CHINHOYI UNIVERSITY OF TECHNOLOGY

COURSE: STRATEGIC MANAGEMENT ACCOUNTING

NAME SURNAME REG NUMBER

TINOTENDA H NHIWATIWA C19136877C
KUDZAI DZIMBA C19137036E
ABIGAL MUNAKI C19138005M
THEOPHELOUS T ZENGENI C19137994X
DIVINE T MWARAMBA C19136589C
TAFARA ZHIRA C19138043M
TAKUDZWA CHIWA C19137152L
RUVARASHE ZVIWARA C19137105B
TRACY SAMANYANGA C19137064O
MALONE MUGAMBIZA C19136657I
1(a) Discuss the ethical issues with reference to the given case above and their impact on
the performance of Plastic Ware PLC (long term as well as short term) [10 marks]

Definition of key terms

Ethics

Refers to the moral principles that govern a person’s behavior or the conducting of an activity. It
can also be defined as a branch of knowledge that deals with moral principles.

Business ethics

These are the moral principles that act as guidelines for the way a business conducts itself and its
transactions.

Ethical issues in Plastic Ware PLC

Product safety

Product safety can be used as a core competence and as a basis for differentiation by companies.
However, for Plastic Ware PLC, a substandard material is used in the production of toys. The
material is harmful to the children if they put the toys in their mouth. Despite this, the company
did not give any warning on the packaging of the toys. Plastic Ware plc misled the customers by
advertising the toy as being safe and claimed them to improve children’s memory and motor
skills at a faster rate than the toys manufactured by its competitors although it was not
scientifically proven.

In the short run the company will perform very well as it will record high sales volume in the
sense that customers are misled by the advert hence the product appears to be better than that of
its competitors. However, this have got an adverse effect to the company sales in the long run as
people will not be willing to buy products that are harmful to their children. This is because
children will react from the harmful material used in making the toys, hence they will lose
customer loyalty and it will be difficult to return those customers as they would have put their
trust in Plastic Ware plc’s competitors.

Woking conditions
There are rules and regulations stipulated in the law of labour Act and Trade Unions which are
supposed to govern employers and employee’s relationships in relation to working environments,
working hours, specific age to perform specific tasks and minimum remuneration requirements.
In organisations, good working conditions are used to attract higher calibre of workers in the
long run. Employees have rights and they must not be seen simply as a means of production,
therefore they need good and favourable working conditions.

However, due to high unemployment rate Plastic Ware PLC is taking advantage of the economic
situation hence workers are required to work beyond normal working hours for lower wages.
Also Plastic Ware plc is using child labour which is against the labour act. This has got a
negative short term effect as employees will be demotivated and this results in the production of
poor quality goods. In the long run the government and labour unions might intervene and
enforce labour laws leading to the company being sued and forced to pay fines and this will
cripple the company financially.

Pollution and hygiene

Avoiding pollution helps the organization to serve costs in the long run and winning in
increasingly sophisticated markets where there is now a threshold competence.

In Plastic Ware PLC, there is no emission treatment plant and the emissions from the factory are
polluting the environment of Harare. In the short the company the company may suffer
financially in trying to put in place hygienic conditions to avoid omissions.

In the long run failure to put measures to control air pollution this may affect the going concern
of Plastic Ware as it may be forced to close by the EMA. Also, this affects the reputation of the
company as the pollution has already attracted media attention and may adversely affect business
in the long run. However, if Plastic Ware manage to put measures to control air pollution it will
not suffer in paying fines from EMA and also it will be able to bring back its reputation.

The work environment should be very hygienic for the products to be highly demanded by the
customers.
In Plastic Ware, there is poor hygiene and they allowed female workers to bring breast fed
children to the company. This has also attracted media attention and they have published a
photographic evidence.

Sponsorship

Making donations builds the image of the corporate.

In the short run, donations are tax deductible hence reduces the corporate tax to be paid to
ZIMRA. Also the Plastic Ware Plc will benefit from financial loans as Carnival is the chairman
of Easy money financial company. However, in the long run, Plastic Ware might face challenges
of conflicts of interest as they make donations to a certain political party which might make the
company lose their customer who are affiliated to other political parties. It is unethical to provide
donations to it since Plastic Ware seem to want to benefit from buying low interest rates loan
from Easy-money.

Honesty in Approach

Honesty in approach can lead to the brand strengthening.

However, Plastic Ware is not disclosing to the customers about the bad effects their products
have. Rather, they are claiming their products as being safe and improving children’s memory
and motor skills at a faster rate which has not been scientifically proven. This has got a negative
effect to the company if customers prove otherwise.

Board Composition and ownership structure

Plastic Ware plc shares are mainly dominated by the directors which consist 80% of the shares
and 20% to the public therefore the decision making is done by the directors. The main goal of
directors is to maximize shareholder earnings. However, this contradicted with what the boss of
Plastic Ware plc suggested in the board meeting that is, she suggested that since it is the
company’s objective to grow by leaps and bounds and become a market leader in the short run
the company will incur costs through building an emission treatment plant of which it is against
the directors will.
b) Using Mendelow’s matrix, map the following stakeholders of Plastic Ware Plc:
(i) Employees
(ii) Customers
(iii) Directors of Plastic Ware Plc.
(iv)Shareholders (other than directors)
(v) The government

Mandelows matrix is a model used to analyze the stakeholders of a company. The stakeholders
are analyzed based on power which is the ability to influence the organization strategy plans.
Interest is also used to analyze the stakeholders of an organization. The power and interest of
stakeholders differs from time to time.
Below is the Mandelows matrix

(i) Employees
Under mendelows matrix employees fall under the third matrix which is keep satisfied.
Employees have high power and low interest in the operations of the organization. As long as
the employees are satisfied they do not demand anything from the organization. Employees
of Plastic Ware PLC are satisfied by the salary they are been paid as indicated by the
financial director. Even though they are working for long ours they are satisfied because they
are been compensated.
 (ii) Customers
Customers of Plastic wave Plc. are placed under keep informed which the second matrix is.
The customers have low stakeholder power to influence the strategic planning of Plastic
Wave plc.and they are highly interested on the company. At times customers can be power
full to influence other groups.

(iii) Directors of plastic Ware PLC

The directors of Plastic Ware PLC fall under key player’s quadrant of the Mendelows matrix
model. They are the most significant stakeholders in the company. They have high stakeholder
power and also high interest on the operation of the company. They hold 80% of the total
ownership of the company, because of that they have high stakeholders power. They are also
mainly concerned with profits that’s why they have high interest on the organization.

(iv) Shareholders (other than directors)

Shareholders (other than directors) of Plastic Wave PLC fall under minimal effort quadrant of the
Mendelows matrix model. They only constitute 20% of the total ownership of the company. They
have little stakeholder power and also low interest. They are not included in the strategic
planning of the organization.

(v) Government
Government fall under keep informed. It has high interest level in the operations of the Plastic
Wave PLC but has low stakeholder power. Government need to be kept informed about all the
operation of the company although it has low stakeholder power. Government can be able to
influence other group of stakeholders like customers and pressure groups.