Analysis of a business problem using various normative theories

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Analysis of a business problem using various normative theories

  1. 1. Analysis of a Business Problem using Various Normative Theories
  2. 2. ContentsAnalysis of a Business Problem using Various Normative Theories .............................................................. iContents...................................................................................................................................................... iiExecutive Summery...................................................................................................................................... i1. Introduction............................................................................................................................................. 11.1. Background........................................................................................................................................... 11.2. Purpose................................................................................................................................................. 11.3. Scope of the Report.............................................................................................................................. 12. Discussion and Analysis of Business Problem.......................................................................................... 12. 1.Business Problem.................................................................................................................................. 12.2. Identify the Ethical Importance of the Business Problem ..................................................................... 22.3. Analysis of the Business Problem from Different Perspectives ............................................................. 33. Conclusion and Recommendation........................................................................................................... 8.................................................................................................................................................................... 9 ii
  3. 3. Executive Summery This report analyzes the ethical importance of a business problem and describes the bestcourse of action on ethical and sustainable perspective. The analysis was made according to the deontological perspective, utilitarian perspectiveand egoism. Even though there are many normative theories, analysis was limited to fewtheories. It is find that the considered activity is unethical activity with related to the deontologicalperspective and utilitarian perspective while it seems to be ethical in the aspect of egoism. i
  4. 4. 1. Introduction1.1. Background Sales Manger of the ABC Company Ltd made a business decision which resulted manyethical issues which will be discussed in the report.1.2. Purpose This report is prepared to evaluate the ethical importance of decision made by the SalesManger of ABC Company Ltd. using various normative theories.1.3. Scope of the Report The report is limited to discuss business problem from the perspective of few selectednormative theories such as deontological, utilitarianism and egoism.2. Discussion and Analysis of Business Problem2. 1.Business Problem Kamal is working as a sales manager in a foreign owned Sri Lankan company whichmainly deals with agricultural machineries and equipments. He is being working in the companysince 2005 and has proven that he is a highly committed employee and always able to achievethe targets set by the management. Siva Kumar is a farmer from north area of the country andjust started his farming activities after long time with the finishing of three decade fightingbetween government forces and terrorist group. He has purchased a company’s two wheel tractorfor his farming activities from a dealer appointed by Kamal. Later engine of the tractor wasbroken due to improper handling as he was no properly trained to operate the tractor. SivaKumar reported the incident to Kamal for warranty claim. Kamal inspect the engine with acompany’s technician and find that it cannot be repaired but has to be replaced. He has refused to 1
  5. 5. give warranty since the damage was happened not due to a manufacturing fault but farmer’simproper handling and ask him to purchase new engine. But Kamal has changed his mind afterhe realized that the farmer is very poor and a victim of civil war, also a bread winner for 6members’ family. Further, find that he has borrowed money from money lending person at ahigher interest rate to purchase the tractor and he have no extra money to buy a new engine.Kamal recommended to issues a new engine on free of charge to farmer without disclosing realfacts to the company. Also he asked technician not to mention anything about this incident to thecompany on the humanitarian ground. New engine was issued to Siva Kumar and later companyhas sent a warranty claim form to Chinese supplier on the ground of manufacturing defect.Supplier agreed to reimburse or to replace engine but ask company to keep the broken engine fortheir inspection which can be done at their annual visit to the company few weeks time.2.2. Identify the Ethical Importance of the Business Problem We can identify many ethical issues in the above scenario. It is very clear that Kamal hasaccepted the fact that Siva Kumar has right to get his machine to be repaired to continue hisagricultural activities since he have no any other job to do to feed his family. Kamal made anethical choice by changing his mind to give an engine on free of charge. He believed that hisdecision was morally right at that moment and asked technician not to mention real fact to theircompany. As a result, technician had to put at risk his own work ethic of honesty to thecompany. Even though Kamal believed he made a morally right decision he has put at risk ofcompany’s long relationship with its foreign supplier by sending them a warranty claim form onthe ground of manufacturing defect. If supplier realized that company mislead them, they willnot happy and can take back their authorized dealership which many local companies arecurrently asking for. Supplier’s products are very important to the company since thecontribution from those products to the company’s total revenue is very significant. 2
  6. 6. 2.3. Analysis of the Business Problem from Different Perspectives The different normative theories discussed and consider a same ethical dilemma in adifferent angle and thus work in a complementary rather than mutually exclusive fashion inmaking a decision with related to a certain ethical dilemma. We can view an ethical problemthrough prism of different ethical theories that provide a variety of consideration pertinent to themoral assessment of the matter considered. From a deontological perspective, the Sales Manager felt a sense of duty as an employeeof the company. However, his sense of duty was more centered on selling of the company’sagriculture machinery to customers and enhances the profitability of the company. The mostinfluential theory from the perspective of ethics of duty, and this theoretical frame work isknown as “Categorical Imperative”. Kant places the basis of ethics on the obligation, or the duty,to do what is "right". What is "right" comes from an idealized notion of what a "better world"ought to be. The duty to make this a better world is something we take upon ourselves.According to him morality and decisions about right and wrong were not depends a particularsituation and let alone on the consequences of one’s actions. And he has explained three maximsas needed to make an ethical decision such as consistency, human dignity and universalityapplicable in categorical imperative. (Crane and Matten, 2010). Maxim 1 suggests to checkwhether the action could be performed by everyone and reflects the aspect of consistency. Buteven Kamal’s concern may not consistent with the principle of beneficence or the customers. Heor another sales person may not act in the same manner for every customer of the company whofaces this kind of problem. If all of them are followed this action, that may be more risky for theexistence of the company as well as the industry. He probably would not like this to becomeuniversal law and it suggest that the activity deemed to be immoral. The Maxim 2, humandignity suggests to act so that you treat humanity, whether in your own person or in that of 3
  7. 7. another, always as an end and never as a means only (Crane and Matten, 2010). This humanityreflects through his response to the kind request of customer, and he compel to replace a newengine for the damaged one thought the damage caused by the improper handling by the userrather than a manufacturing defect. The maxim 3, the universality, suggests that the person mightcome to a conclusion that a certain principle could be followed consistently by the every humanbeing (Crane and Matten, 2010). Accordingly, he cannot come to a conclusion that an activitycould be followed consistently by the every human being. According to these facts it can bestated that his activity is not an ethical activity in the aspects of ethics of duty. There are some problems related to theory of ethics of duty. It may undervalue theoutcomes of one’s action and Kant has only suggests to consider the consequences when youagree that everyone should act in the same manner in similar situation and it does not provides areal mean of assessing the consequences of an act. Further, this theory is complex in applying asits way of evaluating a decision requires a certain amount of abstraction. In addition to that, thistheory is quite optimistic as it assumes that the man is a rational actor according to the self-imposed duties and it is more than the reality of business actors. But this reality has nicelyexplained through the egoism. Utilitarian ethics require that a decision maker assess the choice of all who are involvedin its outcome, then commit to an action is morally right if its results in the greatest amount ofgood for the greater number of people attached by the action (Crane and Matten, 2010). To findout what we ought to do in any situation, we have to first identify various causes of actions thatwe could perform and then we determine all of the foreseeable benefits and harm that wouldresults from each cause of action for everyone affected by the action. 4
  8. 8. When we apply above theory to our problem we have to identify the stakeholders to theproblem and how they were benefited or affected by the action taken by the Kamal. We cansummerize those as follows.Stakeholder Pleasure PainKamal − Mental happiness on help − put at risk his work ethics of honesty to farmerTechnician − − put at risk his work ethics of honestyCompany − − Possibility of withdrawal of dealership by supplier − Possible decrease in revenue and profit − Other customer also may Claim warranty on same mannerFarmer − can continue his farming − activities without problemSupplier − − Reimburse engine at free of charge without reason We can see that pains on stake holders are greater than pleasures to be experienced and thecompany is going to have a big impact by the action. If the supplier cancelled the dealership,company will lose substantial amount of its revenue and profit which may result company opt tosend all casual workers home and will consider going for voluntary retirement plan for itspermanent employees. So the number of people going to be affected is considerably high.Therefore Kamal’s action is ethically wrong. 5
  9. 9. But Kamal and technician could have explained the real situation to the company and couldhave requested the management to replace an engine free of charge. In this case company also mayhave a chance to exercise its corporate social responsibility by helping to the poor farmer. We cansummarized pleasure and pain of this action as follows.Stakeholder Pleasure PainKamal − Mental happiness on helping the farmer - − Appreciation by the management about his attitudesTechnician − Mental happiness on helping to the farmer -Company − No risk of losing its dealership - − Company have a chance to show its Commitment towards CSRFarmer − can continue his farming activities without problem -Supplier − Continue the long relationship with the company - We can see that if Kamal and technician was able to follow the second option all thestakeholders are happy and no body get pain. Therefore according to utilitarianism perspective,Kamal’s action is unethical. According to the theory of egoism, an action is morally right if the decision-maker freelydecides in order to pursue either their (short term) desires or their (long term) interest. Further,Adam Smith (1793 as cited in Crane and Matten, 2010) has emphasized that in the economicsystem, pursuit of individual interest is ethically acceptable as invisible hand of market producedmorally desirable outcome for society as a whole. Thus, people are likely to have moraloutcomes as the end-product of an economic system based on the free completion and goodinformation. Through this concept the seller or the producer compel to provide a good, quality 6
  10. 10. product to the customer or provide a quality and better service to the customer at a reasonableprice in order to increase the customer base and retain those customers with them for a longfuture. Thus the act of Kamal is in line with the egoism concept and it can be identified as anethical activity by providing better after sales services to customers in order to make a loyalcustomer base. Further, we can apply the enlightened self-interest concept in this matter.Companies may involve in social responsibility in order to promote its own self-interest.Instances where the companies rewarded customers with extra and /or more satisfaction can beidentified as socially responsible behaviors of organizations whilst perceived irresponsibilitymay results in boycotts or other undesirable consumer actions. Thus the activity of Kamalrewarded the customer with extra and /or more satisfaction, and it can be identified as an ethicalbehavior as it may promotes the company’s self-interest by enhancing the corporate reputationand customer loyalty. There are some limitations of egoist theory. Egoism explains that no individual egoistperuses his or her own interest at other egoist expense. Similarly this has been explained throughthe Adam Smith’s Theory where the market is functioning perfectly. But there are somesituations where market perfection is not a reality and some individual’s acts leads tounfavorable results. The current anti globalization movement is largely influenced by the factthat on a global level markets are not functioning perfectly and people thus witness a deliberatelyunequal distribution of wealth across globe (Crane and Matten, 2010). Further, the victims oftoday’s resources depletion or global climate change are future generations, which are not yetpresent to take part in any kind of market. 7
  11. 11. 3. Conclusion and RecommendationThis report has analyzed the ethical importance of the business problem which arose due to adecision of Kamal of ABC Company Ltd. using different normative theories. According to thedeontological perspective and utilitarian perspective the Kamal’s decision is immoral and from theegoism perspective it is ethical. According to the complementation of these perspectives it can beconcluded that the Kamal’s decision cannot be accepted from an ethical and sustainableperspective. Thus, Kamal should not handle this type of problem with his own judgment but withthe approval of the management. 8
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