Download Business Ethics Myths (cont*d)

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The role and relevance of the business
ethics norms
3rd. Business Ethics class
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Ethical norms
Offer/proposal
Tenders
Prohibiting provisions
Price politics
Contracting
Suppliers
Showcases and product tests
Warranties
Impartial Information
Topics
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The business process encompasses the
following steps that have an impact to the
consumer:
- market research and evaluation
- offering
- contracting
- the organization and delivering of the task
- financial resolution
- contact and communication during the
warranty period
Ethical norms
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Consumers require offerings/proposals from
business providers
There is no compulsion to write a proposal
for a tender
A proposal could be oral or written
Written proposal is important when the
business activity is complex, long term with
phases, with many stakeholders involved
The written proposal is protecting both parts
from misunderstandings
It is a legal commitment - document
Offer/proposal
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It could happen that the provider finding a
new opportunity would like to move
forward, it is not ethical but it happens
◦ If the proposal does not mentions that it is not
compulsory – than it constrains the provider
◦ If the consumer accepted the conditions –
should be delivered
◦ Only exception – vis major (unpredictable
circumstance that makes impossible to fulfill
the task)
Offer/proposal
Serves to offer equality of chances and
the best possible circumstances of the
business
 Definition: the process of choosing the
best or cheapest company
to supply goods or do a job by asking
several companies to make offers
for supplying the goods or doing the work
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Tendering
• Open tenders: does not require previous
qualification.
◦ Could be selective: only the qualified could
compete.
• Two phase tenders: those who pass
the first step could go further to second
• Tender by invitation: those invited
can compete
Classification of tenders
Tender documentation: contains the
technical, commercial, financial, legal and
other general and special conditions
that the investor requires from the future
contractor.
 The conditions are clear and same for all
 Thus the offers are comparable and could
be assessed objectively.
 Because of the critics – technical
companies developed tender standard
forms, that are easy to adopt
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The process of tendering
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Rules set up by different states in order to
prevent unfair market behavior
Such as the Public Procurement Act in Hungary
◦ Is setting that a business that has tax debt or provided
false data previously, or infringed a previous agreement
cannot participate in a public tender
• In Hungary cannot participate in a public
tender a company that
- Is under final settlement
- Has tax, social security or other duty
- In less than five years committed an offense to the law
established in a final court judgment
- if less than five years of breached a contract that was
concluded by a final court decision.
Prohibitory provisions
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In the introduction of a new product or
service it is important, how the business sets
the new price, the price politics it applies.
Those interested are able to assess if the
price is real or tactical.
It is incorrect and aims to mislead the
potential consumer the reference to fictional
offers for example in price-negotiation.
It is prohibited by the law, however,
companies live by this method, in some
cases, on a reciprocal basis. If becomes
public, the business environment
discriminates the company using such
unethical behavior.
Price politics
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Is a trustful, confidential situation, openness
is needed
Should be based on honest intent and mutual
benefit
Instead of Zero-sum game focus on winwin situation
The price expresses the position of the
business, can be
◦ High: when the product or service is new in the
market or has a superior quality
◦ Tactical: when tries to research the competition
◦ Engaging: to acquire new customers
◦ Follower
◦ Extremely low prices are unethical and damaging
not only for the competitors, but it is undermining
the whole sector (price-wars)
Price bargaining
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The contract is based on the consensus of
two or more (legal) persons
Contains (reciprocal) rights and
obligations
It is an obligation from the part of the
provider and an offer from the part of the
consumer
It details the task, the deadlines and the
rewards
The contracts are risky
The consumer cannot know if the provider
could provide a quality service or product.
Contracting
One of the basic criteria of a contract to
comply the quality standards. For
example: ISO 9000 standards
 Contains: legal and economic guarantees
(penalties)
 Termination of contract, loss of revenue,
compensation for harm caused, the
penalties could be significant
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Contracting
Improper packaging,
negligence,
improper choice of transport equipment,
extension of the time spent on the road,
the injury of deterioration of the product quality
is not uncommon in business.
Could cause:
o Impairment
o Unpleasant
o Discomfort
o Loss of time
o Loss of money
o Loss of quality
o Worsening business relations
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Suppliers
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Immediately by replacing the product or
service
replace the defective, replace the missing,
politely thank you for the consumer`s
patience
Rapid and polite corrections or restorations
could restore the confidence of the consumer
It is important to learn from mistakes – not
to repeat them
It is unethical to deliberately show peak
usage periods to improve the market
position of the company or to get higher
prices for a shorter delivery times
Mend supplier problems
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Mischiefs tend to get unveiled – the business
losses its reliability – one of the main assets
– finally losses money
Time is money: compliance with the agreed
delivery date contributes to the reliability of
the business.
Just in time management
The carrier has a moral obligation to
immediately notify any retarding factor in the
delay incurred
In case of delay, the severance pay is the
smallest penalty, losing a business partner or
losing reliability causes bigger damages to
the business – more difficult to mend
Supplier
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The product testing and showcases make
possible for the consumer to try the
properties and qualities of a product
(handling, comfort, aesthetics, performance).
It is ethical when a business complies with its
promises later as well.
Sometimes the price offered could differ from
the actual one
It is unethical when the product is available
in small amount – and the seller is expecting
that the consumer will buy other products if
already made an effort (commitment)
Showcases and product tests
The warranty of a product or service could
be motivational too
 The measure and time frame of a
warranty could be a parameter for the
quality and reliability of a product or
service
 The ethical part of the warranty is,
weather a business is offering guarantee,
under which conditions and circumstances
and for how long for its own products and
services
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Warranty
Impartial, correct information supersedes
the manipulative information
 Information is power
 Could be manipulated, its extents, depth,
and quality (ex. bank account services,
mobile phone taxations) – making the
prices and services incomparable
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Objective Information
Ethics can’t be managed.
 Being legal = being ethical.
 Managing ethics has little
practical relevance.
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Business Ethics Myths (cont’d)
What is business ethics?
Business ethics focuses on what
constitutes right or wrong behavior in
the world of business.
 Corporate business executives have a
responsibility to their shareholders and
employees to make decisions that will
help their business make a profit.
 But in doing so, businesspeople also
have a responsibility to the public and
themselves to maintain ethical principles.
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