Ethical Reasoning in Business Decisions - Essay Example

Ethical reasoning in business decisions - GB Tobacco 1. Introduction The decisions of managers in multinational organizations need to be carefully planned so that major failures in regard to organizational performance are avoided. The use of well known theoretical frameworks minimizes the relevant risks and allows managers to achieve the higher possible benefits. In any case, the decisions made by managers need to be aligned with existing ethics. In regard to business activities, ethics tend to have a specific content, incorporating not just the rule of fair trade but also the rule of truth towards the consumers (Murray, 1997). The role of ethics in business decisions is presented in this paper. Emphasis is given on the use of ethical reasoning for developing important business decisions. The specific issue is reviewed using as an example the marketing plan of a tobacco firm, GB Tobacco, especially in regard to South East Asia. The decisions of the firm’s manager Fiona Fuller are analyzed through appropriate theory. Recommendations are made for potential alternatives and changes, where necessary, so that the firm’s marketing plan in South East Asia is not opposed to ethics. 2. Business decisions in GB Tobacco 2.1 Evaluation of business decisions in GB in terms of ethical reasoning As explained in the case study, Fiona Fuller has to face a significant challenge in the short term: she has to identify a strategy for enhancing the growth of the firm’s profits. The market of South East Asia seems to be an ideal place for achieving such target since elsewhere the perspectives for the firm’s growth are limited mostly due to the changes in the legislation related to tobacco products (Case study, 1st par.). The options proposed by Suppakorn would be evaluated using the Seven Step model, a theoretical framework that allows the identification of ethical dilemmas and constraints in regard to critical business decisions. The Seven Step Model of ethical decision making would help Fiona Fuller to develop ethical decisions. The specific model incorporates seven phases (Werbane, 1992, in Rothwell, 1999, p.34), which can be described as follows: a) Identification of the facts (Werbane, 1992, in Rothwell, 1999, p.34), meaning those issues that can be considered as having ethical implications. In the specific case these facts are: in Malu existing legislation bans the import of cigarettes; still, the unregulated market is well developed (Case study). As a result, the import of cigarettes in the country needs to be necessarily developed through smuggling distributors in neighbouring regions. The marketing strategy of GB Tobacco needs to be designed taking into consideration the above fact, i.e. the non-legal import of the firm’s products in the market of Malu. b) Identification of the ethical issue (Werbane, 1992, in Rothwell, 1999, p.34); the ethical issue appearing in this case is the following one: the firm’s marketing plans in regard to Malu will violate the local laws in regard to cigarette import. In this context, smuggling distributors will be used for the import of the firm’s cigarettes in the market of Malu, even if GB Tobacco is a firm that operates legally in the international market. c) Identification of alternative interventions (Werbane, 1992, in Rothwell, 1999, p.34). If reviewing carefully the case study, the following assumption is made: there are no alternative strategies for the firm to enter the market of Malu. Since existing laws fully ban the import of cigarette products, with no exceptions, then the use of smuggling distributors for entering the market of Malu becomes unavoidable. In this context, the cooperation with smuggling distributors would be necessarily part of the firm’s strategy for entering the market of Malu. d) Identification of primary stakeholders (Werbane, 1992, in Rothwell, 1999, p.34). According to Madura, there are five groups of people that are incorporated in the term “stakeholders:” “owners, creditors, employees, suppliers and customers” (Madura, 2006, p.11). From another point of view, Ferrell, Fraedrich & Ferrell (2010) note that the term stakeholder can be quite wide referring to all groups, including the industry and the government, that are affected by an organization’s operations. In the specific case particular emphasis would be given to the following three groups of stakeholders: the government of Malu, consumers in Malu and smuggling distributors in Singlaw. Of course, GB Tobacco is also a primary stakeholder, having to cover the costs related to this project and being depended on the project’s profits for improving its performance. e) Identification of the ethics of the alternatives (Werbane, 1992, in Rothwell, 1999, p.36). As noted earlier, the import of the firm’s cigarettes in the market of Malu needs to be developed through smuggling distributors. On the other hand, as explained in the case study, the country’s government has allowed so far the advertisement of the firm’s cigarettes in Malu. This means that the government accepts, even not formally, the import of cigarettes in the market of Malu, even if such practice is opposed to existing laws. Moreover, the marketing of the firm’s products in the market of Malu need to be enhanced so that more consumers are attracted. The alternatives available to the firm for entering the market of Malu, as described above, could be evaluated using the ethical reasoning theories. One of the key theories used in this field is the categorical imperative theory of Kant (Clarkson et al., 2008). This theory is based on the view that the decisions of each human would be based on the following criterion: “which would be the consequences if anyone in society would act in the same way” (Clarkson et al., 2008, p.103). The theory of Kant has been developed on the basis of an important difference between humans and other physical objects: human can be moral while other physical objects do not have such attribute (Cross, 2007, p.95). In other words, according to Kant, moral integrity is a key characteristic of human beings (Cross, 2007, p.95). For this reason, the decisions of human beings should be aligned with morals (Cross, 2007, p.95). The Kantian theory on ethical reasoning leads to another assumption: the views of people as members of the community and as individuals “need to be respected” (Clarkson, Miller, & Jentz, 2006, p.108). Moreover, the Kantian theory on ethical reasoning emphasizes on the power of a human being to promote ethics: if a human being behaves morally, he can influence other people around him to respect morals (Brooks & Dunn, 2009, p.184). A similar theory is the Principle of Rights which promotes the idea that each business decision should be reviewed as of “which can be the effects of this decision on the rights of others” (Miller & Cross, 2012, p.42). A key problem related to the Principle of Rights is the following one: it is possible for each person to have a different view on the hierarchy of rights (Miller, 2011, p.176). Reference should be also made to the Virtue Theory of Ethical Reasoning. This theory suggests that the decisions of humans are based on virtue and should not be influenced by other criteria, such as economic interests (Ali Sarlak, 2010). If related to marketing, virtue would lead marketers to decide to promote a product only “if this product would have a positive impact on consumers’ lives” (Williams & Houck, 1992, p.22). However, in the context of business, it is often difficult to decide which behaviour is virtuous and which not (Mandal, 2010, p.74). At the next level, the theory of utilitarianism is based on the following idea: a decision should be considered as good or bad if reviewing its effects on the majority of people (Miller & Cross, 2012). If the particular decision “affects adversely the majority of people” (Miller & Cross, 2012, p.42), then this decision would be characterized as not moral, even its content is not directly opposed to morals. Using the above theories, contradicting assumptions would be made in regard to the decisions that Fiona Fuller should develop. The promotion of the cigarettes of GB in the market of Malu would be in opposition with the Kantian theory and the theory of Virtue but it would be possibly justified using the Principle of Rights Theory and Utilitarianism. f) Identification of practical constraints (Werbane, 1992, in Rothwell, 1999, p.36). Tobacco market in the South East Asia is not stable. In the context of a recent decision of Australian courts, the promotion of plain packaging of cigarettes in South East Asia is in progress (Rimmer, 2012). Such practice would eliminate the benefits from the marketing of the firm’s cigarettes in Malu. On the other hand, in countries of the South East Asia smoking shows increasing trends, in opposition with the Western markets where signs for decline of smoking has appeared (Asia360 News, 2012). For big firms in the tobacco industry South East Asia seems to be an excellent opportunity for achieving a long term growth, especially since tobacco legislation in this region is not so strict as in Western countries (The Economist, 2011). The only practical constraint in the case under examination would be the potential deny of smuggling distributors to keep their prices stabilized. In such case, the price of the firm’s cigarettes should be also increased, a fact that would make them non-attractive compared to the local brands. g) Identification of the actions that should be taken (Werbane, 1992, in Rothwell, 1999, p.36). Taken into considerations the issue developed above, the following assumptions are made: 1) the firm’s marketing strategy in Malu would be promoted; the funds spent on the promotion of the firm’s cigarettes should be increased so that the firm’s products become more attractive to local consumers, 2) the firm should align its practices with the local laws, as possible; the practice of local government to accept the import of cigarettes in the country, even if not formally, can justify such plan, especially since the existing theories on ethical reasoning, as developed above, lead to contradictory assumptions. 3. Conclusion - Recommendations The development of ethical behaviour in the modern market can be a challenging task for firms operating in different industrial sectors. When a business decision cannot be effectively evaluated as of its ethical reasoning, especially due to the existence of contradictions, then all circumstances of the case need to be taken into consideration. Such case exists in regard to the plan of GB to promote its products in the market of Malu. Ethically, such plan may not be fully justified; however, if all elements of the firm’s external environment are taken into consideration, a different assumption can be produced. The manager of GB, Fiona Fuller, should primarily take into consideration the rules included in the Code of Professional Standards (2012). These rules cannot be violated. However, in the case under examination, another issue is mainly discussed: even if there is a rule banning the import of cigarettes in the country, the government seems to ignore such rule. In practice, this rule can be considered as inactive. Then, the marketing of the firm’s products can proceed with no delay; still, all the rules of professional conduct related to marketing should be respected with no exception. Bibliography Ali Sarlak, M. (2010). The New Faces of Organizations in the 21st Century: A Management and Business Reference Book. 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