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Business Administration
2B
Unethical behaviour straddles both the private and public sectors
Unethical behaviour in local government in South Africa has become uncontrollable
in most municipalities. This has lead to massive corruption and stymies local
development
1. It retards economic growth, deepens poverty and creates a platform for civil
unrest as seen by non – delivery of essential services in South Africa currently
It is therefore obvious that ethics must be understood, analyzed and studied with
the aim of promoting ethical behaviour at all levels of government and the private
sectors of a country.
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Table of Content
Businesses in both the private and public sectors are increasingly
coming under pressure to define their standards and to express
these formally in written codes of practice.
Quality and service
*
Meeting customer needs
* Within standards and expectations (or exceeding)
* No hidden defects or shortcuts
* Produced well (non-polluting, stingy on resources,
good materials, good workers)
* Interactive, when appropriate
' Timely, when appropriate
* Safe, accomodating safety, possibly helping safety
TOTAL QUALITY MANAGEMENT
• The interest in business ethics has been increased by trends towards Total
Quality
Management (TQM).
• TQM means that the management of a business be it in the private or public
sectors, be it in local government or within municipalities is called upon to define in
advance what kind of quality is acceptable within the firm / organization and to
ensure that appropriate systems are in operation, to ensure that overall
quality is maintained.
It has a two fold consequence for business ethics. These are:
The necessity of defining the level of quality and what is acceptable to the
consumer at the end of the process which management has to ensure.
1. Managing the exchange process - What is Marketing
• Will consumers accept “second best” services in terms of costs and therefore,
consumer interests cannot be ignored; the principle of caveat emptor (let the
buyer beware) will no longer suffice as a principle on which any business be it
private or public can operate or function.
• Management has to define procedures and codify them for purposes of practice
in terms of what management expects of employees in the production process
and also what employees expect the management to do at various levels.
• It assigns duties that impart a moral concept, and states what is acceptable and
what is not, and allows for no value judgments in respect of ethical decisions
as concerns goods and services of inferior quality.
HISTORY OF BUSINESS ETHICS
Business ethics was invoked by the Roman Catholic Church in the medieval period, and was
defined by canon law.
Canon law prescribed what legitimate behaviour as concerns business practice was. Canon
means a standard of measure and hence canon law is the ideal standard by which one
measures one’s behaviour.
In the Judeo – Christian tradition, the ethics of business was long established through the laws
of Moses.
It entrenched the rights of the poor.
Servants were entitled to a rest day in order to observe the Sabbath, just like their masters.
Every fifty years debt had to be cancelled – the year of the Jubilees, as it
was called.
Other religious traditions have also been concerned with prescribing ways in which business
affairs are to be considered.
Islam prohibits interest (usury); and any loan must share risk and possible profit with the
borrower.
Lord Buddha enunciated the following in respec
Lord Buddha enunciated the
following in respect of attaining nirvana (bliss and contentment) – perfect speech, perfect
action, and perfect livelihood. In other words one may not earn one’s living by deception,
by misappropriation of goods or monies, or by working in employment which involves
the taking of life (human or animal) or trading in intoxicants or drugs. Present writers
endorse that the reason for the recent eclipse of business ethics is connected with the
Protestant Reformation which paralleled the rise of modern capitalism. This had a two
fold effect on business activity as follows:
4. What Marketers Do
WHY BUSINESS ETHICS
Business ethics are controversial in SA.
Some believe in “reverse discrimination” while others may oppose it
and some may feel it s justifiable to “blow the whistle” on firms and
departments within government at any level, and target
government officials, who are recalcitrant about improving
standards of behaviour, whilst others may hold that company or
government loyalty, to the majority political party takes precedence
over any public benefit, as is seen currently in South Africa, and
many countries within Africa,
The Marketing Environment
• Some may believe that company directors and government civil servants, do
not deserve their apparently very high salaries, while others take the view that
reducing their earnings would make little difference to the average worker.
• Should government officials in municipalities in South Africa be allowed to
drive cars costing million of rands or should we enjoy high standards of living
when the majority of the population of South Africa and Africa, live in poverty.
It is thus vital that, we project on these issues, on the basis that,. it has a direct
impact on business ethics.
• If for example, we are unclear as to what is meant by equality, we cannot
decide whether or not a policy of ‘affirmative action’ contributes to the
equality of sexes because we need to determine what we are to understand by
‘equality of the sexes.’
1. What is environmental monitoring
SECTION 2
THE SCOPE AND PURPOSE OF BUSINESS ETHICS
WHAT IS BUSINESS ETHICS
Business ethics and its values have an international dimension and this aspect cannot
be ignored. The most difficult ethical dilemmas to resolve are those which result from
conflicts of values that are a consequence of the culture clashes which result from
international business.
Ethical questions are essentially questions about whether we ought or ought not to
perform certain kinds of actions; about whether these actions are good or bad, right or
wrong, virtuous or vicious, worthy of praise or blame, reward or punishment, and so on.
Why scan the environment?
HOW IS DONE
•Firstly, the evidence as it is understood. Does the evidence
support or deny the explanation that has been put forward? If
greater participation is required by workers within the business
entity or municipality, what is the evidence that employees
actually want such involvement?
•Secondly, there is the test of internal coherence. Is the
explanation in agreement with other variables or is it self –
contradictory in some way? Does it say that it can not be equally
true at the same time? We must avoid self –esteem in respect of
participating in decision making and thus avoid conflating issues
unnecessarily.
Macro and Micro environments
• Thirdly, compatibility with the general system must be tested.
Is it true or does it contradict our assumptions or is it
uncomfortable with our assumptions.
Business ethics is simply a sub – division of activity which deals
with conduct in business affairs as opposed to any other
particular kind or conduct in general.
Why DO IT
Employee-Employer Relations
Employer-Employee Relations
Company-Customer Relations
Company-Shareholder Relations
Company-Community/Public Interest
4. Write explanatory notes on the following topics: (Answers must be at least one or
more pages in length).
(a) Relations with consumers and the public
(b) Relations with employees
(c) Ethics and self – interest
(d) Ethics and the ‘bottom line’
(e) Will business ethics work and will studying it, make people more ethical?
Macro environment
ETHICS AND THE BOTTOM LINE
Sometimes, the cost of being ethical can threaten the survival of the
business.
Does a company take an order from a tyrannical regime?
Does the company bribe an official to win an order.
Do you as driver on the roads of South Africa, bribe the municipal traffic
officer in order not to pay a speeding fine?
To take a moral stance on issues listed above is to pay a heavy price, but
in the long run and in terms of ordering a country into moral and ethical
behaviour will pay dividends in respect of consolidating democracy and
promoting the general welfare.
,
Micro environment
It must never be the situation or the idea that in business profit maximization must be the
ultimate guiding objective, the ‘bottom line.’
If this is the objective corruption will reign supreme, societal values will be completely
eroded, the poor will get poorer, institutions will collapse, governments will be rendered
ineffective, crime will run rampant disloyalty will become the order of the day and the tenets
of morality and unethical behaviour will become established as a norm that has to be
emulated and pursued, if one has to be considered successful and respected by his / her
peers.
Consumer Behaviour
Important Note: This is a level 5 module and therefore, the readings and case studies
will not be discussed. You are requested in your own interests to read pages 37 to 78
of the prescribed textbook, and also look at the discussion questions in order to
enhance your knowledge and analytical ability. The readings and case studies are not
for examination purposes, but the discussion questions could be used for the
assignments and examinations.
What is Consumer Behaviour and understanding consumer behaviour
Consumer behaviour studies all the activities that influence people
to behave in particular ways when obtaining, consuming and disposing
of products and services.
Understanding the way people think, what motivates them, their
decision-making processes, and post-purchase behaviour are key
factors in ensuring successful marketing.
The marketers task is to understand what happens in the buyers
consciousness between the arrival of an outside stimuli and the buyers
purchase decisions. They must answer 2 important questions:
• How do the buyers characteristics – cultural, social, personal and
Psychological – affect buying behaviour?
• How does the buyer make purchasing decisions?
SECTION 3
ETHICAL THEORY
COGNITIVISM AND NON - COGNITIVISM
The first and most profound division in ethical theory is between the claim that it is
possible to know moral right from wrong and the denial of that claim.
The position which declares we can know is called ‘cognitivism’ and the contrary
position ‘non –cognitivism.’
According to cognitivism, there are objective moral truths which can be known, just as
we know other truths of the world. Statements of moral beliefs, on this view, can be
true or false.
According to the non – cognitivist , objective assessment of moral belief is not possible.
It is all subjective. There is no truth or falsity to be discovered – there is only belief,
attitude, and emotional reaction and so on.
Different cultural groups have different moral practices. Warnings are always expressed
about the types of action considered acceptable in one’s own culture, but could
cause offense when exported to another country.
Is there a culture which thinks that bribery is morally right.
Practice and principle therefore, need be seperated.
In respect of the consumption of alcohol, why attach a religious connotation only, rather
than thinking about the effects of alcohol on society, the public health damage that
alcohol causes, and the strain on the public fiscus.
The banning of alcohol in many countries has failed.
The wearing of the Hijab (covering the body) by Muslim women has been criticized by
many countries and has caused controversy most recently in France. There are differing
views in different cultures as to how women should dress, the west allows mini – skirts
the Islamic dress code prohibits the wearing of such clothing. It may also be a belief that
women may be sexually abused. No culture will want women to be abused.
Another situation in which cultural differences need not amount to a moral difference
and is connected with aesthetic sensibility, manner, fashion, customs and the like.
Diversity cannot be separated from moral principle given the diversity of practices. Given
this diversity there is no proof of moral relativism. The fact of moral diversity can therefore
simply mean that either, no culture has yet arrived at the truth on certain moral matters, or
else some have arrived at it and others have not.
RELIGIOUS MORALITY
The module will only cover the above in cursory terms. The important facts are
encompassed hereunder as follows:
• A source of morality might be thought to lie in religion and God exists and therefore,
who is better positioned to differentiate right or wrong.
• Much of modern ethics in respect of people and business has been built on the ethics of
religion; for Christians – the Bible, for Jews – the Talmud’s and the torah, for Muslims –
the Quran and other holy books for other religions
• The issue is can God make all the decisions in respect of morality. The theory is nown as
‘Divine Command’ and is probably temptingly simple, but perhaps also radically
incoherent.
• Some believers may hold that God, being ruler of the universe, not only makes
laws on behalf of humanity, but also provide sanctions.
• It is about reward and retribution and this must be because of actions right or wrong
that one should be punished or rewarded.
• In spite of the above, we still require reasons independent of God’s will to explain
why an action is right or wrong.
• Other faiths outside the monotheistic religions do not have a God (Buddhists and Jains,
but live by defined codes of ethics.
• Morality can exist without religion, but religion will not exist without morality and few, if
any, religions do not have moral codes.
• Religions seek to obtain reality beyond the physical world, for peace, justice and
harmony.
• The right to practice a religion is ones fundamental human right.
• Those involved in business must take into cognizance the religious convictions of their
trading partners.
• Religion enables its followers to experience a sense of belonging to a tradition or a
community – it means to bind and thus having distinctive characteristics.
• Many religions deplore extremes of wealth and poverty and yearn for compassion
and justice.
• It would be possible to follow the injunctions of religion without belonging to any
religion.
• Religion invokes special kinds of discipline on their followers.
• Religions provide myths or stories, which serve as a source of inspiration and
illustration for moral life.
CONSEQUENTIALISM AND NON - CONSEQUENTIALISM
There is a great divide between cognitive thinking and the theories which assess moral
rights and wrongs in respect of the consequences of actions and those that do not.
Those that do are consequentialist and those that do not are non – consequentialist.
The summary is as follows:
• Consequentialist theories look at the results of actions to determine truth or
falsity of moral judgments. This means that right or wrong is a question of good
or bad or benefit or harm.
• The consequentialist theories are more exclusive, in that only consequences count
but concessions are possible and modifications have been proposed.
• It can be distinguished by where the emphasis is put rather than the concentration
on consequences or their exclusion.
• For non – consequentialism, there is no immediate appeal to beneficial or
harmful consequences to determine good or bad and nor does good or bad determine
right or wrong. It is in actual fact it is right or wrong that determines good or bad.
• The difference between the two is illustrated by divine command theory as follows - if
religious believers were to obey God’s commands to attain entry into heaven or rewarded
by material success, such a motive or view pre – supposes a consequentialist view of
ethics. On the other hand, if the believer obeys the command of God without reward,
then it is strictly a non – consequentialist account of morality. It is the question of
conformity and non – conformity.
• The non – religious theories which we will examine embody the contrast
between the above two theories in more complicate ways and thus clearly
shows that there are huge differences in the different kinds of theories.
• It is the question of approach by people in respect of ethical problems and therefore
cannot be simply right or wrong.
• An example is stealing period and that the culprits must be punished as managers will say,
but what will be the consequences (non – consequential approach). A consequentialist
approach will want to weigh the pros and cons before sanctions are imposed. For example
should surveillance be improved and so on within the work place? This must not be
confused with the moral codes of practice because stealing is wrong.
• Both these theories have different approaches in reaching solutions and it all
depends on what would produce the best results.
UTILITARIANISM AN ETHIC OF WELFARE
• The best known consequentialist theory of ethics is called ‘utilitarianism.’ It is the
capacity of actions to produce good results, in order to determine moral character
rather than anything in the nature of action itself.
• Jeremy Bentham (1748 -1832) is credited for this in that he stated that utility is
happiness and disutility is unhappiness – the minimization of unhappiness
(however both will produce unhappiness it must be noted). A choice must be
made between the lesser evil.
Think Point: Why is the ethic of welfare vitally important in respect of the working
environment in South Africa and with particular reference to local government,
empowerment of people, delivery of services to the poor, to Municipal Services
Partnerships, Local Economic Development and the consolidation of democracy?
Discuss fully
The marketing research process
KANTIANISM – AN ETHIC OF DUTY
Non – consequentialism in ethics is often identified with an approach labeled ‘deontological.’
Its formulation is provided by the German philosopher Immanuel Kant (1724 -1804).
It is in many ways diametrically opposite of Bentham’s utilitarianism we
summarize as follows:
• For Bentham it is happiness but for Kant it is ‘good will.’ An action is only right if it is
motivated by good will and morally wrong if it is not. Nothing else matters.
• The action is done for reasons of principle, from a sense of duty and nothing else and self –
interest cannot be a motive; but neither can kindness, loyalty, sympathy, or any other
sentiment because they do not constitute moral motivation for acting.
• Kant expreses categorical imperative in several ways and in terms of equivalence. This is
unconvincing and can best be seen as separate but mutually supportive formulations of
the categorical imperative.
• He states that “I ought never to act except in such a way that, I can also will that my maxim
should become a universal law.” It may be either a good or bad principle. For example
when the circumstance presents itself, I will break a promise or breach confidentiality. A
personnel officer may wish to qualify circumstances in which exceptionally he / she may
reveal confidential information for example when police ask for disclosure.
Types of Data
Primary Data:
Data collected from an original source for the specific purpose on hand (Focus groups,
surveys)
Secondary Data:
This refers to data that already exists somewhere, having been collected for another
purpose. Examples of secondary data include the company’s internal database, online
databases, external information sources such as commercial data services and
government sources. Primary and secondary data could be further classified as either
being qualitative or quantitative.
Quantitative Data: Data which can be expressed numerically. Effective for sales
forecasts
Qualitative Data: Data which cannot be expressed in numbers. This type of research is
effective for finding out why people behave in ways they do.
Ethics in Marketing
The following are some of the ethical issues arising in
marketing research:
Intrusion of privacy
Misuse of research findings
Competitive information gathering
Sugging (selling under the guise of marketing research)
PART B
The Marketing Mix
1.
2.
3.
4.
Product
Pricing
Promotion
Place
5. People
6. Processes
7. Physical evidence
The Marketing Mix - Product
A product is anything that can be offered to a market for
attention, acquisition, use or consumption that might satisfy a
want or need.
Products include physical objects, services, experiences, events,
persons, places, properties, organisations, information and
ideas.
The Marketing Mix - Product
Product managers need to think about their merchandise range on three levels:
Core products: The core products stand at the centre of the total product. In
Ritz- Carlton Hotels know that they offer their guests more than simply rooms
for rent – they provide “memorable travel experiences”.
Actual Product: Actual products may have as many as five characteristics:
A quality level – Features – Design - A brand name - Packaging
Augmented Products: The augmented product, offers additional customer
services and benefits. These may include the warranty on parts and
workmanship, instructions on how to use technical products, quick repair
services when required, toll free numbers for assistance etc.
The Marketing Mix – Product - BRANDS
A brand is a name, term, sign, symbol, or design, or a combination
of these intended to identify the goods or service of one seller or
group of sellers and to differentiate them from those of
competitors.
Brand Strategies - major brand strategy decisions involve brand
positioning, brand name selection, brand sponsorship, and brand
development.
The Marketing Mix – The Product life cycle
The Marketing Mix - Price
WHAT IS PRICE?
It is the amount of money a person is willing to pay for a product
or service taking into account its perceived value.
Both internal and external factors affect pricing decisions:
• Internal factors eg. Marketing objectives, marketing mix strategy,
costs and organizational considerations
• External factors include the nature of the market and demand,
competition, and other environmental elements
The Marketing Mix – Pricing Approaches
Pricing approaches can be divided into cost-based pricing, value based pricing and competition
based pricing.
Cost based pricing:
Cost-Plus pricing: This implies adding a standard mark-up to the cost of the product. For
example it cost a manufacturer R50 to manufacture a toaster. He decides to add 20% as a profit
mark-up on cost. He will then charge the customer R60 (R50 + R10) for the toaster.
Target profit pricing: Based on break-even pricing, which is, setting price to cover costs (break
even point) of making and marketing a product; or setting price to make a target profit.
Value-based Pricing: This is based on setting prices on buyers’ perceptions of value rather than
on seller’s cost.
Value pricing: Offering just the right combination of quality and good service at a fair price
Value added marketing: Here value is built at each stage of the marketing offer. Most
companies attach value-added services to differentiate their offers and thus support higher
margins.
Competition based pricing: Involves setting prices based on the prices that competitors charge
for similar products.
The Marketing Mix – Promotion
Promotion serves to inform, persuade, and remind the market of a
product and/or the organisation selling it in the hope of influencing
the recipients’ feelings, beliefs or behaviour.
Marketers must choose the specific blend of advertising, sales
promotion, public relations, personal selling, and direct-marketing
tools to pursue the company’s marketing objectives.
The Marketing Mix – Place
Place is the point at which an organisation offers its product or service
to its customers.
In order for a company to sell its product to its target
market, various channels, sometimes referred to as distribution
channels, middlemen, or even intermediaries, have to be used.
The Marketing Mix – Place
New Product development
1. WHAT IS A NEW PRODUCT?
2. NEW PRODUCT DEVELOPMENT PROCESS
3. SOURCES OF IDEAS
4. CRITERIA FOR ADOPTING NEW PRODUCTS
5. ORGANISING FOR INNOVATION IN NEW PRODUCT DEVELOPMENT
6. ADOPTION AND DIFFUSION OF INNOVATION
7. NEW PRODUCT PRICING STRATEGIES
New Product development Process
Organising for innovation in new product development
There are six broad types of innovation strategy:
Offensive: Firms take pride in being the first to enter the market and capture a
substantial portion of the market before competitors.
Defensive: This involves producing slightly improved copies of leaders’ products.
Only innovates in response to competition.
Imitative: Simply produces copies of other firms’ products with few (if any)
adaptations.
Dependent: Performed in response to customer-specified innovations.
Traditional: Not innovative at all – merely resurrects old-fashioned designs or
produces products which have been around for many years.
Opportunist: This company produces and markets its inventions. These inventions
generally fail, mainly because they tend to be technically driven rather than marketdriven.
Adoption and diffusion of innovation
Everett M. Rogers (1962) as cited in Blythe (2006:432) classified
consumers as follows:
Innovators : Those who like to be first to own the latest products.
Early adopters: Those who are open to new ideas, but like to wait a
while after the initial launch.
Early majority: Those who buy once the product is thoroughly tried
and tested.
Late majority: Those who are suspicious of new things, and wait until
others already have one.
Laggards : Those who only adopt new products when it becomes
absolutely necessary to do so.
New Product Pricing Strategies
Skimming – Initially set a high price, then “skim” off layer by layer
Penetration pricing – low initial price to gain a large market share
Product line pricing – when sales of one product is directly linked to
another – set one price low and other higher in order to even out
profits
Psychological pricing – High prices to indicate a quality product – set
prices at 5.99 or 5.95 as opposed to 6
Promotional pricing – Pricing below cost to capture high short term
sales
Assignment and Exam
1. Assignments - Tutorial Letter
2. Case studies / Past Exam Papers
3. Closure
THANK YOU