BRIBERY SCANDAL AT SIEMENS FIRM
A major corruption scandal was revealed in November of 2006 involving Siemens AG, a gigantic German multinational corporation. Therefore, this article seeks to ascertain the corporation’s choice of entry modes to the market and the overall strategies using international business theories and concepts during and after the scandal coupled with the magnitude of the corruption in the international trade arena. Crime is a negative occurrence across businesses since it affects the firm’s ability to compete and mushrooms operational costs, especially those of heightened legal risk concerns. Scandalous ventures serve multiple purposes since it holds a company’s accountability performance and achievements on anti-corruption efforts to elevate public awareness and serve as the basis of understanding effective means of combating such cases by other entities. Unfortunately, the prosperity of international businesses facilitated by globalization has induced numerous ethical problems over the past decades. In that regard, Siemens Corporation is not an exception and was hit through an infringement of marketing morals by the contemporary fraud that occurred in Argentina. Commerce ethics, as a pedagogical specialty, plus a business execution, becomes the centerpiece of prosecuted and spirited discourse across international business theories and concepts. Similarly, increasing attention regarding business norms and standards generate many relative hypotheses.
Therefore, putting into account Freeman’s stakeholder theory, Siemens attracted severe violation of business ethics after scrutiny of its stockholder’s interests. Arguably, Siemens is a large entity, employing a massive workforce across multiple nations and commanding activities in the fields of financial services, healthcare, Information Technology solutions and services, energy, equity investments, and industry. In the wake of December 2011, the “Securities and Exchange Commission” inculpated several former Siemens executives with breaching the “foreign corrupt practices act”. The decade extended scheme to bribe Argentina’s government of a contract retaining worth one billion US dollars to produce national identity cards raised questionable ventures. Therefore, this case study bases on the calculated and continued bribery scheme by Siemens Company to evaluate the structures of global trade and international business, the impact of legal, socio-economic, and political environment on international trade and analyze the difference between domestic and universal business operations. Moreover, it seeks to assess the operational strategies and their importance to comprehensive trade development.
The Siemens Company was formed as a partnership in 1847 and later reorganized in 1889 as a limited partnership that then rose to a stock corporation in 1897 (Duivenvoorden & Tran-Ngoc, 2019). It has established offices in Berlin and Munich with core objectives to manufacture, develop, distribute, supply, trade, and operate in products, facilities, solutions, and systems coupled with service rendering in the avenues of development and research. Therefore, the firm can work in numerous channels that also include all information technology ventures hence operates directly and indirectly across multiple enterprises and companies of diversified measures. In that regard, the corporation achieves its objectives by itself and through consolidated subsidiaries of associated organizations, thus commanding a considerable capital stock that the superintendent panel is accountable for increasing with the approval of the bureaucratic council (Duivenvoorden & Tran-Ngoc, 2019). It accommodates a vast number of employees across different countries in pursuit to actualize its goals. Additionally, it is estimated that the German intercontinental compound enterprise’s headquarters in Munich, coupled with its auxiliaries, has a workforce of over four hundred and twenty thousand employees emanating from approximately one hundred and ninety countries. Precisely, Siemens Corporation is a gigantic entity in all avenues because it has blown its wings to the international trade fields.
Entry modes and strategies
Industrialization is the undertaking in what way firms moderately intensify their international participation, and it is evolving at a higher degree in recent decades. A company employs strategic management as a procedure to weigh, determine, and monitor its mission, vision, and long-term objectives. Therefore, entering the international stage sets a new dimension for advanced models and strategies concerning management. The strategic management team is requested to keep track of mushrooming diversified operations in a rapid and continuously changing international environment considering the elevating scale of direct foreign investments occurring in recent years. It is worth noting that technical characteristics and the origin nation’s applied science eminence condition to a more significant margin the aggregation paths of companies.
Therefore, as the process of entering the global market is a culmination of a concatenation of successive resolutions coupled with anticipating the hindrances of knowledge and recourse lack, Siemens Company utilized “waste electrical and electronic equipment” sustainability blueprint (Plumeyer & Würl, 2019). The scheme contemplates the life cycle of a product in its entirety, thus a firm-wide endeavor to conserve environment philosophy. However, the dimensions of the market are changing the same case applies to the models. In that regard, the firm opted through the dynamic internationalization mode in the first place to target international markets with similar trade environments. Precisely, both strategies acknowledge the fact that entering the global market is a process that should follow a stage-based approach. Therefore, the procedure of actualizing the extensive foreign peddle ingress resolve configuration that discerns export, legitimacy, and apportionment was employed coupled with a joint venture model (Gurkov & Saidov, 2017). This is in the regard that the model is complex, thus entailing numerous stages that each play a critical role in the dream realization.
Similarly, availability and security strategy was vital in opening up globally since it guarantees services such as delivery and installation. Being near to the client base is conformity that the services are available, and questions raised are responded to efficiently. The plan is in line with remaining competitive in the many areas of expertise. Moreover, the strategy aligns with the total adaptation and conformity scheme. This avenue ensures a holistic approach to adhere to customers’ demands regarding products, handling, delivery, and development. Therefore, the company had a substantial degree of inter-functional correlation concerning company supplies and high facetted customer orientation. Precisely, the firm had strategized to remain competitive in the cosmic arena regardless of the shortcomings since all these notions carry along with immense benefits and essentiality.
From 2000 through 2011, Siemens firm was in the spotlight concerning public corruption incidence that included bribery, tax evasion, embezzlement, and money laundering. Blanc et al. (2019) reiterate that the Munich federal prosecutors in November 2006 conducted searches at Siemens offices and private homes for employees looking for evidence linking the firm with bribery claims that incurred the enterprise a fine of two hundred and one million US dollars by October 2007. The case displayed a violation of ethical standards by the employees in correlating to bribe the foreign public officials for the purpose of acquiring contracts on behalf of the corporation. A string of new corruption cases that marked a continued sequence of contradicting the set business ethics followed this case disclosure. Precisely, Siemens is among the worlds’ principal galvanic engineering organization, was tainted adversely due to the massive scandal eruption that arguably concluded with a record fine disrupting its activities (Berghoff, 2018). Therefore, this raises the question of the firm’s entry models and strategy to the international business environment.
Similarly, the corporation replaced its management board in entirety virtually as a resulting outcome of the corruption allegations, inducing a single procedure in the general history of the firm due to fear of being barred from government contracts. The endeavor raises eyebrows concerning leadership ethics and operational strategies standards that elevate international business development. It is rather astonishing to explore the reasons behind Siemens employees engaging in dubious and corrupt payment of such magnitude, putting into account they have a picture of an entity to protect. The themes that pop out are that bribery in this environment is highly practiced; administrators missed a concise sense of actuality by perceiving delinquency as a component of disciplined business and required sourcing for alternatives, thus portraying poor governance (Aßländer, 2017). The systematic continuity of the schemes underscores the firm’s management and questions their understanding of ethical leadership, not to mention the set of standards in place for international trade fair play. Therefore, this happening is a complex scenario inviting a lot to learn since it should explore the aftermath’s progress of the industry. In that regard, the study asks assessing the damage caused by the fraud and how the firm raised to fix the mess according to international business standards.
Aggravated cross-border transactions have compromised the international business and global trade structures due to globalization among societies with diversified norms and regulations concerning bribery. The forms accrue various directions such as the structures demanding for suborns in disparate states, the dispense equation inviting the loophole, and the preparedness by global organizations and their surrogates to offer such corrupt exercises. Therefore, the propensity of firms to engage in such fraudulent acts outsources the contributors from a complex scenario, critically tainting adversely global trade. Regarding the case of Siemens, bribery was a legal exercise. Surprisingly, the German government had a tax for such practices, thus becoming normality in the activities of the firm. Arguably, economic development, culture, and domestic corruption form the basis that challenges international business structures in formulating a fair play rule.
Precisely, the case of the Siemens scandal can be scrutinized based on economic development and cultural corruption bases as the significant contributors to the acts. It is worth noting that if the country of origin does not entertain corruption, bribery cases delineate, and culture provides for powerful distance country firms propensity to increase for bribery. Research has it that Siemens corruption was deeply embedded in the business culture since bribery was legal German foreign officials forcing the firm to adhere to local practices. The concept from the country of origin facilitated the spread of the trend to other countries creating continuous and systematic occurrences of malpractices from Siemens officials. In that regard, this creates a difficulty avenue to formulate favorable international business policies, thus corrupting the global trade environment. Consequently, these malpractices put to question the measure of impact, induced to international businesses by political, socio-economic, and legal backgrounds.
Arguably, the scandal at Siemens Corporation was politically instigated with legal environments supporting the trend. Legal and political factors influence public corruption, as it is the case in this firm (Bahoo, Alon & Paltrinieri, 2019). Precisely, the scandal was a grand organized civil fraud since large sums of money exchanged hands in a systematic and planned format. These factors contributed hugely to the infamous act since it was supported by both the supply and demand sides. However, the international business context advises that demand-side incentives be distinguished from the supply side incentives, which has failed due to political and legal impacts and the lack of exposure to collectivistic norms and education. Bahoo, Alon & Paltrinieri (2019) reiterate that fraudulent acts have remained a worldwide political controversy with massive adverse inferences for universal trade and persistent despite national and international legislation passage aimed at controlling the exercise. Weak licit establishments in the anchor states and involvements of prior malpractices by the firm, primarily in the state of origins, contribute hugely to bribery. Therefore, this calls for updating the existing anti-corruption laws or formulating stiffer ones across the board and of favorable archives. In that regard, this invites examining operational strategies rooted in international business and their importance in promoting equity.
The international business operational strategies can be put to a fault regarding the Siemens case since their foreign corrupt practice act (FCPA) is a one-way tool. Arguably, FCPA has no authority to prevent and punish scandalous acts facilitated by the demand side incentives regarding business transactions, yet it is their fighting mechanism (Bahoo, Alon & Paltrinieri, 2019). In that regard, FCPA should broaden its scope and adopt a more inclusive approach that faults both sides of the divide. Fortunately, the strategy is of crucial essentiality since its regulations cannot be undermined but only demands to be updated to accommodate current anti-corruption laws and operate on both sides in equal measures. Precisely, since many nations have realized and actualized anti-corruption regulations regarding international business, both emerging and developed economies, it shows that there is a base to start from and establish a neutral playing ground. Moreover, the act has facilitated the formulation of guidelines under several conventions for establishing uniform policies and laws to govern global trade. Thanks to the vast fraudulent occasion at Siemens that these platforms are, being ironed out to curb future incidences. The concept is in line with both domestic and universal business operations.
Domestic business operations play a critical role in decision making for multinational firms. The concept is supported hugely by the bribery occasion at Siemens since its headquarters decisions affected the overall running of the branches. Therefore, despite operating in a limited clientele and resources base, the environment occasioned happenings at subsidiary or associate entities. Aithal (2017) agitate that international business is a decisive sum game because of the vast benefits accorded both participant firms and countries as opposed to domestic ventures. The arena of doing business improves modalities and decreases constraints as compared to local environments that incur limited space to exercise its full operations. Arguably, the case of bribery under study in real sense has acknowledged the aspect with the stream of fraudulent acts in a bid to acquire a massive field of operation. In that regard, domestic ventures are forced to apply low cost and high-quality resources due to immense constraints exposure. Finally, multinational firms base their study on internal operations concerning acquiring knowledge of the environment intended to expand their wings.
The fraudulent act at Siemens Corporations was a vast and extensive affair that affected the firm and global trade adversely in general. Globalization is a positive endeavor that creates business openings in pursuit to make ends meet. However, it has created avenues at an exceedingly rapid rate for scandals as companies wrestle for supremacy. Siemens being a large firm, it signaled the wrong picture to stockholders, consumers, and interested parties, regarding the ways of transacting. The measures put in place to clean the damaged name of sacking employees was a long overdue endeavor since the management and governance of the firm could have anticipated for that and drew risk management schemes. In that regard, it produced considerable loopholes in multinational enterprise governance and international business operation strategies. Political, legal, and socio-economic factors contributed hugely to the scum, raising the questions of how secure are universal trade. The German authorities legalizing bribery that can poison neighboring countries, creating a scenario unfavorable for small business entities have portrayed this, inducing the strength of a particular country’s laws and the culture practiced. Therefore, the regulatory authorities are called to action in regards to formulating policies that improve the fair play notion across business transactions regardless of the magnitude of the ventures.
Moreover, the international business platform should advocate for upgrading existing business laws across nations and focus on formulating a universal policy. Acting on punishing and preventing corruption on one side of the divide is a guaranteed process heading to fail. As much as many individuals would argue to save their reputation, the scum witnessed influenced immensely the economic growth perception induced by globalization. Moreover, all sorts of corruption violate leadership and business ethics, and the more reason mechanisms should be devised to anticipate for such risks. Finally, crime, no matter the measure of occurrence, must be condemned in the highest order among societies, organizations, and states.
Aithal, P.S., 2017. Impact of domestic, foreign, and global environments on international business decisions of multinational firms: A systematic study. International Journal of Management, Technology, and Social Sciences (IJMTS), 2(2), pp.93-104.
Aßländer, M.S., 2017. Corruption in the IT Branch–The example of Siemens. The handbook of business corruption: cross-sectoral experiences, pp.209-236.
Bahoo, S., Alon, I., and Paltrinieri, A., 2019. Corruption in international business: A review and research agenda. International Business Review, p.101660.
Berghoff, H., 2018. “Organised irresponsibility”? The Siemens corruption scandal of the 1990s and 2000s. Business History, 60(3), pp.423-445.
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