Pegasus International Inc.
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.”
Tom asks his Wireless
Division manager “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.”
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. 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.
Case Questions
1. What are the ethical issues?
2. What stakeholders are involved?
3. What options are available?
4. Specify a course of action that in your
opinion the main character in the case should follow.
