Jextra Stores

Introduction

Jextra Stores, owned by Sim Lim Holdings, was looking to aggressively grow its footprint in Malaysia. Tom Chong is their Malaysian country manager, and has been tasked with spearheading this growth strategy. Chong has been actively trying to build a new store in the city of Klang, he has found a site that he feels would be perfect for the new store, however the site is not zoned for commercial use. After meeting with the mayor of Klang, Chong is put into an ethical quandary; help finance a new school or risk not getting the site approved. With the new sites approval in jeopardy, Chong discovers he may have an issue with his best buyer, whom may be taking bribes and kickbacks from vendors. What makes the matter even more difficult for Chong is that the buyer, Arif Alam, is Jextra's top performing buyer. Chong admits that Alam has helped him make Jextra so successful in Malaysia.

This paper provides a case analysis and alternative case solution to the Jextra case study. The case revolves around bribery on two separate levels. The first is the idea of bribery in public and private partnerships. In this case it is the mayor of Klang looking for financing for a new school for his city, in exchange a zoning change that would allow Jextra to build a store in the location that it wanted. The second form of bribery is on a person-to-person level in order to get something both parties need. In this case Alam is getting funds in exchange for lower pricing in the Jextra stores, via buying the goods cheaper than any other store. Tom Chong is the country manager for Jextra Malaysia who is responsible for making these tough ethical and business decisions.

Situation Analysis and Problem Overview

When Tom Chong was named country manager for Jextra 8 months ago, he had worked as the finance director of the Malaysian division for the previous two years. This is an important point, because in two years he should have picked up on the idiosyncrasies in the Malaysian culture. A brief look at Hofstede's model would have told him that Malaysia scored very high in power distance, which mean people are content and accept the hierarchical order, and challenges to power are not received well. They score low in individualism, which makes them a collectivistic society, they form loyal groups, and managers manage groups not individuals. Malaysia scores a 50 on the masculinity test, which classifies them as masculine. It is a very competitive society and mangers are expected to be decisive. Malaysia also scores low on the uncertainty test, which means people are not adverse to change, and believe that there shouldn't be an excess amount of laws. By Incorporating the Hofstede model into this case, it makes sense that the mayor would request the financing for the school.

The culture dictates that people are aware of the hierarchical order, very competitive, form loyal groups, and like decisive leaders. The mayor likes his power. He believes in the hierarchy of the culture, interpretation is that he feels this is his right to ask for the school financing. He is loyal to his constituents and feels he is doing what is best for them by asking for the school. He is competitive, bringing in a new supermarket and school would make him look better than other mayors in the surrounding cities. If, and from the information we have in the case study we have no way of knowing for sure, Chong studied Hofstede he would not have been caught off guard. My own hypothesis is that he did not study Hofstede and was not a very observant person. Because how could you live in Malaysia for 2 years and not pick up on the culture?

The uncertainty score for them leads credence to the bribe, because maybe in Malaysia it is not considered a bribe, remember a low uncertainty score means as a society they do not see the need for more laws, only essential ones. However Chong consults a friend at one point, and is told that these payments are not commonplace in Malaysia, but in and around Klang they were. It is almost a situation of what came first the chicken or the egg. Because if Jextra were to make a payment from its social fund to the Klang school district after the store was built it would probably be ok, as opposed to making the payment before hand which is just an all out bribe, or more honestly put an extortion. Suppose Chong actually got the funding for the school, what would happen if that news got out? Would he face prosecution in Hong Kong for violations of the U.S. FCPA?

Although on a much smaller scale the bribery and kickback involving Arif Alam are just as complicated as the school issue. Alam the category manager for fruits and vegetables, his responsibilities is to manage the bundling of orders and negotiating of prices for products to be sold in the Jextra stores. The case study itself tells us that outside of the organizational hierarchy category managers had a lot of leeway to decide of ordering practices. Real world interpretation of this is that they did not have a lot of supervision. In the case it says that Chong had recently learned that there was ample opportunity to exploit the system by selling free samples, being given small appliances, and even going to "lavish" conferences. The only thing Chong should have an issue is here is the reselling of the sample on the "grey market." In most industries there are sales people and brand managers who get treated to nice trips and given goods as prizes to sell their product there is nothing out of the ordinary about this.

Chong then learns of a scheme that Alam has hatched with his father-in-law, where they set up an agency that got paid on commission to products that got placed in the Jextra stores. This was bad on many levels, not the least of which was if true the stores could begin to see decrease in the quality of the goods over time, and not have many things they could do about it because the supplier could make bribery accusations. What does Chong do? Alam is his number one buyer. Chong needs to keep growing the business and Alam is a key part of that. His fruits and vegetables supply chain could become ruined. He could upset the entire unit, because going back to Hofstede; managers in Malaysia manage groups not individuals. However they admire and respect strong decisive leaders also, but this situation does not lend its self to a quick decision because an investigation would take at least months. Who would run such an investigation?

Suggested Plan of Action

How should Chong respond to the Mayors request? Chong should refer to Jextra's business conduct code. In summary it states that Jextra is an international corporation who adheres to upholding itself to the highest ethical and