BECG.L 6 CTyp.problems

7/29/2019 BECG.L 6 CTyp.problems

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Typical Problems in BusinessEthics

Lecture- 6 (BECG)

Prof. C. Anand

Faculty IBS, Hyderabad


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Contents

Typical Problems in Business Ethics:

Factors that determine Code of Ethics

Ethical Issues in Strategic Management

Ethical Decision Making Model Typical Problems in Business Ethics (Advertising,

Product Promotion, Working Conditions,

Downsizing Workforce, Environmental Pollution,

Supplier Relations and Service Conditions)


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There are many ethical issues in marketing

starting right from framing marketing strategies

to finally delivering the products to the

customers. Ferrell and Gresham have identified

three factors that determine the code of ethics

framed by marketer: Individual, Significant and

Opportunity factors that have bearing on the

ethical nature of marketing decisions. Ethical

issues play an important role on the 4 Ps

(Product, Place, Price and Promotion) of

marketing.


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(Contd.)

Individual Factors (Moral values inculcated in aperson by family, education and culture. Theyplay an important role in framing a marketingdecision).

Significant Factors (Those which Referencegroups, Top management and Peers influencethe marketer. These have more to do with theorganizational climate of the marketer)

Opportunity Factors (Ethical codes & standards

that are promoted in an Organization. These arethe rules and policies framed by Organization,which all the employees are expected to adhere.)


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Ethical Issues in Strategic

Management

While making following strategies, organizations

may incur strategic changes:

Developing Vision Statements (priorities, culture

and values) Fixing Managerial Remuneration

Implementing strategic changes (Changes in

ownership thru M&As or thru Exchange Offers,

Share Purchase, Going Private or Leveraged

Buyouts or thru Computerization) which have

both positive and negative effects.


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Ethical Decision Making Model

It is a 4 step process as follows:

1. Evaluate decision from ethical standpoint

(Identify affected stakeholders; Are rights of

stakeholders violated?)2. Evaluate decision from ethical standpoint in

the context of moral principle

3. Establish moral intent

4. Engage in moral behavior


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Typical Problems in Business Ethics

Ethical issues in Marketing Strategy:Marketing Strategy is the plan designed to achieve

marketing objectives. The ethical issues are:

The stance adopted towards competitors Competitive pricing

Effective advertising

Distributing strategies

Product development strategies Efficient supply chain

The above strategies may raise ethical issues whenthey wipe out competitors in the market.

T i l P bl i B i Ethi


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Typical Problems in Business Ethics

(Contd.)

Marketing Issues: The 4 Ps play an important role in framing

marketing strategies. They also includeservice aspects of people, physical evidenceand process.

Issues pertaining to products, price, placeand promotion involve both ethical andcommercial considerations. With publicattention focused on ethics, there is a need

for stricter control in business practices,right from framing marketing strategies tofinally delivering a product to the consumer.


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Product, Pricing and Place

Products also embody the ethical decisions made atthe corporate level. Products should be regulatedrather than advertisements (e.g. tobacco andalcohol). Consuming these products are dangerous

to the health. The issues involve the interplaybetween ethical and commercial considerations. Thetobacco industry faced an ethical issue when thegovernment considered banning of the products.Another issue is the slow reduction of plastic bags

for packing based on commercial considerations. InIndia, the tobacco industry faced an ethical dilemmawhen the government once considered banning ofthe products.


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Product dilemmas

Ethical aspects of products include updating of

products, which is considered as unethical by some

critics. In updating the products some may lose their

basic characteristics, thus depriving them of the

original product.

Product which are hazardous are not acceptable

(CFC gas in refrigerators).

Hazardous products give way to eco-friendlyproducts (Plastic bags are banned for certain

purposes).


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Price Dilemmas

Price is not always an important criterionfor all buyers while making their purchasedecision. The ethical marketing decision

involved in price is always not visible. Foodconsidered healthy can be priced high ifdemand exists. Sometimes manufacturerscash in on publics demand for low fat food.

Publicity with celebrities for higher claimsmay be unethical (Brooke Bond Taj Mahaltea with Ustad Zakir Hussain).


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Place Dilemmas

Place marketers refer to the sum oflocations by which a product moves fromthe supplier to the consumer. Place is thepoint at which the customer is able to

access information about a particular placeor product or service and get the finalproduct. It also includes process ofdistributing the product and the type of

delivery. Customers who regularly buyproducts from those places will have todepend on other places to get products oftheir choices.


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Promotion

Promotion refers to advertising and publicrelations strategies to attract more customers.Communications to consumers are subjectedto close scrutiny and subject to advertisingcode of ethics. On the other hand some timesTV and radio programs publicize thosepractices that deceive consumers easily.Selling practices include soft selling and hard

selling. (advertising Standards Authority of UKand American Marketing Association arecommitted to ethical conduct).


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Ethical Issues in Work Place:

These occur due to involvement of employees

and employers in value judgments, which

by their nature are not clear-cut. It can be

on quality, going against rules, etc. Thereasons for such dilemmas are:

Power, authority and trust

Secrecy, confidentiality and loyalty


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Resolving Dilemmas at Work Place by

Employers:

According to Gelleraman, to resolve the dilemmas at

workplace, managers use the following 4

rationalization approaches:-

The actions are within ethical and legal limits

Their actions are aimed at the individuals orcorporations best interests

Their actions will not be disclosed or published and

hence no danger to them or their company

They will be protected by the companySince rationalization does not fully solve the problems,

managers need to develop skill and experience for

coping with ethical dilemmas.


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Resolving Dilemmas by Employees:

Employees should be fully trained to deal withethical dilemmas at a work place. The step-by-step process to be followed by them (known asBelieve) is as follows:-

Background (Study background of the case)

Estimate (Make an initial estimation of case)

List (List possible solutions)

Impact (Study impact of possible solutions) Estimate (the totally unacceptable solutions)

Assess (the remaining possible solutions)

Evaluate (the solutions based on their impact &

values)

Ethi l I i D i i


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Ethical Issues in Downsizing

Workforce (Firing)

Employees are retrenched due to recessionarytrends, for reducing size and overhead costs.Firing is a critical decision and affects thereputation of business for unethical reasons.

Employers at times include at-will clausewhich enables them to fire their employees atwill or for a cause.

Firing may have devastating effect on the moraleof employee, but is considered ethical whenmaximizing long-term owner value.

Firing to be ethical, should be honest, fair, legalor without coercion.


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Ethical Issues in Downsizing

Workforce (Contd.)

Firing is ethical when it is done due to a workers

poor performance, acts of sabotage, dishonesty, or

misuse of authority which affect long-term owner

value.

Organizations come under criticism when they opt

for layoffs, right-sizing, downsizing, or delayering.

It would be ethical to fire only those employees who

are least productive, as it would be difficult for an

organization to attract fresh talent and retain the

experienced employees.


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Ethical Issues in Environmental

Pollution

Environmental Ethics deals with the moralbasis of environmental responsibility. Anydamage caused to environment will have

an impact on society as well asstakeholders.

The goal of environmental ethics does notmerely revolve round the environment,

but is concerned with the moralfoundation of environmentalresponsibility.


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Pollution (contd.)

Environmental Issues include:

Toxic Waste (solids, liquids and air)

Contamination of Ground Water

Oil Spills (destroying seashores) Fossil Fuels (producing CO2 )

Usage of Fluorocarbons (which deplete Ozonelayer)

Soil Erosion Air Pollution (vehicular and industrial smoke

including noise pollution)


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Pollution (contd.)

Remedies to solve Environmental issues:

Strong Governing Body for formulating and

implementing an environmental policy

(Regulatory Reforms) Strong environmental expertise, technology and

resources for environmental protection

Imposing fines for defaulters

Green programs

Environmental Protection Act, 1986 (India)


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Pollution (contd.)

Indian Environmental Laws:

(i) Water: The Water (Prevention & Controlof Pollution) Act, 1974 (also its Cess Act,

1974 and Cess Rules, 1978); IndianFisheries Act, 1897; The River Boards Act,1956; Merchant Shipping Act, 1970.

(ii) Air: The Air (Prevention and Control ofPollution) Act, 1981; its Rules, 1982;Factories Act, 1987; Atomic Energy Act;Motor Vehicles Act, 1988.


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The End

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BECG.L 6 CTyp.problems