Contemporary Business Issues - Assignment Example

Question 1 ASDA is a super market chain which supplies product at low cost to ensure that they are able to tap customers. The company has followed a policy where they try to fetch the maximum return for their shareholders. This has made ASDA concentrate more on the bottom lines and the shareholders whereas the other stakeholders are ignored. This supports Milton Friedman findings that the prime responsibility of the director is to ensure return for the shareholder but is goes against the stakeholder theory which lays importance on all the stakeholders associated with the company. The paper thus looks into the stakeholder theory for ADSA and the manner it will affect ASDA if it looks towards it. Business units are looking for ways to maximize profits. Different ways and techniques are used to ensure that profits maximizes. Profit maximization is “a process through which the firm ascertain the amount of goods they are going to produce for a particular price which will reap maximum profit for the business unit”. (Producers & Profit Maximization, 2010) Profit maximization thus looks into improvement of the present situation into a better one. This also acts as a mechanism to ensure that “competitors stay out of business”. (Profit Maximization, 2010) ASDA here looks towards purchasing the goods at the lowest cost from the suppliers. ASDA concentrates more on the bottom line which is highlighted from the fact that they put pressure on the supplier to get goods at low prices. ASDA also looks towards cancelling contracts with the suppliers if the product is not delivered on time. ASDA to ensure that their reputation is not hampered looks towards the supplier to ensure that they negotiate with the employees and ASDA has no role to play. This ensures good reputation and helps ASDA to ensure that goods are available at low prices which helps to earn high profits for the shareholders. ASDA which is looking towards stakeholder theory will be able to ensure proper service for all. Stakeholder theory states that “business organisation needs to see that the organisation works for the well being of people associated with the organisation and ensure that their well being is looked after”. (Hill & Jones, 1992) The stakeholders who are influenced by the decision taken by the business units is demonstrated below It shows that corporation should take decision which will improve the performance for the customer, community, employee, trade association and everyone associated with the corporation. This will help ASDA to ensure that only profit doesn’t become the sole criteria for their growth. In fact it will look towards other aspects like improving the condition of the employees by improving the work environment, having a proper compensation package and proper working hours. This will also help ASDA to improve their ethical policy and ensure that they are able to deliver equality in services towards all countries irrespective of its operational country. A study demonstrates that since stakeholder theory “doesn’t specify the trade off between the decisions taken by the manager is correct or wrong and doesn’t hold him accountable for it so the manager might take decision which benefits him instead of all the stakeholders”. (Jensen, 2004) This makes it difficult to monitor the working of ASDA and the decision can have a forbearing on all the stakeholders. This will thereby affect the proposition of value maximization. ASDA won’t be able to maximize profit because the concern for the stakeholders will increase. The shareholders can ensure that corporate governance remains in the organisation ensure that “decisions taken are such that affects all the stakeholders associated with the organisation”. (Corfield, 1998) This will help each stakeholder to perform the duties which will transform into a better picture for ASDA. Even economists support the stakeholders’ theory because “it looks into the well being of every individual associated with the company”. (Corfield, 1998) This theory takes decision for every individual associated with the company so it takes care of the corporate governance aspect from the view of the shareholders and the managers also. This will be a great thing for ASDA as it will help to improve its relationship with suppliers in Bangladesh who are paid low for the goods which will thereby improve the quality and ensure proper services. To increase the effectiveness of stakeholder theory and to ensure proper corporate governance the shareholders need to ensure that “managers are clearly made to understand the business and the kind of relationship they need to create with the stakeholders”. (Freeman, Edward, Wicks & Andrew, 2004) This will give ASDA the sense of purpose and define the objective of working. It will also present a clear picture and the establishment of relationship will ensure that ASDA take decision which helps to increase value for the stakeholders. If we compare it with the theory of profit maximization then we see that using the stakeholder theory will decrease the profits as ASDA will have to become more concerned for the other stakeholders. A study shows that “business units to maximize profits needs to improve their supply chain and look for transfer pricing model so that they are able to extract the best price for it and doing so will ensure that there is timely delivery of goods and services which will ensure the best price”. (Tan & Renato, 2008) This is something which ASDA has been able to achieve and using the stakeholder theory will make them ensure that the suppliers are dealt in a better way which will mean sharing a certain profit with them. This will also ensure better compensation package which will finally result in lower profits. ASDA who deals in various products has ensured that all wants of the customers are met. This helps ASDA to earn high profits as customer satisfaction is high and due to low prices the customer are able to get a better bargain. A study shows that “business units to maximize profits need to have multi-products as customers who are impatient and want new products get a range which will ensure that business units are able to sell more and the customer get a variety and profit maximizes”. (Levin, Ma & Wright, 2003) This will also ensure that business units are able to push additional units to the customer thereby making them earn higher revenues. ASDA has been able to do so and if it integrates the stakeholder theory along with it the reputation will improve. The stakeholder theory thus will help to look things from the shareholders perspective and maximizing returns for them will ensure that all the other stakeholders’ value also maximizes. This will help to “overcome the unethical practices of the management and help the board of directors to manage their stakeholders issue in relation to the shareholder”. (Tony & Kerry, 2009) This thus will help to ensure proper corporate governance in ASDA and ensure that ASDA is able to deliver on the promises and thereby ensuring that management is effective. Question 2 In today’s business world ethics hold prime importance for all business concern. Ethics plays a very important role for business units as it “helps to identify the culture prevalent in the organization and helps to find the reputation the outsiders view about the company”. (Matthews, 2008) It helps outsiders to judge the way work is carried out and sees that the company is fair towards all. For multinationals this multiply as they come from different culture and background and to cope with the local culture and requirements calls for a directed effort from the multinationals. This paper looks into the ethical policy prevalent in ASDA and the ethical issues which the company is presently dealing with. It will also look into the manner the ethical policy code prevalent in ASDA is influencing the negotiation between the suppliers and the customers. This increases pressure on ASDA which is a super market chain to ensure that they are ethical in their dealings. ASDA is operating in different locations and as it procures its materials from different countries around the world it is important that they remain ethical in all their dealings and have an ethical code which is same for all countries so that equality prevails. This will help ASDA to ensure a balance between the suppliers and the negotiating staff. ASDA need to look into the cultural differences and at the same time see that they are ethical. This will ensure that their business in working with the correct framework. ASDA therefore “need to understand the culture prevalent in the local country so that the obstacles are overcome”. (Chung, 2009) For example it is seen that ASDA exploits the Bangladesh suppliers by bargaining with them. ASDA ensures that they are suppressed by paying less. This results in lower wages for the employees and increased working hours which goes against the international norm. Also the fact that ASDA puts pressure on the suppliers to ensure that delivery is on time and also cancels the contract is a concern. ASDA also used its power to ensure that the trade agreement is such that it looks as if ASDA complies with the ethical requirements but actually it doesn’t. It seen that ASDA has an ethical code in place for UK and it abides by it. In reality it uses undue pressure on the suppliers and ensures that it exploits employees indirectly thereby not abiding by the ethical code in place. ASDA needs to ensure ethics in the work place so that “the employees morale don’t get affected as there is fairness while dealing with the executives and employees at the same level will help to create harmony”. (Rhoden, 2008) This is important for ASDA as there ethical policy highlights it. This will help ASDA to bring a balance between the suppliers and customers, Even ensuring that there is fairness will ensure that work is carried out without any hiccups. This will help them to gain the confidence of local employees and will thereby help ASDA to build a good brand image. The ethical policy code prescribed by ASDA provides for the same. It states that ASDA doesn’t use products which have been produced by exploitation of employees and inadequate working environment. In reality ASDA working environment is exactly opposite. This is seen from the fact that employees in Bangladesh are exploited indirectly by ASDA. The employees there are paid low and also have to work more hours than prescribed to earn their livelihood. This goes against their ethical code and is likely to shift the balance of power to the suppliers and customers as the company sells product which have been produced by exploiting the workers. This shows flaws on the part of ASDA and requires urgent measures to be ethical on all fronts. ASDA needs to ensure that “they remain ethical as it affects the personal contribution both emotionally and physically”. (Anderson, 2007) This will ensure that the personal contribution doesn’t get altered as it can lead to the corporation to pay heavily due to the changes. This is true as ASDA which is exploiting workers can pay heavily as certain section of the consumer can start stop purchasing as it goes against the ethical policy. This will result in increased pressure from the government which will increase the bargaining power of the suppliers. ASDA needs to look into the matter and ensure that steps are taken so that the matter gets resolved. Being ethical and coping with the cultural differences will help ASDA to ensure that “essential behavior helps them to conduct the business function effectively”. (Anderson, 2007) This will help ASDA to cope with the corruption level and also ensure that their efforts are directed in the correct direction. This will help them to achieve the best results and will guide ASDA to improve its reputation level and will provide a platform where ASDA is able to bargain and ensure that the company remains ethical at the same time which is stated in their ethical code policy. Ethics forms a very important part for multinational companies. This can be seen from the following example. “Enron as a multinational company failed because it was not ethical and painted a grim picture which resulted in scandals”. (Curry, 2010) This example shows the importance of ethics in the work place. Being unethical lead the company to lose its business area which resulted in wide loss for the company. ASDA needs to be aware of it as an issue like the one in Bangladesh where ASDA has exploited the employees could earn bad name for the company. It could also lead towards closure due to increased pressure from the international organizations. This makes it important that ASDA follows their ethic code strictly and ensures that it practices the same code for every country. ASDA needs to ensure that they remain ethical and cope with the changes in culture. This will ensure that “a code of conduct is developed which has all the values and guiding principles which the employees need to follow so that they are able to match the local requirements”. (Baeyer, 1999) Following this will ensure ASDA to deliver on the promises. ASDA which already has such an ethical cod developed need to lay stress towards following it so that it is able to bring a balance of interest between the suppliers and the customers. Employees who follow this code know what needs to be done. This will ensure that they are able to deliver those. It will thus help ASDA to ensure that the local requirements are looked into. This will also help them to deal with the culture differences and ensure that there is no conflict of interest and the company is able to be ethical in its dealing. ASDA to ensure that the cultural changes are integrated in the work environment should ensure that “training programs are provided by conducting self study groups and other programs so that employees learn the differences”. (Baeyer, 1999) This will help ASDA to cope with the changes and ensure that they are able to understand the local requirements better. This will also help to improve their relation with the suppliers which will enable the super chain to grow and ensure a balance of interest. This will enable ASDA to follow the ethical code and ensure that they are able to deal with the ethical issues thereby creating a balance between the negotiation staff and the suppliers and customers. 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