business ethics

Contents • Business - Definition, Nature, Concept

• Concepts of profit

• Profit in relation to business

• Ethics – Definition, Nature, Concept, Importance

• Profession – Definition, Characteristics

• Difference between Business, Profession & employment

• Values – Definition, Nature, Importance

• Utility of values

What is business?

Busi-ness- A state of being busy.

Economic terms :

Business refers to work, efforts and acts of people being busy in connection

with the production of wealth.

Definition :

According to Urwick and Hunt,-“Business is any enterprise which makes,

distributes or provides any service which other members of the community

need and are willing to pay for it”

Nature of business… Continuous process: Not a single time activity

Buying & selling : Basic activity of any business is trading

Risk and Uncertainties: Two types - Insurable and Non-insurable

Government control: Business organisations are subject to government control. E.g., Indian

Companies Act, 1956, Consumer protection Act

Optimum utilisation of resources: Facilitates optimum utilisation of material and non-material

resources and achieves economic progress

Customer satisfaction: Business adopts a consumer-oriented approach

Creative and Dynamic: Modern business is creative and dynamic in nature

Profit Motive: Profit acts as a driving force behind all business activities

Concepts of Business…

• Problem solving - Fulfils customer’s needs.

• Innovative - combines both dimensions, product and business system, to create an

entirely new “industry.” (e.g., - Apple, Tesla, Uber)

• Unique - USP is the factor that makes a company or a product stand out from its

competitors

• Profit – its is the motivation factor behind a business.

Concept of Profit…• Normal profit : total revenue and total cost is equal to zero

• Supernormal profit/ Abnormal profit : total revenue is greater than the

total costs

Features of profit as a reward:

It is not a fixed remuneration.

It is a residual surplus.

It is uncertain.

It may even be negative. Other factor rewards are always positive.

Profit in relationship to Business…

• Motivation factor behind business.

• Stimulates and guarantee to continue business.

• Ensures the survival of business.

• Reward for the individuals engaged in business.

• The efficiency of a businessman depends on the profit he makes.

Example…• Reliance Industries Limited is an Indian conglomerate holding company

headquartered in Mumbai, Maharashtra, India. Reliance owns businesses across

India engaged in energy, petrochemicals, textiles, natural resources, retail and

telecommunications.

• Recently Reliance has diversified its business in defense sectors too.

• CEO: Mukesh Ambani

• Founder: Dhirubhai Ambani

• Profits of Reliance :

• Revenue: 3.884 trillion INR (2015)

• Net income: 235 billion INR (2015)

• Sales turnover: Rs.340814 Cr (2015)

Walmart• World's largest retailer and grocery chain by sales.

• Almost 50% more than its 5 closest competitors combined.

• 11,527 stores in 27 countries.

• Biggest private employer in the world with 2.2 million employees.

• By first quarter of 2016, minimum salaries would rise to $10 per hour.

• Because of its mammoth size and buying power

Wal-Mart can buy its products at rock-bottom prices

Exchanges high purchase volumes for low cost.

Passes the savings onto its customers as discount.

Gross Profit: $130.6 billion (Till Jan 31, 2016)

Financials:

Revenue US$482.13 billion (2015)

Operating income

US$24.10 billion (2015)

Net income US$14.69 billion (2015)

Total assets US$199.58 billion (2015)

Priorities supported by profit… .

Community

Employees

Customers

Mission

Profit

Ethics Concept :

o Ethics are the principles, norms and standards of conduct governing

an individual or group.

Definition :

o Business ethics is the study of business situations, activities and

decisions where issues of right and wrong are addressed.

ETHICAL RESPONSIBILITY

OFBUSINESS

SOCIETY

EMPLOYEES

INVESTORS

CUSTOMERSESSENCE OF BUSINESS ETHICS = ESTABLISHING A LEARNING ORGANISATION

Nature of organisational ethics.

Code of conduct

o It tells what to do and what not to do for the welfare of the society.

o All businessman should follow this code of conduct.

Based on moral and social values

o This includes self control , consumer protection and welfare ,service

to society, fair treatment to social groups ,not to exploit others.

Gives protection to social groups

o It gives protection to Consumers ,employees ,government ,

shareholders ,creditors.

Provides basic frame work

o It provides basic frame work for doing business.

New concept

o It is strictly followed only developed countries.

Importance of organisational ethics..

• Long term growth.

• Cost and risk reduction.

• Anti capitalist sentiment.

• Limited resources.

KEY ELEMENTS OF BUSINESS

ETHICS

CORPORATE GOVERNANCE

CORPORATE SOCIAL

RESPONSIBILITY(CSR)

RELEVANCE OF CG• Encourages accountability & transparency.

• Enhances productivity & efficiency

• Ensures economic growth with social justice & development.

• Ensures environmental protection & sustainable

development.

• Reduces financial turmoil, fraud & corruption.

• Inspires employees & consumer welfare. Safeguards

shareholders interests.

Example… TATA • Leadership: -

• A designed ethic counsellor , supported by departmental ethics coordinators ,

reports directly to the Managing director and has access to board directors.

• Communication and awareness:-

• compliance to the code is a condition of service for all employee and is also a

pre-requisite for service for suppliers , contractors and vendors ,who must

agree to respect it.

• Compliance structure :-• A number of system and processes based on zero tolerance have been put into

place to ensure that governance standards are met. These include Gift policy.

Profession

A profession is a career for someone who wants to be part of society, and becoming competent in their chosen sector through training; maintaining their skills through continuing professional development (CPD); and committing to behaving ethically, to protect the interests of the public.

Characteristics of Profession..

• Professional Association

• Cognitive Base

• Institutionalized Training

• Licensing

• Work Autonomy

• Colleague Control

• Code Of Ethics

Difference between

What are values??Definition :

Value is a statement of organization’s intention and commitment to achieve a high

level of performance on a specific qualitative goal.

Nature of Values :

Qualitative goals

Honesty

Commitment

Time bound

GERT’S 9 MORAL VALUES• Don’t Kill

• Don’t Disable

• Don’t Deprive Of Pleasure

• Keep Your Promise

• Obey The Law

• Don’t Cause Pain

• Don’t Deprive Of Freedom

• Don’t Cheat

• Do Your Duty

Utility of values in business :

• Motivate people to work together collectively.

• Companies which rated their implementation of key corporate values

the highest also reported the highest levels of revenue growth and

profitability in their respective industries.

• Provide good basis for business decisions.

• Facilitate innovation to support organization competitiveness.

• Commitment from partners/customers and stake holders.

• Improves provided services to partners/customers real needs.

Importance of values in an organization :

• Binds people together as a community.

• Provides people a common language.

• Tell people how to behave to achieve the organization’s vision.

• Contribution to organization’s performance.

• Organizational values are unique to each company.

• Values should represent the culture of the business.

Example: Apple

• We believe in deep collaboration and cross-pollination ( techniques,

knowledge and innovation across the organizations ) of our groups,

which allow us to innovate in a way that others cannot.

• We don’t settle for anything less than excellence in every group in the company,

and we have the self-honesty to admit when we’re wrong and the courage to

change.

• We believe in saying no to thousands of projects so that we can really focus on the

few that are truly important and meaningful to us.

• (i.e. qualitative goals)

WIPRO

• Intensity to win

• Make customer successful

• Team, Innovate

• Act with sensitivity

• Expanding potentials

Ethics

If you don’t stand for something…. You will stand for anything.

Do what is right… Not what is easy.