Question

Text:

You are the financial vice-president of Turnkey Corp, a large manufacturer of consumer durables that is considering expanding into two developing countries. Azmenistan and Turgistan recently split off from the former Soviet Union and may provide opportunities for both manufacturing and sales for your company. While the two countries have similar backgrounds and current GDPs, they differ substantially in economic policies. Because of limited resources, your company can only expand into one country.

You would like to invest in a country that will be growing rapidly so that the citizens will be able to afford to buy your products. Your job is to assess the prospects for investing in the two countries.

In making your decisions, you have met with the Minister of Commerce for Turgistan, Mr. Boris, and the Minister for Development for Azmenistan, Mr. Volkov. Your company has also sent a number of representatives to the two countries to gather data to help you make your decision.

Azmenistan

Azmenistan has had a democratic and populist tradition. This has resulted in the people enjoying substantial civil rights after independence, including free speech and popular elections. However, the government has an inefficient civil service and a mixed record of enforcing property rights. Investment in education and physical capital is low even though public spending and the federal deficit are high.

Turgistan

Turgistan is run by a generally peaceful one-party government. The government budget has been balanced, with taxes and tariffs at a level typical for a developing country. Government spending has focused on education with the goal of universal primary education. The legal system is well developed and has been effective in supporting property rights (although less effective for political rights). Corruption is low.

Unlike Azmenistan, Turgistan is more restrictive in terms of civil rights and democracy. There are no prospects for elections in the near future and a number of opposition leaders have been jailed. All television and radio are run by the government. Newspapers have a close relationship with the government and generally follow a pro-government line.

Question: If you find that economic prospects are better in Turgistan, should you invest there? Or, does your company have an obligation to support the more democratic political regime of Azmenistan, even if it turns out that the returns to your firm will be lower? Include the ethical implications.

Answer 1

Although investment in turgistan will provide company with high returns in the near future, company has a moral obligation to support a more democratic political Regime of azmenistan.

Because company does not have the sole motive of profit making it has many more goals like survival, stability, growth, effectiveness along with profit making. Corporate social responsibility is one term which a company has to involve as its application while performing a business. It helps a company to build a long-term relationship with people and increasing profit in long term.

Azmenistan can be seen as a brighter future because of its democratic political nature. People will be able to choose between different products which will increase competition and which is more beneficial for a company then a country with Monopoly government. Turkistan government can anytime reject the contract with the company because of no democracy and it's a huge risk for the company. Where as in azmenistan free trade will be prevailing hence more security for the company.

Other than that company has a moral obligation towards supporting democratic countries in the world and investing in such type of countries as a social responsibility. As set a dear corporate social responsibility is one factor which is highly important for the survival and good working of a company in long term as well as short term. Company may be facing a lower income in short term by investing in Azmenistan, but open trade democratic environment will provide more profit to company in future.