Ethical Challenges in Emerging Markets

“Ethics is the difference between knowing what you have the right to do and what is right to do.” -Potter Stewart, former Associate Justice of the U.S. Supreme Court

As the world’s marketplace continues to become more global in scope, it presents an increasing number of opportunities for multinational companies to expand their operations into potentially lucrative emerging markets. According to, the relative average GDP growth rate for emerging nations such as China, Brazil, Vietnam, India, Turkey, and others has been about twice that of the more advanced nations over the past 15 years, a trend that is expected to continue in the foreseeable future.

However, while staking a claim in developing markets can offer access to new profit centers for companies that are struggling to remain viable in a sluggish U.S. or European economy, it can also result in significant ethical dilemmas.

Types of Ethical Challenges Companies Face

Perhaps the single biggest ethical challenge many companies face is gaining an understanding of the various cultural differences. Some companies take a “one size fits all” approach to ethics, and attempt to apply their normal corporate standards in new markets. However, this often results in a policy that fails to meet the needs of the market or is met with resistance. These companies quickly realize that, when it comes to ethics, the rules for doing business in emerging markets aren’t necessarily the same as at home.

Another significant area of concern is corruption. In many emerging economies, corrupt practices such as bribery are rampant, and are even an expected method of doing business. While learning to operate without paying bribes in these nations can be difficult, it has become a business imperative as efforts to crack down on violators of anti-corruption laws continue to intensify.

In essence, for companies to avoid ethical dilemmas in emerging marketplaces, they must perform a rather delicate balancing act. In particular, companies must find a way to balance the rapidly evolving global values, standards, and norms with the needs, cultures, and business practices of the markets in which they wish to do business.

Meeting the Challenge

There are a number of steps your company can take to ensure that you develop and maintain an ethical operation in any emerging market. Here are just a few:

1. Choose intermediaries wisely. Under the Foreign Corrupt Practices Act and the U.K. Bribery Act, companies can be held responsible for the actions of third-party agents doing business in foreign countries on their behalf. Be certain to thoroughly vet all vendors, resellers, consultants, and others.

2. Develop an ethical reputation. Make it a point early on in your involvement in an emerging nation to establish your company as one that will always act in an ethical manner. This will discourage corrupt entities from attempting to engage in bribery or similar practices when doing business with your company.

3. Practice patience. In many instances, an official may request payment of a bribe to expedite a transaction. By simply declining to pay and indicating your unwillingness to “play the game,” you may find that you will still be able to execute the transaction after a brief waiting period.

4. Build a culture of meritocracy. When staffing your operation in an emerging market, hire based on how individuals will fit into your intended company culture instead of their experience, social connections, or ethnicity. This sends a clear message that all candidates will be judged using a standardized process instead of by who they know.

5. Put the law on your side. Just because you choose to play by the rules, it doesn’t always mean your competitors will. According to, companies can often seek remedies against unethical competitors and level the playing field by bringing a case against them under the FCPA or U.K. Bribery Act. Some local jurisdictions also have monitoring bodies of their own, although local laws are often applied on an inconsistent basis.

To learn more about ways to effectively deal with the challenges posed when doing business in emerging markets, read the article Even the Virtuous Can Thrive in Corrupt Countries at or Managing Ethically in Corrupt Environments at the London Business School website.

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