4.4.2 Ethics

Question 1

what are business ethics?

Answer 1

the morality of business decision-making and actions

as MNCs operate in less developed countries, a conflict arises between operating in a morally acceptable way and boosting profits

Question 2

name the ethical issues that are raised by the operation of MNCs

Answer 2

-stakeholder conflicts
-pay and working conditions
-environmental conditions
-supply chain considerations
-marketing considerations

Question 3

how can stakeholder conflicts arise?

Answer 3

MNCs operate on a global scale with a likely objective to maximise profit due to shareholder pressures- dominant stakeholder group
conflicts can arise between:
-retailers and their suppliers
-directors and staff
-management and shareholders

Question 4

what is an ethical solution for conflicts between retailers and their suppliers?
e.g. retailers paying smaller suppliers less

Answer 4

they should negotiate price and agree on a set price
-should not bully a small supplier to receive less of a payment

Question 5

what is an ethical solution for conflicts between directors and staff?
e.g. conflict between differing pension contributions

Answer 5

-staff should understand that bosses receive higher wages, however a large difference is unethical

Question 6

describe pay and working conditions as an ethical issue

Answer 6

MNC will operate in countries that have different employment regulations and working conditions
-they need to decide whether to comply with their host or home country
-MNCs can exploit cheaper labour in LEDCs
-MNCs can provide poor working conditions to cut costs
-issues with child labour, working extremely long hours

Question 7

describe environmental considerations as an ethical issue

Answer 7

as governments begin to tackle global warming and climate change, they encourage businesses to improve the environmental impact of their business activity
-waste management regulations in developed countries provide enforcement and infrastructure to manage this, MNCs find it cheaper to dispose of waste in LEDCs to maintain higher profits
-emissions from factories of products made by MNCs negatively impact local communities, causing health issues etc

Question 8

describe supply chain considerations as an ethical issue

Answer 8

MNCs will have suppliers in different countries, they are accountable for the supplier working conditions
-MNCs are now taking action to reduce unethical labour practices as part of their CSR practices
-CHILD LABOUR AND EXPLOITATION OF LABOUR

Question 9

explain how child labour is an ethical issue

Answer 9

many MNCs have facilities where child labour is common, especially when children have to work to generate income fo the family
-using child labour in their supply chain can damage brand reputation and affect sales

Question 10

explain how exploitation of labour is an ethical issue

Answer 10

this can include low wages and poor working conditions such as long hours with little ventilation
-MNCs are being pressured more by governments, customers and institutions to ensure their products and services to not involve exploitative labour practices

Question 11

what is the supply chain?

Answer 11

all the suppliers involved in the manufacturing of a product/ service

Question 12

what are the two marketing considerations MNCs have to ensure?

Answer 12

misleading labelling
inappropriate promotional activities

Question 13

describe misleading labelling as a marketing consideration for MNCs

Answer 13

labelling must comply with the regulations of the country
-not including false information to generate higher sales
e.g. false info about product’s size, ingredients, features or functionality
-otherwise can damage brand image

Question 14

describe inappropriate promotional activities as a marketing consideration for MNCs

Answer 14

promotional activities should not be offensive or illegal
example:
-encouraging customers to buy more than they need to can lead to food waste
-advertising body image issues, editing photos, unattainable beauty goals aimed at teens