Case Study 04- Neem Trees

Part 1: Ethical Decision-Making


Facts of the Situation:

  • Neem is a sacred, indigenous tree to India
  • Neem has been used for medicinal purposes, food production, toiletries, fuel, and pesticides
  • Chetan operates a business of neem products and employs 60 people
  • Tom Johnson is the Director of Oregon Organic Pesticide Services
  • Tom travelled to India on vacation and discovered the neem seeds’ use as a potent pesticide
  • Tom imported neem seeds to his factory in the USA and developed a formula for an organic pesticide from the seeds
  • Tom’s company invested $5 million to conduct extensive safety and performance tests over the next decade
  • Tom’s company got security clearances from the EPA and got a patent for the pesticide. He made a profit of $12.5 million in a year.
  • OOPS, Tom’s company can sell the products at a lower price than Chetan, and people are likely to prefer products from American companies than Indian companies 
  • Tom demands a royalty from Chetan as a result of his patent.


Stakeholders and Motivations:

  • Chetan
    • Successful business of neem tree products that produces pesticides, skin creams, contraceptives, lamp oil, and more
    • Be loyal to customers and employees
  • Oregon Organic Pesticide Services (OOPS) 
    • Want people to buy the pesticide from them and make a profit
    • Put and patent on the pesticide and want it to be adhered to
    • Want healthy, organic pesticides
  • Tom
    • Social impact
    • Make money
    • Tap into the neem market in India
  • EPA- Environmental Protection Agency
    • Ensure public health, safety, and well-being
    • Avoid environmental consequences from the use of pesticides
  • Consumers
    • Want to be able to purchase neem products for the same cost or a lower cost with the same benefits
    • Want to support either themselves, their friends, or family who are working for Chetan
  • Farmers
    • Want crops that have good harvest
    • Want to use pesticides that do not harm their products or their customers
  • Indian government (secondary stakeholder)
    • Improve the local economy
    • Protect Indian business owners
    • Preserve the use neem trees


What rights does Chetan have and is it ethical for the US company to uphold their patent rights?

  • Because Tom/OOPS was issued a patent on the pesticide, Tom technically does not have the right to sell the neem pesticide as well. He is allowed to sell his other products such as the creams, contraceptives, and lamp oil because they are not restricted under the patent. Tom’s patent is only on the pesticide formula, so Chetan would only need to pay royalties on the pesticide. With that being said, Chetan could try to fight the patent because the U.S. Patent and Trademark Office ruled that products of nature are unpatentable [1]. Therefore, Chetan should have the right to compete with Tom for neem pesticide business. 
  • With that being said, until Chetan fights the patent, it is ethical for OOPS to uphold the rights of their worldwide patent. Patents give companies “the right to exclude others from making, using, offering for sale, or selling” products [2]. So while it is not exactly fair for Chetan to have his business restricted, it is more ethical for him to adhere to the patent than to not. He can focus more on his other neem products if he is unable to sell the pesticide. Therefore, we do not have any alternative solutions to present for this portion of the case studies because Tom is within his rights under the patent. Additionally, Harvard Business Review gives three guiding principles for companies working abroad- respect for core human values, respect for local traditions, and belief that context matters when deciding what is right and wrong [3]. In this case, Tom/OOPS are respecting local traditions by continuing to use the neem products and using it in a cheaper and healthier way.






Implications on the venture:

  • The environment and people’s health will likely improve because an organic pesticide will be used
  • OOPS is well respected because they chose to partner with another company that improves the livelihood of workers in the Indian cottage industries. 
  • Chetan is able to continue with part of his business, but will likely lose success from the patent.


Part 2: Grassroots Diplomacy


Facts of the Situation:

  • 6 months later, OOPs had developed 20 different neem-based products being sold in India
  • Their most successful product is neem-based soap
  • The soap’s wrapper features a photo of Tim Johnson 
  • Chetan also has a soap product that features a photo of his great grandfather, a local legend
  • Chetan and Tom have met several times, and Tom is willing to collaborate
  • Chetan’s business is suffering and he will most likely have to lay off half of his staff
  • Half of Chetan’s staff feels cheated and the other half is confident he will find a way out. Chetan feels loyal to the staff that have worked with him for many years


Stakeholders and Motivations: 

  • Chetan
    • Personal
      • Continue to make money
      • Maintain his successful family business of seven generations
    • Professional
      • Protect his employees’ jobs and livelihood
      • Successful business and products
  • Tom/OOPS
    • Personal
      • Make money off the neem products
    • Professional
      • Expand OOPS’s business
      • Stay on top of the Indian market
      • Continue to make successful neem products 
  • Chetan’s employees
    • Personal
      • Loyalty to Chetan and his family business
      • Continue the legacy and reputation that the business has earned over the past few decades
    • Professional
      • Make money and support their families


Chetan’s potential next steps:

  1. Form a collaboration where Tom is in charge in production and Chetan is the supplier
    1. Pros
      1. Take advantage of OOPS’s economies of scale
      2. Takes advantage of Chetan’s local connection 
      3. Employees can keep their jobs- because Chetan’s company would need to expand to take on OOPS’s share of the market employees could take on new roles if needed
      4. Chetan still would have a role in the company and continue his family’s legacy 
    2. Cons 
      1. OOPS still has the power because of the patent so they have leverage in this scenario
      2. People that prefer Chetan’s product will have to get used to the American/OOPS formulations
    3. Saving face
      1. Chetan saves face with his employees because can keep a good relationship with the majority of them
      2. Chetan saves face with Tom/OOPS by not competing and being willing to collaborate
      3. Tom shows good faith by working with Chetan and the people of India because his business can be successful even without Chetan
    4. Implications on Relationships
      1. Short term: mutually beneficial relationship for the two companies, saves the relationship between Chetan and the majority of his employees
      2. Long term: good relationships with customers continues because they are still getting quality neem products
    5. Implications on the Venture
      1. Short term: Tom can continue to build his own company and Chetan can continue working for his company and provide employment to his friends
      2. Long term: Chetan is able to continue his family company’s legacy
  2. Merge with OOPS and hire some of his local employees
    1. Pros: 
      1. Keeps some of his people employed
      2. OOPS will get Chetan’s loyal customers and make more money
      3. OOPS has a good reputation because it is an American business with personal ties in India
      4. Forces out some competition
    2. Cons
      1. Chetan will lose some of the history of his company
      2. Probably cannot hire all of Chetan’s employees
    3. Saving face: Chetan saves face with the employees that he saves jobs for
    4. Implications of relationships:
      1. Short term: Chetan’s employees may feel like they are being betrayed by Chetan working with an American company, employees that can keep a job will be mostly happy with Chetan’s decision, but they will likely feel bad for anyone that needs to lose their job, employees who need to lose their jobs/be laid off will be angry, customers may have some initial issues as a result of the merger
      2. Long term: employees who he keeps will most likely feel better about the decision because they are still making money, customers may 
    5. Implications on venture:
      1. Short term: Chetan will be absorbed by OOPS
      2. Long term: The collaboration will have a larger market share, Chetan and local people will still be working for the company
  3. Strike a deal so that they sell Tom’s neem products with the image of Chetan’s great grandfather in exchange for the employment of Chetan’s workers
    1. Pros
      1. Chetan’s employees keep their jobs
      2. Consumers get EPA-approved, organic products that are sold with the approval/image of Chetan’s company
      3. OOPS can keep its control over the market of neem products while connecting with Chetan’s customers
      4. The legacy of Chetan’s great grandfather is continued
    2. Cons 
      1. While the image of Chetan’s business is continued, his products/recipes would be discontinued to use OOPS’s products instead
      2. Not all of Chetan’s employees would likely be able to keep their jobs
      3. Customers who are unaware of Chetan and OOPS’s relationship may be unaware that they are buying new products
    3. Saving face
      1. Customers can continue to buy neem products that Chetan’s family approves of, Chetan strikes the deal for the sake of his employees’ livelihoods
    4. Implications on Relationships
      1. Short term: employees may not want to work at a new company, Chetan and Tom can avoid competition by forming this collaboration
      2. Long term: customers value American products and with the approval of Chetan’s family on the package it could be even more valuable
    5. Implications on the Venture
      1. Short term: Chetan’s business would no longer be his own, but his great grandfather’s legacy could still continue, many of Chetan’s employees could potentially keep their jobs
      2. Long term: customers will want to buy the American neem products, and because OOPS has more resources than Chetan’s business, they will be able to keep the company successful


Best Solution: Form a collaboration where Tom is in charge in production and Chetan is the supplier

This solution is the best case scenario for Chetan because his family’s business can continue to grow and his employees will be kept happy with new opportunities and more work on their hands. He will also be able to take advantage of OOPS resources and have economies of scale because of their increased share of the market. Chetan will be able to keep his connections with the local communities. He will save face with his employees by staying loyal to them and save face with OOPS because of the opportunities that come to both companies through the collaboration. By losing control of the production of the products, they may lose some of the authenticity or qualities of Chetan’s products, but Tom and Chetan could potentially renegotiate recipes to ensure that they are still organic but more similar to Chetan’s products. 

  • Implementation:
    • Strike a deal with Tom/OOPS that delegates which responsibilities each side of the company is responsible for, which recipes will be used, and the profit split
    • Figure out if any employees will need to change roles in the company
    • OOPS uses their resources to produce neem products at a lower cost
    • Chetan and his employees distribute the products to leverage their local connections

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