Business Notes: Conclusion of ethical behaviour

Ethical behaviour is a much more common part of day to day business now a days.

A lot of businesses are now committed to morally and ethically correct behaviour.

Long term benefits help both the business and the wider society.

Esjae x

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Business Notes: Ethical behaviour or public relations?

Some companies have been accused of behaving in an ethical way just because it’s seen as the right thing to do, ie. its just a public relations exercise.

Esjae x

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Business Notes: Examples of ethical behaviour

  • Paying staff above the minimum wage
  • Fair prices for raw materials (fair trade)
  • Environmental audits – independent organisations determine whether you are meeting certain targets such as level CO2 emissions, carbon footprint, % of recycling, publish environmental/ social report
  • Ethical training
  • Ethical codes of practice
  • Corporate integrity
  • Ethical investments

Esjae x

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Business Notes: Conclusion of behaving ethically

In the short term the costs tend to be higher (financial costs). However in the long term the benefits out weigh the disadvantages when operating in an ethical manner.

Esjae x

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Business Notes: The Disadvantages of Ethical/ Unethical Behaviour

  • Loss of custom/ sales (unethical behaviour)
  • Difficult to ensure ethical behaviour exists in large companies
  • It’s difficult to define what is unethical
  • Damage reputation (unethical behaviour)
  • Illegal activities (unethical behaviour)
  • Decrease competiteness
  • Increase costs
  • You could be the only one behaving ethically

Esjae x

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Business Notes: Advantages of ethical behaviour

  • Fair, the right way of doing things
  • Morally correct
  • Could enhance or lead to a better reputation
  • Should make it easier to raise capital
  • Pressure groupds should see them in a better light
  • Higher levels of repeat business and customer loyalty
  • Word of mouth promotion
  • Easier to recruit/ retain employees
  • Reduces the chance of breaking the law
  • Higher product safety and quality
  • Gives the company a competitive edge or unique selling point
  • Suppliers more willing to supply
  • Recognition and awards
  • Media recognition
  • Lowers operating costs (lower emissions, government grants, recycling) – cost advantages

Esjae x

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Business Notes: The ethical environment and corporate social responsibility

Definition: Morally correct behaviour towards all stakeholder groups

Below are examples of stakeholders and the businesses social responsibility towards them:

Shareholder:

  • Provide with upto date trading information
  • Tell them if the business isn’t doing well
  • Pay fair appropriate dividend
  • Be able to express views/ opinions/ concerns about how the business is run

Employees:

  • Fair wages
  • Safe working conditions
  • Fair breaks
  • Fair and transparent promotion

Government:

  • Publish full accounts (fair and open publication)
  • Avoid practices that will allow tax evasion

Consumers:

  • Fair pricing (transparent and open) – not misleading
  • Value for money
  • Safe

Suppliers:

  • Keep trade credit as short, appropriate as possible
  • Pay within the appropriate trade credit period

Esjae x

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Business Notes: Demographic Change

‘Grey Pound’ – Final salary pension schemes (1/2 or 1/3 of their final salary as their pension) -> now being closed down meaning future pensions won’t be as good as they are now

‘Pink Pound’ – Gay Market

Single Households – Due to an increase in divorce and marrying later in life

Falling birth rates (as a result of single households)

Falling death rates (due to ageing population)

Increasing number of service sector jobs

More part time employment

More female workers

Companies effected in a positive way

  • Companies who target their products at older people (eg. over 60s holidays)
  • More demand for housing (builders, mortgages, estate agents)

Companies effected in a negative way

  • Companies targeting young people
  • Baby products

Esjae x

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    Business Notes: Changes In The Social Environment

    Demographic Change

    • Religion
    • Cultural
    • Increasing number in the workforce
    • High youth unemployment (NEET – Not in Education, Employment or Training)
    • ‘Grey Pound’ Old people are better off
    • Immigration
    • Race
    • Ageing population (more over 65s than under 16s)

    Ethical Issues

    • Discrimination
    • Ethical behaviour
    • Sweatshops
    • Child labour
    • Drugs
    • Animal testing
    • Smoking
    • Beliefs
    • Alcohol/ drinking
    • Morals
    • Working hours (working weekends, bank holidays, Sundays)

    Green Issues

    • Recycling
    • Carbon footprint
    • Pollution
    • Sustainability
    • Waste
    • Reduce food miles
    • Renewable energy
    • Fossil fuels
    • Carbon off setting
    • Reduction in CO2 emissions

    Corporate Social Responsibilty

    • Unemployment/ employment
    • Ethical Behaviour
    • Morals
    • Moral and ethical behaviour by comapanies

    Esjae x

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    Business Notes: Unit 4 Topic 3 – Relationship Between Business and the Political and Legal Environment

    Government Intervention:

    • Funds/money
    • Education
    • Social services
    • Health care
    • Emergency services
    • Defence

    Local:

    • Waste disposal
    • Road maintenance
    • Street Lighting

    Public good are not provided by the private sector but suffer from the ‘free rider problem’ as everyone has the opportunity to consume them.

    Merit goods are where the consumer doesn’t fully appreciate the benefit of consuming them.

    Government Legislation and Regulation:

    Consumer:
    Food Safety Act (1990)
    Sales of Good Act (1994)
    Trade Descriptions Act (1968)
    Consumer Credit Act (1974)
    Weights and Measures Act (1963)

    Health & Safety
    Health & Safety at Work Act (1974)

    EU
    European Works Council Directive (1994)

    Environmental
    Clean Air Act (1993)
    Environmental Protection Act (1990)

    Competition
    Competition Act (1998)
    Companies Act (1985)

    Employment
    Disability Discrimination Act (1995)
    Minimum Wage Act (1998)
    Sex Discrimination Act (1975)
    Equal Pay Act (1970)
    Age Discrimination Act (2006)
    Race Relations Act (1976)
    Employment Relations Act (2000)

    Purpose of Laws

    Consumer Law

    • To ensure fair treatment of individual consumers
    • Clear and transparent prices

    Employment Laws

    • To ensure fair and non discriminatory of workers race, gender, age

    Competition Law

    • To ensure fair trading conditions apply to all companies
    • Restricts monopoly power, price fixing

    Health and Safety Law

    • To ensure employees, customers and all visitors can operate in a safe environment

    Environmental Law

    • To ensure the sustainability of resources and reduce the pollution into the environment

    EU Laws

    • To ensure common legal framework throughout the EU

    Government Economic Policy

    Fiscal Policy is the use of taxation and government expenditure to influence the economy.

    Monetary Policy is controlling the money supply and the rate of interest in order to influence the level of spending and demand in the economy. This uses quatitive easing this means that when there is a rise in interest rates customers feel poorer and spend less on luxuries due to having a lower discretionary income. Also businesses invest less as its more expensive to borrow money to purchase capital goods (long payback period and lower ARR). When there is a fall in interest rates consumers feel richer and therefore spend more on luxuries due to having a higher discretionary income. Also investments by businesses increas as it is less expensive to borrow money (short payback period, higher ARR). Therefore to slow the economy down the government could raise interest rates when using monetry rates but if the government wants to boost the economy (such as during a recession or slump) they could reduce interest rates.

    Supply-Side Policies boost the level of output (level of total supply) which makes the economy more efficient. These policies include:

    • Education and training
    • Reduce regulation and red tape
    • Subsidies (a payment to encourage production and or consumption) eg. alternative energy
    • Labour market reforms (make it easier to switch between jobs) eg. reduce the power of trade unions
    • PFIs (Private Finance Initiatives) Private sector provides funds instead of the government.

    EU Membership

    27 Countries:

    1. Greece
    2. Bulgaria
    3. Romania
    4. Hungary
    5. Slovakia
    6. Slovenia
    7. Italy
    8. Austria
    9. Czech Republic
    10. Poland
    11. Lithuania
    12. Latvia
    13. Estonia
    14. Finland
    15. Sweden
    16. Denmark
    17. Germany
    18. France
    19. Spain
    20. Portugal
    21. Belgium
    22. UK
    23. Ireland
    24. Malta
    25. Cyprus
    26. Luxemburg
    27. Netherlands

    Benefits of EU Membership for a UK Business:

    • There is an access to a large market
    • Large market = opportunities for economies of scale (lower costs and increased specialisation)
    • Competition = encourages innovation
    • Opportunities for european marges and joint ventures = synergy and improved efficiency
    • Wider labour market
    • More mobility of capital, able to invest anywhere
    • Freedom of movement
    • No tariff or quota
    • Single currency = no exchange rates = no transaction costs
    • Pan Europe marketing
    • Ansof Matrix: Market Development
    • Emerging markets

    Negatives of EU Membership for a UK Business:

    • Increase in legislation
    • Need to meet technical standards
    • Increased competition
    • Labour and capital attracted to other EU countries
    • Labour maybe attracted to other countries
    • Language/cultural barriers
    • Countries outside euro have to pay transaction costs
    • Diseconomies of scale

    Strategies UK Firms Should Adopt (to maintain competitiveness)

    • Merge/take over
    • Share technology and knowledge
    • Reduce unit costs and overheads
    • Reach a wider market/ audience
    • Move production to low cost areas
    • Effective working practices (training and motivation)
    • Product development
    • Multi site locations

    Free trade -> Trading Bloc -> eg EU -> free trade between the countries within the bloc.

    Free trade means that there is no restrictions or trade barriers meaning there are no tariffs and no quotas

    If the UK trades with China there are trade restrictions, there are some tariffs and some quotas

    Advantages of Free Trade:

    • Comparitive advantage – trading bloc as a whole benefits
    • Competition – encourages/ forces firms to become more efficient and competitive
    • Trade creation

    Disadvantages of Free Trade

    • Infant industry – needs protection in the early years
    • Jobs: cheap labour, cheap products

    These notes have come from my Business Studies A Level Lesson.

    – Esjae x

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