The document discusses the history and challenges facing Best Buy, the largest consumer electronics retailer. It outlines Best Buy's evolution from its founding in 1966 as Sound of Music to its current struggles. Key points include:
- Best Buy is facing declining sales and profits as competitors like Amazon gain market share. Its new CEO is aiming to refocus the company on customer centricity.
- The company changed its business model several times over the decades in response to market changes and competition, from hi-fi audio stores to superstores to a "grab-and-go" format.
- Challenges now include losing market share to online and discount retailers, as well as changing consumer preferences as devices like smartphones replace
1. Running Head: PHIL WORKSHOP 1
PHIL WORKSHOP 2
Phil Workshop
Name:
Institutional Affiliation:
Phil Workshop
One
According to Kant’s theory, the wrongness or rightness of
actions do not rely on their outcomes but on if they tend to
fulfill our responsibilities. Kant believed that there has to be a
supreme guideline when it comes to morality which he
mentioned to be the categorical imperative. Kant mentioned that
when looking at categorical imperative, he believed that
whether actions are wrong or right relies not on their
consequences although on if an individual fulfils their duties
2. (Bowie, 2002). In the philosophy according to Kant, there are
diverse aspects that we learn up to date. These include: ethics,
utilitarianism, among others (Winch, 2015). The limitations of
this aspect are however somewhat severe. According to
research, most philosophers tend to know much about several
topics although they do not have any tangible mastery of a
particular subject in a thorough way (Hossieni, et.al, 2016).
Both Aristotle and Kant argued that an action was classified to
be moral it got to be partaken with a moral result in mind.
Aristotle breaks with Kant and believes that there are not such
things as the Forms or Eidos which are permanent and eternal
and real. Whatever feelings one is subjected to, determines how
they develop. It is better that we understand the definition of
personifications.
Two
FGM, that is, female genital mutilation is a concept which
denotes all the processes that involve total or partial removal of
parts of the exterior female genitalia or maybe causing other
injuries to the organs for non-medical or cultural reasons.
According to a report by the World Health Organization on 31st
January, 2018, FGM has no health benefits for women and girls.
In addition, it is a violation of the women’ and girls’ violation
(Reisel & Creighton, 2015). When it comes to the morals and
ethical aspects of FGM, there ought to be a reasoned public
dialogue regarding how well to get rid of harmful aspects of the
mutilation of female genitals via laws, policies and education.
Also, debate is supposed to get encouraged in diverse academies
dealing with bioethics on how medical specialists could fulfil
both their moral and ethical duties in the acknowledgement of
the religious traditions when it comes to their patients.
Goodness is whatever promotes the greatest happiness for the
greatest number of people. This is because not all actions are
morally acceptable despite the positive consequences attained.
John Mill explained that the greatest happiness is the pleasure
and lack of pain. Happiness is the end desirable thing that either
brings pleasure or is a means of pleasure. In that case, FGM is
3. clearly an unethical issue.
When looking at ethical relativism, the theory tends to hold a
morality which is relative towards the norms of an individual’s
culture. That is, if an action is wrong or right relies upon the
moral norms of the community whereby it gets practiced. Just as
female genital mutilation, this act could be morally right in one
community however, could be wrong morally in another one. As
far as I am concerned, the act of FGM ought to be condemned in
all cultures. This is because a victim of the same partakes
psychological and social harms which accrue to the female who
gets mutilated.
References
Bowie, N. E. (2002). A Kantian approach to business ethics. A
companion to business ethics, 3-16.
Hossieni, H., Fatah, J., Kaki, S., & Khalil, A. (2016).
Heisenberg Uncertainty Principle & Kant Philosophy: Why
Hawking Thinks Philosophy Is Dead. Journal of Consciousness
Exploration & Research, 7(10).
Reisel, D., & Creighton, S. M. (2015). Long term health
consequences of Female Genital Mutilation (FGM). Maturitas,
80(1), 48-51.
Winch, P. (2015). The idea of a social science and its relation to
philosophy. Routledge.
9 - 7 1 3 - 4 0 3
5. could still claim to be the world’s largest consumer electronics
retailer with $50.7 billion in revenues,
growth for the year, at 0.9% was anemic. Meanwhile, Amazon’s
sales in Best Buy’s categories were
growing at more than 50% p.a. and its total sales, at $48 billion,
were approaching those of Best Buy.
Operating profits were also disappointing having dropped 54%
to $1.1 billion and net income fell
into the red at -$1.2 billion. The fiscal 2012 year-end stock
price fell to $24.70, down from a high of
$53.86 in 2006. In five years, Best Buy had lost more than 55%
of its market capitalization.1
Best Buy had slowly been losing market share to both
discounters and online retailers. As Wal-
Mart cherry-picked popular items for steep discounts and
Amazon encouraged consumers to
compare prices using smart phones, Best Buy became a
showroom for lower cost retailers. 2 Although
there had been promising growth in Best Buy’s online and
mobile divisions, store closures and
programs to reduce the size of stores by 10% increased
expenses.3 International expansion, a key
pillar of a goal to double revenues in five years was struggling.
Adding to the problems, the boom in
digital TV sales was cooling and in 2011 mobile devices
comprised a larger percentage of overall
electronics sales than digital TV sets, effectively ending the
sixty-year reign of television as the
biggest category in consumer electronics.4 Moreover, many
mobile devices were sold by telephone
service providers, creating increased retail competition.
6. To add to Best Buy’s problems, on April 10, 2012, CEO Brian
Dunn resigned after an investigation
into his “personal conduct” with a female subordinate.5 Board
member G. Mike Mikan took over as
interim CEO. On May 14, 2012, Dick Schulze, the firm’s
founder, stepped down as chairman after
other board members suggested that he had not kept them
properly informed of Dunn’s behavior. At
first, he agreed to remain on the board for a year, but on June 7,
he reversed this decision, resigning in
order to “explore all available options” for his 20.1% stake in
the company. Schulze was the
company’s single largest shareholder and had steered the firm
through many crises since the
company was founded in 1966.
Early Years 6
In 1966, Dick Schulze and a business partner opened the first
Sound of Music store in St. Paul,
Minnesota. Sound of Music sold hi-fi audio products and by
1969 it had expanded into five more
locations around Minneapolis. By 1970, revenue reached $1
million and Schulze bought out his
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7. 2
original business partner. In 1973, Sound of Music opened its
first 3,000 square-foot central
warehouse and first 5,000 square-foot showroom. By the end of
1978, it operated nine stores of
around 5,000 square feet. However, competition in hi-fi audio
grew increasingly cut-throat and the
company began looking for a new business model. A natural
disaster and a clever marketing ploy
became the catalyst for this new sales formula. In 1981, a
tornado hit Best Buy’s outlet in Roseville,
Minnesota and, while it destroyed the building, it left the
inventory undamaged. Schulze held a
Tornado sale in the parking lot and the success of this heavily
discounted event prompted Schulze to
change his strategic direction and shift focus from service to
discounted name brands. In 1981, Schulz
added photography, home office products, video equipment, and
televisions to Sound of Music’s
selection, driving his sales per square foot up to $350,
compared to an industry average of $150 to
$200. In 1983, inspired by the 12,000-square-foot stores of the
Federated Group, Schulze decided to
venture into superstores. Schulze renamed the company “Best
Buy” to emphasize their commitment
to discounted, value products.
Concept I: 1983-1988
In 1983, Best Buy opened its first superstore in Burnsville,
Minnesota. It featured a wide
assortment of discounted brand-name merchandise, central
service and warehouse distribution, and
above all, low prices. Household appliances and VCRs were
added to expand the line. In 1985, Best
8. Buy raised $8 million in an initial public offering and was listed
on the NASDAQ. This helped fund
three new superstores outside the Twin Cities area. A second
public offering in 1986 raised $33.6
million, funding a 12-store expansion. CDs and an expanded
line of photo equipment were added to
the product line. In 1987, Best Buy debuted on the NYSE with
an offering of 8.3 million shares to fund
more growth. Sales more than doubled in 1987 for the fourth
consecutive year, reaching $240 million
with operating profits of $15.3 million. In 1988, personal
computers were added to the product line.
Four years into the superstore strategy, Highland, the industry
number two, lowered its prices in
Minneapolis, Best Buy’s heartland, selling at 10% above cost.
Best Buy margins fell sharply. In search
of a new approach, Best Buy conducted consumer research and
discovered the customers had a poor
image of superstores. They saw shopping as a stressful
experience and felt pressured by salespeople
into buying expensive items. Customers wanted an enjoyable
shopping experience and a no-pressure
selling environment.
Concept II: 1989-1994
In response to this consumer research, Best Buy implemented a
ground-breaking “grab-and-go”
store format in 1989 called Concept II. Backroom space in
stores was turned into sales space and the
inventory was put out on display with basic information labels
so that customers could see what was
in stock and understand the product without explanations from
sales staff. Salaried product
specialists replaced commissioned sales staff and, rather than
9. pushing products on customers,
patiently waited in department centers for customers who sought
help. The format proved very
popular, and by fiscal 1994, Best Buy operated 151 stores
generating $3.0 billion in revenue and $77
million in operating profits. In the process, Best Buy entered
Chicago and Texas, Highlands’ core
territories. Highland declared bankruptcy soon after.
Concept III: 1995-2002
In 1995, Schulze, anxious to avoid waiting too long to change,
decided that it was time to try a
new business model. The company began to upgrade, broaden,
and promote a wider range of
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Best Buy in Crisis 713-403
3
products. Best Buy was the first national retailer to add DVD
hardware in 1997 and it added high-
definition televisions to their selection in 1998. By the end of
fiscal 1996, 130 of Best Buy’s 251 stores
were Concept III, revenues had grown to $7.2 billion, and Best
Buy had displaced Circuit City as the
number one consumer electronics retailer.
10. However, explosive growth and a wide product line caused the
company to lose control.
Disappointing sales in the 1995 holiday season undermined
fiscal 1996 results, and PC inventory
write-offs in the fall of 1996 erased profits for fiscal 1997 and
resulted in Best Buy’s first quarterly loss
as a public company. Best Buy slowed its expansion to between
15 and 20 stores a year, rationalized
its inventory and introduced a Standard Operating Platform in
every store. Profitability was restored
and the growth reignited. In fiscal 2000, Best Buy reached
$12.6 billion in revenue with operating
profits of $539 million
The new century marked the beginning change of strategy for
Best Buy. Management felt that
they would saturate the market for warehouse stores by 2005
and so began looking for new growth
opportunities. One of these was BestBuy.com, which was
launched in early 2000 to sell Best Buy’s full
product line on the Internet. The company also made a number
of acquisitions, including Magnolia
(home theater), Future Stores (a Canadian consumer electronics
chain with 104 outlets), Geek Squad
(an in-store and in-home service business), and Musicland
(music CD’s). Musicland was
subsequently divested but Best Buy continued to invest in the
other businesses, integrating Geek
Squad and Magnolia into its stores.
Fiscal 2002 sales reached $19.6 billion, a 28% increase from the
prior year, and operating profits
$937 million.
Concept IV: Customer Centricity: 2002-2009
11. On February 25, 2002, Best Buy announced that Schulze, 61,
would step down as CEO on June 30
to be replaced by Brad Anderson, a long-time employee who
had started as a stereo salesman.
Schulze would remain chairman of the board. Anderson was
convinced that although the company
was doing well, it should change again. Rather than rely on
opening new stores to maintain sales
growth he pledged to get more out of current stores and sell
more to current customers. A key
element of this approach was customer centricity. He identified
a number of key customer groups
and organized the company around them, launching a loyalty
card to help build stronger
relationships. Initial attempts to redesign stores to serve these
customers better were driven by top
management with little effect, so instead store associates were
empowered to make the changes and
same-store sales grew strongly. However, this required
introducing a new set of Agile Operating
Procedures that provided each store with more flexibility to
choose and display merchandise. The
customer centricity program drove same-store sales growth of
8.4%.7 By the end of fiscal 2007, all 822
Best Buy stores had completed the transition to customer
centricity.
Another one of Anderson’s strategic imperatives was “win-in-
the home.” To meet this need, he
expanded Geek Squad to 12,000 service personnel by 2006,
generating about $1 billion in revenues.8
Lehman Brothers analyst Alan Rifkin commented, “(Geek
Squad) fits perfectly in that it's a concerted
effort on service. There are many stores selling these must-have
12. items, at the end of the day we think
service levels are important because of the complexity of the
products and the fluidity that these
products are coming down the pipeline.”9 In addition to home
installation and support, the Geek
Squad also began to expand into the small business market with
intent to achieve the same
recognition and market dominance as they had with the home
sector. Tom Healy, executive vice-
president of Best Buy for business, stated, “We have a great
customer acquisition tool in the store
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713-403 Best Buy in Crisis
4
with 80 million unique customers, many of whom are small
business customers. I don't think there is
anybody else who is as well positioned to take advantage of the
next big thing. There is nowhere for
customers to go to incorporate that into their businesses.”10
The success of Geek Squad attracted a variety of imitators. In
fiscal 2007, Circuit City launched
firedog(SM). In 2008, Wal-Mart expressed interest in the home
installation/repair market and soon
13. after it contracted with Dell to provide these services for its
customers.11 At the same time, Wal-Mart
began opening Sam’s Club Business Centers, targeting the same
small business owners that Best Buy
was actively courting.12 Target also began offering installation
and repair services through Zip
Express, a privately held company, and Staples expanded its
EasyTech services to better assist small
business owners. 13
Anderson was also committed to “win-in-entertainment.” He
launched the first Magnolia store-
within-a store in 2005 and rolled Magnolia out to 300 Best Buy
stores by 2007. Musicland was more of
a problem, performance declined significantly immediately after
the 2001 acquisition, so Anderson
divested the business in fiscal 2004.
Product Expansions
In fiscal 2006, Best Buy acquired Pacific Sales Kitchen, a high-
end home appliance chain with 14
outlets. By fiscal 2010 they had added 21 more outlets.
Also in fiscal 2006, in partnership with Carphone Warehouse, a
British cellular retailer, Best Buy
opened nine Best Buy Mobile stores in Manhattan.14 Five of
these stores were stand-alone and located
in trendy neighborhoods, such as Chelsea and Union Square,
and the remaining four were located
inside existing Best Buy locations. Scott Moor, the marketing
director at Best Buy Mobile, commented
14. that although “Best Buy has been in the cellphone business for
sometimes” a decision was made to
reconsider their marketing of phones because “we are becoming
a more customer-centric
organization.”15 While Best Buy had a 20% market share in
consumer electronics, it only sold three
million cellphones a year, a 2% share of the market. 16
By the end of fiscal 2009, Best Buy had rolled out mobile
stores-within-stores to all of its US
locations and added 32 more stand-alone locations in the USA,
bringing the total to 38.17
During this period, on January 10, 2007 Apple released its
iPhone and by end of 2009 had sold
nearly 25 million phones and quickly captured 14% of the
smartphone market.18 Although Best Buy
was the first US national retailer to sell Apple’s iPhone, Apple
products only carried profit margins of
around 17%.19 Apple also actively sold its products on-line and
through its own stores. Many
telephone service providers also actively marketed a wide range
of mobile devices through their own
retail channels, posing significant competition to Best Buy.
Best Buy partnered with both Apple and Dell to carry their
products, expanded their warranty
line, and increased their SKUs for small businesses. Jeff
Severts, VP of Services, commented on the
expansion of warranty options, “Anybody can sell them a TV or
a computer or a mobile phone. The
real value is in finding someone who can get this stuff to work
15. for you and can keep it working. This
is the area where Best Buy is moving aggressively to create
options for customers.” 20 Small
businesses remained a key focus and David Hemler, president of
Best Buy for Business, asserted,
“We know that those customers are there. The data we've looked
at shows about 3.4 million active
small-business customers at Best Buy. The secret is: how do we
turn on our stores to engage those
customers while they're in there with their business hats on?” 21
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5
In fiscal 2008, Best Buy acquired Speakeasy, a broadband voice
and information technology
services provider to small businesses.
In fiscal 2009, Best Buy Co signed a deal to acquire digital
music provider Napster Inc. for $54
million, giving the retailer a means of taking on Wal-Mart in
the increasingly important on-line
distribution channel.22
16. Internationalization
Through this period, Anderson also actively expanded the
company internationally. In May of
2006, Best Buy purchased a majority stake in Jiangsu Five Star
Appliance Co., China’s fourth-largest
appliance and electronics retailer, for $180 million.23 Five Star
operated 134 stores in 7 of China’s 34
provinces. Five Star’s business model depended on
manufacturers to supply sales people while it
provided the display space. By December, Best Buy had
announced that it would open its first
flagship store based on the Best Buy model in China.24 Ellen
Wang, a project manager for Best Buy,
said that the company would “distinguish itself from
competitors in China by staffing the store with
Best Buy employees paid regular salaries, not sales
commissions” as well as by stocking a mix of
home appliances and consumer electronics that were generally
not sold under one storefront in
China.25 Best Buy opened four more flagship stores in fiscal
2009, bringing their total to five.
Best Buy also continued to expand its Canadian presence,
growing their Future Shop stores to a
total of 139 stores in fiscal 2009, up from 104 in 2003, and
adding 58 stores competing under the Best
Buy name.
In fiscal 2007, Best Buy joint ventured with Carphone
Warehouse (CPW) of the U.K. to launch
Geek Squad in the U.K. In fiscal 2009, Best Buy acquired a
50% stake in CPW which operated 897
Carphone Warehouse stores in the U.K. and 1,568 Phone House
17. stores throughout continental
Europe. As part of the deal, Best Buy acquired CPW’s interest
in Best Buy’s US mobile stores. The
newly constituted European operation announced that it would
open four to five large-format Best
Buy stores in the U.K. They also announced their intention to
open 100 big-box stores over the next
five years and claim 10% of the European consumer electronics
market. 26
Financial Performance
As customer centricity took hold and the product line expanded,
financial performance improved
significantly. Despite a tough holiday season in 2006 with
discounters Wal-Mart and Lowe’s forcing
down prices of popular flat-screen televisions and creating a
venerable “blood-bath” of holiday
discounts,27 Best Buy achieved sales in fiscal 2007 of $35.9
billion 83% up on 2002, and operating
profits of $2.0 billion, an increase of 113%. In January of 2007,
Circuit City and Best Buy entered into
discussions with manufacturers to prevent a repeat of these
discount wars, but the price slashing
continued. In the first quarter of fiscal 2008, Best Buy posted
an 18% decline in quarterly profits even
through sales rose 14%. Regardless of these challenges, Best
Buy continued to expand aggressively
and pursue a 5-year plan to double sales. In fiscal 2008, sales
grew 11% to $40 billion and operating
profits rose 8% to $2.2 billion million. In June of 2007, the
board approved a $5.5 billion buyback of
18. common shares and raised the quarterly dividend by 30%.28
(See Exhibit 3).
In fiscal 2009, the pressure continued. Sales grew 12%, to $45
billion but operating profits fell to
$2.0 billion. Brad Anderson attributed this trouble to the
industry, stating, “Since mid-September,
rapid, seismic changes in consumer behavior have created the
most difficult climate we've ever seen.
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713-403 Best Buy in Crisis
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Best Buy simply can't adjust fast enough to maintain our
earnings momentum for this year.”29 He also
recognized the work that Best Buy needs to do in “managing our
expenses amid a challenging macro-
economic environment”30 and added that the company doesn't
need to resort to a price war to
compete with discounters.31
19. In December 2008, just before 2009 fiscal year end in February
2009, all corporate employees were
offered voluntary separation packages in order to reduce
corporate expenses. 32
2010–2012: Brian Dunn Becomes CEO
The end of fiscal 2009 marked the end of Bran Anderson’s reign
as Best Buy’s CEO; Brian Dunn,
previously the president and COO, succeeded him. In
Anderson’s seven-year stint as Best Buy’s CEO,
the company more than doubled annual revenues from $17.7
billion to $45 billion while store count
increased from a 591 locations in the U.S. and Canada to 3,942
locations in 13 countries. 33 It also
marked the end of Circuit City, the industry number two, which
was forced into liquidation on
January 16, 2009. The loss of a $10 billion competitor promised
to relieve some of the competitive
pressure of recent years.
Best Buy began fiscal 2010 by promising that capital spending
would fall 50% and that there
would be a “substantial reduction” in new store openings. 34
Additionally, Best Buy made sweeping
cuts in their sales associates and store management positions.
Although the retailer declined to make
statistics public, brokerage firm, Sanford C. Bernstein estimated
that as many as 8,000 senior sales
associates were demoted to positions that would pay half the
hourly rate of their old positions.
Assistant store manager headcount was reduced and
approximately 1,000 salaried jobs were
20. eliminated. 35 A Best Buy spokeswoman stated that such
change “places greater emphasis on
customer-facing employees and provides more focus and clarity
to the leadership roles in the store.”36
However, the dramatic staff cuts reminded more than one media
source of Circuit City’s ill-fated staff
cuts two years previously. 37
In order to drive growth, Best Buy began testing new product
categories, from musical
instruments and exercise equipment to electric scooters and
pool tables. 38 It was also looking to
increase high-margin private label sales which had soared 40%
during fiscal 2009. 39
The international division continued to be plagued with
problems. In the first six months of fiscal
2010, international business generated an operating loss of $42
million compared with a profit of $24
million the previous year. 40 Internal troubles also saw the
division’s CEO, CFO, and COO retire in
quick succession.41
Sales in fiscal 2010 rose to 10% $49.7 billion and operating
profits 14% to $2.29 billion (see Exhibit
3).
In 2011, competition with online retailers reached new levels
and began to substantially impact
21. sales. Amazon released a “price-check” mobile phone
application that allowed users to compare
offers in stores to the prices on Amazon’s website. Since
Amazon, according to a Wells Fargo study,
“beats bricks-and-mortar retailers across the board on average
electronics prices,” this app
represented a dangerous maneuver in Amazon’s war against big-
box retailers.42 In fact, by the end of
calendar 2010 (roughly in line with fiscal 2011 for Best Buy),
Amazon’s electronics and non-media
sales had risen 66% to $18 billion and their share of portable
audio devices rose to 11% of the
market.43 Customers began using Best Buy as a showroom and
information center for purchases that
they would later make on Amazon. Although Best Buy
attempted to compete with Amazon directly
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in 2011 by offering deep Black Friday promotions and free
holiday shipping, their profit margins fell
dangerously low and quarterly earnings plunged 29%.44 (See
Exhibit 1.)
22. One advantage Amazon enjoyed over Best Buy was that it didn’t
levy sales tax on its purchases.
The median sales tax in the USA was 6%, putting Best Buy at a
significant disadvantage (see Exhibit
4).
Despite these challenges, Best Buy continued to develop its
Best Buy Mobile concept and further
expand their domestic product line. At the end of fiscal 2011,
Best Buy Mobile had 305 stand-alone
mobile stores and had increased their market share to around
5%, with executives planning to reach
20% in the next five years. 45
International operations continued to pose problems. In
February 2011, Best Buy announced that
it would be closing its flagship stores in China and focusing on
expanding the Five Star model. It also
closed recently opened outlets in Turkey and the U.K.46 Brian
Dunn confirmed that the European
stores “could not overcome the challenging macro environment
and did not provide the results we
had expected.” 47
Sales in fiscal 2011 rose 1% to $50.3 billion and operating
profits 2% to $2.34 billion (see Exhibit 3).
In fiscal 2012, the pressure mounted. Best Buy bought out CWP
in the end of fiscal 2012 for $1.3
billion. Brian Dunn commented, “Going forward, we are
capturing the full profits from our Best Buy
23. Mobile format”48 Domestic product expansion continued with
the sale of 3D televisions and
tantalizing mentions of electric cars. In response to questions
regarding Best Buy’s potential
involvement in the electric car sector, Leo Raudys stated
simply, ““It's a new technology; it’s part of
our strategy to get consumers to think of us as the first in the
consumer technology.”49
However, Best Buy encountered difficult setbacks in their
international division. Sales in Fiscal
2012 rose 1% to $50.7 billion while operating profits fell 54%
to $1.1 billion. Net income fell from $1.3
billion in 2011 to a loss of $1.2 billion. Meanwhile, Amazon’s
sales world-wide increased from $34
billion to $48 billion over the same period. (See Exhibit 8.)
Dunn announced that Best Buy would be cutting $800 million in
costs and back-office jobs
through closing 50 big box stores.50 He also outlined a plan to
downsize Best Buy stores by an average
of 10% to better reflect the smaller electronics and the shift
toward mobile computing. 51
Less than a month after these announcements, on April 10,
2012, Brian Dunn resigned amidst
accusations of improper conduct.52 Board member G. Mike
Mikan took over as interim CEO. On May
14, 2012, after an internal investigation, Dick Schulze stepped
down as chairman. At first, he agreed
to remain on the board for a year, but on June 7, he resigned
from the board in order to “explore all
24. available options” for his 20.1% stake in the company. It was
rumored that he was talking with
bankers to try to take the company private. Schulze had steered
the firm through many crises since
the company was founded in 1966. The company and the board
would sorely miss his experience.
Moreover, the search for a replacement CEO was unlikely to be
swift or easy. (See Exhibit 5.)
Over its long history, Best Buy had escaped from many “near
death” experiences and reinvented
itself many times in the process. What could it do this time to
avoid the cherry-picking challenge
from broad based discounters like Home Base and Wal-Mart and
the rapidly growing on-line global
giant, Amazon?
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.
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Business Policies - Summer 2019-1-1 taught by GUNTRAM
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7
1
3
-4
0
3
-
1
0
-
E
204. 0
1
2
.
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Best Buy in Crisis 713-403
11
Exhibit 4 Sales Tax in the United States as of 2012
Alabama 4.0% Nebraska 5.5%
Alaska 0.0% Nevada 6.9%
Arizona 6.6% New Hampshire 0.0%
Arkansas 6.0% New Jersey 7.0%
California 7.3% New Mexico 5.1%
Colorado 2.9% New York 4.0%
Connecticut 6.4% North Carolina 4.8%
205. Delaware 0.0% North Dakota 5.0%
Florida 6.0% Ohio 5.5%
Georgia 4.0% Oklahoma 4.5%
Hawaii 4.0% Oregon 0.0%
Idaho 6.0% Pennsylvania 6.0%
Illinois 6.3% Rhode Island 7.0%
Indiana 7.0% South Carolina 6.0%
Iowa 6.0% South Dakota 4.0%
Kansas 6.3% Tennessee 7.0%
Kentucky 6.0% Texas 6.3%
Louisiana 4.0% Utah 4.7%
Maine 5.0% Vermont 6.0%
Maryland 6.0% Virginia 4.0%
Massachusetts 6.3% Washington 6.5%
Michigan 6.0% West Virginia 6.0%
Minnesota 6.9% Wisconsin 5.0%
Mississippi 7.0% Wyoming 4.0%
Missouri 4.2% District of Columbia 6.0%
206. Montana 0.0% U.S. Median 6.0%
Source: http://www.taxadmin.org/fta/rate/vendors.pdf, accessed
June 30, 2012.
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http://www.taxadmin.org/fta/rate/vendors.pdf
713-403 Best Buy in Crisis
12
Exhibit 5 Best Buy Board of Directors
Hatim A. Tyabji
Chairman of the Board
Hatim A. Tyabji, aged 66. First appointed to the board in 1998.
Appointed chairman of the board in June
2012. Mr. Tyabji had significant experience in wireless and
broadband technologies. Since July 2001, he
was executive chairman of Bytemobile, Inc., a wireless Internet
infrastructure provider. He had previously
served as the chairman and chief executive officer of Saraïde,
Inc., a provider of Internet and wireless data
services, as well as the president, chief executive officer, and
chairman of VeriFone, Inc., a global
transaction automation enterprise. He had previously served on
the boards of Ariba Inc.; Bank of America
Merchant Services; Deluxe Corporation; eFunds Corporation;
207. Novatel Wireless, Inc.; PubliCard Inc.;
SmartDisk Corporation; Datacard Group; Depotpoint, Inc.;
Impresse Corporation and Norand Corporation
G. Mike Mikan
Interim CEO
G. Mike Mikan, aged 39. First appointed to the board in 2008.
Appointed interim Chief Executive Officer in
April, 2012. Mr. Mikan’s past experience included executive
positions in UnitedHealth Group Incorporated
and Optum, a health care services company.
Lisa M. Caputo
Lisa M. Caputo, aged 47. First appointed to the board in 2009.
Ms. Caputo had extensive marking
expertise and a strong background in global and corporate
communications. Ms. Caputo was the Executive
Vice President of Marketing and Communications at The
Travelers Companies, Inc., a leading property
casualty insurer.
Ronald James
Ronald James, aged 60. First appointed to the board in 2004.
Mr. James’ background included work in
investment funds, communications, and business ethics. He was
currently serving at the president and
chief executive officer for the Center for Ethical Business
Cultures in Minneapolis, Minnesota.
Sanjay Khosla
Sanjay Khosla, aged 59. First appointed to the board in 2008.
Mr Khosla was executive vice president and
president in the developing markets division of Kraft Foods,
Inc. He had a substantial background in
consumer marketing and global expansion strategies.
208. Matthew H. Paull
Matthew H. Paull, aged 59. First appointed to the board in
2003. Mr. Paull had served as corporate senior
executive vice president and chief financial officer for
McDonald's Corporation as well as a partner at Ernst
& Young LLP, focusing on international tax.
Rogelio M. Rebolledo
Rogelio M. Rebolledo, aged 66. First appointed to the board in
2006. Mr. Rebolledo had been chairman of
PBG Mexico, the Mexican operations of The Pepsi Bottling
Group, Inc, as well as president and chief
executive officer of Frito-Lay International, a subsidiary of
PepsiCo.
Gérard Vittecoq
Gérard R. Vittecoq, aged 62. First appointed to the board in
2008. He was the group president and
executive office member of Caterpillar, Inc., a manufacturer of
construction and mining equipment, diesel
and natural gas engines, and industrial gas turbines.
Source: Best Buy Investor Relations. http://phx.corporate-
ir.net/phoenix.zhtml?c=83192&p=irol-govboard, accessed June
29, 2012.
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Business Policies - Summer 2019-1-1 taught by GUNTRAM
WERTHER, Temple University from May 2019 to Nov 2019.
http://phx.corporate-ir.net/phoenix.zhtml?c=83192&p=irol-
govboard
209. Best Buy in Crisis 713-403
13
Exhibit 6 Best Buy Sales Mix
Source: Casewriter’s graphs based on data from company 10k,
2000-2012.
0
5
10
15
20
25
30
35
40
45
50
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
2011 2012
210. Domestic
Consumer Electronics Computing and Mobile Phones (home
office)
Entertainment Appliances
Services Other
0
10
20
30
40
50
60
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
2011 2012
International
Consumer Electronics Computing and Mobile Phones (home
office)
Entertainment Appliances
Services Other
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713-403 Best Buy in Crisis
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Exhibit 7 Best Buy Comparable Store Sales Growth
Source: Casewriter’s graphs based on data from company 10k,
2000-2012.
-4%
-2%
0%
2%
4%
6%
8%
10%
212. 12%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
2011 2012
Domestic Growth
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
2011 2012
International Growth
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Best Buy in Crisis 713-403
15
Exhibit 8a Sales and Gross Profit Margin
Source: Casewriter’s graphs based on data from company 10k,
2000-2012.
0
10,000
20,000
30,000
40,000
50,000
60,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
2006 2007 2008 2009 2010 2011 2012
Sales ($ m)
214. Best Buy Amazon
0
5
10
15
20
25
30
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
2006 2007 2008 2009 2010 2011
Gross Profit (% sales)
Best Buy Amazon
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713-403 Best Buy in Crisis
16
215. Exhibit 8b Operating Expenses and Operating Margin
Source: Casewriter’s graphs based on data from company 10k,
2000-2012.
0
10
20
30
40
50
60
70
80
90
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
2006 2007 2008 2009 2010 2011
SG&A (% sales)
Best Buy Amazon
216. -70
-60
-50
-40
-30
-20
-10
0
10
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
2006 2007 2008 2009 2010 2011 2012
Operating Income after Depreciation (% sales)
Best Buy Amazon
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Best Buy in Crisis 713-403
17
217. Exhibit 8c Stock Price and Market Capitalization
Source: Casewriter’s graphs based on data from company 10k,
2000-2012.
0
20
40
60
80
100
120
140
160
180
200
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
2006 2007 2008 2009 2010 2011 2012
Year-end Stock Price Adjusted for Splits ($/share)
218. Best Buy Amazon
0
10
20
30
40
50
60
70
80
90
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
2006 2007 2008 2009 2010 2011
Market Capitalization ($ billion)
Best Buy Amazon
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219. 713-403 Best Buy in Crisis
18
Exhibit 8d Sales Growth and Operating Profits (% capital)
Source: Casewriter’s graphs based on data from company 10k,
2000-2012.
0
100
200
300
400
500
600
700
800
900
1,000
220. 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
2006 2007 2008 2009 2010 2011
Sales Growth (%)
Best Buy Amazon
-1,000
-800
-600
-400
-200
0
200
400
600
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
2006 2007 2008 2009 2010 2011
Operating Profits (% capital)
Best Buy Amazon
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Best Buy in Crisis 713-403
19
Exhibit 8e Debt to Capital and Working Capital
Source: Casewriter’s graphs based on data from company 10k,
2000-2012.
0
20
40
60
80
100
120
140
160
180
223. Working Capital (% sales)
Best Buy Amazon
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713-403 Best Buy in Crisis
20
Endnotes
1 Miguel Bustillo, “Best Buy CEO Quits in Probe” The Wall
Street Journal, April 10, 2012.
2 John Jannarone, “Forecast for Best Buy: Worst Is Yet to
Come,” The Wall Street Journal, March 4, 2011.
3 “2nd UPDATE: Best Buy Tweaking Stores, Looking Online;
1Q Results Beat Views,” Dow Jones Business
News, June 14, 2011.
4 “Digital America: US Consumer Electronics Industry Today,
2011,” Arlington, VA.: Consumer Electronics
Association, c2011. Pg 1.
5 Miguel Bustillo, “Best Buy CEO Quits in Probe” The Wall
Street Journal, April 10, 2012.
224. 6 Most of the material in this section in based on Kasturi
Rangan and Balaji Chakravarthy, “Best Buy,” BHS
No. 598-016 (Boston: Harvard Business School Publishing,
1997), and ww.BestBuy.com, Best Buy Timeline,
accessed July 2005.
7 Ariana Eunjung Cha, “In Retail, Profiling for Profit; Best Buy
Stores Cater to Specific Customer Types,” The
Washington Post, August 17, 2005.
8 Desiree J. Hanford, “Best Buy's Geek Squad A Driver In
Retailer's Growth,” Dow Jones Newswires, December
9. 2005.
9 Ibid.
10 Lavonne Kuykendall, “Best Buy's Geek Squad To Branch
Out Into Sales,” Dow Jones Newswires, March 8,
2006.
11 Mary Ellen Lloyd, “'Geeks' Galore: Best Buy, Circuit City
Tech Support Mimicked,” Dow Jones Newswires,
August 5, 2008.
12 Ibid.
13 Ibid.
14 Stuart Elliott, “CAMPAIGN SPOTLIGHT: Best Buy Calls
for New Venture,” The New York Times, January 8,
2007.
15 Ibid.
16 Samar Srivastava, “Best Buy Moves to More Mobile
Selections --- Chain Expands Choices For Handsets
225. and Plans; Ringing Success, So Far,” The Wall Street Journal,
July 12, 2007.
17 Andria Cheng, “UPDATE: Best Buy Net Drops, Backs
Forecast,” Dow Jones Business News, June 17, 2008.
18 “Gartner Says Worldwide Mobile Phone Sales to End Users
Grew 8 Per Cent in Fourth Quarter 2009;
Market Remained Flat in 2009.” Gartner Newsroom, February
23, 2010.
19 “TECH VIEW: Another Innovation At Apple: The Retail
Strategy,” Dow Jones News Service, June 28, 2007.
20 Mary Ellen Lloyd, “Best Buy Unveils New Extended
Warranty, Service Plans,” Dow Jones Newswires,
September 15, 2008.
21 “WSJ: Best Buy Expands Merchandise For Small Business,”
Dow Jones News Service, August 9, 2007.
22 Dan Gallagher, “Best Buy to acquire Napster for $54
million,” MarketWatch, September 15, 2008.
23 Kate Linebaugh, “Best Buy Will Pay $180 Million For
Majority of China's Jiangsu,” The Wall Street Journal,
May 13, 2006.
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226. Best Buy in Crisis 713-403
21
24 Mei Fong, “Best Buy to Enter A Crowded Field With China
Store,” The Wall Street Journal, December 9,
2006.
25 Ibid.
26 Erica Herrero-Martinez, “Corporate News: Best Buy, U.K.'s
Carphone Detail Joint Venture,” The Wall Street
Journal, October 15, 2008.
27 Marry Ellen Lloyd, “TV Prices To Drop But Retailers Aim
To Limit Profit Hits,” Dow Jones News Service,
January 12, 2007.
28 “Best Buy Authorizes $5.5 B Shr Buyback Program And 30%
Div Increase; Co Expands North Amer Store
Outlook,” Dow Jones News Service, June 27, 2007.
29 Miguel Bustillo, “Best Buy Warns of Dire Holiday Sales;
Electronics Giant Says Profit and Revenue Will
Fall Short of Forecasts, Sending Shivers Through Markets,” The
Wall Street Journal, November 13, 2008.
30 Andria Cheng, “Best Buy net drops 19%, weighed by
spending; Second-half sales growth to slow from first
half,” MarketWatch, September 16, 2008.
31 Andria Cheng, “Best Buy leaps as forecast, results exceed
estimates,” MarketWatch, March 26, 2009.
227. 32 “WSJ: Best Buy Cuts Capital Spending, Offers Workers
Buyouts,” Dow Jones News Service, December 16,
2008.
33 Andria Cheng, “Best Buy promotes Brian Dunn to chief
executive,” MarketWatch, January 21, 2009.
34 “WSJ: Best Buy Cuts Capital Spending, Offers Workers
Buyouts,” Dow Jones News Service, December 16,
2008.
35 Mary Ellen Lloyd, “Best Buy's Store-Staffing Changes Draw
Circuit City Comparisons,” The Wall Street
Journal Online, April 15, 2009.
36 Ibid.
37 Ibid.
38 Mary Ellen Lloyd, “Best Buy Expands Into Outdoor Living
With Grills, Pergolas,” Dow Jones Newswire,
May 22, 2009.
39 Miguel Bustillo and Christopher Lawton, “Best Buy Expands
Private-Label Brands,” The Wall Street Journal,
April 27, 2009.
40 “CORRECT: UPDATE: Best Buy Intl CEO Retires Despite
Incentives To Stay,” Dow Jones News Service,
November 11, 2009.
41 “CORRECT: UPDATE: Best Buy Intl CEO Retires Despite
Incentives To Stay,” Dow Jones News Service,
November 11, 2009.
42 John Jannarone, “Forecast for Best Buy: Worst Is Yet to
228. Come,” The Wall Street Journal, March 4, 2011.
43 Ibid.
44 Miguel Bustillo, “Best Buy Pays Price to Rival Amazon,”
The Wall Street Journal Online, December 14, 2011.
45 Mary Ellen Lloyd, “Best Buy Mobile Executive: Growth
Plans On Track,” Dow Jones Newswires, July 28,
2010.
46 Miguel Bustillo, “Best Buy to Close China Stores,” The Wall
Street Journal, February 21, 2011.
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713-403 Best Buy in Crisis
22
47 Miguel Bustillo and Kathy Gordon, “Best Buy Leaves U.K.,
Reboots Phone Venture,” The Wall Street Journal
Online, November 8, 2011.
48 Ibid.
49 Andria Cheng, “Best Buy Plans For Electric Cars In Product
Lineup,” Dow Jones News Service, April 16,
2010.
229. 50 “UPDATE: Best Buy Outlines Wide Cost Cuts As 4Q Core
Profit Leaps,” Dow Jones Business News, March
29, 2012.
51 “2nd UPDATE: Best Buy Tweaking Stores, Looking Online;
1Q Results Beat Views,” Dow Jones Business
News, June 14, 2011.
52 Miguel Bustillo, “Best Buy CEO Quits in Probe” The Wall
Street Journal, April 10, 2012.
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A Brief, Simplified (but, not simple) Presentation of Kant’s
Ethics
For a variety of reasons, Kant has garnered the reputation of
being a notoriously difficult thinker. Although in many ways
this is the case, it certainly is possible to gain a sufficient
understanding of his Ethics without having to “wade into the
weeds” of his entire system. Thus, the aim of the following
paragraphs is to identify the key elements in his Ethics and to
do so in a way that they might be grasped without too much
difficulty.
Let’s begin by asserting what is, for Kant, “The Supreme
Principle of Morality.” Now, before doing so, let’s note that
Kant articulates his supreme principle in more than one way (in
fact, he offers three formulas and two variants). So, for the
purpose of clarity, I shall offer only one of these formulas: the
one Kant calls The Formula of Humanity as the End in Itself
(FH). Kant refers to his supreme principle of morality as the
230. Categorical Imperative (CI); the FH version of the CI claims the
following:
So act that you use humanity, whether in your own person or
that of another, always at the same time as an end, never merely
as a means.
The first aspect of this formula that must be understood is the
assertion that one ought never to treat another as a “means” and
that one ought to treat another as an “end.” For Kant, all acts
are reflections of maxims. A maxim articulates a person’s rule
or justification for a given act. For example, if a person decides
to begin contributing a sum of money to a charity, then his or
her maxim would be: “I shall begin to contribute X amount of
money to charity Y.” Or, to translate his or her maxim into a
universal principle: “One ought to contribute to charity.” Here
we see the move from the individual to the universal: the
individual maxim asserts the specific person’s intention or
motive for acting; the universal maxim asserts the claim that all
people ought to act in the same sort of way.
When we act, we “manifest” a maxim. And, moreover, if we
reflect a bit we shall be able to articulate it. Hence, according to
Kant, if we aim to generate a judgment about the moral nature
of a given act, then we must look at the maxim from which the
act emerged. What we ought not to do, according to Kant, is
look at the quantity of pain and/or pleasure that the act
generates. Our check – or, better, our limiting principle – on our
acts is whether or not the act treats or uses another as mere
means or as ends in themselves.
To use or treat another as “mere means” is to involve him or her
in an act in which he or she is unable to consent. This does not
mean that one can never use another as a means: an employer,
for example, uses his or her employees as a means to making
money; one uses another as a means to achieve any number of
ends. In these cases, the key is that each person involved freely
consents to be involved. Hence, in these cases, Kant would say
that one uses others as “means,” but not as “mere means to
one’s own end: each person engages in the act on basis of his or
231. her own maxim and thus is not used as a mere tool to be
manipulated.
Let’s consider Kant’s famous example of one who breaks a
promise to another. I make a promise to you, knowing full-well
that I intend to break it. You accept the promise, which suggests
that you have no idea that I intend to break it: you, that is, have
no idea what my intention really is. In fact, if you had known
my intention, you would have rejected my promise. This
suggests that successful, false promises are a result of the one
making the promise deceiving the one to whom the promise is
made about one’s intention. Moreover, because the person to
whom the promise is made is deceived about my maxim, then
the one who accepts the promise can’t, in principle, consent to
his or her part in the action of the promise. The deceived person
is, thus, being treated as a tool, or, as a mere means, to the end
of the deceiver.
Deception is one of the primary ways that one treats another as
a mere means. When a person involves another in any sort of
scheme – criminal, business, or whatever – by deception then
one involves another in an act to which he or she cannot
consent. Another common mode of treating another as a mere
means is by the exercise of coercion. When one threatens
another, and because of the threat one is compelled to involve
oneself in act, then the one coerced, in principle, can’t consent
to participate in the act. Hence, in Kant’s Ethic, acts that are
done on maxims that require the deception and/or coercion of
another violate the Supreme Principle of Morality; these acts
are, in their very natures (that is, intrinsically) wrong.
For Kant, then, the treating of a human being as a mere means is
always wrong, that is, unjust. And, for Kant, the duties of
justice are the most important duties. To treat another as an end,
and not as a mere means, requires, first, one not use another as
a tool. Furthermore, the treating another as an end suggests that
one might involve oneself in another’s efforts; one does this by
adopting some of the ends of another. If I am to act beneficently
232. – that is, to attend to another’s well-being – then I may adopt as
my own some of the ends that the other intends. If my aim is to
enhance the well-being of another, then I shall embrace maxims
that not only avoid treating the other as a mere means, but I
shall also adopt maxims that foster some of their plans and
activities. To be beneficent is to try to achieve what the other
intends.
In an effort to determine the degree to which they fulfill the
duties of justice, Kantians will not assess the consequences of
their acts. The ultimate criterion of justice is to be sure that an
act does not entail the use of another as a mere means. If the act
does not violate the CI, then the act is morally permissible. If
by not doing a given act, then one would use another as a mere
means, then the act must be undertaken. As noted by Onora
O’Neil, Kant’s Ethic has less scope than the Ethic of
Utilitarians. Kant’s Ethic is unable to pronounce a judgment on
a given act unless that act’s maxim is fully known. That is,
Kant’s Ethic is unable to move from an unclear or unknown
maxim to an act’s consequences to justify a given judgment.
Let’s, now, consider a couple of the differences between Kant’s
Ethic and Utilitarianism. Kant’s Ethic, as noted above, lacks the
scope of the Utilitarian Ethic, yet, Kant’s Ethic is more precise.
For the Utilitarian, every act, in principle – of a person or a
collective – can be judged, so long as data pertaining to the
consequences of the act are available. Yet, the Utilitarian Ethic
often lacks precision, for consequences are, generally,
imprecise. Kant’s Ethic, on the other hand, possesses the
precision lacked by Utilitarianism: Kant’s Ethic hones in on the
intention of the actor, that is, on the maxim of the act.
Hence, a gap, often, opens-up between intention and
consequences. We all know that moral intentions have generated
horrific consequences and that bad intentions sometimes garner
good consequences. Some scholars have demonstrated that the
233. good intentions of those who attempt to feed the hungry
generate dreadful consequences (in the long run). And, who can
deny that greedy intentions often generate profitable
consequences? These contradictions, says O’Neil, are,
generally, the exception, not the rule. Our intentions do reflect
what we expect the consequences of our acts to be: when a
person’s articulated intentions disregard predictable
consequences, one ought to infer that their words do not express
his or her true intentions.
The FH assures one that so long as his or her act does not use
another as a mere means, he or she does not act unjustly.
Moreover, the FH assures one that so long as one’s maxims
foster some of the ends of others, then one can be assured that
engages in acts of beneficence. Kant’s Ethic, then, is able to
make these judgments, unlike the Utilitarian Ethic, even when it
lacks relevant information about the consequences of a given
act. This allows the Kantian to work out the justice of a given
act even though he or she lacks the insight into the long-term
consequences of a given act. For the Utilitarian, however, the
key phrase “in the long run,” is essential to its assessment of
specific acts.
For Utilitarians, an individual, at least in theory, might be
sacrificed for the sake of the larger good. Not so for the
Kantian: human beings – and, hence human life – are valuable
because they are the bearers of rational life. Human beings are
able to think, to choose, to plan. Hence, no rational being
should be denied this capacity; that is, no human being ought to
treated as a mere means for another’s enjoyment or happiness.
One may sacrifice one’s own body for others for in doing so one
is not being treated as a mere means.
In the end, it might be the case that a society full of Kantians
might be a society that is less happy than a society full of
Utilitarians. Yet, for Kant, the aim here is not happiness, but
virtue, or better, justice: that is, a society in which one will not
be made the tool or mere instrument for another’s happiness.
234. Kant: Lecture Notes
The primary purpose of the Groundwork is: “the search for and
establishment of the supreme principle of morality” (Preface).
· The first section of the text attempts this by appealing to
moral common sense as a way of establishing the basis for a
more rigorous account of the commitments of common moral
sense.
· The second section attempts a new beginning; it does so by
bypassing “popular moral philosophy” and by employing a
philosophical theory of the will to lay the ground for
“metaphysics of morals.”
The first section of the text formulates provisionally the
supreme principal of morality, while the second section
generates an additional three formulas:
First Formula
· FULThe Formula of Universal Law: “Act only in accordance
with that maxim through which you can at the same time will
that it become a universal law” (paragraph 13).
and its variant:
· FLNThe Formula of the Law of Nature: “Act as if the maxim
of your action were to become by your will a universal law of
nature.”
Second Formula
· FHThe Formula of Humanity as End in Itself: “So act that you
use humanity, whether in your own person or that of another,
always at the same time as an end, never merely as a means”
(par. 45).
Third Formula
· FAThe Formula of Autonomy: “. . . the idea of the will of
every rational being as a will giving universal law” or “Choose
only in such a way that the maxims of your choice are also
included as universal law in the same volition.”
and its variant:
· FRE The Formula of the Realm of Ends: “Act according to the
maxim of a universally legislative member of a merely potential
realm of ends.”
235. Key Concepts
· Apriori v. Aposteriori
· Good Will (pars. 1-4)
· Maxim(par. 10)
· Categorical v. Hypothetical Imperative (pars. 17-23; 31)
· Autonomy
· Acting from Duty (par. 5)
· Respect for Law
· Self-Love v. Self-Respect
· Self-Regard v. Self-Conceit
· Reason v. Inclination
1. In the Beginning: Good Will
Before beginning one’s reading of the text, one must, at least
understand the distinction between apriori and aposteriori. This
distinction is fundamental to Kant’s approach.
· Apriori: In our context, apriori refers, literally, to “prior to
and independent of experience.”
· Aposteriori: In our context, aposteriori refers, literally, to
“justification based on experience.”
Hence, Kant is claiming that the fundamental principle of
morality is an apriori principle, one that a person deduces from
first principles and not from any sort of sense based experience.
Good Will
Recall that in this section Kant is dealing with “common
rational moral cognition.” This mode of cognition is pre-
philosophical. It presupposes that to be a moral agent one must
be able to recognize what morality demands and to acknowledge
the value of complying with those demands.
Thus, Kant begins the text discussing the nature of a good will,
a concept that he believes is presupposed by moral action, but
has not yet been given the philosophic precision it requires.
· Good will: the only unqualified good in the world (par. 1). He
will attempt to clarify this by placing the good will next to
other sorts of goods.
· Gifts of Nature: things which generally belong to the natural
236. endowments of a person.
· Gifts of Fortune: things that are contingent; things one strives
after: power, wealth, etc.
Note Well: Kant ascribes “happiness” to gifts of fortune. That
is, for Kant “happiness” is a qualified good, for, by itself, it
may have a corrupting influence on a person. Kant holds this
because he believes that human beings have an innate nature
that, when they acquire certain gifts of fortune, they infer that
they deserve these gifts, that is, that in some way these gifts
bestow a greater moral quality upon the one who possesses
them.
2. Acting from Duty
Next, Kant proceeds to develop the good will itself. He will do
this by explicating the concept of duty, which, he says,
“contains that of a good will, though under certain subjective
limitations and hindrances, which, however, far from hiding it
and making it unrecognizable, rather raise it up by contrast and
all it to shine forth the more brightly” (par. 5).
Note Well:
· Kant says that the concept of duty contains that of a good will.
This leads him to claim that there are actions that are “in
conformity with duty” and actions that done “from duty (par. 5).
· An act “conforms to duty” if complies with what duty
requires, regardless of one’s motives for doing it: “the necessity
of acting from pure respect for the practical law is what
constitutes duty” (par. 14).
· Act done “from duty” are acts which Kant characterizes as
containing moral worth, the sort of worth, he claims, that
generates esteem. These sorts of acts derive from the good will.
Kant discusses the meaning of acting from duty in his four
examples:
The example is the shopkeeper who lacks any immediate
inclination to deal with the young shopper fairly. The
shopkeeper conforms his actions out of self-interest to his duty.
The other three involve agents who do act in accord with duty:
to preserve one’s life, to act beneficently, and to promote one’s
237. happiness.
For Kant, acts done from duty “with repugnance” are acts that
involve a “hidden hatred of the moral law.” He considers act
done from duty as those done willingly, with a desire to do
them, and hence with a feeling of pleasure. The key, for Kant, is
whether the desire to act from duty arises from freedom, from
reason recognizing the action as necessary or from some other
contingent inclination.
The motive of duty is not, like the shopkeeper’s motive of
calculated prudence, something that prompts us to do an action
we do not value for itself but only do reluctantly for the sake of
its consequences. That is, to act from duty is to recognize the
inherent moral value of the act, and that recognition gives rise
to a direct desire to perform the action for its own sake.
3. The Maxim
Paragraph 10: the first sentence contains two points:
1. It indicates that the moral worth of an action does not depend
on what it accomplishes.
2. The moral worth of an action is located in the “maxim” or
“principle of volition.”
Understanding the nature of maxims:
Kant, here, is dealing with the act of a promise. His points seem
to be the following:
· To keep my promise is a requirement of duty.
· To keep my promise because of the projected consequences of
breaking my promise is to violate a principle of duty.
· To say that keeping my promise has moral worth is to say that
my action is valuable for its own sake, especially if keeping it
generates certain inconveniences for me.
To state all of this in Kantian terms: My “maxim” or “principle
of volition” is to keep my promises; the esteem owed to my
action is based on my keeping my promises despite my
experiencing incentives not to. Kant holds that my action is to
be esteemed, not for the end or consequences, but solely on the
fact that I have opted to observe the “maxim” that promises are
to be kept, and that I fulfilled that “maxim” from the motive of
238. duty.
*Note well: A “maxim” always universalizes a specific action.
Why? Because a specific act itself is specific and can’t be
universalized.
* Maxims, let us say, are bearers of moral guidance, or life-
rules. So, in the case of the man whose life has become one of
sorrow and adversity, his action, when he "preserves his life
without loving it, not from inclination or fear but from duty" is
said to have a "maxim" that "has a moral content." By contrast,
when, in happier days, he acted to preserve his life from
immediate inclination, the maxim of his action had "no moral
content" (par. 6). This leads to Kant’s claim that "an action
done from duty has its moral worth ... in the maxim from which
the action is concluded.”
4. Respect for Law
This is going to be the longest and perhaps most difficult
section because of the number of additional concepts that are
bound up with respect.
First, most of what we will cover is not in our text but is
derived from another of Kant’s works. In that work Kant is
attempting to establish a moral theory of sensibility. The key
element here, for us, is his claim that respect, when properly
understood, will be seen to function as an incentive that
influences the will. Respect, here, is understood as a moral
incentive and as the feeling that arises when the moral law
checks our desires. For Kant, this aspect of respect is grounded
in reason and is, thus, the source of human dignity.
Since the concept of an incentive is a technical term for Kant, it
deserves comment. He defines it as ‘a subjective determining
ground of the will of a being whose reason does not by its
nature necessarily conform with the objective law’ (KpV 5: 72).
It is a subjective determining ground of the will in the sense
that it is the motivational state of the subject that is operative
on a particular occasion. Thus, an incentive must be a kind of
determining ground of the will, or a kind of motivation from
which human beings can act. Though incentives are ‘subjective’
239. in the above sense, they can include reasons that are objectively
valid: respect for the law is the operative incentive in morally
worthy conduct, and hence its ‘subjective determining ground.’
This feeling is most easily explained as the experience of
constraints that the moral law imposes on our inclinations.
Thus, Kant stresses that it originates as a ‘negative effect’ of
our moral consciousness. When the moral law determines the
will, it frustrates the inclinations, and ‘the negative effect on
feeling … is itself feeling’ (KpV 5: 73). In short, the feeling of
respect is an emotion that is the effect of, and follows from, the
determination of the will by the moral law, when the latter
limits the inclinations.
Kant also tries to spell out a sense in which this feeling is an
incentive in moral conduct by showing how this originally
negative effect is at the same time a positive source of
motivation. In us the inclinations present obstacles that we must
control, or overcome, when we act morally. Respect promotes
the satisfaction of our moral interests by counteracting these
obstacles. Kant holds that it is an incentive toward good
conduct in that it offsets the influence of contrary motives, and
thus moves us toward something that we must at some level find
good.
Now, the following passage from Kant, will set-up our final
points and move us toward some practical applications of
Kant’s thought:
All the inclinations together … constitute self-regard
(solipsismus). This is either the self-regard of love for oneself
[Selbstliebe], a predominant benevolence toward oneself
(philautia), or that of satisfaction with oneself (arrogantia). The
former is called, in particular, self-love [Eigenliebe]; the latter,
self-conceit [Eigendünkel]. Pure practical reason merely
infringes upon self-love … But it strikes down self-conceit
altogether. (KpV 5: 73)
Let’s first extract each concept: self-regard: self-love
(benevolence toward oneself) and self-conceit (satisfaction with
oneself). The moral law (pure practical reason) intrudes on self-
240. love but destroys self-conceit.
Now, under the heading “Self-Regard” we find both “self-love”
and “self-conceit.” We are told by Kant that the moral law
“checks” self-love – that is, controls it – and as a result
“reasonable self-love” emerges. On the other hand, we are told
that the moral law “strikes-down” self-conceit, which suggests
that self-conceit is directly at odds with the moral law.
Self-love is a love of oneself that manifests itself as interest in
one's own welfare and in the satisfaction of one's own desires. It
comprises inclinations directed at ends outside the self, such as
goods and activities that produce satisfaction or well-being, the
means to such ends, and so on, as well as the disposition to
regard such inclinations as reasons for action.
On the other hand, the object of self-conceit is best described as
personal worth or esteem, or importance in the opinions of
others. It is a desire to be highly regarded, or a tendency to
esteem oneself over others. It should be stressed that it is a
natural inclination, specifically for a kind of esteem that
depends on the opinions either of oneself or of others, and on
one's standing relative to others, and which operates
independently of one's moral consciousness. It turns out for this
reason to be a comparative form of value that one only achieves
at the expense of others—for example, by surpassing them, or
by being perceived to surpass them in certain qualities. Briefly,
the object of self-conceit is a form of esteem or personal
importance that you can only achieve when you deny it to some
others.
Thus, and this is the most important aspect of self-conceit:
This propensity to make oneself, on subjective determining
grounds of choice [Willkür], into the objective determining
ground of the will [Wille] in general can be called self-love;
and if self-love makes itself lawgiving and the unconditional
practical principle, it can be called self-conceit … [S]elf-
conceit … prescribes the subjective conditions of [self-love] as
laws.
241. People naturally place a special importance on themselves, and
often make a concern for others conditional on its congruence
with their own interests. Kant's remarks suggest that, when
moved by self-conceit, you act as though others should accord
your interests the same priority that you give them, and you put
your desires forward as conditions on the satisfaction of theirs.
Though self-conceit aims at increasing one's welfare, it does so
by claiming a certain kind of value for one's person relative to
others. How could you possibly get other rational individuals,
with desires of their own, to treat your desires as reasons for
their actions? Self-conceit attempts to get others to defer to
your interests by claiming a special value for your person and
by ranking yourself higher.
In this way, it seeks a kind of respect that moves in one
direction. When you treat a person with respect, you attribute a
value to his or her person which limits how you may act. Self-
conceit would have others act as though your interests outweigh
theirs and refuses to return the respect that it demands. This
indicates that it is at root a desire to dominate others. It is an
outgrowth of self-love in that those who manipulate others in
this way both protect their own interests and increase the means
available for getting what they want.
Self-conceit is a desire for a kind of respect that claims
something like an absolute value for oneself. But this is thought
to ground preferential treatment or deference from others; it is
not reciprocal; and its aim is to further the satisfaction of one's
inclinations. It is as though you take your inclinations to confer
a value on your person that sets you above others. This prevents
you not only from recognizing their humanity, but your own as
well, in that you have taken inclinations, rather than rational
nature, as the ultimate source of value in your person.
Hence, the moral law, for Kant, and the respect that it is owed,
are components of our rational natures. The moral law is an
“internal mode of humility” that strikes down one’s self-
conceit, while at the same time providing the ground for how
one ought to understand oneself and others.
242. 5. Additional Thoughts
a. Reason: “To make use of one’s own reason means no more
than to ask oneself, whenever one is supposed to assume
something, whether one could find it feasible to make the
ground or the rule on which one assumes it, into a universal
principle for the use of reason.”
b. Wisdom: “Wisdom, as the idea of practical use of reason that
conforms perfectly with the law, is no doubt too much to
demand of human beings. But also, not even the slightest degree
of wisdom can be poured into a [person] by others; rather he or
she must bring it forth him or herself. The precept for reaching
it contains three leading maxims: 1. Think for oneself; 2. Think
into the place of the other person; 3. Always think consistently
with oneself.”
5. Back to the Imperatives
Now, with all of the above covered, let’s re-read and reflect on
the imperatives.
Page 38
Chapter 2—
Relativism
Simon Blackburn
Relativism in ethical theory is the doctrine that ethical truth is s
omehow relative to a background body of doctrine, or theory, or
form of life or "whirl of organism". It is
an expression of the idea that there is no one true body of doctri
ne in ethics. There are different views, and some are "true for" s
ome people, while others are true for
others.
243. This should be distinguished from what it is sometimes thought
of in ethics itself, a practical stance that encourages toleration o
f different societies or different
approaches to practical living. This toleration could in principle
coincide with an absolutist theory of ethics, according to which
there is just one correct body of ethical
doctrine. For that one correct body of doctrine could, in principl
e, include the view that it is permissible or even obligatory to to
lerate people who do things differently.
Nevertheless the practical attitude of fairly universal toleration
is often felt to be a consequence of the theoretical stance that th
ere is no one truth. That is, once the
theorist takes the view that there are pluralities of ethical truths,
each relative to the different positions of people, it becomes qu
ite natural to draw the conclusion that
toleration is the only warranted stance. For if "they have their tr
uth" and we have ours, it would seem at best a brute exercise of
power to coerce them into our ways,
or ostracize them or go to war with them for doing it differently
. Thus the postmodernist Richard Rorty takes himself to have di
smantled any conception of absolute
ethical truth, and indeed draws the conclusion that only a light,
ironic, aesthetic stance to practical problems is justified. 1 Rort
y is not unique in this. Many people, and
many ethical theorists, believe that without some "robust" or "o
bjective" conception of moral truth, our right to hold judgments
with a sufficient degree of conviction
evaporates. If we want to oppose cruelty, or defend free speech,
or outlaw child sex, we need the conviction that it is not "just u
s", voicing a contingent or accidental
aspect of how we feel. We want to hold that truth is on our side:
absolute truth, even God's truth. This is why relativism is usual
ly seen as a disturbing challenge to
moral authority: a challenge that it is the business of a proper m
oral theory to answer.Cop
247. Page 39
In this essay I shall compare a number of approaches to ethical t
heory, in terms of how they react to relativism. I shall start with
the theory I myself defend, which is a
kind of "projectivism" or "expressivism". I shall argue in the ne
xt section that, perhaps surprisingly, this metaphysically undem
anding view of ethics in fact puts us in a
very strong position to make the right reaction to relativism. I t
hen say how certain other approaches, while superficially better
able to defend themselves against
relativism, in fact open up disturbing relativistic options. While
ostensibly protecting our authority, they in fact undermine it.
Expressivism holds that the key to ethics lies in the practical sta
nces that we need to take up, to express to each other, and to dis
cuss and negotiate. As the
expressivist tradition has always emphasized, ethics is at bottom
about practice. It is about choices and actions. Ethics concerns
what to do, and what not to do; who
to admire and who to avoid; where to draw lines, and where not
to; what feelings to cultivate, and which ones to repress. Our et
hic is shown in our cluster of
dispositions to encourage and to discourage various choices, cha
racters, and feelings. A sincere moral opinion is the expression
of one of these dispositions. For this
reason ethics can, fundamentally, be expressed in terms of presc
riptions, and in some systems, like that of the Old Testament, th
is is indeed how it is given: thou shalt
do this, and not do that. But prescriptions only get us part of the
way. Attitudes need comparison and ranking as well as simple e
xpression. "This is better than that"
248. can get expression as "admire this more than that", but the repla
cement would be strained. And we have an ethical language that
goes beyond simple imperatival forms
for good and sufficient reason, namely to bring to the business o
f systematizing and reasoning about attitude the elegant framew
ork of propositional logic.
Because practice is so important, these dispositions need discus
sion. They need to be queried, and sometimes qualified and reje
cted and replaced. These queries can
take the form of asking whether a particular opinion is true or ri
ght. But the appearance should not mislead us. As Wittgenstein
often reminds us, p is true means that
p. 2 Asking whether a moral judgment is true or right is no mor
e than asking whether to accept it. And asking that is asking whi
ch attitude or policy or stance to
endorse.
All this should be platitudinous. But in fact in many peoples' mi
nds it rings all kinds of alarm bells. It sounds to them to be an i
nvitation to some alarming downgrading
of ethics. It seems to undermine the "absolute" or binding or aut
horitative character that we associate with moral and ethical im
peratives.3 Some people who share the
basic orientation have encouraged these anxieties. Bernard Willi
ams believes that ethics cannot be what it seems.4 And famousl
y, John Mackie, in his "error theory"
supposes that there are elements in our ethical practice that coul
d only be justified if something more were true: some kind of "o
bjectivity" or "authority" or "to-be-
doneness'' built into the frame of the world. But this something
more is not true, so first-order ethical practice is founded on a
mistake.5
I take these views to be natural, but also to be rejected. I don't t
hink first-order ethical practice embodies any mistake at all. Par
249. ticular ethical views, of course, may
be mistaken. But the categories of ethics and the states of mind
of those who findCop
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Page 40
they need them and express themselves in terms of them are quit
e in order. Or rather, if they are not (as some people think that t
he concept of a "right", for example, is
of doubtful use) then it is an ethical problem, not one of logic o
r metaphysics or the theory of what ethics is. One sign of this is
that Mackie himself never showed what
a practice of expressing and comparing and encouraging and dis
couraging practical stances would look like if it were free of the
mistake. I would suppose that it
would come to look exactly like ours (even if started somewhat
differently, in some impoverished form). And this shows that th
ere is no mistake embedded in the very
structure of our reasonings.
Expressivism and Relativism
There is no problem of relativism for the expressivist, because t
here is no problem of moral truth. Since moral opinion is not in
the business of representing the world,
but of assessing choices and actions and attitudes in the world, t
o wonder which attitude is right is to wonder which attitude to a
dopt or endorse. Suppose, then, to
take a real-life example, that I adopt and express an attitude: sa
y, that women should be educated. Suppose I meet a member of
the Afghan Taliban, who holds the
reverse. This may certainly pose me a practical problem: in fact
253. at least two practical problems. First, I would like to be able to
change his attitude. And second, even
if I can't do that, I would like to be able to stop him from imple
menting it. But I may not know how to go about either of these t
hings, and there lie my practical
difficulties.
The relativist will get up at this point and say, "well, it is true f
or the Taliban that women should not be educated". But what ca
n that mean? Surely it is just a bad way
of saying that the Taliban hold that women should not be educat
ed, which we already knew. It is not a way of putting that opini
on in a favorable light. "True for them"
sounds a qualified kind of truth, like "it is true in Greenland tha
t it freezes all winter", as opposed to "it is not true in Carolina t
hat it freezes all winter". But seeing the
Taliban's view as true in any kind of way must involve putting i
t into a favorable light. And if anyone wants to put that opinion
in a favorable light, he has some very
hard work to do, and we can promise in advance that he will fail
. Why? Because nothing worth respecting speaks in favor of the
view. There is no favorable light in
which it can be put; it is a view that can only appear attractive
when the light is very dim. If you think otherwise, I am against
you and I will express this by saying that
you are wrong. I reject your opinions, and this I voice by word a
nd deed.
The relativist will try again. He will say: "well, it is merely you
r attitude against his". Part of this is right: it is indeed my attitu
de against his. That is what ethical conflict is.
The part that is wrong is the "merely". What is "mere" about a c
onflict of attitude? The world's worst conflicts are those of poli
cy, choice, and practice. They are the
most important conflicts there are. By comparison, mere conflic
ts ofCop