GSK in China: Bribery allegations
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Assist me with a clear and logical analysis of the issues that responds to the criteria and questions listed below.
Provide additional research from scholarly sources and academic journals.
Use the data presented in the case study “GlaxoSmithKline in China (A)” (Harvard Business School case, no. 9-514-049).
Please address the following issues and questions:
The CEO of a company based in the USA with subsidiaries in the United Kingdom is contemplating moving some of its operations to China but has read about the GSK bribery scandal in China. The CEO understands that the climate for foreign companies operating in China is not as welcoming as it used to be. The CEO is now asking his manager for international business to assess the GSK case, analyze the issues it presents. In particular the CEO wants to know what lessons his company can learn and how the company can reduce its risks when operating in China. The CEO handed his manager this list of questions:
•GSK has featured its robust ethics and compliance program, even a "3rd Party Code of Conduct" for suppliers. What went wrong? What are the main external and internal factors that encouraged the GSK bribery scandal in China? Which, in your opinion, are more important? Explain your position.
•Assess GSK's response so far. Are the initiatives that GSK has implemented to address the bribery problems sufficient or would you suggest further actions? If you were Mark Reilly what would you have done? Explain.
•Do you think that GSK has been treated unfairly? Was GSK really at fault or was it just unfortunate to have gotten caught given the perception that companies have to resort to bribing to win contracts? Explain.
•How can we avoid similar situations and how can we reconcile local expectations of questionable payments with the U. S. Foreign Corrupt Practices Act or the U.K. Bribery Act? What do you recommend? Explain your position.
•What strategic and operational lessons can the CEO learn from this analysis?
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Solution Summary
Chinese economy has though undergone reforms in healthcare, there still are loopholes in the system which can be exploited by an external party.
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GSK IN CHINA
GSK has featured its robust ethics and compliance program, even a "3rd Party Code of Conduct" for suppliers. What went wrong? What are the main external and internal factors that encouraged the GSK bribery scandal in China? Which, in your opinion, are more important? Explain your position.
Chinese economy has though undergone reforms in healthcare, there still are loopholes in the system which can be exploited by an external party. People who worked for state-owned employers received inexpensive coverage for themselves and their families while those who worked in private sector had no coverage at all. For such people there was private health insurance that covered basic services but specialist services were not. Majority of healthcare expenditures, about 70% were paid out of pocket by individuals. Doctors received very petty salaries from hospitals and were not allowed to take additional jobs to supplement their incomes. Bribing in domestic Chinese environment was not uncommon and was a common marketing strategy. To take advantage of doctor's plight, some pharmaceutical companies placed high costs on sale of drugs and promised commission to doctors when specific volume of drug was sold. Hence, the most important factor that encouraged bribery was the ease with which fraudulent practices could be undertaken. The underlying reason being money as the motivator could influence doctors to prescribe drugs by GSK and bring in more sales for the employees, which in turn resulted in higher status and pay. Money was the most important factor contributing to the scandal because if doctors were not struggling to make their ends meet, they would not be willing to take the risk of accepting bribe and jeopardizing their careers. It was the lack of it that made them resort to unethical means. Other ...
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