4.4.2 Ethics

Ethics

🖇️ Moral guidelines that govern good behaviour.

📝 Examples of Businesses with Sound Business Ethics

• Microsoft (charitable work)
• John Lewis (profit share with workers)

📝 Examples of Businesses with Questionable Business Ethics

• Sports Direct (poor and illegal working conditions)
• Primark (child labour) When businesses take ethics into account, they may not truly believe in the right thing they are doing (depending on the views of those in control). Instead, it could just be cynical marketing.

Cynical

🔗 Purely motivated by self-interest rather than for the benefit of others

Stakeholder Conflicts

🔗 Stakeholder – An individual or group affected by and who can affect a business's activities or decisions.

Stakeholder Conflicts in the Market

Consumers

• Conflicts of interest – Whether the customer should receive a cheaper price than they are paying based on (E.G Collusive business activity)
• Product safety (E.G Hygiene of food when it reaches customer)
• Misleading advertising – Tricking customers into purchasing a product

Employees

• Safe working conditions to minimise the risk of injury or death (E.G Risk assessment)
• Redundancies – A business may need to cut costs and as a result lay off workers
• Pay and conditions – Workers expect the pay they are contractually obliged

Shareholders

• Conflict between managers and shareholders – Decisions and their impact on dividend payments
• Short-term vs long-term – Shareholders may want quick financial rewards to make their investment in the business worthwhile

Countries or Communities

• Safety – People's well-being isn't compromised (E.G Bhopal disaster, Emissions scandal)
• Environmental concerns – Impact of operations on the environment (E.G Pollution, global warming)
• Resource depletion – Sustainability and impact on the country's environment

Pay and Working Conditions

• MNCs sometimes enter countries to exploit the cheap labour of the country for production -> Lower total cost per unit -> More competitive
• These countries may also lack legislation protecting worker rights or giving them fair treatment (E.G No minimum wage, lack of health and safety)
• This does result in a conflict between the business and its stakeholders (employees and customers) who demand fair working conditions and ethical consideration -> Bad PR for the business

Environmental Considerations

• Emissions – Bad air pollution caused by operations -> detrimental to public health. Government regulation in place as a result
• Waste disposal – Waste such as e-waste contains toxic elements and deteriorates over time -> Damage both the environment and public health

Supply Chain Considerations

🔗 Supply Chain – The sequence of processes involved in the distribution of a product.

• Materials sourced for products come from least developed countries (LDCs) where human rights are abused and young children are used
• Exploitation of labour – Workers are enslaved, paid next to nothing and physically abused -> Businesses taking steps to keep products free from exploited labour to ensure their brand image and PR remain strong
• Child labour – Local suppliers follow local traditions and utilise young children for hard work.
• However clamping down on child labour can have negative consequences, especially considering many children in poor families in LDC are the sole breadwinners or earn key income.
• Moreover, these countries lack formal education systems which force the children into work.

Marketing Considerations

• Misleading labelling – Prevents consumers from making an informed choice on buying products. Can also put them at risk if the product has a hazardous aspect. The UK has Trade Descriptions Act in place
• Inappropriate promotional activities – Some business promotions can be illegal or offensive (E.G GSK's illegal marketing activities in China to increase drug sales)
• Businesses also have to consider cultural aspects as part of when they operate in the global market with countries such as China