MARKETING MINICASE: MKTG - 20 BUSINESS ETHICS PROGRAMTEACHING NOTES

1992 Arthur Andersen & Co, SC. All rights reserved. Page 1 of 2

I Spy: A Case of Competitive EspionageTeaching Notes

What Are the Relevant Facts?

1. Deception is being suggested to get the Hiyotasales rep to snake a sales call and give out productinformation.

2. Using deception to obtain competitive productinformation is a common practice. Some firmsinitiate security procedures to prevent informationfrom leaking out.

3. Competitive product information influences thedecision about which product features to offer tothe public. Thus, the information obtained viadeception may influence the profitability of BECand Hiyota

4. Lynn is an employee of a consulting firm. Heractions reflect on her firm and influence therelationship between BEC and her firm.

5. Lynn feels uncomfortable about the action she hasbeen asked to take.

What Are the Ethical Issues?

1. Is deception ever appropriate? 1s an action lessunethical if the action is a generally acceptedindustry norm?

2. Does Lynn have an obligation to provide fullinformation about her intentions when requesting asales presentation?

3. Does Lynn have a professional obligation as anemployee and a consultant to undertake actions toimprove the financial positions of her employerand client? Note: This conflicts with the preceding“obligation”

4. Does a company have the right to ask an employeeto perform an act that she believes is unethicaleven though it is legal and consistent with industrynorms?

5. Do the firms involved have a responsibility todesign their competitive activities to maximizeconsumer options, speed new productintroductions to consumers, and minimize costs toconsumers?

6. Are any acts of “corporate espionage” everacceptable?

Who Are the Primary Stakeholders?

• Lynn

• Stockholders of Lynn's firm• Kyle• Stockholders of Kyle’s firm, BEC• The Hiyota sales rep• Stockholders of Hiyota• Consumers

What Are the Possible Alternatives?

1. Lynn can call Hiyota and request a salespresentation.

2. Lynn can refuse to call Hiyota (and perhapssuggest alternatives such as waiting until she canactually buy the Hiyota machine or trying to obtainthe infornnation from alternative sources such astrade journals, financial analyst reports, tradeshows, or other people who legitimately receivedsales brochures from Hiyota).

What Are the Ethics of the Alternatives?

• Ask questions based on a “utilitarian” perspective(costs and benefits).

1. What are the costs and benefits of eachalternative? Which provides the greatestbenefit?

2. Some Benefits of Agreeing to Act:• Pleasing Kyle and Bob, which is good for

Lynn’s career• Encouraging future business from BBC• Increased profits for BEC if the

information obtained results in a morepopular product design, a more effectiveadvertising strategy, etc.

• See point 4 below for the effect onconsumers.

3. Some Costs of Agreeing to Act:• The opportunity cost of the sales rep• Lost profits at Hiyota if the information is

useful to BEC• Potential damage to the image of the

consulting firm• Discomfort felt by Lynn• See point 4 below for the effect on

consumers.

4. What are the systemic implications of compe-titive information gathering for consumers?• Timely, complete information on compe-

titive products may speed new product

MARKETING MINICASE: MKTG - 20 BUSINESS ETHICS PROGRAMTEACHING NOTES

1992 Arthur Andersen & Co, SC. All rights reserved. Page 2 of 2

introductions and also increase consumeroptions and facilitate consumer choice byenabling marketers to differentiate prod-ucts.

• Security procedures add to the cost ofconsumer products and may slow theflow of product information to legitimatecustomers.

5. Does it matter that some of the costs andbenefits are consequences of Lynn’sindividual action (e.g., sales rep’s time, profitsat Hiyota and BEC, Kyle’s promotion, futureconsulting business for Lynn’s firm) but othercosts are dependent on the decisions of allcompetitors in the industry? For example, thecost of security procedures will be borneregardless of Lynn’s decision; these costs canonly be eliminated if everyone in the industrypractices honesty.

• Ask questions based on a “rights” perspective.

1. What does each stakeholder have a right toexpect?

2. Does Hiyota have a right to expect salesrequests to be legitimate?

3. Does Lynn have freedom of conscience?

4. Do clients have the right to expect consultingfirms to engage in deceptive actions?

5. Is the action consistent with Kant’s categoricalimperative? Is the action self-defeating ifeveryone follows the action (i.e., does theaction only work if a limited number of peopleengage in the action)? Is BEC gaining acompetitive advantage by gaining a free rideon Myota?

• Ask questions based on a “justice” perspective.

1. Which alternative distributes the benefits andburdens most fairly among the stakeholders?

What Are the Practical Constraints?

1. As a junior employee, it is difficult for Lynn tochallenge the requests and views of her employerand client.

2. It is difficult for a firm to forgo actions that areconsistent with industry norms.

What Actions Should Be Taken?

1. Is it ethical for Lynn to request a sales call from aHiyota sales rep? Justify your answer.

2. Which alternative would you choose if you wereLynn? Why would you make that choice?

3. To what extent does the ethics of the decisiondepend on the amount of harm, and to what extentdoes it depend on the principle of being fair ormoral? In other words, if you think Lynn shouldcall Hiyota, would your opinion change if the costswere greater? Suppose it turns out that the salesrep actually lost a sale to another customer becausehe called on Lynn. Suppose the sales rep got firedwhen his employers found out that he passed outcopy quality samples before he was authorized todo so. Suppose the information obtained by Lynnled BEC to alter its strategy and Hiyotaexperienced a huge financial failure instead of asuccess. This line of questioning basically askswhether the utilitarian or rights approach is moreimportant.

4. Which ethical theories (utilitarian, rights, justice)make the most sense to you in this scenario?

5. Would the ethics change if Lynn placed an orderfor a Hiyota machine?