Rmit International University Vietnam

RMIT International University Vietnam

BUSM4185

Assignment 2 Cover Page

INTRODUCTION

Doing business is not as easy as playing a game and there are a lot of factors that top managers have to consider in order to maintain their company profits and reputation. According to the case study, a Foreign steel factory in the South of Vietnam is in a difficult situation while its management approaches are not appropriate. In the upcoming paragraphs, we will analyze this company’s problems in detail based on related theories and suggest several theoretical measures to mitigate the issues.

The Steel Company is blamed for disposing toxic pollutants to the local air and water, which seriously affect the environment and residents’ life. Although the authorities came into conclusion that there was a little of waste released into the environment by its factory, some investigations have revealed the opposite evidence. Therefore, M. Sumimoto, CEO of the Steel Company, is in a dilemma whether he keeps following the producing activities to satisfy his shareholders and customers or shuts down the factory because of the objection among local residents.

THEORIES

Some related management theories will be considered in this case analysis are an external environment, power and ethics. Firstly, in the external environment, two factors which should be analyzed in this case are shareholders and stakeholders. Shareholders are the people who own the stock in a business while stakeholders can be the ones who are just interested in the company activities such as customers, suppliers, employers (What is the difference between stockholder and stakeholder? n.d.) (What comes after those ellipses? n.d.). Both of these factors have influences on the company’s decisions. The reason is that shareholders usually invest their money in the development of the company and expect for benefits in return. Also, stakeholders such as customers can draw pressure on the constant development of the corporation when they have a right to continue to buy its products or not. Moreover, the stakeholders can be impacted by the business in terms of its activities. Secondly, power is defined as the influential relationship among individuals or groups. Some power types such as legitimate and coercive can be seen in this case. Finally, ethics theory is covered by Aldo Leopold’s speech: “ethical behavior is doing the right thing when no one else is watching- even when doing the wrong thing is legal”. In other words, ethics is taking suitable action regardless of the situation.

APPLICATION

In the case of the Steel Company, problems in the external environment come from the conflict between the bondholder and their shareholders and stakeholders. Based on the external environment theory about their relationship, while the factory is under pressure of shareholders to maintain their production so as not to make losses and depress the shared value, the important impact of stakeholders can be seen in the action of local residents and authorities. They hold investigations and even asked the company to close temporarily to clarify all of the blames. Additionally, local authorities are affected by the company regarding the tax income and job opportunities provided. All of the above follow what the theories tell about the external environment impact on the corporation. Then, according to the power theory, the local authorities have the legitimate power on the company. The authorities use it to stop the factory’s production in short-term. Coercive power can clearly be identified when the stockholders force the company to pursue the activities. Finally, followed the ethics theory, the Steel Company is unethical but legal. They have been concluded to be innocent among the pollution accusation by the local authorities. However, this corporation is unethical in terms of making false explanation when actually releasing the toxic wastes to the environment, which are 50 times higher than the ceiling level.

RECOMMENDATIONS

1. According to Key principles n.d, the first in 10 vital principles to deal with shareholders is “communication”.

• This activity can help to build more trust and show the responsibility towards the negative situation. During the meetings, some misunderstandings are also solved, which leads to better cooperation.
• Unless the manager comes up with potential plans before the meetings, all of the ideas are just the empty promises. Also, it is not easy to call for more investments during the depressed period.

🡪 It is suggested that the Steel Company should hire a good negotiator, or at least the bondholder himself, to have a conversation with other shareholders about new strategies and how much time is needed to achieve the target.

1. Also for the conflict with local residents and publicity, this factory has to show their responsibility and devotion to improve the local environment.

• This would somehow decrease the anger and protests as well as enhancing trust.
• Time and effort, especially money, are the key concerns and the manager should develop more short-term solutions such as appropriate compensation.

🡪 First of all, the press conference must be carried out with the purpose of delivering official apology and solutions for the environmental problem. Several cleaning campaigns and compensation should be conducted at the same time. All of these activities can be recorded by selected journalists from reliable newspapers like Tuoi Tre, Thanh Nien to prevent unhelpful articles on social networking and newspapers. To avoid the turn-over of the workers, who are also local residents, the Steel Company should use their referent and reward power. If the employers stay, they will receive advantages. Every three months, the most active worker is commended and given bonus.

For instance: Vedan Vietnam manufactures sodium glutamate products. In 2008, this business was under criticism for disposing pollutants to Thi Vai river. At that time, no official apology conference was held except for the insincere confession and prevarication of the vice-president (Le Nguyen and Duc Minh 2008), which led to the bad attitudes among Vietnamese people. However, in 2017, this company invited journalists to its factory to record its waste treatment process and also delivered the apology again in the press conference (Sao Mai 2017). This would help to build a much better image for the company.

1. For all the accusations, the company should hold more investigations and publish the real waste disposing numbers.

• This can rebuild the company’s image, sustainability and ethical behavior toward customers.
• The company may be in a disadvantageous position towards in terms of negative waste rate as well as drawing more public’s attention and waves of anger.

🡪 After working with an expert in the serious investigations, the CEO can contact some reliable newspaper such as Tuoi Tre, Thanh Nien to operate an interview or give information for articles about the results. The figure must be clear and objective including both positive and a few negative ones. While revealing the negative ones, practical solutions must be enclosed and the changing attempt must be drawn significantly.

For instance: Target Corporation is an American department store retailer. This company has the annual CSR report to announce to the stakeholders about its process (Target: a case study on transparency - Speaking of Seafood 2017).

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