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Ethical Issues Faced By Novartis Commerce Essay

Paper Type: Free Essay Subject: Commerce
Wordcount: 4040 words Published: 1st Jan 2015

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In 1996, Novartis was created between the merger of the Swiss based life sciences companies, namely Ciba-Geigy and Sandoz.  At that time, this was the largest merger in corporate merging history. Since the merger in 1996, Novartis has transformed itself from a diverse group, including agribusiness, to a highly focused leading healthcare company. The years since the merger have seen many strategic changes including the purchase of Hexal and Eon Labs, creating a world leader in generics under the brand name Sandoz, as well as the acquisition of Chiron Vaccines in 2006, taking Novartis to the forefront of vaccines and diagnostics.

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Ethics is a code of behaviour that a society considers moral and appropriate for guiding relationship with one another. It involves judgments as to good and bad, right and wrong and what ought to be when everything will go smoothly in the organization then it treated as an ethically sound business organization. In addition people should have the right for electing religious or social beliefs and relationship. Moreover people should respect others rights as well as get respect from others consequently. Unless standard ethics or these short of situation occurred in organization then conflict will arise and responsibility going down progressively. Consumer rights are practiced in Europe with a greater importance comparing to the other regions. Being a highly developed country, and being in a very sensitive business like drugs and medicine, Novartis have to be very careful and always on the toes regarding the consumer rights. Therefore compared to other regions, Novartis has to comply a very standard framework to cope up with the consumer rights in Switzerland.


One of the major parts of marketing is to create demand for a certain product in peoples mind. Information bridges a relationship between consumer & the organization. In this relationship an organization should not participate in actions, agreements or practices which may be detrimental to customers, competitors or established community. Novartis has adapted its marketing policies accordingly the way it suits the European markets considering the sensitivity and legal aspects in mind. And they must have been successful because the market in the Novartis has always been a good contributor in its total revenue worldwide. It is obvious that the marketing policies in the Europe will not be same as the other parts of the world and it must be kept in mind the business they are in because drugs and medicine is a product which is very susceptible. We can say that Novartis has successfully customized the policies fit with the marketing strategies in Switzerland.


While representing an organization a person is entrusted to do certain action to his best utilizing own merit, experience & creativity. Trust, integrity, honesty, knowledge, judgment, courage, commitment, respect, responsibility etc are the factors those an organization faces. Customers from the general public rely on the knowledge, expertise, and honesty of the professional. This outstanding characteristic will cause his superiors to take notice which is pretty much important for organization. It is well clear to all that no doubt Novartis is one the biggest multi national companies and one of the leaders in the drug business, so they would be professional in their business, it is easily understandable. And we should also keep it in mind that without being professional a big company cannot run smoothly. And Novartis deserves full marks in the field of professionalism.

Information technology:

Manipulation of information, fabricated data regarding any business situation, competitors move or misleading customers are being faced by organizations. Information technology combined of people, equipment, and events that gather, sort, analyze, evaluate, and distribute needed, timely, and precise information to marketing decision makers. It covers the total area of communication from management decision making to consumers’ right choice. In today’s world the business highly depends on the Information technology and Swiss Novartis has used the same profoundly and effectively in Switzerland.


Communication must have been a considerable barrier because the communication system varies widely if we compare Middle East with Europe or America. Communication is thus a process by which means assigned and conveyed in an attempt to create shared understanding. This process requires a vast range of skills in intrapersonal and interpersonal processing, listening, observing, speaking, questioning, analyzing, and evaluating. Through this an organization passes their mission, vision and goal to their employees. Ethical concepts are also convey to the employee through effective communication. As it is varies country to country like Middle East and Europe, America, if we compare among them. But Novartis has adapted the communication intensively and came out with a very good result.

Freedom of action:

Knowledge on ethical & legal matters helps an organization grow fast. This issue has been probably a real trouble because once a foreign company operates in a country; they have to abide by the law of the host country and ultimately are forced to diversify to a substantial transformation from their parent concern. Like their law, rules and regulation. And the knowledge of ethical and legal matters helps the foreign organization raises fast if they abide the rules and regulation of the parent country.

Novartis also has been forced to bring changes and we can say they have successfully done this. And they have lucratively adapted with the system acted well.

Censorship on the internet:

Like any other communication, here an organization has to abide by the rules, regulations and other ethical issues so that manipulation of information does not take place or none of the community is biased. Information related to the business that followed by the rules and authorization of governing body is welcomed and helps the community or the target group well informed. In addition the ethical issue is also should involve in the censorship on the internet.

Throughout the Europe the censor ship on the internet is a bit flexible and relaxed comparing to the other continents. And Novartis have made the internet a very useful media to reach the consumers.

Computers and work:

Companies should have the system & procedures to perform all the operation or to response to any issue. While using computers employees have to follow the guidelines related to the betterment of the community as well as the organization. Information is the one of the basic way of running organization effectively which is related with technology like computer. And through the computerized organization, it’s would be easier to maintain organization rules, regulation and others stuff properly .

Novartis is utilizing the optimum facilities that can be obtained from the technology. And undoubtedly technology available in Switzerland is at its best.


Now a day’s legal matters are closely merged with the corporate social responsibilities. Considering this issue we may think that business scope has become narrow but it is not true at all. Because we do business within the community and if we cannot develop the community or do not respect the community or legal issues our scope of business will be narrower. So organization should cope up with this legal issue as well as CSR (Corporate Social Responsibility) for the welfare of the whole nation. Foreign companies are not apart from that at all.

In context with the market in the Europe, Novartis have to face the barriers from mostly the strong competitors and the consumers right protections. The reason behind this is that the consumer right is a major issue in the Europe and treated with intense importance. And accordingly they have customized their business and products quality in Switzerland.


While deciding on any matter an organization has to consider- is there anything wrong that goes against the employees’ rights, organization’s expectation or community’s want? That is, nothing can be done that affects the smooth functioning of organization, community or the people. So every organization should maintain security effectively for the companies’ privacy which will establish the company’s security strong as well.

Novartis whatsoever harmonized with the security system and running smoothly.

Novartis have not only successfully handled the above discussed issues but they have effectively handled and made the most out of these ethical issues and used them as one of their strengths to gain and retain the market share in Switzerland and in the Europe as well.

Question-02: Choose a country (switzerland) and discuss the following in respect to that country-

Legal System:

Switzerland is a nation created by the tenacity of its citizens: it is not an ethnic, linguistic or religious entity. Since 1848, it has been a federal state – one of 23 in the world and the second oldest after the United States of America.

Switzerland is a Confederation of 26 cantons and half-cantons (States): Aargau (AG), Appenzell Ausserrhoden (AR), Appenzell Innerrhoden (AI), Basel-Landschaft (BL), Basel-Stadt (BS), Bern (BE), Fribourg (FR), Genève (GE), Glarus (GL), Graubünden (GR), Jura (JU), Luzern (LU), Neuchâtel (NE), Nidwalden (NW), Obwalden (OW), St. Gallen (SG), Schaffhausen (SH), Schwyz (SZ), Solothurn (SO), Thurgau (TG), Ticino (TI), Uri (UR), Valais (VS), Vaud (VD), Zug (ZG), and Zürich (ZH).

Switzerland has a federal structure with three different political levels:

the Confederation (Federal State),

the Cantons (States), and

the Municipalities (Local Authorities), which are subordinated to the Cantons, although they are granted a certain autonomy.

Switzerland’s federal institutions are:

Sources of law:

Switzerland has a civil law legal system. Therefore, enacted or written law is the primary source of law.

As in all other civil law legal systems, Swiss law is divided into public and private law.

Public law:

It governs the organization of the State, as well as the relationships between the State and private individuals (or other entities such as companies). Constitutional Law, Administrative Law, Tax Law, Criminal Law, Criminal Procedure, Public International Law, Civil Procedure, Debt Enforcement and Bankruptcy law are sub-divisions of public law (see Voyame in Dessemontet/Ansay, p. 9).

Private law:

This governs the relationship between individuals. Swiss civil law is mainly comprised in the Swiss Civil Code (which governs Status of Individuals, Family Law, Inheritance Law, and Property Law) and in the Swiss Code of Obligations (which governs Contracts, Torts, Commercial Law, Company Law, Law of checks and other payment instruments). Intellectual property law (copyright, patents, trademarks, etc.) are also areas of private law. Labor law is governed by private and public law (see Voyame in Dessemontet/Ansay, p. 9).

 Swiss laws are hierarchically ordered, according to the following rules (see Voyame, in Dessemontet/Ansay, p. 5):

federal law takes precedence over cantonal constitutions and law,

constitutional rules prevail over ordinary statutes, and

legislative statutes take priority over regulations promulgated by the government or administrative authorities.

Legislation in Switzerland is officially published in print by the applicable federal or cantonal Chancellery. Federal laws are published in two main collections:

the “Official Collection of Federal Laws” (“Amtliche Sammlung des Bundesrechts (AS)”/”Recueil officiel des lois fédérales (RO)”; by chronological order) and ,

the “Systematic Collection of Federal Law” (“Systematische Sammlung des Bundesrechts (SR)”/”Recueil systématique du droit fédéral (RS)”; by content). Similar collections exist in the cantons (see Voyame, in Dessemontet/Ansay, p. 6).

Court structure:

The Swiss Federal Supreme Court comprises two courts of public law, two civil-law courts, one criminal court, as well as the two courts of social law in Lucerne. When a court is constituted, a judge-president is appointed. Each court has at least five ordinary judges. The courts are constituted for two years. If a point of law involves several courts, at least two-thirds of the judges of each court must be present to adjudicate. In principle, three judges sit at a court. Five judges sit on matters of law or at the request of a judge.

Different forms of business allowed to operate and the laws governing them:

Swiss private (civil) law recognises eleven types of companies, six of which are basically suitable for the operation of a trading company. Furthermore, a trading company can be run by a sole trader and – with restricted independence – by a subsidiary of a domestic or foreign company. First and foremost, the focus is on two types of company when someone wishes to set up business operations – the limited company and the limited liability company. These two types of company have the following benefits:

Limited liability and risk capital

Easier transfer of company shares / interests

Controlled representation/ agency rights

Dispute resolution procedures / options available and their effectiveness:

Dispute resolution procedures are almost same in all countries but options may be different from case to case. Basic procedure is as follows:

Presentation of Case

Witnesses usually presented through written testimony, subject to live cross-examination

Legal arguments may be presented at same time as factual arguments

Arguments as to damages can be presented at the same time or left to a bifurcated proceeding

Arbitrators consult on and prepare award

Draft award or portions of the award may be circulated to the parties before final issuance

Each proceeding is different subject to the control of the authority.

Laws relating to –

Switzerland has strong rules and regulations to protect counterfeit products. Copyright, trademarks, patent, designs etc are controlled by specific rules & regulations.


Copyright protection is available for all works at the point that the work is in any tangible form:

There may still be reasons to register.

As a copyright owner, you must register in order to be able to bring suit in federal court for infringement.

Registration puts others on notice.


Must file trademark applications with the Swiss Trademark Office), which is part of EU Administration for Industry and Commerce.

CTO is the most active TMO in the world

Local bureaus provide administrative enforcement of trademarks throughout EU

Patents :

Must file patent applications with State IP Office

Their Regional Offices provide administrative enforcement

Rights are territorial

Have to use registered patent agent.


Every design of units is to be registered in Swiss Design control body. Once design is registered, the authority will not allow any other to copy design. These designs must have identical difference attributes.

Most of the registration is related to the government registration authorities. There are some legal representatives who help the organization to get assistance for protecting their patent, trademark etc.

Talking about their effectiveness, Novartis can said to be quite successful because their overall performance has been remarkable in Switzerland. In the overall worldwide performance, the Swiss Novartis performs well comparing to Novartis in the other parts of the world. Despite all the pitfalls, the cultural barriers, the adverse regulations, and all other hindrances, Novartis has been one of the most successful concerns out of all Novartis concerns. Considering all the factors, both external and internal, we can say that on the above discussed points, Novartis has been highly effective in running their business smoothly and outstanding in performance. And they have successfully abided by the legal system of Switzerland without any dispute.

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Question-3: The ‘changes’ it faces in its business due to the effects of-


The whole idea is to compete more effectively offering a creation with good quality and very cost effective. The lessening of difficulties to international deal enables firms to make the world as their market. The lowering of barrier to trade and funds also allow firms to base production at the best position for that action. Thus, a firm might plan a product in one country, create a component parts in two other countries, assemble the product in another country and then export the finished product around the world. The lowering of trade barriers has facilitated the globalization of production.

It refers to the open market competition, considering no geographical barriers. It also passes on to the arranging of services from locations around the world to take benefit of national differences in the cost and quality and services of factors of production. The lowering of trade barriers has facilitated the globalization of production. The particulars also suggest that foreign direct venture is playing an increasing role in the global economy.

The lowering of barrier to trade and investments also allows firms to base production at the optimal location for that activity. It refers to the open market competition, considering no geographical barriers

If we consider the effects of globalizations on Novartis, the benefits supersedes from the pitfalls. In my opinion the only problem they faced is the open competition but this has not been a problem for them because of their goodwill, quality of the products. All other aspects of globalizations worked in favour of them.

In 2006, Novartis committed $755 million in corporate citizenship initiatives around the world, particularly focusing on improved access to medicines in the developing world.

The Novartis Foundation for Sustainable Development:

The Novartis Foundation for Sustainable Development is a charitable foundation that works at policy and field level to improve access to healthcare for the world’s poorest people.  It is one of many Novartis Foundations worldwide which also include scientific and research foundations, as well as venture capital and social foundations.

Access to Medicine projects:

Please see below some examples of their Access to Medicine projects:

Donations of medicines to patients affected by leprosy (4 million patients cured since 2000)

Donations of medicines to patients affected by tuberculosis (donations of medication reaching 500,000 patients)

Malaria treatment at cost in many parts of Asia, Africa and Latin America

Patient assistance programmes around the world donating medicines to patients affected by chronic myeloid leukemia who cannot afford the treatment

Relief to support major humanitarian organisations with emergency medical needs ($14 million committed in 2005)

The Novartis Institute for Tropical Diseases:

The Novartis Institute for Tropical Diseases in Singapore is run to discover novel treatments and prevention methods for major tropical diseases, such as tuberculosis and dengue fever, to make them available without profit.


The Novartis Biotechnology Leadership Camp (BioCamp) is a pioneering three-day seminar that brings the biotechnology sector closer to talented young people from universities in the UK and across the world.

Developments in information, communications and technology (including internet):

Technological changes have achieved advances in communication, information processing, and transportation technology, including the Internet and the World Wide Web. The rapid growth of the internet and the associated www is the latest expression of this development. Besides, innovations have occurred in the field of the transportation technology.

Novartis have fully utilized technological changes and adapted very smoothly with it and as au outcome of it they have derived very good result out of it.


Switzerland’s geographical position with its transit routes over the Alps made it a desirable possession for European great powers through the ages. Switzerland developed slowly over many centuries, as more and more regions came together to form a loose confederation whose members gave each other mutual support. The Swiss culture is an amalgamate of the German, French, Italian and Rhetoroman cultures incorporated in the inherent particularities of each Swiss linguistic region and the result is an autonomous culture blended with the dialectical differences and the cultural influence that each zone has received.

The small stretch of our territory does not imply that nothing will happen or has happened here. Quite on the contrary! Switzerland fosters a cultural life so intense and so diverse.

Therefore we can relate with the Novartis in this way that the culture of Switzerland has also been favorable for the company. There were no substantial barriers from the Swiss regarding the acceptance of a foreign product and a foreign company which sometimes acts as one of the major barriers in case of accepting a company and its products from a foreign country which has been a very good strength for them.


Has not been a major issue which affected Novartis that much. It was not a hindrance in the operation of business in the country.


Switzerland has a stable government and a diverse society. National elections typically produce only marginal changes in party representation. Switzerland has seen a gradual shift in the party landscape in recent years. The Constitution limits federal influence in the formulation of domestic policy and emphasizes the roles of private enterprise and cantonal government.


Switzerland has a civil law legal system. Therefore, enacted or written law is the primary source of law. 

As in all other civil law legal systems, Swiss law is divided into public and private law.

Private law governs the relationship between individuals. Intellectual property law (copyright, patents, trademarks, etc.) are also areas of private law. Labor law is governed by private and public law.

Novartis was no exception and had to face the barriers from the concerned legal aspects. And accordingly they have customized their business and products in Switzerland.


In case of choice of the customers, the Novartis did not face that much challenge because of its goodwill and exclusive quality of its products. Rather, I think it acted as a beneficial point on behalf of Novartis because apart from the loyal customers of Novartis, due to the changes in choice they gained more customers rather than losing. But they always had to face challenges from the other competitors in the market.

On the above aspects, we can assume that all of the above issues have been managed successfully by Novartis. Not only that they successfully managed it, they have performed outstandingly, if we consider the whole of Europe. The reasons behind this success according to my opinion, has been their strong business network worldwide, excellent goodwill, and very good and proactive strategic decision making.


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