Fiji versus FIJI: Negotiating Over Water Harvard Case Solution & Analysis

Government of the Republic of Fiji:

The Fijian Government can defend itself through various ways that include: tax for extraction, transfer pricing and alternate investors. Fiji Water is taking an advantage of the natural resources from the Yaqara Valley and in return it is paying a very less amount in terms of tax. The company has export earnings of nearly F$ 150 million with high spending on marketing; thus, Fiji Water can easily pay that increase in taxes demanded by the government.

In addition to that, the company has underpriced its export for water bottles just to save the company from taxes and then sell the products on higher prices in other countries. The remaining local competitors of the company were exporting at much higher prices; thus, they paying more taxes than Fiji Water. Government of Fiji could make an investment from the international players all around the world. If, in the future, Fiji Water did not agree to pay the increase in taxes, then the government could stop their operation and ask for intercontinental players to put their capital in the Fijian economy.

Building Relationship with the Government of the Republic of Fiji:

It is a known fact that Fiji Water is highly dependent on the Fijian Government to access the natural resources of water, therefore; the company needs to build a well-maintained and positive relationship with the Fijian Government. The company can make stable relationship with the Fijian Government through a number of ways. Firstly, the company can build good relationships by paying the increase in taxes demanded by the government as this will help the company to build long lasting relationships with the government and may help the company at some point of time. Furthermore, the company can do more and more investment in the Fijian economy by making more employments, more procurement from brokers and by taking more educational initiatives. Moreover, the company can make government a major shareholder in the company’s stake by encouraging government to make investments in the company and in return share profits with the government.

Ethical Perspective on the Tax Increase:

After the government has increased the tax on water extraction with a 45 fold increase; the question of ethics stimulated as many believes that in case the company has stopped its operations, then it will make hundreds of employees unemployed. From this perspective, increase in the tax rate was not at all ethical. Furthermore, an increase in taxes was not applied to the whole industry as it was only applied to one company. The Government of Fiji should make such a process in which each and every company has to pay a certain amount of tax according to the exports and revenues that it generated from the business. On the other side of the coin, the Government of Fiji has been indicted for various wrong activities like corruption with regards to evasion in taxes, nepotism, mismanagement in the finance of the country and bribery. Thus, there is a high probability that Fiji Water have paid some sort of favor or bribery to the government officials just to avoid the company from paying taxes. If the company is engaged in this sort of illegal activities then charging the increase in tax is ethical.

Impact on Parties who are not on the Table:

If the company did not agree on the conditions given by government and refused to pay the increase in taxes, then the Fijian Government can force the company to stop its business operations. With this action by the Fijian Government, other players in the industry will be able to take an advantage by making efforts to increase their share in the market. Other players then go for those areas and segments that Fiji Water was catering. If the company itself agrees to pay the increase in taxes then, it will surely negotiate and try to convince the government to increase the taxes for other companies within the industry as well.

Parasitic Value Creation:

Companies are often engaged in creating value for the company itself and ignore the stakeholders around them who may have been affected by the action taken by the company. They don’t show any apprehensions for the detrimental effects of the actions taken by them on the society and specifically on consumers.

Many scholars from all over the world always encourage companies to work together with all the stakeholders of the company to add more value to overall business operations. Whenever, the company earned higher profits, manufactured better products, and provided efficient services or achieved higher sales; it will not only benefit the company in terms of value creation but it will also benefit all the parties that are engaged with the company directly or indirectly......................................

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