Kitchen Best

Grade: 84/100 87/100 Challenges: 16/20 Causes: 16/20 PoA: 20/25. Be more specific Research: 20/20 Writing: 12/15. Work to organize your paper more concisely and coherently with more effective headings/subheadings/visual aides Grade update: I added 3 more points to make this section 15/15 based upon your re-draft.? Henry Chan, who is the CEO of Kitchen Best, has set some ambitious targets for the business in 2008. However, his plan suffered a setback when a series of crises happened in 2010.

These incidents involved in serious management problems such as personal gains made at the expense of the company and kickbacks offered and accepted between Kitchen Best and its partners. Symptoms Deep rooted practices of kickbacks, bribing and corruption: Accepting kickbacks, bribing and corruption were common in business dealings of kitchen best. Chan dong, founder of kitchen best treated his employees as family, and turned blind eye on any such practices as long as they were helpful in business expansion.

But later when Henry Chan took over the business, a series of incidents had led him to take a deeper look into the company and uncover serious instances of misconduct. Unethical means followed by kitchen best’s most trusted employee: The shago incident : Horatio Sze : Sze awarded the contract to a factory owned by his brother in law, for his personal gain. Knowing that the products were faulty, he hasn’t taken any remedial action or cancel the contract. Macy wei :

Having known that the products showed faulty in the in-house testing and Sze’s negligence towards this for his personal gain, she hasn’t reported it to the higher management, considering the good relation between Sze and Li. Ignorance of Henry and Ma luk : Sze reported directly to Ma Luk. Neither Ma took the responsibility to enquire further on the issue, nor did Henry involve himself much in monitoring the decisions of sub-contracting made by Sze. Haus de metro :

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Henry Chan, after having learnt from an anonymous letter that a shipment for German retail chain HdM did not meet the company’s safety requirements, did not pursue the case any further for fear of losing the customer. Honghua appliances : Ma Luk: Ma has built good relations with Honghua’s general manager for greater china, through wining, entertainment, dining and offering kickbacks. But the changed management of Hanghua was strictly against these practices and reevaluated the competency of all its suppliers. So, kitchen best’s relations with Honghua were at risk.

Also, Ma has misused the company expenses for his personal gain. Henry Chan: Henry Chan didn’t have much grip on the clients and relations with them. He was mostly dependent on the experience of the senior management, like Ma who were mainlanders, to build relations with the clients and customers and he saw such practices as inevitable part of Chinese business culture. Lack of well-designed financial policies: Kitchen best did not have any well-defined policies or guidelines to control the expenses for entertaining customers.

Henry Chan’s Cultural barrier: Henry Chan found it difficult to deal with mainland customers due to his cultural barriers. He was born and brought up at Hong Kong, and had not much exposure to deal with the mainland customers. So he had difficulties to cope up with the business culture and dealings with mainlanders. He had to depend on senior management, hence had no proper grip on the business there. Causes: Unplanned/sudden shift in management: Kitchen best’s employees were not prepared for the sudden change in management from Chan dong to Henry Chan.

Each of them had completely different managing styles. Chan followed a paternalistic managerial style, treating the employees as a family and maintaining good relations with them, while Henry followed the western style of management. This gave the employees a chance to misuse the liberty of taking decisions that western style invoked • “In the west, the ideal boss is a “resourceful democrat”. He sets the vision and strategy for the business but empowers subordinates to execute. He encourages two-way communication with his employees and allows bottom-up input in decision-making. In China, the ideal boss is a “benevolent father”. He is like a parent (a Chinese parent, by the way) who supervises his children on everything that need to be done. He believes in discipline and attention to details and manages his people at a micro level. He also spends lots of time caring for the personal welfare of his employees and regards it as part of his job. ” – reference; management style differences between china and U. S Author: Joy Huang Shift of focus on different set of customers: eastern and western management (business cultures)is for 95% the same and differs in every important aspect. ”- Takeo Fujisawa (Honda) Kitchen best mostly focused on Asian market but Henry focused on extending the business to western customers. Till then the company had no experience with directly dealing with the customers of Europe and America, and hence has no grip over these regions. The dealings at mainland and decision making were completely left to trusted employees without Henry’s personal monitoring and they took advantage of it.

Henry’s experience as compared to that of senior management: Henry’s experience was far less than most of the employees in senior management who have been working for the company from its very beginning. Employees like Ma, Sze were very much trusted by Chan dong and Henry couldn’t go completely against the practices they followed although they were unethical. Lack of control over decision making and financial management: Henry relied much on his senior management for decision-making. But unlike Chan, he did not involve himself much, in making important decisions in mainland business operations.

Any other monitoring measures were not implemented in the company. Kitchen best did not have any well designed financial policies that checked the ineffective expenses like dining, wining or entertaining the clients. Employees faked invoices and used the expenses for their personal gains. This would have been controlled if there was frequent auditing. Henry’s cultural limitations: Henry was born and brought up in Hong Kong, studied at U. S. Although he had experience in marketing of electric and electronic appliances, it was the first time for him to work with kitchen best.

He was not so familiar with the business culture of mainland nor did he have good relations with the mainland clients. He believed that some unethical practices were inevitable in Chinese business culture, so although determined to change these practices, he ignored some cases and hand not implemented strict measures to control them altogether. “Culture is more often a source of conflict than of synergy. cultural differences are nuicanse at best and often disaster” –Dr. Geert Hofstede Recommendations :

A strong policy for internal contro l and financial management has to be designed and implemented. 2 months a strong policy • to mitigate financial risks, continually asses new risks and minimize operational distractions to achieve the key results established in a commission’s strategic plan •That should clearly and consistently maintain an internal control framework by developing a control policy and accompanying procedures that establish a commitment to reducing risk of loss and preserving commission resources.

This document should briefly explain the objectives/goals of the commission, the ethical standard expected from employees, and the policies/procedures it is committed to adhering to in order to meet those objectives. Henry must first concentrate on getting a good grip on existing territory and then expansion of business to the west. Immediately 1-2 months •Henry Chan should start working more on the existing territory business operations, by involving himself in decision making, interacting directly with clients of mainland, rather than leaving it to Ma. Then strategically work on expanding direct business with the west, like getting to know the business culture and training a set of employees according to western business culture. Investigate and warn/ take disciplinary action Next one month •Ignoring the ethical breach of employees could lead to more corruption. Completing the investigation of cases and warning or taking disciplinary actions on employees responsible for it irrespective of their seniority could be substantial in reducing the corruption in business dealings.

Set up a monitoring committee 15 days •Set up a monitoring committee that is headed by Henry, and includes legal , financial advisors of kitchen best, and auditing group. •This committee should constantly work on monitoring the activities, and flow of finance at different branches of the company Trial implementation of the policy made and make amendments if necessary 2 months •Implementing the designed policy for a period of two months and check for any loopholes, and make amendments if necessary. Managing the risk of fraud : The truth is you cannot defeat internal fraudsters if you are unfamiliar as to where and how they play their game of deceit and betrayal—you fail to know where your operation’s greatest risks and vulnerabilities are—or you fail to have enough knowledge to develop and implement a realistic anti-fraud action plan. ” – reference book; business fraud – Jack L Hayes Ethics management : Keep the unique ethical climate of each market in mind when crafting your code of ethics to ensure that it is relevant to the international arena Apply standards equally in all markets, and among all subsidiaries.

Stick to your standards, whatever they are. If you have a policy of following your home country’s ethical standards around the world, be prepared to turn down opportunities in markets with unfavorable ethical climates. Make company-wide ethics training a regular activity, in addition to administering comprehensive ethics training programs for new hires. Use training sessions to highlight actual areas of concern in your organization, citing specific examples as often as possible. References Journal of Academic and Business Ethics: International Business Ethics •International Business Ethics Institute: Top Ten Mistakes References : http://www. f5ac. org/item. asp? id=3340 first five financial control guide; ch 6. Internal control http://www. slideshare. net/anandsubramaniam/cross-culture-east-west http://smallbusiness. chron. com/accounting-principles-general-financial-ethical-standards-36283. html http://www. copedia. com/internal_controls. html http://smallbusiness. chron. com/cultural-communication-barriers-workplace-13888. html

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