Conducting Business

Ethically and Responsibly

 BUSINESS ENVIRONMENT

Macro Environment

Micro Environment

Internal Environment
Financiers Mission / Objectives
Suppliers Management Structure Economic
Customers Internal Power Relationship Technological
Competitors Physical Assets & facilities Global
Public Demographic
Mktg Intermediaries Socio-Cultural
Business Political
Decision
Company image
Human resources
Financial Capabilities
Technological Capabilities
Marketing Capabilities
The Economic Environment
 Inflation (Measuring Inflation: The CPI)
 Rate of Unemployment
 GDP
 Purchasing Power Parity
 Balance of Trade
 National Debt
 Fiscal & Monetary Policy

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The Technological Environment
 Technology:
 All the ways firms create value for their
constituents
 Knowledge, methods, equipment, systems, etc.
 Research and Development (R & D)
 ERP (Enterprise Resource Planning)
 a large-scale information system for organizing and
managing a firm’s processes across product lines,
departments and geographic locations
 Internet
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The Political-Legal Environment
 Reflects the relationship between
business & government, e.g. regulations
 Pro- or anti-business sentiment
 Canadian government has put a halt
to bank mergers
 Political stability
 International relations

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The Socio-Cultural Environment
 Customs, values, attitudes & demographic
characteristics of the society in which an
organization functions
 Customer preferences and tastes
 vary across & within national boundaries
 vary within the same country
 change over time
 affects job significance

 Ethical Compliance and Responsible Behaviour

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The Business Environment
 Porter’s five forces model is used to analyze the
competitive situation in an industry.
 Rivalry Among Existing Competitors
 Threat of Potential Entrants
 Suppliers
 Buyers
 Substitutes

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Emerging Challenges and Opportunities
in the Business Environment
 The most successful firms are getting leaner by
focusing on their core competencies
 Core competencies
 Divestitures and Spinoffs
 Subsidiary and Parent Corporations
 Employee-Owned Corporations
 the skills and resources with which an organization
competes best and creates the most value for owners
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 Emerging Challenges and Opportunities in the
Business Environment
 Outsourcing
 paying suppliers & distributors to perform certain business
processes
 Viral marketing
 using the Internet and word-of-mouth marketing to spread
product information
 Business process management
 moving away from department-oriented organizations toward
process-oriented teams

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What is Ethical Behaviour?
 Ethics
 standards or moral values that dictate what is
right and wrong
 culturally based
 formed upon society’s expectations
 vary by person, and by situation

Everyone develops their own

“code of ethics”

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Influences on Ethical Behaviour
Family Experiences

Personal Code of
Ethics

Peer
Group
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 Managerial Ethics
 The standards of behavior that guide individual
managers in their work
 Ethical behaviour conforms to individual beliefs and
social norms

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Assessing Ethical Behaviour
Gather the
relevant factual
information
Make an ethical
judgment based on
Analyze the facts the rightness or
to determine the wrongness of the
most appropriate proposed activity
moral values or policy

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Assessing Ethical Behaviour
 Utility - optimize

 Rights – individual rights

 Justice – fair
 Some decisions not illegal, but still unethical
 Behaviour toward employees
 Firing, hiring, wages, privacy, etc.
 Behaviour toward the organization
 Conflict of interest, confidentiality, honesty

 Behaviour toward other economic agents

 Customers, competitors, shareholders, suppliers, unions

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Company Practices & Business Ethics
 Firms are adopting written codes of ethics to guide
employee decisions

 Top management support is essential

 Ethics Programs – educating employees

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Core Principles and Organizational Values
Core Principles
Organizational Values
Organizational Objectives
Unchanging
Changed Infrequently

Strategies and Practices

Revised Frequently

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Social Responsibility
 Social Responsibility
 The overall way in which a business attempts to balance
its commitments to relevant groups and individuals
(stakeholders) in its social environment
 Organizational Stakeholders
 Groups, individuals, and organizations that are directly
affected by the practices of an organization and,
therefore, have a stake in its performance

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FIGURE 2.3 Major Corporate Stakeholders
The Stakeholder Model of Responsibility
 Customers
 Businesses strive to treat customers fairly and honestly
 Employees
 Businesses treat employees fairly, make them a part of the team,
and respect their dignity and basic human needs
 Investors
 Businesses follow proper accounting procedures, provide
information to shareholders about financial performance, and
protect shareholder rights and investments
 Suppliers
 Businesses emphasize mutually beneficial partnership
arrangements with suppliers
 Local and International Communities
 Businesses try to be socially responsible
The Evolution of Social Responsibility
 Late 19th Century: laissez-faire attitude leads to business
strife and exploitation of labour
 Development of business law
 Great Depression (1930s): many feel that business greed
led to job loss and failure of financial institutions
 Enhanced protection to non-business stakeholders
 1960s-1970s: Business perceived as a negative social force
leading to increased activism
 More aggressive laws and labeling initiatives enhance
consumer protection
 Today: stress need for more social role for business
 More awareness and activism

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Environmental Responsibility Issues
 Air Pollution
 Water Pollution
 Land Pollution
 Toxic Waste Disposal
 Recycling

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Customer Responsibility Issues
 Rights of Consumers
 Unfair Pricing
 Ethics in Advertising
 Some decisions not illegal, but still unethical
 Behaviour toward employees
 Firing, hiring, wages, privacy, etc.
 Behaviour toward the organization
 Conflict of interest, confidentiality, honesty

 Behaviour toward other economic agents

 Customers, competitors, shareholders, suppliers, unions

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Consumer Rights Issues
Consumerism Consumers rights
 social movement  right to safe products
that seeks to protect  right to be informed
and expand the  right to be heard
rights of consumers  right to choose what they buy
in their dealings  The right to be educated about
purchases
with businesses
 The right to courteous service

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Unfair Pricing Issues
 Illegal pricing practices may occur due to the
intentional (illegal) limiting of competition
 Collusion
 a group of companies
conspiring to fix prices
 results in inflated prices
and a lack of competition
 Price gouging during shortages

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Ethics in Advertising
 Truth in Advertising Claims
 Advertising of Counterfeit Brands
 Stealth (Undercover) Advertising
 Paying individuals to
speak well of a product,
but not admit they are
being paid to do so
 Morally Objectionable Advertising

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Employee Responsibility Issues
 Human resource management issues
 Provide equal opportunity for rewards and advancement
without discrimination
 Social responsibility issues
 Safe workplace, no abuse

 Privacy issues
 Drug testing and computer monitoring

 Whistle-blowers
 Employees who call attention to unethical behaviour

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Improper Financial Management
 Doing a poor job of managing the
financial resources of a company
 payment of high salaries, lavish expense accounts, & other perks
with little control over how money is spent
 May be legally unpunishable because no law has been
broken
 It may be difficult to replace management because unrest
in the firm may devalue its stock

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Insider Trading
 Using confidential (non-public)
information to gain from the sale of stock
 Martha Stewart (ImClone shares)
 Involves gaining knowledge of inside information about
the company prior to making the purchase
 Can involve the collusion of investors buying and selling
stock at the appropriate time to make huge profits

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Misrepresenting Financial Information

 Companies must conform to accounting guidelines called

“Generally Accepted Accounting Principles” (GAAP)
 Failure to follow GAAP in order to inflate expected profit
figures can mislead investors

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Social Responsibility

Social Audit
Managing
Appointment of a
Director
Social
Responsibility
Strategic Planning Programs

Top Management
Support

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Approaches to CSR

Lowest Level of
Social Responsibility

Obstructionist – Defensive – Accommodative - Proactive

Highest Level of
Social Responsibility

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Step 1: Top Management Support

 Top management support is essential to adopting a social

responsibility program
 Top managers must develop a policy statement outlining
their commitment to more ethical behaviour

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Step 2:Strategic Planning
 Top managers develop a plan of the level of company
support toward goals of
social responsibility
 percent of sales revenues to go to social causes
 promise to train chronically unemployed people

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Step 3: Appoint a Director
 An executive-level administrator must be appointed to
oversee the social program that the firm has created
 This may be achieved through a partial time work
commitment on the part of existing top managers

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Step 4: The Social Audit
 A systematic analysis of how the firm is using funds
designated specifically to fund its social initiatives
 Also addresses the effectiveness of the monies that
have been spent
 Triple bottom line reporting =
 financial reports, social audits and sustainability reports

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Social Responsibility and the Small Business

 small businesses face many of the same ethical and social

responsibility issues as large firms

 some wonder if they can afford a social agenda

 need to decide in advance how to respond

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