4.4.2 Ethics Flashcards
What are business ethics?
- Refers to the principles & norms that govern business behaviour
- Ethics of a business will determine how they operate & their decision making process
Unethical actions can damage the brand & result in a loss of profitability
Unethical actions are usually pursued as they result in higher levels of profit for the business (or its owners)
What are the 5 ethical considerations businesses need to consider?
- Marketing considerations
- Supply chain considerations
- Environmental considerations
- Stakeholder conflicts
- Pay & working conditions
What are stakeholder conflicts?
- An individual or group that has an interest or can be affected by a business
Different stakeholder have different levels of power & different priorities which inevitably creates potential for conflict
What potential stakeholder conflicts might there be and give an explanation as to why these may occur?
Management v Workers:
- Management may be more focused on output or reducing costs than on worker safety or creating a positive working environment
- Workers want to be safe and have a comfortable environment in which to work
Management v Owners:
- The owners (shareholders) want management to maximise the business profits &, for example, be less interested in the mental well-being of the employees
- The management work daily w the employees & will often sacrifice some profit in the interest of looking after their workers health & mental well-being
Company Profits v Resource Depletion
- The owners (shareholders) aim to maximise output so as to generate increasing levels of profit
- Higher output requires more rapid usage of natural resources & generates more environmental damage
What is pay and working conditions?
Pay:
MNCs often operate in countries which have different employment regulations & working conditions
- MNCs need to decide if they will comply w the regulations of their base location or the country abroad
- MNCs may demonstrate unethical behaviour by exploiting workers in LEDCs by paying them lower wages
- MNCs argue that the wages they pay provide a decent standard of living within that country
Working Conditions:
- Some MNCs also behave unethically by providing poor working conditions in order to cut costs
- Another issue with MNCs is child labour, where school aged children are working extremely long hours
What are environmental considerations?
- Climate change & global warming have become priority for governments across the world
- Governments are encouraging businesses to improve environmental impact of their business activity
What are some current environmental issues and what are the explanations as to why these issues occur?
Waste Management
- Many developed countries have regulations about how businesses should dispose of their waste
- LEDCs usually have less regulation & enforcement on waste management
There is usually poor waste management infrastructure
- MNCs can also dispose of waste in LEDCs at a cheaper cost, which allows them to maintain their high profits
Emissions
- Emissions are often released from factories or from products made by MNCs
- The emissions MNCs produce have a negative impact on local communities, causing health issues such as asthma, cancer & skin irritations
What are supply chain considerations?
- The supply chain consists of all the suppliers involved in the manufacturing of a product/service
Many MNCs have suppliers in different countries & increasingly they are held accountable for the working conditions of these suppliers
- Many MNCs are now taking action to reduce unethical labour practices as part of their Corporate Social Responsibility (CSR)
What issues are there with child labour & explitation of labour as a part of the supply chain considerations and what are the explanations as to why these occur?
Child labour
- Some MNCs have manufacturing facilities in countries where child labour is common
- MNCs using child labour in their supply chain face backlash, which can damage their brand and affect sales
Exploitation of labour
- Exploitation of labour can take the form of low wages & poor working conditions
- MNCs are under increasing pressure from governments, customers & institutions to take action to ensure their products and services do not involve exploited labour
What are marketing considerations?
- When developing their marketing strategy, MNCs must consider the cultural & social differences in the countries in which they operate
What are some of the marketing considerations MNCS take and what are the explanations for these?
Misleading Labelling
- Labelling must comply w the regulation of the country
- The information must be correct & not include any false information aimed at generating higher sales
Examples of misleading information include false information about:
- Size
- Content of product
- Features
- Functionality
e.g. the Volkswagen diseal scandal
Inappropriate Promotional Activities
- Promotional activities should not be offensive or illegal
E.g. Nivea had to pull their ‘White is purity’ campaign for their deodorant in the Middle East as the public believed it was promoting white supremacy
