Managing business ethics in China Essay Example | Topics and Well Written Essays - 1750 words

Managing business ethics in China - Essay Example In the modern day business world, a manager needs to ensure adherence to business ethics in a firm’s quest for profiteering motives. However, recent developments have resulted in varied definitions of ethics, and each person has to use own judgement to differentiate between ethical and unethical practise. Moreover, the capacity of a business to adhere to ethical expectations is dependent on political, social, economic, and environmental factors of a market. This means that a firm should balance its business practice with environmental and social responsibility, and in adherence to the ethical guidelines stipulated by the government in the country of operation. In essence, the highest level of ethical practice involves business practices that aim to ensure economic, environmental and social sustainability. The Chinese economy is characterized with widespread criticism on high levels of unethical practices; including corruption that is touted to be the most detrimental factor of the economy. However, recent changes have seen a change in focus to adherence to ethical guidelines by managers, most of whom are learning how to incorporate the system into their businesses without seeming to suffer from the alienation by western values. The Chinese investors insist on charting their own path to ethical practice despite the assimilation of various western characteristics into its economic system. On august 26, 2010, Landau reported on BBC about a businessperson who tried to incorporate Christianity as a tool to entrench ethical practice among his employees, mainly by encouraging his employees to convert to the Christian faith. While this practice is not illegal, it brings up the question of how far managers can go to ensure ethical practises in their firms (Landau, 2010). Factors Influencing Et hical Practice in China Many factors have been blamed for the widespread unethical practices in China, but the most outstanding ones are philosophical beliefs, globalisation and the rapid changes that the Chinese economy undergoes. Philosophical Beliefs The main philosophical approaches taken by the Chinese are Confucianism, Taoism and Buddhism, all of which are based on the teachings of prominent thinkers who resided in the Far East. Confucius, the father of Confucianism, taught that the first obligation of every person is to the family, such that everyone is expected to take care of the needs of family members and close friends before extending favours to others. While this is a convenient way of living in day-to-day life, the philosophy may be destructive in the business world, as managers tend to hire their family members regardless of their qualifications. This has resulted in poor quality of Chinese products; erosion of work ethics since a favour leads to another, and the cycl e goes on despite detrimental effects to the economy. However, this does not mean that Confucianism only has negative effects on ethics; in fact, if applied correctly, the philosophy has three main aspects that promote ethical practise. These include the teachings on obedience, following laid down guidelines, and humanity (Suen, Cheung and Mondejar, 2007). Taoism incorporates the principles of learning the details of one's profession for improved workmanship, and promotion of maximum good for the greatest number of people. In addition, Taoism results in increased efficiency at the workplace though this is not the prime concern of the philosophy. Buddhism is the philosophy that encourages business personality to respect and preserve the business environment; and to create a healthy relationship between the business and the community around it. Any manager intending to do ethical business in China has to have an understanding of the perceptions of

Case Study- Company Situation (Financial Analysis & SWOT Analysis Essay

Case Study- Company Situation (Financial Analysis & SWOT Analysis only) - Essay Example Based on the rising revenues and margin data, it is possible to conclude that Inditex is at the growth phase of the life cycle, while Benetton, the GAP, and H&M are at maturity and stability phase, as their revenues and margins are declining. Financial Ratio Analysis - Inditex Profitability Gross profit margin of the company is fairly high – 59%, which implies that the company has effective outsourcing manufacturing strategy and has good relationships with suppliers. Both factors have positive impact on cost reduction. Operating profit margin is 18%, which means that the company makes 0,18 cents for every Euro of sales (before taxes). Net profit margin is 14% and it means that the company has good control over its costs. ROA ratio which is 19% means that the company is effectively using its investment, converting it into profit. ROE Liquidity Current ratio of the company is 2,0 suggests that the company has a good ability to pay back its short-term liabilities with the short-t erm assets it has. This means that Inditex is capable to continue its business expansion strategy and to avoid insolvency during the slower growth phases. The quick ratio of 1,5 means that Inditex position has enough liquid assets to cover its current liabilities. Thus, the company can implement its strategy of fast fashion being capable to pay quickly for its orders and to kepp short inventory turnover. Leverage Debt-to-Equity ratio (0.42) indicates that the company’s debt used to finance its operations is not so high and is a positive sign of strong financial position of the Inditex. This indicates that the company is financially strong enough to grow its business due to its profits rather than debts. Long-term debt-to-equity ratio is relatively low and indicates on the company’s financial stability. Activity Inventory turnover at 4,50 indicates that the company has efficient supply chain and can continue taking its course of fast fashion retailer. Days of inventory ratio is equal to average 81.0 days. This indicator seems to be fairly high for the company focusing on fast fashion strategy. Average collection period is 13,4 days, which is quite low and therefore optimal for Inditex to continue its aggressive business development strategy. Financial Analysis has shown that Zara’s overall financial position is very strong and enabling for implementing its strategy of future sales and stores’ growth. SWOT Analysis Strengths The company’s strategy is based on aggressive multichannel global business expansion which is implemented due to its flexible business model based on having the right fashions at the right time at affordable prices. Financial state of the company rated as â€Å"healthy† allows the company to have enough capital for future growth and investments. Global expansion of Zara’s stores and its responsive marketing strategy increase global brand awareness. All these result in strong sales and revenue growth. Effective supply chain management allows the company to be competitive on the market balancing the quality of its goods and affordable prices for mass market consumers. Excellent human resource management is another strategic strength of the company which enables the company to grow its sales and gain positive reputation. Design of new stores in