Page 168 - DMGT401Business Environment

Unit 7: Socio-cultural Environment

advertisements and high initial and repeat sales of the new product. This is true for any new Notes
product that Tata launches and has meant big profits over the years, not only from their existing
product portfolio but with every new and prospective launch.
People prefer doing business with an honest person. This means ethical companies attract more
suppliers and business contracts. GM and FORD followed a policy of many suppliers for the
same product to increase their bargain power. They also used the threat of backward integration
to increase their bargaining power. On the other hand, TOYOTA takes its suppliers as business
partners and keeps the number of suppliers as low as possible. This helps them in R&D and in
their production system. Instead of the need for bargaining power resulting only in threat, they
achieved one of the lowest procurement costs in the automobile industry in the world through
their cooperation.

Even dishonest people love to work for those who believe in ethics. Ethical companies attract
more and good quality human resources, have low executive turnover, and less labour unrest.
All this decreases cost and increases production, which results in high revenue and profits.
In totality, we can say that ethics aids in good sales, good relations with the industry and better
human resources. All this, results in higher profits and long-term eminence.

Caselet Act as an Agent and Knock out Ethics?
– Excerpt from article by C Gopinath

hen companies try to balance their push for commercial success with what is
acceptable professional behaviour, ethics can take a bit of a knock. Take, for
Wexample, the role of a sales agent. It is ok to pay a commission to an agent to
push your product, but if the agent also happens to be an influential party in the transaction,
then both the ethics of the company and that of the agent come into question.
When the agent is a legislator or a minister and the deal in question is a lucrative contract,
then we will scream 'bribe' and drag people off to jail. Mr. W. Jefferson was recently
sentenced to 13 years in prison in a corruption case where boxes of bribe money were
found hidden in his refrigerator. A member of the US parliament at the time he was
caught, he was to hand over this money to a Nigerian minister on behalf of a company that
was looking for a contract in Nigeria.

What happens when the doctor behaves as an agent? That can even be as lucrative as
treating patients, which incidentally gives them the leverage to act as agents. Doctors are
regularly paid lavish fees by pharmaceutical companies to lecture to their peers on the
benefits of a drug they endorse. In the health care reform that is being debated in the US,
one of the bills under consideration requires pharmaceutical companies and medical
device manufacturers to disclose the payments they make to doctors and other companies
that provide continuing education to doctors. This is being hotly resisted! If transparency
is a solution to prevent corruption, then any resistance to transparency must make you
wonder about the intent of the action.

Source: thehindubusinessline.com

Task Give examples of any two companies that had to suffer losses due to unethical
business practices.

LOVELY PROFESSIONAL UNIVERSITY 161