Saudi Arabia is a large Middle Eastern country covering 865,000 square miles. Part of its east coast


Saudi Arabia is a large Middle Eastern country covering 865,000 square miles. Part of its east coast rests on the Persian Gulf, and much of the west coast rests along the Red Sea. One of the countries on its border is Iraq. After Iraq's military takeover of Kuwait in August 1990, Iraq threatened to invade Saudi Arabia. This, of course, did not happen, and Saudi Arabia was not an Iraqi target during the U.S.-led war in Iraq during 2003-2004. However, accusations stemming from rumors of terrorists financing activities have made Saudi Arabia a focus in the global war on terrorism, and Saudi Arabia itself was the target of terrorist attacks in 2003-2004.
There are approximately 22 million people in Saudi Arabia, and the annual per capita income is around $11,500. This apparent prosperity is misleading because most Saudis are poor farmers and herders who tend their camels, goats, and sheep. In recent years, however, more and more have moved to the cities and have jobs connected to the oil industry. Nearly all are Arab Muslims.
The country has the two holiest cities of Islam: Mecca and Medina. The country depends almost exclusively on the sale of oil (it is the largest exporter of oil in the world) and has no public debt. The government is a monarchy, and the king makes all important decisions but is advised by ministers and other government officials. Royal and ministerial decrees account for most of the promulgated legislation. There are no political parties.
Recently, Robert Auger, the executive vice president of Skyblue, a commercial aircraft manufacturing firm based in Kansas City, had a visit with a Saudi minister. The Saudi official explained to Auger that the government planned to purchase 10 aircraft over the next two years. A number of competitive firms were bidding for the job. The minister went on to explain that despite the competitiveness of the situation, several members of the royal family were impressed with Auger's company. The firm's reputation for high-quality performance aircraft and state of the-art technology gave it the inside track. A number of people are involved in the decision, however, and in the minister's words, "Anything can happen when a committee decision is being made." 

The Saudi official went on to explain that some people who would be involved in the decision had recently suf-fered large losses in some stock market speculations on the London Stock Exchange. "One relative of the King, who will be a key person in the decision regarding the purchase of the aircraft, I have heard, lost over $200,000 last week alone. Some of the competitive firms have decided to put together a pool of money to help ease his burden. Three of them have given me $100,000 each. If you were to do the same, I know that it would put you on a par with them, and I believe it would be in your best interests when the decision is made." Auger was stunned by the suggestion and told the minister that he would check with his people and get back to the minister as soon as possible.
As soon as he returned to his temporary office, Auger sent a coded message to headquarters asking management what he should do. He expects to have an answer within the next 48 hours. In the interim, he has had a call from the minister's office, but Auger's secretary told the caller that Auger had been called away from the office and would not be returning for at least two days. The individual said he would place the call again at the beginning of this coming week. Meanwhile, Auger has talked to a Saudi friend whom he had known back in the United States and who is currently an insider in the Saudi government.
Over dinner, Auger hinted at what he had been told by the minister. The friend seemed somewhat puzzled about what Auger was saying and indicated that he had heard nothing about any stock market losses by the royal family or pool of money being put together for certain members of the decision-making committee. He asked Auger, "Are you sure you got the story straight, or as you Americans say, is someone pulling your leg?"

1. What are some current issues facing Saudi Arabia? What is the climate for doing business in Saudi Arabia today?
2. Is it legal for Auger's firm to make a payment of $100,000 to help ensure this contract?
3. Do you think other firms are making these payments, or is Auger's firm being singled out? What conclusion can you draw from your answer?
4. What would you recommend that Skyblue do?

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