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Business Ethics


 1) Ethics

Ethics can be defined as the philosophy of addressing questions about morality, what is good or bad; right and wrong, what is virtuous. Business ethics are a form of application of moral principles that arise in conducting and maintaining a business relationship. Sales and marketing personnel are governed by a set of proper rules, principles and values that they act by. Sales and marketing principles and ethics have been debated severally; on one side are the philosophers who argue that the ethics of marketing are based on just maximizing profit for the company and nothing else. On the other hand are business philosophers who state that the marketer not only has a responsibility to the company but mostly to the client and the customer more.


 Marketing ethics began to be formerly implemented in the late 90’s. One of the challenges facing the implementation of marketing ethics is the lack of a proper and formal agency to take responsibility for the application of marketing ethics. Marketing is a social profession and therefore most of the ethics are designed to revolve around social interaction.


 In the example provided, Joseph faces some ethical issues in his work. To begin with is the ethics of honesty, where the sales agent is required to operate on utmost honesty. Therefore once he finds something wrong in the operation or product of the company it is upon him to ensure that the information is directed to the right authority. However in this case the dilemma arises from the perceived reaction of the vice president. If by informing the vice president Joseph perceives that he will loose his job definitely he may choose not to. Ferrel, Fraedrich and Ferrel (2009), there are philosophers that view each situation according to the customer, if the practices and operation of the company are injuring the customer or client in any way, then the employee must make the practices known even to his own detriment.


 Secondly Joseph faces another ethical issue arising from his wife establishing a business relationship with the company. While matters of the company should remain confidential to the sales employee, should they feel a responsibility to inform some partners who may be hurt by the practices? Not only is this a difficult professional but also professional dilemma but also a difficult personal decision. In not informing his wife of the company practices, he is risking their relationship and financial future.


 1b) Ethical and unethical issues

Ethical issues

Economic responsibility: Agalgatti and Krishna (2007) business organizations together with their marketers and sales representatives have the responsibility of employing skills and knowledge to maximizing profit on behalf of the shareholder. Since the shareholders and other stakeholders cannot market the products themselves, they call upon the skills and knowledge of marketers.


 Social responsibility: it is the responsibility of the marketer to treat all customers and potential consumers respectfully. The social behavior of the marketer should be impeccable respecting other people’s opinions, attitudes and beliefs, even though he may disagree with them.


 Education and knowledge: the marketer has the responsibility to ensure that the consumer receives all relevant information regarding the product including the risks involved in using the product. Marketers can be held responsible for withholding some information regarding risks involved in the use of the product, (Frederick, 2002).


 Competitive strategies: Frederick (2002), marketers have the responsibility to employ and allow the operation of competitive skills and strategies in business. This is usually of the case of the best man winning. Competitive strategies not only build the companies and ensure circulation of quality products, but also build the individual skills and thus the marketing profession.


 Unethical issues

Price Skimming:  Schlegelmich (1998), this is a strategy through which a single marketer or the company’s marketing department charge the consumer a high price when introducing the product slowly lowering the price as competition steps in. the concept is mainly applied by marketers to cover sunk costs and increase their commissions. The concept is unethical as it charges consumers more than they should pay for a product.


 Bait and switch: Ferrel, Fraedrich and Ferrell (2009) a technique through which marketers advertise a product at a ridiculously low price to attract consumers. However when the consumers order the product, the marketer informs them it is out of stock but a substitute product is available at a slightly higher price. This technique is generally used by unscrupulous marketers to sway consumers away from low profit making product to those that might be more costly and higher profit making.


 Attack advertising: an attack advertisement focuses on pointing out the faults of other products while highlighting the strengths of the advertiser’s product. The advertisement statements are normally exaggerated and focused on negative campaigning.


 Disinformation: Frederick (2002) the use and spread of false information to improve sales is unethical. It may include the spread of rumors and propaganda based on fabricated research. Withholding information on risks experienced from the use of products is also considered disinformation. A common disinformation technique is mixing the truth with some lies therefore presenting the half truth as the entire truth.


 1c) Business ethics

Ethics is concerned with the morality of good and bad in any circumstance or situation. It therefore follows that business ethics are the application and specialization of ethical issues to a business environment or situation. Agalgatti and Krishna (2007) Business ethics are the applications of personal morals and principles to the commerce trade. Therefore business ethics are not a separate concern from ethics, but a specialty within ethics that poses situations encountered in commercial activities and how they should be dealt with.


 Business ethics acknowledge that indeed choices made within the business environment have ends that justify their morality. Therefore it is important for the choices to be regulated and defined in a proper way setting goals and means of achieving the moral goals.


 Understanding business ethics is important for Joseph, because he ahs to define his own obligations. Joseph must learn to apply his personal moral code to the marketing situations that face him. For example in reporting the misconduct of his senior. there is no specific code of ethics that applies to such situation, but in reference to his own personal ethic standards and reflection to the rights of others he should be able you make a decision.


 When working with family it is difficult to decide where the ethical line should be drawn. For example in Joseph’s case, his wife has entered into a contract with the company, therefore Joseph faces a dilemma on whether he is ethically required to inform her on the information on business conduct of the company. Business ethics applies to the business and not personal relationships.Finally it is important for Joseph to understand the business code of ethics not just for the situation he is facing presently but also the future ethical dilemmas that he may face in the company and his work.


 2a) i) primary stakeholders:

A primary stakeholder is any individual or group of individuals that are a directly affected by the actions and decisions of the business holistically. Madura (2006), primary stakeholders are people who share a common and significant interest in the business. They include the owners of the business in private entrepreneurship and shareholders in companies. These are the people willing to invest financially in the business, with the belief that rewards will be due to them.


 Secondly are clients. These are the people served by the company. Customers interest arises from the product they receive or service accrued to them because of their relationship with the business.


 Third are employees who ultimately rely on the business or company for their income. Failure of the business or company for example ultimately means a loss of income and change of lifestyle for them.


 

Finally are creditors, people who have invested in the company but in form of goods or services provided with the hope that they will receive payment for the goods and services after a specified period of time. Failure of the business will mean great losses in terms of goods or services and income.


 

ii) Secondary stakeholders

These are the stakeholders who may not actually engage directly in commercial exchange with the business but who are affected or cause effect to the business. These are for example communities in which the company has been established. Madura (2006), communities provide employees and resources for a manufacturer. There are communities that have completely destroyed business for manufacturers.


 Secondly, industry trade groups manufacturers must abide by a code of ethics set by these groups or face civil and criminal suits against them. Industry trade groups set a rules and regulations that the companies must abide through.


 Another secondary stakeholder is the media, who may not be directly affected by the company except through the purchase of airtime and space for advertisements. The media may also be influenced by decisions made by businesses especially when covering stories and practicing journalism privileges.


 iii) Wal-Mart primary and secondary stakeholders

The first group of primary stakeholders is the shareholders who have invested in the Wal-Mart company. They have an interest in seeing a return on their investment through increased value of stock and dividends.Employees who have an interest in their company for maintaining their jobs while others also double as stakeholders in the company.Consumers and clients, survey studies conducted reveal that Wal-Mart is the biggest chain grocery retailer, (Fishman, 2006). Consumers rely on Wal-Mart for most of their supplies.Retailers and suppliers, for example gasoline and home suppliers rely heavily on Wal-Mart for most of their business. Retailers work towards contracts and tenders with Wal-Mart stores, (Fishman, 2006).


 Some of the secondary stakeholder includes non governmental organizations that rely on support from Wal-Mart’s goodwill. This include community based NGOs.Secondly are communities where the stores are located. They rely heavily on employment opportunities and other developments that seem to follow Wal-Mart stores.International retail stores also rely on Wal-Mart to increase their supply and distribution of goods. Wal-Mart has also acquired companies that allow it to spread internationally, (Fishman, 2006).Finally Wal-Mart employees are members of labor unions who govern the relationship between Wal-Mart and its employees.


 2b) Ethics in business

The business environment is filled with situations where the owners and employees of the businesses are required to make moral standings. Business ethics defines clearly such situations and the process of decision making that should be followed in making the moral decisions. The business ethic code applies to any commercial transactions.


 List of ethics in Wal-Mart.

Relationship with employees: all businesses are required to abide by the requirements of industrial bodies with regard to employees. All employees must be treated equally without discrimination of race, color or gender. Disabled employees must also not be discriminated and must be accrued the special treatment commanded by their disability.


 Surrounding environment: some civil cases have been brought against the Wal-Mart stores with regard to the misuse of the environment. For example in Solano and Orange county where it was alleged that the Wal-Mart stores failed to dispose of their hazardous material properly. All businesses must endeavor to maintain or improve the state of the environment where they are located.


 Relationships with suppliers: Wal-Mart stores are concerned with the quality of products suppliers bring in. while some suppliers may bring faulty merchandise, it is nor clear who is actually responsible for the damage accruing from the merchandise. Additionally the Wal-Mart stores are faced with the dilemma of profit maximization at low prices while maintaining positive relationships with suppliers.


 Relationships with consumers: Wal-Mart stores are made famous by their fare and lower prices. However deciding the cost of products in favor of consumers while maintaining profit maximization policies may prove to be difficult for the stores.


 2c) Role of stakeholders

Each stakeholder is responsible for the ethics in the business. The shareholders have the responsibility of making fine and sound decisions that establish ethical policy for the company and maximize profits and income.Employees should ensure they understand company goals and their role in ensuring the success of the company. They should at all times discharge their duties effectively to the company and the client.


 Suppliers should be responsible for providing the company and business with the best merchandise possible. They must always keep in mind the satisfaction of the business clients who in turn are their clients.Finally it is the responsibility of industrial organizations and labor unions to ensure that its members are conducting business in an ethical manner without hurting or injuring anyone.


 2d) Leadership and business ethics

Coughlin states that companies are commonly cheated and defrauded by their top management staff, especially those who have access to sensitive company information, (Flynn, 2008). Leaders are required by the ethical standards of business to treat company information as they would personal information, respecting its importance and maintaining its confidentiality principles.


 

Coughlin Thomas clearly says that the vision of the company is driven by the executives, it is therefore their burden and responsibility to ensure each stakeholder in the business is treated properly and ethically. Each stakeholders complaint must be dealt with equally just as they would for other stakeholders.


 Executives have a responsibility to ensure that each stakeholder is informed of decisions that may affect them in any way, in a timely fashion. Whereas they may not be the ones making the decisions they are charged with the responsibility of ensuring proper implementation of the decision made by the shareholders and owners of the company.


 3a) lay solid foundations for management and oversight

This principle defines the division of power between the board chosen by the shareholders and the employees running the company on behalf of shareholders. Lack of clear definitions when it comes to the responsibilities of the board and the management often leads to conflict which may prove hard to manage properly. Each individual whether a board member or an executive should be aware of their responsibility and what they are accountable for.


 The management principle also dilutes the power structure so that in the companies there is no one individual or group of individuals that posses insurmountable power. The company policies should ensure that though individuals are accountable for some decisions they do not posses absolute power to make the decisions.


 Companies must ensure that directors and executives understand the process of evaluation which must be proved to be not only exclusive but fair with regard to performance. New executives need to understand how they will be evaluated and who will evaluate them. The process must be well defined for easy understanding.When employing new executives, the board needs to consider their knowledge and skills that will be employed in the company. The executives must be aware of the strategies of management financial reporting and the rights of each stakeholder.


 The information agreed upon in the principle should be included and revised each year in the corporate governance statement of the annual report. The report should be made available to the stakeholders and the general public for anyone who may have an interest in developing a relationship with the company.


 3b) Transparency

Companies are required by law to disclose any important information to the stakeholders. This especially covers information on financial performance. The executives and board of companies are required to not only prepare financial reports but also disclose the true performance of companies to shareholders and other interested parties. However there is some sensitive information that can be kept confidential for the shareholders only as it may affect the decisions or attitude of other stakeholders. Shareholders must always have the full, accurate and correct information on time. Delaying disclosure of information to influence the decisions of stakeholders is illegal and unethical.


References

Agalgatti. B. H And Krishna. S (2007). Business Ethics. Maharashtra, Pragati Books Ltd.

ASX Corporate Governance Council (2007). Corporate Governance Principles And

Recommendations, 2nd Ed. ASX Corporate Governance Council

Ferrel. O. C, Fraedrich. J And Ferrell. L (2009). Business Ethics: Ethical Decision

Making And Cases, 7th Ed. South Western Cengage Learning.

Fishman Charles (). The Wall Mart Effect: How The World’s Most Powerful Company

Really Works. New York, Penguin Press.

Frederick. R (2002). A Companion To Business Ethics. Massachusetts, Blackwell

Publishers.

Madura. J (2006). Introduction To Business. Cornwall, Thomson Business Press. Pgs 11-

27

Schlegelmich .B. B (1998). Marketing Ethics: An International Perspective. Cornwall,

Thomson Business Press. Pgs 62-110


 

 
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