David Werwie Wk 3: Ecuador Flower Power Written Assignment January 29, 2012 Professor Daria Crawley

MBAD6153-L1 - INTERNATIONAL BUSINESS SP12/ROL

American consumers love roses. They are always a favorable gift to a friend or loved one. However, the question is rarely asked where do these roses originate from and under what conditions? As is often the case with imported goods from other countries, consumers are unaware of the conditions present in the country of origin from which goods are created. For the purpose of this case, the question is asked under what conditions Nevado Roses operated under for both their employees and their roses. 1. Identify and discuss the ethical issues faced by 3 stakeholders highlighted in the Ecuador: Flower Power video. Market studies have shown that U.S. consumers are not currently interested in fair trade practices for the market of roses. In other words, consumers purchasing power are unlikely to be swayed by the conditions present in Ecuador. There only concern is the quality of Roses. This results in a confounding dilemma for John Nevado, one of the owners of the business. On one hand he wants to engage in socially responsible fair trade practices to do the right thing for the environment and the local people of Ecuador. However, what incentives are there for him to participate in these extracurricular affairs? Natural market forces have not resulted in improved working conditions for the people of Ecuador and the sustainability of the land. There has been little incentive from governments and consumer demand for growers to comply with fair labor practices and produce a sustainable, organic rose. This is where the challenge arises for Nevado Roses. In competitive markets, how does one incorporate these practices when profit is taken away from these organic principles? It has been said that in order to achieve corporate social responsibility and maintain profits, one must truly believe in their efforts. It is vital to picture the long-term success of the company over shortterm financial losses when incorporating social responsibility. In other words, the ability to sacrifice profits now for a more engaging company in the future is required, especially for John Nevado and his company. It will surely cost more to provide an organic farm which engages in an environmentally responsible method of operation. However, Nevado Roses believes in their efforts and are willing to sacrifice time and money for the good of society and the health of the environment. Globalization, sustainability, and increased consumer awareness have resulted in recent trends towards improved working conditions and organic, environmentally friendly business practices. Markets around the world will continue to engage in fair trade practices as consumers purchasing power increases. John Nevado believes the worlds consumers are trending towards increased compliance with environmental standards. He remarkets, I think we're part of a global trend, from Al Gore to the yoga mom going to Whole Foods to buy organic vegetables," says Nevado. "We're all part of something bigger, and we're finally realizing there are finite resources. We need to take care of those and the planet." Some larger companies are beginning to recognize and get behind the notion of free trade. Sam's Club, which happens to be the company I work for, has recently agreed to sell Nevados fair-tradecertified flowers. The real test, however, will be if there are enough American consumers who are willing to spend money on Nevado's vision. 2. Using the theories and/or concepts discussed in your textbook explain Nevado Roses' approach to Corporate Social Responsibility. Nevado Roses has a self-sustaining organic approach when incorporating social responsibility in their organization. They go above and beyond the call of duty to ensure fair trade practices and

empower their employees by teaching them skills in which they can employ outside the workforce and in their future. The fair trade label means that their staff receives a cut of the consumer sales price that they can use for joint projects. As highlighted by the video, they offer workers the opportunity to partake in educational classes, the resources to initiate and maintain an environmentally friendly garden in employees backyards, and other opportunities that are not available to many Ecuadorians. Nevado Roses strives to be ever cleaner in their production methods. One of their ways forward is organic farming. Through Nevados efforts, the company was recently certified as a United States Department of Agriculture (USDA) Organic producer in 2007. John Nevado had a vision to provide for his employees in a way that was unprecedented for businesses in Ecuador at the time. One of the programs paid for by the Fair Trade sales from their farm is a childrens nursery. The nursery at Nevado Roses was founded in 2006 with the purpose to attend the children of the companys workers. It has the necessary infrastructure to host about 40 children and is on an aggressive expansion plan. The schedule is arranged according to necessities of the parents. The personnel in charge have the profile adapted for the attention to the children of pre-school age. However, John Nevado was not fully satisfied and believed the company could offer more for their workers. Later that year, Nevado Ecuador became one of the first flower producing companies in Ecuador to offer their employees full medical attention in partnership with IESS, the Ecuadorian State Insurance System. This has resulted in their employees having access to specialized medicine, free medicine, and simplified social insurance procedures without leaving the farm. 3. Will the level of corruption in your assigned country, based on it's CPI score have a negative impact or positive impact on negotiating a business deal with your country and the United States. Explain your answer.

My Country, Saudi Arabia, currently has a Corruptions Perceptions Index of 57. While corruption is a problem for the country, it is not as problematic as the majority of countries around the world. On one hand they are more corrupt than the United States and many European countries. On the other hand Saudi Arabia is less corrupt than other nations in their region. They fair well against countries like China, India, and Russia. I feel as if the current conditions as they pertain to corruption would have a minimal impact on trade with the United States. In all honesty, Saudi Arabia has the luxury of offering the worlds hottest commodity, oil and petroleum. The United States has little bargaining power at this time to negotiate with Saudi Arabia in the hopes that corruption will be lessened. Economists will understand how the laws of supply and demand put America in a poor position to negotiate. If Saudi Arabia restricts exports to the United States, oil prices would soar across the world. All it takes is a slight decrease (say 2-5%) in the supply of oil and petroleum to increase the price many times over (say 10-25%). Economists are aware of this phenomena and this is partially to explain why OPEC has all the negotiating power. Countries like Venezuela, which has drifted apart from the United States in recent years as escalating tensions between Hugo Chavez and President Bush/Obama, still engage in high levels of trade with the United States. I feel this would be similar to Saudi Arabia if tensions began to escalate and corruption continued to be problematic.