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Question 1: Should Terim let somebody else complete the transaction because he knows that if he does not sell to the North Koreans somebody else will?
This question may stimulate a great deal of discussion among students. On the one hand, Terim is contemplating a transaction involving commodities (chemicals and lumber) as well as with a country (North Korea) with which he is not all that familiar. These aspects might argue against completing the transaction. Moreover, in light of certain events involving North Korea—specifically, admitting that the country possesses nuclear capabilities—Terim might pull back from the proposed transaction because of uncertainty as to exactly how the chemicals will be used by the North Koreans (e.g., might the chemicals actually be used to make weapons?). On the other hand, even though the case indicates that the Turkish have imposed trade sanctions against North Korea, trade involving “banned” partners is periodically achieved by routing the products through other countries.
Question 4: Which option should Terim recommend? Why?
Either option can be supported. For example, the Romanian option is nearly $30,000 cheaper than the Syrian option, thus solely from the perspective of cost, the Romanian option might be preferred. However, the Romanian option takes three weeks longer to complete than does the Syrian option. Moreover, the Romanian option appears to be riskier than the Syrian one in the sense that things might go awry in the redocumentation process.
Question 5: What other costs and risks are involved in these proposed transactions, including some not mentioned in the case?
The entertainment of the North Korean officials can be viewed as both a cost and a risk. At a minimum, luxurious hotel accommodations as well as business-related dinners and receptions will not come cheaply. From a risk perspective, there is a chance that the entertainment could get out of hand and generate embarrassing publicity.
There is also a chance that some of the rusvet “fees” might unexpectedly increase, particularly those associated with generating the false documents. If providers of the documentation understand the “captive” nature of the lumber shipment from Romania to Turkey, then it is possible that these providers could leverage their position to increase their income.
A more general risk for these proposed transactions is the volatile political situation in the Middle East. One manifestation of this volatility is through disruptions in transportation routes; traffic through the Suez Canal has periodically been influenced by the region’s political volatility—an important consideration given that the proposed lumber shipments will need to move through the Suez Canal.
Students are likely to generate other costs and risks.
Question 6: Regarding the supply chain, how—if, at all—should bribes be included? What functions do they serve?
From a broad perspective, the purpose of bribes should be to facilitate the completion of international transactions. At least two perspectives must be considered when analyzing the first part of the question. One is the legal perspective; quite simply, in some countries (such as the United States), bribes are theoretically illegal—regardless of the circumstances. Under this scenario, bribes would not be included in the supply chain.
A second perspective, practicality, understands that bribes are essential for the completion of international transactions. Under this scenario, supply chains would need the flexibility to accommodate situations that require a bribe. One manifestation of this flexibility could be the name assigned to a “bribe.” For example, one of the authors was not allowed to board an airplane flight to Katmandu, Nepal until all four members of his traveling party (each a U.S. resident) paid what was called a “weight penalty.” This “weight penalty” appears to have been bribe-like in the sense that none of the other passengers, several of whom clearly had weight problems, were assessed “weight penalties.”
Question 7: If Terim puts together this transaction, is he acting ethically? Discuss.
The answer to this question could depend on one’s definition of ethical actions. One definition, for example, focuses on a personal code of conduct to guide one’s actions. Another definition suggests that anything that is not illegal is ethical. Having said this, the Romanian routing appears questionable because of the document alterations associated with it. These document alterations are probably illegal, regardless of the country in question.
Alternatively, because the Syrian routing does not appear to include any overtly illegal activities, some might view it as ethical. Even though it includes rusvets, Terim merely would be following accepted protocol for many international transactions. Moreover, the use of Syria is “smart” in the sense that Terim is avoiding a Turkish port where the chances of getting caught, and the associated penalties, are much higher.
From another perspective, the case suggests that Terim is struggling with the decision to do business with the North Koreans in part because of concerns about their communist regime and support of terrorist policies. Because this may indicate that Terim has a “conscience,” any transaction involving the North Koreans could be viewed as unethical in the sense that Terim is violating his personal code of conduct.
Question 8: What do you suggest should be done to bring moral values into the situation so that the developing countries are somewhat in accordance with Western standards? Keep in mind that the risks involved in such environments are much higher than the risks of conducting business in Western markets. Also, note that some cultures see bribery as a way to better distribute wealth among their citizens.
Because this case involves organizations located in two non-Western countries, it might be culturally insensitive to bring in moral values that are more in accordance with Western standards.
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