Lockheed case study analysis

Lockheed Case Study Analysis
Name
Institution
Lockheed Case Study Analysis
The kind of payments made by Lockheed to the Japanese can affect the structure of the market by (a); pushing prices upwards, and (b); killing competition. With regards to prices, an agency that pays bribes in order to win a contract or entice a potential buyer to buy a product, must obviously, and inevitably, target o recoup the money spent on bribery by including it in the cost of the product. In good business manners, however absurd the idea sounds, a bribe is an automatic cost that the giver of the bribe intends to regain after achieving the objective of the bribe. In this case, the objective of Lockheed’s payments to the Japanese was to win a contract that would ensure that the company sold its aircrafts. The money for the bribe had to come from somewhere, and no service or product was acquired for giving the bribe, other than the assurance of a contract. Considering that the aim of any business is to make a profit, it is logical to expect the company to sale the aircrafts at a price above the actual cost of production of the aircrafts plus the bribes. Consequently, the final cost will be higher than if no bribe was paid. Such practice, therefore, pose the risk of pushing market prices up. As noted above, the aim of giving a bribe is to win favors such as a contract without necessarily having to follow the right procedures, e.g. competitive bidding. In this regard, a company that gives bribes does so in the knowledge that it will get the contract regardless the quality of its products and competitiveness of its pricing strategies. This practice can kill market competition because one player is guaranteed to win over its rivals without considering the merits of all the parties involved.
In my view, Lockheed’s payments to the various Japanese parties were bribes and not extortions. This is because it was Lockheed that initiated contact with Yoshio Kodama, a mafia figure, with the aim of using him as a go-between with the Japanese parties. The ultimate goal of this relationship, and the bribery, was to influence decision makers in the bidding process to favor Lockheed’s offers. Simply defined, a bribe is an illegal payment aimed at securing favors. At the same time, one may not be under obligation to give a bribe; it is done voluntarily. Lockheed made these payments voluntarily. This is different from extortion, which involves coercion and threats, such as ransom. No one put a gun to Lockheed’s head and demanded that they should pay or face dire consequences. Lockheed had the option of placing bids like the other manufacturers, but it was not willing to gamble on its chances of success. It wanted the contract by all means, and got it alright by all means. In the words of its former president, Carl Kotchian, not paying the bribes could have “most certainly sacrificed commercial success,” (Velasquez, 2012). He could not...