bmom5203 - assignment answer - ng kim wang - 720228015993
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Barbie vs BratzTRANSCRIPT
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ASSIGNMENT
NG KIM WANG (720228015993)
OPEN UNIVERSITY MALAYSIA
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Question 1
What are the arguments for and against the concept of corporate social responsibility? Where
do you stand, and why? Give your opinions, specifically, with respect to the case above.
According to Carroll and Buchholtz, corporate social responsibility can be defined as
economic, legal, ethical and discretionary expectations that society has of organization at a
given point in time. The corporate social responsibility means that organizations have moral,
ethical and philanthropic responsibilities to earn a fair return for investors and at the same
time comply with law.
Carroll and Buchholtz‘s four-part definition of CSR expressed the different aspect of social
responsibilities.
Economic responsibilities – This can be understand as the responsibility of an
organization to produce a good or services that society needed and at the same
maximize profit of its investor/owner.
Legal responsibilities – All businesses are expected to comply with law and
regulations set by relevant authorities while trying to maximize their profit. Violated
law may cause penalty imposed to an organization and even bring negative impact to
its reputation.
Ethical responsibilities – The ethical responsibilities defined social expectation of
organization conducting matters which sometimes not rule by law in a fair way.
Discretionary responsibilities – It is a purely voluntary, not because of mandated by
law or ethic, an organization make social contributions that did not expect any
payback.
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Some example of CSR:
Community development
Donations to community groups and charitable bodies.
Sponsoring public health, sporting and recreational projects.
Funding scholarship program or activities.
Human resource
Health and safety of workplaces.
Industrial relation.
Employee assistance, remuneration and benefits.
Environment contribution
Environmental education programs, awards and studies.
General environmental considerations and statements.
Sources: Belkaoui and Karpik, 1989; Guthrie and Parker, 1989; Gray et al, 1995a, 1995b,
2001; Hackston and Milne, 1996; Imam, 2000; Newson and Deegan, 2002; Hamid, 2004)
Corporate social responsibility is actively being discussed among economists, and the most
contrast views were on the arguments for and against CSR.
Argument for CSR
Corporates create social problems
The major argument is corporates create and continue create social problems, and
therefore is their responsibility to address social problems. For example, some
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manufacturer produced toxic waste during manufacturing contributed environment
pollutions, that’s why public will holds them accountable.
Long run self-interest & profit
Corporate that practice and actively engage in social responsibility tends to have
better profit in long run compared with those doesn’t. If corporates respond to
community’s needs they will have a better environment to conduct their business.
They will be having advantage in recruiting quality employee. Social problems such
as crime will be reduced thus less money need to spend on protect property. All these
cut down the operation cost in future. For instance, corporates who pay reasonable
wages that meet industry standard will have advantage in recruiting labor. When
labors got the wages that enough to support their living, crime rate will be reduced.
Public image
Corporates enhance their public image by responding to social responsibilities. As a
result of positive public image, corporate gained more customers and better
employees. For instance, auto maker who responded to consumer demand in reducing
energy consumption and protecting environment will attract more customers.
Less government regulations
When corporates operate with socially responsible behavior, they will reduce the
chances of increased governmental regulation. Government regulation adds cost to the
business and restricts the flexibility of decision making. For instance, if corporate
ignored the requirement of social in reducing environment pollutions, it will lead to a
new law enforced by government which to meet the social demand of protecting
living environment. The consequences of this will be corporate spend more cost
finding solutions adhere to new law to reduce pollutions in their manufacturing.
Corporate has resources
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Social expect large corporates who have resources (financial capital, technical expert
and management talent) are able to handle social problems. Social can leverage on
their strength such as innovative ability and high productivity in solving certain social
problems. For example, an advertising company can produce a very innovative
advertisement to draw public attention to promote certain campaign, e.g.
environmental awareness campaign.
Prevent is better than cure
Handling social problems are like treating illness, taking precaution to prevent is
always better than cure it when it happened. Business should recognize and act on
social problems before they become more serious and costly to correct them. For
example a business that contributed to environment pollutions choose not to deal with
the problem now will have higher cost in saving the environment in future when
issues become serious and difficult to tackle.
Argument against CSR
Violation of profit maximization
Addressing social issues are costly and eaten into business profit, and this has violated
the main responsibility of a business to maximize profit for its shareholder. This view
was support by many economists, one of them Milton Friedman explained that the
primary responsibility of business is to make a profit for its owner, while conforming
to the law. Corporates should focus on earning maximum profit and leave the social
issues to others.
Cost of social responsibility
As mentioned above, involvement of social responsibility activities need cost.
Corporation who pay the cost will either absorb the cost or transfer a small portion of
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the cost to its customer, to keep the margin of their profit. Unless the activities itself
can pay their own way which is a very little case.
Lack of skills solving social problems
Business people’s strength by nature is well trained in finance, marketing and
operation management, so they might lack of skills in dealing with complex social
problems. If we expect someone to tackle social problems, why choose a group which
is not equip with the right skills and ability. It should leave the issues to others who
are fit to the job such as government or other organizations.
Dilution of business purpose
Business primary purpose is focusing on economic productivity which would benefit
business itself and society. When corporate involved in social responsibility it might
distract their focus in business, productivity may drop, and market share may reduce.
It is in fact that in the end corporation may accomplish poorly its economic and social
role, which society will be suffer as well.
Business has too much power
Another argument is that the businesses already have enough power in influencing the
society; you can see their influence in many places such as school, government, at
home and the market place. If society is purely rely on business to handle social
problems they may giving business more power and increase their influences, which
may end up bring bad influences to the society.
Conclusion
My personal opinion, corporates who operate in social responsible way would gain
competitive advantages compared with those who don’t. This is simply because the
demanding of corporate to involve in social responsibility increased during the last few years,
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in both develop and under develop countries. Corporate who conduct business towards this
direction would find it gradually gain customer and public favor. Corporate who choose not
to enter into social responsibility arena would gradually sink into customer and public
disfavor.
Cristina gomez’’s survey results further support the view. She is against Dr. Karnani view
that corporate should treat maximizing profit as top priority, and then she conducted a survey
to observe public’s view on the topic. According to her survey result, people do care about
how corporate dealing with social responsibility. 93% of respondents would buy a product
from company that trying to increase community likelihood if all other factors are equal. 91%
of respondents care about company’s reputation for being involved in social responsibility.
When ask how often respondent will buy product that produced from companies show
interest in community, 27% said they will always buy, 64% will consider because not sure
what actually company do in respond to social responsibility. 9% will never think of that.
Another survey revealed that 86% of respondents will boycott companies whose actions
weren’t in line with respondents’ philosophies.
Now, we use Mattel VS MGA legal case to further support the view by looking at bad
consequences of not being social responsible.
Legal actions being taken due to violation of laws
Both companies were being fined for million dollars due to misconduct in trade secret
and intellectual property, and this definitely reduce their profit. In addition, million
dollars was using to file the suit case also further reduce the profile. The case seems
going to continue for years and this will continues eaten the company profit. That
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money spent could have spent in social welfare for a better living environment for
community.
Public image spoiled and customer may leave them
Put a side who is wrong or right in the suit case, it has up to the certain extend affect
the company image in a negative way. Public would think that the suit case is not
necessary and the money spent in the drama could have better use in improving their
living environment. This would lead to disfavor of the company and buy product from
others, which end both companies lose in the market place.
Difficult in recruiting employee and high turnover of employee
When a company image is not on the positive side, is difficult to recruit staff and
some may leave the company. In long run, it increases the operating cost.
New regulation/guideline set by the relevant authorities
A new regulation and guideline may have to set in order to cease the Mattel and MGA
fighting, to address loop hole in controlling intellectual property and trade secret. As a
result, companies tend to spend more money to comply with this new rule.
There is no question that the public’s expectation on corporate social responsibility is greater
than ever before, thus companies who totally disregard social issues and problems will be
suffer in the future.
REFERENCE
Carroll, A.B., and A.K. Buchholtz. Business and Society: Ethics and Stakeholder
Management. 5th ed. Australia: Thomson South-Western, 2003.
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Cristina a. Gomez, 22 September 2010,
http://apersonalinvestment.wordpress.com/2010/09/22/all-about-profits-means-all-about-
people/
Friedman Milton, “Does Business Have a Social Responsibility”, Bank Administration, April
1971, page 13-14.
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Question 2
MGA and Mattel are facing a dilemma over their newest product in the market. This moral
and ethical issue is weighing heavily on their mind. Discuss an effective process that is
applicable to ethical decision making. In your opinion, would using this process be of benefit
to MGA and Mattel? Explain.
Like many other corporates, Mattel and MGA are facing difficult ethical dilemma, such as
whether Mattel should continue manufacture their toys in china which they may not have the
full control over product quality, whether MGA should changing image of their Bratz dolls
which were claimed being over sexualized.
The subject of business ethic is complex and making ethical decision is always not easy. L T.
Hosmer in his book “The Ethics of Management” has suggested a process which believes
helps in making ethical decision. Let’s discuss the process and see how it helps Mattel and
MGA making the appropriate ethical decision.
There are 5 steps in the process.
1. Understand moral standard
There are many moral system and standard out there, and these concepts underlie the
ethical decision in business.
Utilitarianism
This can understand as a system that the action taken will result greatest good for
the greatest number of people. For example, during economy downturn, cutting
salary from the executive or management level of staff will help a company
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survive in the difficult time. This action will help all employees secured their job
if company can still sustain.
Egoism
Unlike utilitarianism, egoism is a system defining acceptable behavior that
maximizes the greatest interest for oneself. For example, when someone selling a
new product or services which are not in the market, they will make a lot of
money simply because there is no competition, this is an acceptable behavior by
pursuing one’s own interest.
Universalism
The universalism system says that all peoples should uphold certain values such
as honesty that society needs to function. For example, murder is considered
wrong according to the universal principle.
Relativism
Relativism is a contrast view of universalism where the judgment of right or
wrong is not follow the universal principle instead is a personal view of someone.
For example, murder is wrong according to most people, but murder during war
someone may view it is right to protect their homeland.
Virtual ethics
According to virtual ethics theory, a decision should be made based on someone’s
moral judgment instead of just follow the rules. For example, if someone telling
lie to protect another being hurt is not consider wrong, which against the rules
that saying telling lie is wrong.
By understand these moral standards, Mattel and MGA can choose the concept which
is align with their corporate culture and business behavior.
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2. Recognize all moral impacts
This is referring to the process of recognizing the impact of alternatives in ethical
problems. A business must list down the impact of alternatives (advantages and
disadvantages) in order to make an appropriate decision.
Mattel
For example, Mattel must know the advantages and disadvantages of
manufacture their toys in china to help them making a decision at later stage.
Advantage is able to bring down the cost and offer lower price to customer but
disadvantage would be losing control over the product quality which has been
proven in its 2007 recall where certain partner doesn’t comply with the rules
and guideline set by them.
MGA
For example, MGA must know what is the pros and cons of changing Bratz
dolls image which is over-sexualized, what would be the positive and negative
views of changing image to follow public’s opinion. Positive side would be
meeting parents’ expectation not to deliver wrong message to their children
but on the negative side their toys may lose its trendy and edgy characteristic
that better selling over Mattels’ Barbie dolls, and also losing its originality
which has compromised due to market demand.
3. Identify and define ethical problem
Before even making decision, first must identify and define the ethical problem. There
are few things to consider to identify and fully defined the ethical issue.
Does a dilemma or problem exist?
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For example, one of the Mattel’s ethical dilemmas is whether they should
continue production in china which on positive side is offer customer lower
price due to lower wages in china, the downside is product safety maybe
compromise if they losing control over their china partners.
If the dilemma is an ethical issue?
Refer to above given example, Mattel can identified the issue is an ethical
problem because it against the principle that business should always offer
goods that of best interest of public, it violated if product safety cannot be
guaranteed.
It is a single issue or combination of more than one?
Take Mattel as an example, other than consider if they can control the product
safety of being produce in China, they may need to consider if the decision has
other ethical issues such as employed under age worker, not paying reasonable
wages and etc.
When businesses truly understand and defined the scope of problem then only they
are able make a wise ethical decision.
4. Consider the consequences
After knowing the problem, the next step is to consider its consequence from
economic and legal perspective.
Consider the economic outcome
Cost associated with unethical behavior can be categorized to 3 levels.
Level 1 cost which is less damaging cost but get more attention from
executive such as fine and penalties from the local authorities.
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Level 2 cost is medium level in term of cost damaging and drawing the
executive attention. They are like administrative cost, audit cost,
corrective action cost.
Level 3 has the highest level in cost damaging but getting less attention
from the executive, such as loss of reputation, lost employee morale,
employee turnover.
Business must weigh the benefit of its decision against the damage the
decision would bring. For example, Mattel should compare how much cost
they can save if production in china compared with how much damage they
have to bare if product quality and safety are being compromised. Remember
those recall of thousands or million toys in year 2007 and weight against how
much they have save in production cost.
Consider the legal requirements
Business is expected to obey laws while trying to maximize its profit. The
consequences of violated law will be fines and penalties being imposed.
Indirect consequences will be damage the company image and reputation.
Thus is worth for business to think about legal requirements and ensure the
ethical decisions made are comply with law.
5. Proposing a solution
Last step is to propose a convincing solution which is ethical and will not harm the
company profit.
There are few golden rules when proposing an ethical solutions.
All decisions made must reflect concern of interests of all stakeholders.
Ethical values and principles are always take precedence over non-ethical one.
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It is ethically proper to violate an ethical principle which is necessary to
advance another true ethical principle. If according to the decision maker’s
conscience will produce the greater good in the long run.
And there are few suggestions/tips that may help decide what will be the right
decision.
Conduct a brainstorming session to find out all possible solutions.
Gather feedback and input from client in the decision making process as they
will be the one judge if is a right or wrong decision.
Getting consultation or advices from peer or supervisor which might have
experience in dealing the problem or think from another perspective.
Conclusion
Ethical decision making is tough, no one can guarantee a decision made is right or wrong, it
can only be observed in the future. However, utilize the above said process will increase the
chances of making the correct decision.
REFERENCE
Bateman/Snell, Management Leading & Collaborating in a Competitive World, 9th ed, 2011.
Josephson Institute of Ethics, Making Ethical Decision: Model, last update 2009,
http://blink.ucsd.edu/finance/accountability/ethics/model.html
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L T. Hosmer, The Ethics of Management, 4th ed. New York: McGraw-Hill/Irwin, 2003, p.
32.