Business Ethics And Its Importance For Profitability Commerce Essay

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Business ethics is the behaviour that a business adheres to in its daily dealings with the world. The ethics of a particular business can be diverse. They apply not only to how the business interacts with the world at large, but also to their one-on-one dealings with a single customer.Many businesses have gained a bad reputation just by being in business. To some people, businesses are interested in making money, and that is the bottom line. It could be called capitalism in its purest form. (Kaler 1996)

Making money is not wrong in itself. It is the manner in which some businesses conduct themselves that brings up the question of ethical behaviour.Good business ethics should be a part of every business. There are many factors to consider. Here are some:

Corporate social responsibility or CSR: keynamereferring to ethical duties, which should exist between an organization and society.

Issues regarding the moral rights and duties between a company and its shareholders: fiduciary responsibility, stakeholder concept v. shareholder concept.

Ethical issues concerning relations between different companies leadership issues: corporate governance.

Political contributions made by corporations.

Law reform, such as the ethical debate over introducing a crime of corporate manslaughter.

The misuse of corporate ethics policies as marketing instruments.

Many global businesses, including most of the major brands that are well known to public, have ignored ethical standards. Many major brands have been fined and paid millions for being very unethical. Increasing profits and making more money is a major player in this situation. Many organizations have ignored ethics and have broken ethical laws. They have paid a lot of money. However compare to the amount of profits they make annually and the amount of finesthey have paid for being unethical had made not much of a difference for them. Thinking about profits and money makes many companies to go blind and ignore many ethical issues that are crucial for keeping company's values. (Harrison 2005)When it comes to ethics and profits it is very important for companies to analyse the damage that unethical behaviours can bring. Besides huge fines that they can get, they also might lose trust in their customers. Many people are concerned about human rights and environmental problems nowadays. For this reason if a company's name appears in media for beingunethical, they might lose vast number of customers. Once a customers has a bad opinion over a particular name or a brand it is hard win him or her back. Especially when there is a high competition on the market, companies should track their ethical behaviours. As a consequence company mightlose competitive advantage and can cost lot more than millions to regain brand value and image.

Examples of CompaniesEngaging in Unethical Actions and Impact on Profits

Today, rapidly developing technologies allow businesses to have bigger influence on people. Many companies use different types of advertising to get their message across. They target different groups of people with their common needs or characteristics. They tell people about their values and how special their customers, employees or shareholders are for them. They also try to convince them how their products can be beneficial and why should people choose them over their competitors. They talk about environmental issues and assure people that their waste is disposed safely and that they cause no harm to the environment. We see a lot of commercials every day and they generate our opinions about certain products or a company overall. We purchase particular products because we think they are as good as the companies tell us. However there are companies that are more likely to lie to persuade public to use their products or services. Unethical companies can go very far and try to convince people that they are very ethical. It gets more harmful for society and environment when a big company decides to expand its profit and ignores ethical issues. People have witnessed many of examples like this. For example we have seen media exposing Nike in its unethical behaviours overseas. Nike is a giant in athletic shoes and clothes manufacturing and has billions in profits every year. However it came out that the company was involved in very horrific activities. Nike has factories in many developing countries. Therefore there are many people seeking for jobs desperately in such countries. It was exposed that employees in Nike factories were paid less than minimum wage and treated terribly. The most shocking fact about Nike situation was that young children were employed in factories. In addition to that, they were strictly punished for various reasons such as, if they refused to work overtime. Showing these facts to public had a big impact on company's profits and its name overall. Many people changed their minds about buying Nike shoes, thinking about those poor children making them in a very awful working environment. This fact noticeably decreased company's profits and harmed its brand image. In the same way Nestlé, known for its various food products was a victim of massive protests throughout the world. The problem about Nestlé was that they mislead people by their false marketing. In 1981 there were protests in many countries against Nestlé's breast milk substitutes. They aggressively advertised milk for babies. As they claimed it was a substitute for breast milk for people who couldn't breastfeed. Most of the packages lacked the information about health warnings or was written on a wrong language. Therefore it caused a lot of health problems for many people. (www.mcspotlight.org) In addition to that they were accused of discriminating employees in Brazil. Many of the workers complained about their working conditions and went on strike. These are one of the few examples how unethical some organizations can behave to satisfy their never satisfying greediness.These types of actions strongly reflected on their profits.

Analysis of Ethical Organization

Marks and Spencer

M&S is known as one of the UK's leading retailers, with over 21 million people visiting their stores each week. M&S offers stylish, high quality, great value clothing and home products, as well as outstanding quality foods, responsibly sourced from around 2,000 suppliers globally. M&S employ over 75,000 people in the UK and abroad, and have over 600 UK stores, plus an expanding international business. They are the number one provider of womenswear and lingerie in the UK, and are rapidly growing their market share in menswear, kidswear and home products.They aregrowing theirbusiness online too. The other 51% of M&S's business is in food, where they sell everything from fresh groceries, to partly prepared meals and ready meals.

If you stopped anybody in London and asked: who has the best quality in UK's supermarkets? Most of them would probably say M&S. They represent quality worth every penny, deliver best services and by 5-year plan willing to become UK's greenest company. "Marks & Spencer is committed to Quality, Value, Service, Innovation and Trust. Trust is earned from others as a result of our commitment to long hold values and the ethical manner in which we behave that underpins them. Having trust is a very important part of what makes Marks & Spencer a special company and we all have a responsibility to protect this heritage in everything we do and say."(Marks & Spencer Code of Ethics 2006)

Here is the overview of M&S approach to people it does business with. Which clearly shows how big business can strongly appreciate the importance of ethics and at the same time be highly profitable.

Customers

Marks & Spencer values the loyalty and confidence of their customers. Theyprioritize safety of customers and strive to offer the highest possible standards of quality, value, Innovation and service. In addition M&Sis also responsible to keep data collected from customers confidential.

Employees

All Marks & Spencer employees work hard with the common aim of serving customers. They all treat each other with courtesy and respect. Everyone is treated equally regardless of age, gender, colour, ethnicity, disability, hours of work, nationality, religious beliefs, marital status or sexual orientation. As a company, Marks & Spencer is committed to provide clear, honest and accurate communication directly to employees and consult where necessary when significant changes are being considered. This factor speaks about strong organizational culture, which can have a big influence on employee relationship and the way they treat each other. (Robbins and Coulter, 2007)

Suppliers

Marks & Spencer sources products from around the world, respecting third party rights and design integrity in order to provide customers with the best quality at competitive prices. They work in partnership to ensure that all our suppliers comply with the requirements of their GlobalSourcing Principles and over time adopt the recognised international standards contained in theEthical Trading Initiative Base Code.

Environment

The natural environment provides all the raw materials people need to operate business. Marks& Spencer is committed to the principle of sustainable development. They have a responsibility to current and future generations to use natural resources in a responsible manner and to prevent unnecessary pollution. Including environmental considerations in all their decisions and specifications.

Charitable Donations

Marks & Spencer commits at least one percent of pre-tax profits to initiatives that benefit the community. These donations will be given according to a Board endorsed policy and will not be used to gain improper influence.

(Marks & Spencer Code of Ethics Version 1.0, April 2006)

(www.joe-turner.co.uk)

Marks & Spencer has made quite a splash when it announced a detailed plan to do business "more ethically". At the core is a 100-point five-year plan to re-engineer itself to become a carbon neutral, zero-waste-to-landfill, ethical-trading, sustainable-sourcing, health-promoting business. "We're doing this because it's what you want us to do. It's also the right thing to do. We're calling it Plan A because we believe its now the only way to do business."Sir Stuart Rose(www.plana.marksandspencer.com)

Richard Gillies, Director of Plan A and Sustainable Business commented on the business case for driving the plan forward: "In January 2007 we were prepared to invest £200m over five years in Plan A - but it has already become cost positive, mainly as the result of cost savings made on climate change and waste initiatives. Not only is it the right thing to do, it also makes complete business sense.(M&S annual report 2009)

Conclusion

Law is all about issues of right and wrong. There is considerable overlap between ethics and the law. The law might be said to be a definition of the minimum acceptable standards of behaviour. But law covers not every ethical aspect. (Crane and Mattan, 2004) Accordingly companies showing people that they are doing far more than just obeying laws means a lot. It can be true in many cases that that being ethical might negatively affect profits of a company. However M&S is a strong example how company can balance profits and ethics. Being ethical is like to be a good person doing good things rather than greedy and selfish. Even thought it might take some sacrifices and involve some of your budget, but you will be more trusted and surrounded with more loyal people. Which means a company will have more loyal customer and higher value.

References

Books:

Crane, M., (2004) Business Ethics, New York, Oxford university press, pp.127

Robbins, S., Coulter, M., (2007) "Management ninth edition", United States of America: Pearson education LTD, pp.128

Fisher, C., (2008) "Business Ethics and Values: Individual, Corporate and International Perspectives, Financial Times, Prentice Hall, pp.345

Kaler, J., Chryssides, G., (1996)"Essentials of Business Ethics", McGraw-Hill Higher Education, pp.232

Harrison, M., (2005)"An Introduction to Business and Management Ethics", Palgrave Macmillan pp.428

Internet:

http://www.joe-turner.co.uk/-2-2-2-2-2/new-from-digit/ Date accessed 15.02.

http://plana.marksandspencer.com/about/the-plan Date accessed 15.02.10

http://www.mcspotlight.org/beyond/companies/nestle.html Date accessed 16.02.10

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