The American Fur Company Founded by John Jacob Astor - Report Example

Case Study Report: American Fur Company Name Institutional Affiliation Date Table of Contents Table of Contents 2 Background 3 The case in relation to business/government issues 5 Questions and answers 6 Conclusion 10 References 11 Case Study Report Introduction This case study report is about the American Fur Company founded by John Jacob Astor in 1808 in the then thriving fur trade business. Astor was a German immigrant, shrewd in business, and whose hard work and determination led him to become the second richest man of his time. This case study is important especially in the way that it explores the trends that affect the dynamic business environment such as social responsibility and business ethics. It highlights various issues that relate to leadership styles, business-relationship models, organizational culture, workplace environment, labour, and sustainability among others. This report discusses about the context of the American Fur Company organization and the main issue of business and ethics as brought out in the case. The case further looks into how the issue relates to business and government topics as well as their comprehension. Background During the 18th Century, furs from animals such as beavers, otters, ermines, raccoons, wolves, muskrats, bears, deer, and minks among others had become highly demanded commodity in Europe, and North America became its major supplier (Wishart, 1992). In 1786, its founder Jacob Astor had already established a business of trading furs with the native Indian fur traders and trappers at the Columbia River region. Astor’s business skills at sourcing for furs from traders and negotiating soon founded him several agents trading under his post. America expanded its territories through the Louisiana Purchase and soon there was an interest to protect its trade interests in the region, especially the British and Canadian traders. Astor saw this opportunity as a chance to develop his fur trade venture and worked to block competitors in the region including Canada’s Hudson’s Bay Company which at the time had dominated the fur business in North America. It was now easier for Astor to establish his own fur charter under America’s new legislations. Pledging patriotism, and the need to challenge foreigners’ business interests in North America, Astor was granted the charter to begin the company on the condition that he forms a board of directors. Astor was also able to advance payments and personal loans to government officials, who in return agreed to his suggestions for trade legislations. The American Fur Company was established in 1808 with fictional stakeholders as Astor still held 99.9 percent of the stock, and declared himself President of the company, and in control of all the assets, liabilities, and dividends. The American Fur company expanded to become one of the pioneering American trusts. It dominated the fur trade activities in the region by its presence in the fur-trapping regions and fur trade routes. Entrants and existing players in the fur business were simply crushed out, acquired, or taken in a merger and this way; the American Fur Company established a business monopoly. The company made a lot of profit by exchanging a small amount of trade goods such as gun powder, with furs that were sold at high prices in the Europe market. Indians cultural beliefs did not agree with receivership of money and hence the company fetched almost 1000 percent profits from the trade in by giving Indians other low-value trade items. In addition to cheap labour, the company’s workers who toiled to refurbish the furs to add value before sale worked in poor conditions of long hours and lowered wages of $250 every three years. The company annual revenue was at least $500,000. However, in early 1830s, volatile trends emerged that saw the fall and ultimate liquidation of the American Fur Company. These were related to forces of nature, market environment, epidemics, poor social responsibility by the corporate, and fashion trends. The main issue being highlighted in the case is ethics in business. Astor the leader of American Fur Company was guided by extremely selfish morals and cared for neither workers nor the environment in which his business thrived. Workers were severely underpaid and let to work in hazardous conditions which led to deaths of many. The company’s products were also overpriced regardless of obtaining them at a low price through exploitation of traders. With his influence and ability to bribe government officials, Astor unfairly crushed his competitors, allowing unfair business practices inequity and establishing a monopoly. Astor never gave back to the community and the company left a legacy of environmental degradation. The case in relation to business/government issues In business, this case relates to the issues of sustainability. Sustainability in business entails acts of businesses that have minimal negative impact on the community, local, or global environment as well as to the economy (Morse, 2010). In this case, Astor’s firm involved in extensive slaughtering of the animals for fur, leading to extinction of most of the animal population, especially the beaver. River side forest areas were also denuded leading to environmental damage. This issue highlights some of the problems that arise when sustainability is not included in business decisions; for example, depletion of biodiversity, loss of habitats, and other natural resources. The case also relates to government legislations and regulations entailing fair work practices. The well-being of workers in the case was mostly ignored, and most worked for long hours with very little pay. The workers were also exposed to conditions that made them vulnerable to diseases. Today, government legislations are strong on worker treatment, and these include Acts on equal opportunity, equal pay, employment protection, health and safety, and working hours (Dcoring & Hallerberg, 2004). This issue highlights problems that arise when fair work practices are not considered for instance deterioration of health of employees, poor living standards, ill health, and death in some cases. Questions and answers 1. How would you evaluate Astor in terms of his motive, his managerial ability, and his ethics? What lesson does his career teach about the relationship between virtue and success? Astor’s motive shows that he is only concerned about making gains for himself even if it means using exploitative and selfish means. Astor wanted to do something different from his father’s butcher trade, trade fur, own his own region, the Astoria, in which he planned to make himself king. On the other hand, he had shrewd managerial abilities with ability to identify and materialize opportunities in a strategic and rewarding manner as he had great negotiating skills. However, he does not show strong ethical values, and is guided by very individualistic principles. With his high earnings, he paid his workers very little despite their hard work and let them work in hazardous conditions leading to their illnesses and deaths. He also exploited the Indians traders and blinded their rationale with alcohol during negotiations, and influenced Congress for his own gain as he could afford to bail even the president. Astor overpriced his goods that even when people were desperate and did not give to charity. Worst, the existence of his trade activities led to a depletion of animals and destruction of the environment, by which he had never considered to conserve. This case teaches that lack of virtue leads to short term success. The budding America Fur Company later became liquidated because of the same problems it created. Despite Astor’s success, he is remembered more as an unethical and ruthless business man hence, the only real success is one that comes with virtue. 2. How did the environment of the American Fur Company change in the 1830s? What deep historical forces are implicated in these changes? The American Fur Company environment changed quickly just within three year leading to liquidation of the firm. Price of fur products such as beaver lost value by over half price. This was caused by deep historical forces. First, because of settlement large forest areas, which were mostly habitat regions for Indian traders and sources for fur, were cleared to make room for settlers leading displacement of Indian traders, and scarcity of fur animals hence decline of fur trade. Second, fur trade was the thriving economic activity of the time which led to over-trapping of fur animals by competing entities leading to their extinction especially the beaver. Third, the force of changing market preferences led to animal fur products losing value as products from other materials such as silk became fashion. Fourth, the labourers became limited from epidemic attacks of cholera and smallpox on which they blamed on fur trading. Most trappers were also killed in restricted for fur-sourcing. 3. What were the impacts of the fur trade on society in major dimensions of the business environment that is economical, cultural, technological, natural, governmental, legal, and internal? Economical: Economy bloomed but only too few individuals with the guts to control the trade routes, fur-sourcing regions, and establishing strategies to block competitors. It became the era of unrestrained capitalism. Cultural: Indian traders holding beliefs such as the evilness of money and instead spiritualizing liquor and other trade items such as kettles, rifles, which motivated them to look for more fur in exchange of these. Technological: Innovation of the steamboats such as Astor’s Yellowstone which could travel 50-100 miles a day making him deliver his posts faster than competitors who used keel boats which could only manage 20 miles upriver on a good day. Natural: Lower reproduction rate compared to trapping of targeted animals leading to their extinction. Governmental: Fur traders being too rich that they are able to pay government officials hence control the latter’s judgment. Legal: The presence of big influential businesses with the ability to shape trade laws to their advantage. Internal: Several fur workers were exposed to hazardous conditions that led to disease, and loss of lives. 4. Who were the most important stakeholders of the nineteenth century fur industry? Were they treated responsibly by the standards of the day? By the standards of today? The most important stakeholders were first, the workers who were mostly native Indians; second, the customers, mainly from Europe; third, inhabitants in the fur producing areas. These were not treated responsibly by the standards of the day as there was no attempt to conserve culture and their population areas were destroyed by liquor, diseases and attacks. Although these acts were tolerable then, the same could not be tolerated by today’s standards. Today, there is a huge focus on ethical business practices such as environmental conservation, fair treatment of labourers, and animal rights activism. 5. On balance, is the legacy of the American Fur Company and of the fur trade itself a positive legacy? Or is the impact predominantly negative? It was not entirely a negative legacy as there is a positive legacy generated by the AFC and the fur trade. Fur trade shaped the economic, political, social and cultural values. These include advancing the geographical knowledge of regions and routes making it easier for jurisdiction purposes, implanted the current central American values such as frontier spirit, rugged individualism and optimism to progress. Fur trading posts stood for civilization at the time. On the other hand, the negative legacy entails traders undermining cultural values of the natives and using it as means of extortion, unfair treatment of native workers, and leaving behind extensive ecological damages. 6. Does the story of the American Fur Company hint at how and why capitalism has changed and has been changed over the years? The case gives a hint for example, in that era, monopoly was allowed, workers could be exploited, government instruments were weak, and laws were passed in favour of the business man. Today, monopoly practices can be challenged, employees are to be treated fairly, and governments are strong as well as consideration of all stakeholders in making business legislations. 7. Do one or more models of the business-government-society relationship discussed in Chapter 1 apply to the historical era set forth in this case? Which model or models have explanatory power and why? Yes, the Dominance Model of business-government-society relationship applies in the case. Astor the found of American Fur Company dominated over his workers and competitors in a ruthless way. With his power, he was also able to control government decisions and legislation of business laws. Conclusion This report has analyzed the case of the American Fur Company that was founded by an ambitious immigrant John Astor. The company grew into a monopoly controlling regions and routes of fur trade as well as influencing legislations of the fur business. The case analysis has found that there is a strong relationship between virtues and long-term success in business. The company drove to the height of success speedily but dropped down to nothingness after only a few years. The leader of the company was guarded by selfish motives, a lack of social responsibility, corruption, and a tyrant attitude despite his great negotiating skills and ability to find opportunities in business. The company’s environment was later affected by changing fashion preferences, morbidity of workers, and inadequate raw materials following severe environmental degradation. The case has taught a great lesson by highlighting the importance of the issue of ethics in business. References Case study. The dynamic environment, Chapter 2. Dcoring, H., & Hallerberg, M. (2004). Patterns of parliamentary behaviour: Passage of legislation across Western Europe. England: Ashgate Publishing Ltd. Morse, S. (2010). Sustainability: A biological perspective. Cambridge: Cambridge University Press. Wishart, D. (1992). The fur trade of the American West 1807-1840: A geographical synthesis. Nebraska: University of Nebraska Press. Read More