ETHICAL ISSUES AND THEIR EFFECTS SMALL AND MEDIUM SIZE BUSINESS

ETHICAL ISSUES AND THEIR EFFECTS SMALLANDMEDIUM SIZE BUSINESS
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Introduction
Kitchen Best Appliance Company LTD. Is a home appliance manufacturing company that is based in the mainland Hong Kong with mother manufacturing plant located in Guangdong province. The company was founded by a popular Hong Kong business kingpin known as Chan Dong Hwa. In the 2008 fiscal year, Chan Dong handed over the management of the firm to his son named Henry. Henry was very ambitious and embarked on a revamping process of the firm so as to diversify its business outlets and broaden its revenue channels. These ambitious targets were aimed to double revenues in the next four years.
Henry being a man of controversies altered the company's objectives into his personal gain's agenda. His plan suffered a huge setback in 2010 where a number of incidences and occurrences in the company's business revealed personal gains made at the pretence of the company's objectives. Such instances included his misconduct that undermined the company operations and belittlement of the management as most decisions were made without due consultations. Ethical issues are relevant for the success of any going concern and it is very prudent for any CEO to be very vigilant so as not to upset the social responsibility of the firm for scrupulous financial gains. As a CEO, Henry was tasked with the responsibility of putting his messy house in order so as to decide what kind of internal control mechanisms that would ensure the future stability of his crumbling firm.
Major, Social, Ethical and/or Legal Challenges that Kitchen Best and other Small and Medium Size Enterprises Face in doing Cross- Border Business.
Light industry has been the mainstay for Hong Kong industrialization. The industrialization campaign began in the early 1950s. The industrialization process has relied on light industry and Small and Medium size business mostly because Hong Kong has insufficient land and other entrepreneurial resource to put in place for heavy industries.
The SME's willingness to respond to customers, agility and cost effective mechanism used by most it players enabled the sector to flourish. By 2010, Hong Kong had more than 290,000 registered SME's, providing about 47 percent employment level in the private sector. These SME's comprised of 98 percent business units which were dormant in Import/export, wholesale sector and to some extent the retail sector. As it has been pointed out that these business enterprises were mostly in the export/ import kind business, it was very imperative for the managements to be very vigilant with each and every change in the political environment of their trading cross-border countries. Their businesses have been hit by regulations of other countries, rogue contractors and subcontractor who were easily bribed to clear goods and hence jeopardizing the ethical and legal procedures of the exporting company. Take a case of Kitchen Best ltd predicament when a shipment to German was rejected because it did not meet the testing and safety requirements. For kitchen Best, all the necessary protocol was followed but through dishonesty of other key players in the verification and testing process, the transaction was bungled leading to the cancellation of the deal. This is not only the case with Kitchen Best ltd only, other business units in Hong Kong are also faced with these challenges of accountability and transparency. Employees of most of these small enterprises are not committed and trustworthy to the course of good and ethical business practice (Chamerlain, 1973). Taking for the example Sze, a purchase and procurement employee at Kitchen Best company, he was mandated to competitive tender for a company that would export certain designer products to France. Due to lack of business ethics like most of other procurement officer in Hong Kong, he awarded the tender to his brother in law who offered substandard goods that were not accepted. Bribery and generating business ethics and adherence to commercial law has had a bad impact on Kitchen Best and other Small and medium size business in Hong Kong as this has resulted in huge losses, ligations and compensations.
Kitchen Best has a culture of offering entertainment and kickbacks to potential clients and business partners. What legal risks does this pose to the company in a cross-border setting?
Giving incentives in the conventional way is not illegal but if kickbacks are given in order to get favors' can be taken as unlawful. For the case of Kitchen best, kickbacks were given so as to close a business but not to complement it. This is dangerous practice as it can be taken as premise by an independent party to conclude that the business being conducted is substandard. In most cases, kickbacks are used to make unworthy deals to go through. On the case of Kitchen best, Henry has had enough litigation which had put the ethics of the firm at trial. Any other involvement of questionable activities such as offering entertainment to its customers and business partners can be taken as giving bribe by foreign importers. This could pose serious risks as business may be lost, customer loyalty would also be lost, law suits and compensations from clients would follow when goods ordered had been rejected.
Kickbacks may also be inflated as with the case of Kitchen Best. Ma, one of the employees at Kitchen Best was involved ...