Typical Problems in Business Ethics

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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Price and Promotion) of marketing. Significant and Opportunity factors that have bearing on the ethical nature of marketing decisions. Place.Factors that determine Code of Ethics There are many ethical issues in marketing starting right from framing marketing strategies to finally delivering the products to the customers. 3 . Ethical issues play an important role on the 4 Ps (Product. Ferrell and Gresham have identified three factors that determine the code of ethics framed by marketer: Individual.

They play an important role in framing a marketing decision). education and culture. Significant Factors (Those which Reference groups. Top management and Peers influence the marketer.Factors that determine Code of Ethics (Contd.) 4 .)    Individual Factors (Moral values inculcated in a person by family. These have more to do with the organizational climate of the marketer) Opportunity Factors (Ethical codes & standards that are promoted in an Organization. which all the employees are expected to adhere. These are the rules and policies framed by Organization.

Ethical Issues in Strategic Management While making following strategies. Going Private or Leveraged Buyouts or thru Computerization) which have both positive and negative effects. 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. 5 . Share Purchase.

Are rights of stakeholders violated?) 2. Evaluate decision from ethical standpoint (Identify affected stakeholders.Ethical Decision Making Model It is a 4 step process as follows: 1. Establish moral intent 4. Evaluate decision from ethical standpoint in the context of moral principle 3. Engage in moral behavior 6 .

Typical Problems in Business Ethics Ethical issues in Marketing Strategy: Marketing Strategy is the plan designed to achieve marketing objectives. 7 . 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 when they wipe out competitors in the market.

) Marketing Issues:   The 4 Ps play an important role in framing marketing strategies. right from framing marketing strategies to finally delivering a product to the consumer. there is a need for stricter control in business practices.Typical Problems in Business Ethics (Contd. place and promotion involve both ethical and commercial considerations. Issues pertaining to products. With public attention focused on ethics. price. 8 . They also include service aspects of people. physical evidence and process.

Pricing and Place Products also embody the ethical decisions made at the corporate level. The issues involve the interplay between ethical and commercial considerations. Another issue is the slow reduction of plastic bags for packing based on commercial considerations. tobacco and alcohol).Product. Consuming these products are dangerous to the health. The tobacco industry faced an ethical issue when the government considered banning of the products. the tobacco industry faced an ethical dilemma when the government once considered banning of the products. 9 . In India.g. Products should be regulated rather than advertisements (e.

Product which are hazardous are not acceptable (CFC gas in refrigerators). 10 . Hazardous products give way to eco-friendly products (Plastic bags are banned for certain purposes). thus depriving them of the original product. In updating the products some may lose their basic characteristics.Product dilemmas    Ethical aspects of products include updating of products. which is considered as unethical by some critics.

Price Dilemmas   Price is not always an important criterion for all buyers while making their purchase decision. 11 . The ethical marketing decision involved in price is always not visible. Publicity with celebrities for higher claims may be unethical (Brooke Bond Taj Mahal tea with Ustad Zakir Hussain). Sometimes manufacturers cash in on public’s demand for low fat food. Food considered healthy can be priced high if demand exists.

It also includes process of distributing the product and the type of delivery. Customers who regularly buy products from those places will have to depend on other places to get products of their choices. 12 . Place is the point at which the customer is able to access information about a particular place or product or service and get the final product.Place Dilemmas  Place marketers refer to the sum of locations by which a product moves from the supplier to the consumer.

Communications to consumers are subjected to close scrutiny and subject to advertising code of ethics. 13 .Promotion  Promotion refers to advertising and public relations strategies to attract more customers. (advertising Standards Authority of UK and American Marketing Association are committed to ethical conduct). Selling practices include soft selling and hard selling. On the other hand some times TV and radio programs publicize those practices that deceive consumers easily.

going against rules. authority and trust  Secrecy.Ethical Issues in Work Place: These occur due to involvement of employees and employers in value judgments. etc. confidentiality and loyalty 14 . which by their nature are not clear-cut. The reasons for such dilemmas are:  Power. It can be on quality.

managers use the following 4 rationalization approaches: The actions are within ethical and legal limits  Their actions are aimed at the individuals or corporation’s 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 company Since rationalization does not fully solve the problems.Resolving Dilemmas at Work Place by Employers: According to Gelleraman. managers need to develop skill and experience for coping with ethical dilemmas. to resolve the dilemmas at workplace. 15 .

Resolving Dilemmas by Employees: Employees should be fully trained to deal with ethical dilemmas at a work place. The step-bystep process to be followed by them (known as “Believe”) 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) 16 .

 Firing to be ethical. legal or without coercion.  Firing may have devastating effect on the morale of employee. for reducing size and overhead costs.  Employers at times include “at-will” clause which enables them to fire their employees “at will” or for a “cause”. but is considered ethical when maximizing long-term owner value.Ethical Issues in Downsizing Workforce (Firing) Employees are retrenched due to recessionary trends. Firing is a critical decision and affects the reputation of business for unethical reasons. should be honest. fair. 17 .

)    Firing is ethical when it is done due to a worker’s poor performance. dishonesty.Ethical Issues in Downsizing Workforce (Contd. acts of sabotage. It would be ethical to fire only those employees who are least productive. or misuse of authority which affect long-term owner value. or delayering. downsizing. Organizations come under criticism when they opt for layoffs. 18 . right-sizing. as it would be difficult for an organization to attract fresh talent and retain the experienced employees.

Any damage caused to environment will have an impact on society as well as stakeholders. but is concerned with the moral foundation of environmental responsibility.Ethical Issues in Environmental Pollution   Environmental Ethics deals with the moral basis of environmental responsibility. 19 . The goal of environmental ethics does not merely revolve round the environment.

Ethical Issues in Environmental 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 Ozone layer)  Soil Erosion  Air Pollution (vehicular and industrial smoke including noise pollution) 20 .

Ethical Issues in Environmental Pollution (contd. technology and resources for environmental protection  Imposing fines for defaulters  Green programs  Environmental Protection Act.) Remedies to solve Environmental issues:  Strong Governing Body for formulating and implementing an environmental policy (Regulatory Reforms)  Strong environmental expertise. 1986 (India) 21 .

) Indian Environmental Laws: (i) Water: The Water (Prevention & Control of Pollution) Act. 1981. 22 . 1970. 1897. Merchant Shipping Act. The River Boards Act.Ethical Issues in Environmental Pollution (contd. 1978). Motor Vehicles Act. 1974 (also its Cess Act. 1988. its Rules. Atomic Energy Act. Factories Act. 1987. 1956. (ii) Air: The Air (Prevention and Control of Pollution) Act. 1982. Indian Fisheries Act. 1974 and Cess Rules.

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