Tobacco Case

This case reflect different decisions made by multinational firms and governments regarding the sale of tobacco to third world countries and also reflect the social responsibility and ethical values underpinning the decisions.

The sales volume in United States is found to be shrinking due to campaign against smoking, higher cigarette taxes and due to concern Americans have about general health. Even though companies have agreed to sweeping restrictions in the United States on cigarette marketing and secondhand smoke and to bolder cancer warning labels, they are fighting even in the third world to convince the media, the public and the policy makers that similar changes are not needed.

Recently, a major U.S. tobacco company signed a joint venture agreement with the Chinese government to produce cigarettes in China. The company projects that the 80% of the cigarettes produced under the joint venture will be for the domestic market, with the remainder for export.

Tobacco companies adopt different advertising and promotional strategies like in Gambia, smokers send in cigarette boxtops to qualify for a chance to win a new car. In Argentina, smoking commercial fills 20% of the television advertising time. Such things as babies' shirt printed with cigarettes logos and health warnings printed in foreign languages are some of the ways adopted to promote their products.

Third world governments stand to profit from tobacco sales. Brazil collects 75% of the retail price of cigarettes in taxes. Tobacco is largest cash crops in some of the countries and source of revenue for the government.

The complexity of ethical decisions is compounded in the international setting, which comprises different cultures, different perspectives of right and wrong, different legal requirements, and different goals. When companies conduct business in international setting, the ground rules become further complicated by the values, customs, traditions, ethics, and goals of the host countries, which have developed their own ground rules for conducting business.

Three prominent American ethicists have developed a framework to view ethical implications of strategic decisions by American firms. They identify three ethical principles that can guide American managers in assessing the ethical implications of their decisions and the degree to which these decisions reflect these ethical principles or ground rules.