Markets and Consumer Protection - Case Study Example

Markets and consumer protection- tobacco companies case study Name Institution Introduction In corporate governance, the issue of ethics and morals is an issue that attracts widespread debates across the world (Thaler, 1980). Companies and professionals in the corporate structure are expected to act in the best interests of their companies. However, they are also expected to adhere to some forms of ethical inclinations depending on the nature of their work. Sometimes, due to the unscrupulous nature of some of the operators of these companies, it has become important to form boards and checks and balances whose main aim is to protect the consumer and the public from being swindled (Drakopoulis, 1992). Some governments have formed agencies whose main concern is the protection of the consumer against violations from the companies. It is to be understood that most of the companies in operation in the world today have the concept of profit making as their primary interest. To this regard, most of these companies do not really care about the interest of their consumers who largely constitute the public. This paper seeks to investigate closely the theories of ethics and morals that are applied in everyday running of these companies and in so doing, identify the facets through which consumer rights violations occur. The paper will offer an examination of a practical example involving tobacco companies in the United States and how they are perpetuated to have violated the rights of their consumers through the promotion of a product that is potentially harmful. The ethical and moral factors in this case, tying to the ethical and moral theories will be analyzed here. Recommendations will also be offered in this paper. A conclusion that ties the discourse in this paper will be issued at the end. Theories of business ethics and moral issues There are several theories that explore business ethics and moral issues in business. These theories have been expounded in the following paragraphs. Rossouw (1997) shows that there is a thin line between business ethics and the morals issues in business. The two concepts tend to intermarry and go hand in hand Rossouw (1997). Business ethics raise morals and morals ensure that the adherence to business ethics is uplifted. Customers crave to purchase products or services from a company in which they can trust (Bray, nd). The trust culture results from the capacity of the business management to offer ethics and moral standards that these clients can relate to. Typically, many people get drawn towards the companies in which they believe offers them the services and products that they need without feeling that they have been shortchanged in any manner. One of the ethical theories to be discussed here is the egoism ethical theory. Under this theory, morality is equated to self-interest. The implication in this theory is that companies acting within their own self-interests are not really bound by some moral or ethical factors as these actions will be justified by their results. Another theory of business ethics, which is mostly hailed and used in many businesses today is the utilitarian theory (Guiry, 1992). Under this theory, the concept of happiness for all the parties involved in a transaction is hailed. Technically this implies that companies will act in their own best interests but at the same time taking into consideration the interests of the consumer. Both parties end up being satisfied and the feeling of goodwill is mutual. The following paragraph relates to a case study that involves a violation of the ethics and moral responsibility of companies to their clients. The tobacco companies and product Safety case study The tobacco companies and product Safety is a case that involves a case filed against the biggest cigarette manufacturing companies in the USA. The companies had been accused of continuous breach of their ethics and moral obligations for over a decade and a ruling by one of the judges made the companies stand to lose over $280 billion collective profits that they had made over the years. As argued in this case, these cigarette-manufacturing companies had violated their ethical and moral standards through misleading advertisements and conducting campaigns that led to the promotion of the harmful product without caring about the health implications of their actions. The tobacco industry research committee (TIRC) has been accused of not taking enough time, resources and measures to conduct research pertaining to the harmful effects of tobacco as a product. Due to this, the product has continued to harm countless people. Despite quantified research showing the harmful effects from the product, the committee continued to hail the production and use of the products citing that there is no direct link to that tobacco as a product causes lung cancer. Objectives of this assignment Following the introduction of the case in the previous sentence, the objectives of this assignment are then stipulated in the following sentences. Through the use of various ethical and moral theories, the assignment will investigate the Tobacco case study and offer an analysis of the case. The assignment will also discuss the duties of the organization to its clients. Here, the analysis will involve taking a look into what the organization ought to have done to ensure that their clients have full information pertaining the product that they wish to purchase from the companies. It is important to ensure that the client has the information that he or she needs to be able to make informed decisions pertaining the purchase of goods and services. Another objective of this assignment will involve the investigation of the consequences that accrue to these companies following their failure in observance of ethics and moral standards for the industry. Lastly, it is also the objective of this assignment to offer various recommendations pertaining to how these Tobacco companies would have presented and marketed their products to the consumer without fear of being accused of violating ethics and moral standards. Theories on organization’s duties to the customers There are various theories that follow duties to the consumers. These theories have been discussed in this portion. To be able to offer distinctive services, it is vital for the companies to identify and understand the theories that relate to how these consumers behave. During the formative stages, each company comes up with a list of their objectives as well as the projections of where the company ought to be sometime in the future (Langtry, 1994). It is also during this stage that the companies come up with a list of the duties and obligations that they have upon their clients. These duties as well as obligations to customers differ from one company to the other because of the dynamism in these companies (Hurst, 2004). One of the theories under the consumer behavior that brings out the obligations and duties of the company to its clients is the indifference theory. Under this category, the consumer declares his or her preference of certain goods and services in a basket of goods compared to others. Technically, the management of the company identifies the preferences of the clients and from this, it becomes a duty to provide the products that the customer wants. When advertising these products, it is a requirement by law to provide full disclosure of the various parameters that are involved in the product (Freeman et al). The clients have a right to know everything there is to know about a particular product so that they can make informed decisions on whether to purchase the product or not. It then becomes the obligation of the company to provide all the necessary information pertaining the product so that the clients can be in a position to make this decision. Application of the theories to the case study It is important to be able to take care of the clients as most companies make their profits from repeated buying. In the above case, the companies under the TIRC failed to take care of their obligations to their clients. There are various duties that the individual companies operating under this committee and the committee itself, should have taken on behalf of their customers. Some of these duties have been highlighted in the following sentences. One of the duties of the committee was to provide correct and unbiased advertisement of their tobacco products. As noted in the preceding section, the organizations have a duty to ensure that they offer advertisements and information to their clients in such a way that will not be biased so that these clients may be able to make informed decisions. For instance, the companies under the TIRC should have made it clear that tobacco does indeed cause health complications. To this regard, the consumption of the same and the consequences from the usage of the product would not be traced back to them in case of any issues. The Tobacco manufacturing companies however did not offer this information to their clients. The clients who used these tobacco products did so at the risk of getting lung cancer from the usage of the drugs. The tobacco manufacturing companies also had an obligation of conducting research on the drugs and the effect of the drug so that they could make informed decision whether to purchase the products or not. Theories and concepts related to this topic The theories that are related to this topic may be broken down into two forms: those that are accentuated by the companies themselves and those that show the side of the buyers. These theories have been discussed in this portion. On the side of the buyer, the theories present include the egoism theory. This theory shows how various companies act in their own interests. The egoism theory relates to the concept of where one party acts in its own interest without much consideration of the other party (Lancaster, 1996). On the consumer’s side, the indifference theory is most prominent (Hooker, nd). Consumers spend money on a certain basket of goods depending on how they perceive the basket of good to be attractive. There are various parameters that they use in this determination and this includes pricing, quantity and even class. Application of the theories to this case The tobacco companies operating under the TIRC should have disclosed all the information pertaining the situation of the cigarette products so that people would know the kind of products that they are buying. To this regard, the TIRC should have disclosed the nicotine content in the cigarettes that the companies under this umbrella manufactured so that people would know the consequences of using the products. Conclusion The above paper has offered a discussion into the various theories of ethical behavior in business. It has been shown that most businesses do not act in the spirit of morality and ethics. Most of these companies act in the spirit of their own self-interest. They do not usually take into consideration the desires of their clients and the consequences they their actions may have on their clients. A typical case study of the tobacco manufacturing companies in the USA has been carried out in this paper. It has been shown that these companies do not always act in the interest of the customers. They do not disclose the full information pertaining to the usage and content of the products. As such, they are involved in the violation of the ethics and business morals. Various theories have been explored in this case. These theories include the egoism theory, the utilitarian and the indifference theories. Recommendations based on findings There are various recommendations in this case as the following sentences highlight; I. The TIRC should disclose the nicotine contents on every cigarette that they produce. This way, people will be able to assess the quantity of the cigarettes that they should take at a given. II. The companies should invest in research to ensure that they come up with products that are less addictive and whose effects do not translate into complications for their clients. References Bray, J (nd). “Consumer Behaviour Theory: Approaches and Models ”. Retrieved from http://eprints.bournemouth.ac.uk/10107/1/Consumer_Behaviour_Theory_-_Approaches_%26_Models.pdf Drakopoulos, SA (1992). “Keynes’ economic thought and the theory of consumer behaviour”. journal of political economy. 19(3). Pp. 318-336 Freeman et al (2008). “Environment, Ethics, and Business”. Retrieved from http://www.corporate-ethics.org/pdf/environment_ethics.pdf Guiry, M (1992). “Consumer and Employee roles in service encounters”, in John, FS & Sternthal, B, “NA-advance in consumer research”, vol 19, eds. Association for consumer research, pp. 666-672. Hooker, J (nd). “Why Business Ethics?” Retrieved from http://web.tepper.cmu.edu/ethics/whybizethics.pdf Hurst, NE (2004). “Corporate Ethics, Governance and Social Responsibility: Comparing European Business Practices to those in the United States”. Retrieved from http://www.scu.edu/ethics/publications/submitted/hurst/comparitive_study.pdf Lancaster, J (1966). “A New Approach to Consumer Theory”. The Journal of Political Economy. 74 (2). pp. 132-157. Langtry, B (1994). “Stakeholders and the moral responsibilities of business”. Business Ethics Quarterly. 4(4). pp. 431- 442. Rossouw, GJ. (1997). “Strategy and skills for moral decision-making in business”. Koers journal. 62 (1). Pp. 19-28. Thaler, R (1980). “Toward a positive theory of consumer choice”. Journal of Economic Behavior and Organization. pp.39-60. Read More