the industry’s norms was, undoubtedly, unethical; however, there was no other way to cope with the case. At the moment of entry, the company was interested in pursuing particularly this market share due to its unique characteristics. In addition, the Chinese government held all the tools and instruments for affecting international organizations and companies within the state, and there was no other way out or option.

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3. The circumstances of the case demonstrate that the company has not been treated fairly by the Chinese government (Quelch and Rodriguez, 6). The country nowadays is overwhelmed with foreign companies and their affiliations; however, the Chinese government has decided to pursue specifically GlaxoSmithKline and to get the revenge in this case. GlaxoSmithKline has occupied a substantial market share that represented a certain threat to the Chinese domestic market, thereby affecting the positions of domestic organizations. The bribery and nepotism are inherent features of Chinese economy, and despite all the statements that are made by international organizations and China itself, its economy is still far away from being market-driven. The reason is that many decisions and policies are still regulated and strictly controlled by the government. Therefore, in this case, the government has merely decided to prevent Glaxo Smith Kline from further growth and development through its corrupt system and its elements. The bribery and corruption have affected GlaxoSmithKline, though the country and its residents will soon face far more complicated outcomes due to the spoilt reputation and breach of trust towards the officials. The investment flow might rather decelerate due to the fears of foreign investors to be treated like GlaxoSmithKline.

4. The GSK admitted that there were violations and confirmed its responsibility for the accusations against the four employees. The response that followed was quite prompt which demonstrated the company’s willingness to solve the problem and remove all the consequences that followed this scandal. Moreover, it pledged to cooperate with its rival, namely Chinese government, in the elimination of the negative consequences that followed the bribery and other misdeeds that were undertaken by the GSK employees (Quelch and Rodriguez, 7). The company did not blame the Chinese government for the obvious unfair treatment and persecutions that were initiated against it. At the same time, it seems that in this case, the company and the government would simply agree on the higher price of the bribery that would be transferred to the appointed officials. The company is interested in prolonging its presence in the country, and it would take all the steps to ensure that it will happen and that the relations will be improved. Additionally, despite the allegations regarding the increased market share of the company and government’s fears in relation to the exceeded influence of GSK on the domestic market, still the issue of the price or, it is better to say, a contribution is the primary one. Therefore, from the company’s perspective, such response was totally correct, as it ensured that the wolves were fed and the sheep were safe. The company publicly acknowledges its failure to control its representatives and partners in the foreign country. If it rejected the guilt, it would have lost its reputation points and the customers who were concerned about the ethical issues and bribery. Moreover, it could have negatively affected the relations with the potential partners, investors and other stakeholders. The response was also extremely tactful in relation to the Chinese government, which practically revealed the scandal and one of its business norms to the general public and the international community to simply negatively influence the company. Obviously, the stakes are quite high, and most probably the negotiations between the company and government promptly followed this scandal. Furthermore, the company prevented itself from burning all the bridges and stressed on its interest in the further handling of the conflict with the authoritative officials. In addition, it committed to perform a comprehensive check-up of its partners, suppliers and employees as well as work practices in this country to establish other violations that might have been admitted and to install the controlling mechanisms that would prevent them from happening in the future.

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