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Business Ethic

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| |Name |Garry Jonathan | |
| |Student ID |29112169 |Mobile phone |081806527970 | |
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| |Course code and title |MM5001 | Business Ethics & Law | |
| |Course time and place |Sunday, 2 September 2012 | Jakarta |Program |MBA Jakarta | |
| |Lecturer |Karl Knapp | |
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| |Assignment number |Mid-Test |Due date |11 September 2012 | |
| |Assignment title/topic/case |Business Ethic & Law Mid-Term Examination | |
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CASE: INDOFOOD’S RESPONSE ON INDOMIE RAID IN TAIWAN

Statement of Facts
PT. INDOFOOD CBP SUKSES MAKMUR, was founded in 1972 as PANGANJAYA INTIKUSUMA before changing to its current name in 1990. It is one of the companies owned by the family of Sudono Salim under the Salim Group. (Wikipedia 2012. Approx. 1st screen).

PT Indofood CBP Sukses Makmur Tbk (“ICBP”) is an established and leading packaged food company in Indonesia. ICBP was established from the Consumer Branded Product (“CBP”) Group of PT Indofood Sukses Makmur Tbk (“ISM”), a holding company listed on the Indonesian Stock Exchange since 1994. ISM provides total food solutions through its four strategic business groups: consumer branded products (CBP), Bogasari (flour producer), agribusiness, and distribution. Through internal restructuring, all business activities of CBP which involves instant noodles, dairy, food seasonings, snack foods, nutrition and special foods, as well as biscuits which was previously under Bogasari Group, has been transferred from ISM to ICBP, which was established in September 2009. The aforementioned restructuring process was completed in March 2010. ICBP principal brands include a variety of brands of instant noodles (Indomie, Supermi and Sarimi), dairy (Indomilk), food seasonings (Sambal Indofood, Sirup Indofood and Bumbu Racik), snack foods (Chitato and Qtela), as well as nutrition & special foods (Promina and SUN). (ICBP. 2012.)

The company had a change of pace when the son of Sudono Salim, Anthoni Salim, took over the business, as reported on Saturday, June 26, 2004. (Witular. 2004). Anthoni Salim took control of the management of giant food producer PT Indofood Sukses Makmur on Friday, marking the bold return of the seriously rich Salim family, which once had dominated many sectors of the country's economy for decades.

Anthoni, the son of tycoon Sudono Salim and the heir to the Salim Group business empire, was chosen by the firm's shareholders to replace Eva Riyanti Hutapea, who tendered her resignation last December amid reports of growing disagreement with the Salim family.

In a press conference after the firm's annual shareholders meeting on Friday, Anthoni said he took over the leadership of the firm primarily to counter increasingly stiff competition in the industry.

""Every company needs to revitalize itself in order to face tougher competition in the market ... Indofood is a huge concern with around 50,000 employees. In order to survive, we need to be more focused on our business,"" said Anthoni. The business was established by Salim family in 1990. The family still owns 52 percent of the firm through Hong Kong-based First Pacific Co.

The shareholders meeting turned poignant when Eva burst into tears as she left the meeting room and bid farewell to her staff and colleagues. ""Eva has made her own choice of career, and we regret her decision to resign. We will really miss her,"" Anthoni said.

Media reports have speculated that Eva's resignation was due to increasing acrimony and disagreement over company policy between her and Anthoni, as well as other Salim family members, including Franciscus Welirang, the son-in-law of Sudono and the Indofood director responsible for the company's Bogasari Flour Mills division.

Eva was credited with bringing Indofood back to profit, reducing the company's huge dollar-denominated debt, while at the same time erasing the company's negative image as a business closely connected with the regime of president Soeharto. Soedono Salim was known as one of Soeharto's closest associates.

Following the fall of Soeharto in 1998, the family lost many of its businesses, but retained ownership of some of its most profitable ones, including Indofood. Unlike during the Soeharto years, they avoided publicity, and Anthoni's appearance on Thursday could well be his first before the press since Soeharto's fall.

A legislator said that Anthoni's decision to take the helm of Indofood signaled that the family once again felt comfortable about living in Indonesia as the government had declared the family free of all debts resulting from its past infringements of banking regulations.

""The Salim family now feels more comfortable as they don't have any legal problems here anymore. This is the main reason why they have decided to come out from their hiding places,"" said legislator Hakam Naja.

Hakam, who is from the National Mandate Party (PAN), also said that Anthoni's return also signaled that the family was comfortable with Indonesia's current crop of politicians, adding that some top politicians now contesting the presidential election had recently attended the birthday party of Sudono Salim in Singapore.

Anthoni dismissed speculation that it was the Salim Group's debt-free status that had motivated him to take over Indofood's leadership. ""Salim Group businesses have always been here and have always expanded. We will not focus our activities anywhere else... And I have always been out in front, not hiding behind a screen,"" he said.

The company is currently one of the world largest instant noodle manufacturer with its brand, Indomie, which is distributed to Australia, Asia, Africa, New Zealand, the United States of America, and European and Middle Eastern countries. Other than its manufacturing plant in Indonesia, Indomie is also produced in Nigeria since 1995, and the facility has been the largest instant noodles manufacturing plant in Africa. (Wikipedia. 2012. Approx 1st screen).

On early October 2010, Indomie was banned in Taiwan due to some ingredients in the seasoning that contain preservatives that will be harmful to human health and might cause cancer in long run.

Chronology of the story: (Wikipedia. 2012. On Popularity Section) • On October 7, 2010, In Taipei, The Taipei County Public Health Bureau announced that cosmetic preservatives were found in the Indonesian instant noodle “Indomie” and ordered all vendors to withdraw the product from the market. • On October 11, Official Statement released by Indofood regarding the Taiwan Incident is The "The Company believes that the recent reports in the Taiwanese media arose in relation to instant noodle products manufactured by ICBP that were not intended for the Taiwanese market.” • Since December 6, 2010 Taiwan authorities have allowed Indomie instant noodle products to re-enter Taiwan market.

The following is the report from the local online newspaper regarding the withdrawal of Indomie in Taiwan market: (The China Post. 2012) The Taipei County Public Health Bureau yesterday announced that cosmetic preservatives were found in the Indonesian instant noodle “Indomie” and ordered all vendors to withdraw the product from the market.

However, Singapore health officials said their tests on the noodles did not show any sign of the substance, insisting that there is no need to de-stock the product. The company behind Indomie has also come forth to denounce the Taiwan findings.

The Public Health Bureau reportedly found butylparaben in the soy sauce packet provided. Officials also discovered traces of benzoic acid in the noodles and seasoning that surpassed the amount deemed safe by health standards.

According to the bureau, butylparaben is often used as an antifungal preservative in cosmetics such as lotion. The chemical is highly caustic and acidic and should never be used as additives in food.

The health bureau said consuming benzoic acid will result in loss of appetite, deterioration in kidney function, nausea and stomachaches, with the worse case scenario resulting in metabolic acidosis — the consequence of which may be coma and death.

Responding to the report and withdrawal of its product from local market by Taiwan’s government, Indofood claimed that the exported instant noodles to Taiwan are wholly compliant with the regulation of Taiwan Department of Health Bureau of Food Safety as announced on the company’s official website as follow: (ICBP. 2012. Press Release) Following media reports in Taiwan on the inclusion of the E218 (Methyl P-Hydroxybenzoate) food preservative in Indomie instant noodle products, PT Indofood CBP Sukses Makmur Tbk (“ICBP” or “the Company”) would like to clarify that noodle products the Company exports to Taiwan are wholly compliant with the regulations of Taiwan Department of Health Bureau of Food Safety.

The Company believes that the recent reports in the Taiwanese media arose in relation to instant noodle products manufactured by ICBP that were not intended for the Taiwanese market.

ICBP has exported instant noodles products to countries across the world for more than 20 years. ICBP has always taken all necessary actions to ensure that its products comply with food safety regulations in all of its markets.

“ICBP would like to emphasize that its products are wholly compliant with the globally accepted guidelines set out by the CODEX Alimentarius Commission, the international food standards body and established by Food & Agriculture Organization (FAO) and World Health Organization (WHO) as a joint global initiative to develop food standards to protect the health of consumers and to facilitate the Good Practice of International Trade.

“We are reviewing the situation in Taiwan, in relation to these reports and will take any action necessary to protect our consumers in this and other countries”, said Taufik Wiraatmadja, Director of ICBP.

In addition, the ban on Indomie has raised another speculation for competition in local market between Indomie and local instant noodle product as declared by Mr. Fransiscus Wellirang. (The Jakarta Globe. 2010) Senior executives from Indofood, the world’s biggest maker of instant noodles, on Monday speculated that unfair trade practices or illegal imports were to blame for their products being pulled off shelves in Taiwan on Friday, as two chains in Hong Kong followed suit on Monday.

Meanwhile, Indonesian health officials moved to reassure the public the noodles were safe.

Fransiscus Welirang, director of Indofood Sukses Makmur, questioned the Taiwan Health Department’s motives for banning Indomie brand instant noodles, which are produced by Indofood CBP Sukses Makmur, a spinoff company.

“Taiwan wants to protect its market from Indomie, which is cheaper than any other noodles,” Fransiscus said. (The Jakarta Globe. 2010).

Moreover, Mr. Fransiscus raised another opinion against the case as reported: (The Jakarta Globe. 2010). He also suggested that the Indomie noodles in Taiwan might have been intended for other markets and illegally imported to the island nation, which has higher food-safety standards than other countries.

Indofood CBP makes the Indomie noodles with different ingredients for different markets.

After a few months of investigations, the source of the issue was discovered, and Taiwan is urged to clarify it. (Sensationizer. 2010). Indonesian Minister of Commerce, Mari Elka Pangestu stated that Indonesia is urging Taiwan to clarify that Indomie instant-noodle is safe to be consumed.

After attending Trade Indonesia Expo (TIE) opening by Vice President Boediono in Jakarta, Elka Pangestu insists that all Indomie instant-noodles products are safe to be consumed, including the exported products in Taiwan.

"About Indomie, we would like to explain once again that whether in domestic market or exported, Indomie products are safe," Pangestu explained.

Pangestu said, Taiwan and Indonesia have different standard in food matters, especially about noodles and soy.

"Both standards are internationally approved, means that the Indomie products being exported to Taiwan are safe to be consumed by their people," said Pangestu.

She added, the Indomie products being recalled by Taiwan Food Safety Bureau are not the products marketed in the country.

"It turns out that the Indomie products are actually not intended for the Taiwanese market. That's what happened," Pangestu explained.

Related to this, she's been communicating with Taiwan Food Safety Bureau and asked them to immediately clarify their claim.

"What I want to avoid is the perception that Indomie products are not safe to be consumed, and that's not true. So we ask for clarification issue from Taiwan Food and Safety Bureau about this matter," she said.

Upon the clarification, Taiwan authorities have allowed Indomie instant noodle products to re-enter Taiwan market. (Wikipedia. 2012.)

Mr. Harry Susetyo, General Manager and Region Head of International Market at Indofood said “This issue happened because of the actions of parallel importers and exporters, or so called trader, that bought Indomie in Indonesia market, then sold them in Taiwan market, while the composition of the ingredients between Indonesia’s and Taiwan’s Indomie are different due to CODEX. Their action is based on currency rate between USD/IDR & USD/TWD a few months earlier.” (Personal communication, November 2010).

Analysis
This case occurred in late September – early October 2010 when the currency rate for 1 USD is 8,925 IDR. (IMF. 2010). Considering the shipment from Indonesia to Taiwan will take 1 month by sea, 1 month for custom clearance process in Taiwan’s Port, and 2 months for market distribution, the distribution of Indonesia’s Indomie in Taiwan’s market can be assumed to start at least 4-5 months prior to the occurrence of the case. Based on Mr. Harry’s comment (Personal communication, November 2010), the currency rate of 1 USD during the period of January to May 2010 was ranged between 9,408 – 9,125 IDR (IMF. 2010). The currency movements between these periods would be a good time to do trading business, when they bought Indomie in Indonesia market in January – May 2010 in large quantity and then sold them in Taiwan’s market 4-5 months later. By doing simply mathematical calculations, the trader will have 2.2 – 5.5 % of profit from this currency movements alone between a short period of time. The percentage may seems small, however, the quantity that was counted. With some adjustment (price mark up) to the ‘legal’ Indomie’s price in Taiwan’s market, the trader could gain more profit. No one could specifically describe how much the profit was.

Mr. Harry continued to comment, “As a matter of fact, Indofood has official Taiwan’s distributor that imports Indomie, which met Taiwan’s authority food safety requirement, into Taiwan’s market every month.” (Personal communication. 2010). It is obvious now that there were two types of Indomie that were distributed in Taiwan’s market, Taiwan’s Indomie, which is distributed through official distributor, and Indonesia’s Indomie, which is distributed through the trader. Indonesia and Taiwan have their own standard of food safety requirements, however, Taiwan’s standard is slightly above Indonesia’s, and Indonesia’s Indomie was not legally accepted in Taiwan’s market.

All things considered, the trader’s practice can be categorized as illegal, because of not only that they distributed Indomie from non-official distribution system, but also distributed Indomie, which was not met Taiwan’s food health requirements. As can be seen from the public point of view, such practice would be unethical because the trader neglected the regulation and law to gain profit from the huge popularity of Indomie. Furthermore, the basic human rights to have protection on human health, safety, and rights was violated. Given these points, the trader could be given a lawsuit and banned from doing business in Indonesia and Taiwan.

Being cornered by international media for distributing non-healthy food product, Indofood’s reputation of being the most delicious and famous instant noodle manufacturer could be ruined and no one would buy and consume Indomie in the future. In addition that Taiwan government conducted raids, withdraw, and ban all of Indomie product from local market, Indofood’s course of action was proven effective to counter the negative issue and raise its popularity. Together with Indonesian government, the company conducted scientific research to prove that the company has fulfilled the law and regulation accordingly. As a result, Indomie products were permitted to re-enter Taiwan market through official distributor. (Wikipedia. 2012).

Conclusion
Indofood’s response on Indomie raid in Taiwan was a good case to be a good example to see a problem, which concerned international market and Indonesia reputation, from many aspects, such as: business ethic, business law, reputation management, human rights, company dignity, company best practice. By solving such international problem, we can conclude that the company’s executives have done an excellent job and made perfect decision to maintain company’s reputation and customer’s loyalty.

REFERENCE LIST
Wikipedia, 2012. Indomie. [online] Available at: http://en.wikipedia.org/wiki/Indomie [Accessed 8 September 2012].

Wikipedia, 2012. Indomie. [online] Available at: http://en.wikipedia.org/wiki/Indofood#History [Accessed 8 September 2012].

Rendi A. Witular, 2004. Salim in driving seat at Indofood. The Jakarta Post, [online] 26 June 2004. Available at: http://www.thejakartapost.com/news/2004/06/26/salim-driving-seat-indofood.html [Accessed 8 September 2012]

The China Post, 2010. Harmful Preservatives Found in Indonesian Instant Noodles. The China Post, [online] 13 October 2010. Available at: http://www.chinapost.com.tw/taiwan/national/national-news/2010/10/13/275996/Harmful-preservatives.htm [Accessed 8 September 2012]

ICBP, 2010. ICBP Confirms Indomie Complience with International Food Safety Guidelines. [press release] 12 October 2010. Available at: http://www.indofood.com/InvestorRelations/PressReleases/ID/tabid/169/articleType/ArticleView/articleId/9/language/en-US/ICBP-CONFIRMS-INDOMIE-COMPLIANCE-WITH-INTERNATIONAL-FOOD-SAFETY-GUIDELINES.aspx [Accessed 8 September 2012]

Baskoro, Faisal Maliki, Sagita, Desy, and Wardhani, Susilo, 2010. Indofood Insist Noodles Safe After Taiwan Ban. The Jakarta Globe, [online] 12 October 2010. Available at: http://www.chinapost.com.tw/taiwan/national/national-news/2010/10/13/275996/Harmful-preservatives.htm [Accessed 8 September 2012]

Sensationizer, 2010. Indonesia Urge Taiwan to Clarify Indomie. Sensationizer, [online] 12 October 2010. Available at: http://www.sensationizer.com/2010/10/indonesia-urges-taiwan-to-clarify.html [Accessed 8 September 2012]

IMF, 2010. Representative Exchange Rates for Selected Currencies for September 2010. International Monetary Fund, [online] 12 October 2010. Available at: http://www.imf.org/external/np/fin/data/rms_mth.aspx?SelectDate=2010-09-30&reportType=REP [Accessed 8 September 2012]

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...BUSINESS ETHICS Name Institution of Affiliation Introduction The business environment is changing to embrace ethical conduct in the performance of duties and activities of individuals in professional setting. Nowadays, companies are exposed to public scrutiny where their corporate social responsibility and social accountability are assessed. A shift towards rethinking the various functions of a business entity to encompass ethics into their daily management activities has been undertaken as entities seek to be market leaders. Business ethics encompasses the relationship the company has with the employees, customers, shareholders and the community. Business ethics is the analysis of business activities and situations where issues pertaining what constitute a right or wrong act are dealt with through institutional processes (Jennings, 2011). Consequently, ethics involves ascertaining good practices from bad practices based on the context of morals. On the other hand, moral conduct is the behaviour exhibited by human beings that can either be right or wrong depending on the context whereas business ethics. Business ethics can be viewed from two distinct perspectives; descriptive ethics and normative ethics. Normative ethics ascribes to the justification of moral systems whereas descriptive ethics depicts what ethical practices are. Ideally, the paper will delve into more details concerning what business ethics entails and the importance of business ethics...

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Business Ethics Assignment

...Higher Education Assessment | School: | Hospitality, Tourism and Sport | Awarding Body: | Lancaster University | Module Code: | TH4MD013 | Programme Title: | Foundation Degree Hospitality and Licensed Retail Management | Occurrence: | 13/15 | Module Title: | Business Ethics and Social Responsibility | Weighting: | 100% | Assessment Title: | Corporate Social Responsibility | Assessment No. | 1 | fds | Tutor Details | Name | Ian Mills | Telephone No. | 504481 | | Email | Ian.Mills@blackpool.ac.uk | Room | SB110 | | Internal Verification (IV)For Staff Use Only | Assessment Brief IVMust be internally verified prior to distribution to students | IV Name: | Beverley Heinze | | | Date: | | | Student Submission IVTo be completed if the assessment submission forms part of the IV sample | IV Name: | | | | Date: | | | Assessment Distribution, Submission & ReturnPlease note that late submissions may incur a penalty as defined within the assessment regulations of the awarding body | Distribution Date: | Monday 19th January 2015 | | Submission Time: | Midnight | | Submission Date: | Friday 15th May 2015 | | Submission Point/Location: | Moodle | | Feedback Week Commencing: | Week commencing Monday 1st June 2015 | | Student Number: | | Student Name: | | | Assessment RecordFor Staff Use Only. All assessment grades are subject to ratification by the College board of examiners and the awarding body. | Grade Awarded:...

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Business Ethics

...The success of modern business is apparent, but recently there is much concern in the business-and-society literature and in the general press on whether business fulfils its social role responsibly. Business ethics, corporate social responsibility and corporate governance movements have been developed in recent decades as responses to a growing sense of corporate wrongdoing. This paper attempts to explain why the three movements seem yet to have generated little in the form of widely accepted prescriptions for improvement of business behaviour to the satisfaction of the “constituents” of business, i.e. the major stakeholders. Without denying the usefulness of any of the three movements, the paper suggests that there are weaknesses in all three, especially concerning the way they conceive modern business operation. To this end business pluralism, responsive codes of practice and re-examination of the assumptions (conditions) of business operation could be helpful. In the business literature there is a major strand that celebrates business strength and seeks formulae for success. This strand was manifested in the Scientific Management tradition dating from Frederic Taylor’s work in the early twentieth century (Taylor, 1911) and continued through the Human Relations studies of Elton Mayo that sought to find growth through taking care of the “people dimension” (Roethlisberger and Dickson, 1939). The tradition was further developed following the publication by Peters and Waterman...

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Business Ethics

...Running head: Ethical and Moral Issues in Business * Ethical and Moral Issues in Business MGT/216 * Ethical and Moral Issues in Business * In this paper I will address the following topics: the differences between moral and ethical issues, the differences between business ethics and personal ethics and list some examples of ethical issues in today’s business environment. The line between morals and ethics may seem blurred; however, some differences between the two do exist. Morals are defined as one’s personal values or beliefs. These values are typically established by religious beliefs or family influences. Ethics are defined as guidelines for behavioral standards. These guidelines are usually set in place by a specific group or groups of people. For example, businesses usually have a specific code of ethics that may differ from a religious group’s code of ethics. What is acceptable for one group or organization may be unacceptable to others. Business ethics are defined as codes or guidelines used to govern behaviors and practices within any given company. Typically all companies abide by a written code of ethics. These codes are used to ensure that employees understand and practice acceptable behaviors in the workplace. Usually a company’s code of ethics is influenced by the culture surrounding that business. In the business world, personal ethics will sometimes be put aside for the greater gain of the...

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Business Ethics

...on ethics by the Santa Clara University, a number of years ago sociologist Raymond Baumhart conducted a survey asking people about what they think of ethics. The results showed many people linking ethics to their feelings, their religion and standards set by the society (Manuel et al, para. 2). Manuel Velasquez and other authors of an article published by the Santa Clara University on business ethics pointed out flaws in the responses. They believed that feelings sometimes deviate from ethics because a person may feel to do something that is not right (Manuel et al, para. 4). Moreover, they argued that most religions advocate high ethical standards, yet these standards cannot be identified with religion because if they were, they would have only applied to religious people (Manuel et al, para. 5). Finally, saying that ethics are standards that a society set was proved wrong as the standards of behavior in a society can diverge from ethics, considering Nazi Germany which was a society that became morally corrupt (Manuel et al.). This was what ethics are not. Then, what are ethics? Ethics are the well founded standards that are backed up by consistent and well founded reasons. These standards include rights, obligations, honesty, fairness, benefit to society or specific virtues. For example, the rights may include right to life and right to freedom whereas reasonable obligations may include abstaining from stealing and fraud (Manuel et al, para 7). The application of ethics is not...

Words: 3013 - Pages: 13