HCC The Case of the Multi-Million Dollar Expansion Discussion

Case Study:

The Case of the Multi-million Dollar Expansion

Pegasus International Inc. is a leading manufacturer of integrated circuits (chips) and related software for such specialty markets as communications and mass storage, as well as PC-based audio, video, and multimedia. With a focus on innovation, Pegasus is committed to “technology leadership in the new millennium.” Its long-standing strategy has been to anticipate changes in existing and emerging growth markets and to have hardware and software solutions ready before the market needs them. The company has also made significant strides in wireless communications.

The systems and products of Pegasus’ wireless business have been selling well in its already existing markets in the United States, Japan, and Europe. But, like any company, Pegasus is eager to grow the business. At a strategy session with the Wireless Division, Pegasus CEO Tom Oswald and division managers decide to explore the potential of expanding their business to China.

Initial research indicates that China is likely to develop into a huge market for wireless because its people do not currently have this capability and the government has made spending on wireless a priority. Wireless is really the only choice for China because of the high cost of burying the communications cables necessary in wired systems; further, in underdeveloped countries, copper wires are often stolen and sold on the black market.

Subsequent research does raise one concern for Pegasus wireless managers. They tell Oswald, “We have this problem. China allocates frequencies and makes franchise decisions city by city, district by district. A ‘payoff’ is usually required to get licenses.”

The CEO says, “A lot of companies are doing business with China right now. How do they get around the problem?”

His managers have done their homework: “We believe most other companies contract with agents to represent them in the country and to get the licenses. What these contractors do is their own business, but apparently it works pretty well because the CEOs of all those companies are able to sign the disclosure statement required by law saying that they know of no instance where they bribed for their business.”

“I wonder if paying someone else to do the crime is the same as our doing the crime,” Oswald says. “I’m just not very comfortable with the whole question of payoffs. So, let me ask you, if we don’t expand into China, how much business will we lose, potentially?”

His Wireless Division manager responds, “It will be huge not to do business in all the countries expecting payoffs. China alone represents easily $100 million of business per year. It’s not life and death, but it is a sizable incremental opportunity for us, not to mention potential Japanese partners who will make significant capital investments. All we have to do is add our already-existing technology. When you consider all that, we have a lot to gain. What will we really lose if our local contractors are forced to make payoffs every now and then?”

Oswald wants his company to succeed, he wants to maximize shareholder value, he wants to keep his job, and he wants to model ethical leadership. He has made an effort to build a corporate culture characterized not only by aggressive R&D and growth but also by integrity, honesty, teamwork, and respect for the individual (See Pegasus Values below). As a result, the company enjoys an excellent reputation among its customers and suppliers, employee morale is high, and ethics is a priority at the company.

What should he decide in this case? Why?

Pegasus International Values

Pegasus International has always placed a high premium on its relationship with its employees. Although the nature of our business and markets may change as the company evolves to meet different market conditions, a strong emphasis on ethical behavior and respect for each other will remain constant.

Our behavior is guided by these simple but important values: Integrity and Intellectual Honesty

• Be Honest With Yourself and Others
• Tell It All and Tell It Like It Is
• Protect Our Intellectual Property
• Face the Facts

Teamwork and Trust

• Keep Your Commitments Make It Happen
• Take Personal Responsibility Be Accountable
• Think Beyond Boundaries Leverage Your Activity
• Value Each Other’s Contributions/ Opinions/Perspectives

Respect for the Individual

• Attack the Problem, Not the Person
• Be Prepared for Meetings
• Do Not Waste Others’ Time
• Listen Actively
• Seek Others’ Participation

Delight the Customers

• Create Value for Customers
• Promise What You Can Do and Do What You Promise
• Build Quality In and Improve Continuously
• Meet/Exceed Customers’ Requirements
• Create Long-term Successful Customers

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Case Study Instructions

Case analyses are typically 3-5 pages. The paper is an individual assignments and should reflect your own thoughts on the following Elements of Case Analysis. Your response should be submitted as a file upload (.doc or .docx).

Elements of Case Analysis (Outline)

1. Determine the relevant facts. This summary should not exceed one paragraph.
   (Note: You do NOT need to state what facts might be missing that you would like to have known, unless it clarifies information or context.)
2. Identify and explain the key ethical issue(s) involved in the case.

• Moral standards
  • honesty, fidelity, confidentiality, autonomy, injustice
• Categories of unethical behavior include:
  • Taking things that don’t belong to you
  • Saying things you know are not true, or giving or allowing false impressions
  • Buying influence or engaging in a conflict of interest
  • Hiding information that should not be hidden
  • Acting disloyally/not keeping promise or meeting obligation
  • Revealing information that should be kept confidential
  • Taking unfair advantage of others, i.e., manipulation, coercion, capitalizing on weaknesses (e.g., children)
  • Committing personal decadence
  • Perpetrating interpersonal abuse
  • Permitting organizational abuse
  • Violating rule
  • Denying justice or fairness
  • Condoning unethical actions
  • Balancing ethical obligations
• Identify the key stakeholders and explain how they would view this situation.
• Use your “moral imagination” to generate at least two potential alternatives to address the problem.
• Explain the implications of these alternatives relative to all 3 frameworks:

• The Utilitarian View (the greatest good for the greatest number)
• The Deontological View (duties/responsibilities, rights and principles)
• Virtue Ethics (implications for personal integrity and character)
• Offer a solution to the problem and defend it as being sound from both an ethical and business perspective. This solution can be one of the alternatives you identified or a combination of parts of them.

When writing the case study, do not reproduce the language in the case study, i.e., no quotes. Summarize or paraphrase everything you use from the case study. Outside sources may be used. Be succinct. Spell check and grammar check the assignment; find and correct errors. Be sure every point is expressed clearly.

Formatting – use MLA format, including:

• Do NOT use a separate title page
• Font must be 12-point, Times New Roman or Cambria
• Lines must be double-spaced
• Spacing for a new paragraph should be the same as between lines – a double line space.
• Indent to denote the beginning of new paragraphs
• Top/bottom margins may be no greater than 1”
• Left/right margins may be no greater than 1.25″

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