What are Business Ethics and why are they important?

D = Definition. Ethics is the study of what is generally accepted by society as being right or wrong.

I = Importance. It is important for a business to behave ethically – if it does not - that is – it behaves unethically – then
 its reputation with customers may be damaged….

• which may lead to reduced sales and falling profits…
• which may in the long term threaten the long term survival of the business
• which of course if the most important business objective!

E = Example These 2 articles give examples that can be used in an exam.

In this first article Ralph Norris, the Australian Commonwealth Bank’s CEO (Chief Executive Officer) has just received an 80% pay increase. His salary package of $AUD 16,000,000 (approx $USD 16 million) has received lots of criticism.

Is it ethical for businesses to pay such large salaries? Ist is it right for anyone to receive so much money, regardless of the success of the business?

In this second example, many of Chinas super-rich business bosses have been accused of being ‘stingy’ by not attending a Charity event with 2 of the worlds richest men – Bill Gates and Warren Buffet. Chinas richest man. What do you think of this argument from the article?

"Zong Qinghou, named by the Hurun Rich List as China's richest man with a $12bn fortune, told Phoenix television he had a previous engagement and said real philanthropy was creating wealth and jobs.’

‘"If I want to donate, I will; if I don't want to, I won't be persuaded to either. I don't think donating a lot of money is real philanthropy. It is just a way to get around the high inheritance tax and other taxes," he said.’

What is marketing and why is it important?

Definition: Marketing is the work done by the business in

Identifying customer wants and needs

• Informing the customer about the forms products
• Persuading customers to purchase the firms products

By its definition, we can see that marketing is focussed on actual and potential business customers.

  

Importance: We study marketing because it is an important business process. Marketing is important to the business it
Provides the business with information on the products that customers will want to purchase

• informs customers about the products offered by the business that will satisfy their wants and needs
• persuades customers to buy the products offered by the business that will satisfy their wants and needs

Effective marketing supports the most important business objective of business survival as follows

Effective marketing means that a business produces products that will meet customer wants and needs

1. Effective marketing informs and persuades customers to buy these products
• this increases sales for the business
• this increases business profits (assuming of course that the increase in sales are greater than any increase in costs to product and promote the new products!)
• increased profits help a business to survive in the long term – the most important long term objective of any business

 

For Example: For example, Apples iPad meets customer needs for a multi-featured portable wireless device. Those needs were identified by thr careful study of existing and potential customers by Apples marketing department. In addition the marketing department has promoted the devide (to inform and persuade) customers to buy it.

The iPad has sold amazingly well – leading to increased profits for Apple. Apple can use those profits to ensure its long term survival (e.g.by investing in new markets, new products etc)

Funny Market Research: Diamond Shreddies

Shreddies are a breakfast cereal sold in UK, Canada and New Zealand.

This link to an award winning ad campaign for the Canadian market has some very funny ideas, including great primary market research spoof videos!

In the comic “‘New’ Diamond Shreddies” campaign, , the square Shreddie was turned 45 degrees to become diamond shaped! The videos show how real people felt about the “new” Shreddies.

How to solve digital piracy

You should know the basics of E-commerce from the IB course

Advantages to businesses include – possibility of wider customer base, the ability to update product information quickly, the ability to offer a wider product range etc
Disadvantages to businesses include - possibility that so called 'aggregate sites' drive prices down to the 'lowest common denominator' etc

Advantages to customers include – increased convenience of online shopping, a wider range of products and stores to choose from etc.

Disadvantages to customers include the possibility of credit card fraud, sites that download harmful spyware to computers etc.

A related topic is the problems of illegal downloading and filesharing faced by music and film producers. This Guardian file sharing link is worth checking out: there are arguments for and against digital file sharing. You will see that there is still no agreement on how business can preoct its products from illegal copying

Ex-Morgan Stanley boss jailed for insider trading

1) Who or what is Morgan Stanley?
2) What does the term 'insider trading' mean?
3) What does Hong Kong's Securities and Futures Commission (SFC) do?

Read this Guardian article

4) What was Du Jun found guilty of - what sentance has he received?

If you get time...read this more detailed analysis of the case and answer these more detailed questions.

5) Explain how SEC overcame the difficulties it faced in getting a conviction in this case
6) Can you explain what "Tiger Asia Management" did to be put under investigation from the SEC?