58. Corporate Aims and Objectives - sunny'sbiznuzz.weebly.com/.../4/2/1/8/42184325/4a_topic_1_-_objectives.pdf58. Corporate Aims and Objectives 1. ... ANSWERS – Corporate Aims and

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58. Corporate Aims and Objectives

1. Delete as necessary and fill in the gaps:

Companies as big as Tesco may have as many as 250,000 staff. All need to know where the

business is heading and what the immediate targets are. The directors of the business must

agree the corporate aims/strategies. Once these are clear, the directors can set the corporate

tactics/objectives. These will lay down precise targets such as to increase market ___________

from 33% to 34% by the end of the coming year. Once these targets are clear, the directors can

discuss with senior managers about the corporate ________________, i.e. the plan for meeting

the objectives.

2. Spot the sequence. Identify the aim then objective then strategy of these two

businesses:

A. Use regional TV ads to communicate: Best BMW range in the Midlands

B. Use UK design students and UK production for initial stock

C. To be the site of choice for those wanting catwalk fashion fast

a) To be the fastest-growing BMW dealership in Britain

b) To get clothes delivered to customers within 10 days of them being shown on the catwalk

c) To become the top-selling BMW dealer in the Midlands within the next 2 years

On-line fashion retailer BMW car dealership, Warwick

AIMS 1. 1.

OBJECTIVES 2. 2.

STRATEGY 3. 3.


3. Data response question

Cadbury’s 2009 annual report focuses on two strategies used by the business:

• ‘use existing distribution strength to expand into new categories’, such as the launch of

Trident gum into the U.K.

• focus on six countries where it enjoys ‘strong growth across all categories: U.K., U.S.,

Mexico, Russia, China and India’. Outline a corporate objective that you think both

strategies would help to meet. Explain your answer.

__________________________________________________________________________________

__________________________________________________________________________________

__________________________________________________________________________________

4. Explain why:

4.1 Clear objectives are especially important to big multinational firms

__________________________________________________________________________________

__________________________________________________________________________________

4.2 Some directors like to set hugely ambitious goals for staff

__________________________________________________________________________________

__________________________________________________________________________________

4.3 Staff may respond better to an objective based on high growth than high profit

__________________________________________________________________________________

__________________________________________________________________________________

4.4 The worst problem of all may be aims and objectives that are clear, but wrong.

__________________________________________________________________________________

__________________________________________________________________________________


58. ANSWERS – Corporate Aims and Objectives

1.1.1.1. aims … objectives … share … strategy

2.2.2.2. OnOnOnOn----line fasline fasline fasline fashion retailerhion retailerhion retailerhion retailer BMW car dealership, Warwick BMW car dealership, Warwick BMW car dealership, Warwick BMW car dealership, Warwick

AIMSAIMSAIMSAIMS 1.1.1.1. C.C.C.C. 1.1.1.1. a)a)a)a)

OBJECTIVESOBJECTIVESOBJECTIVESOBJECTIVES 2.2.2.2. b)b)b)b) 2.2.2.2. c)c)c)c)

STRATEGYSTRATEGYSTRATEGYSTRATEGY 3.3.3.3. B.B.B.B. 3.3.3.3. A.A.A.A.

3. Both strategies are based on quite cautious objectives because they are building on known

strengths rather than taking risks with radically new products or markets. The objective might be:

‘To safely build sales and profits by single figure percentages over the next 2 years’.

4.1 Firms with divisions or subsidiaries throughout the world might find it hard to have a

coordinated approach. Clear objectives would help keep everyone pointing in the same direction.

4.2 Many bosses feel that ‘audacious’ goals help motivate people, i.e. even if the goal isn’t quite

achieved, the outcome may be better than it would otherwise have been.

4.3 It may be hard to get excited about high profits for the benefit of the shareholders; growth

provides greater job opportunities for all staff.

4.4 Leading up to the credit crunch, bankers were clear in their pursuit of profit/bonuses, but

this proved to no-one’s benefit. Aims and objectives have to be very carefully considered, on

moral as well as practical grounds.


91. Stakeholders

1. Missing words

Stakeholders are individuals or groups with an interest in the actions, successes and failures of

an organisation. They include the owners (in an unlimited ____________________ business), the

________________________ (in a limited company), staff, suppliers, customers and local

residents. Some writers suggest that modern firms take care to respect all their stakeholders,

whereas others believe that firms focus upon shareholders rather than the wider interests of all

their ______________________. Current company law says that Directors’ primary

responsibility is to their _______________________.

2. Which stakeholder group is affected most by each of the following decisions?

2.1 A move to a policy of JIT ordering of materials.

2.2 To adopt a strategy of non-replacement of staff.

2.3 A switch in transport policy from delivering by rail to using the roads.

2.4 A decision to cut dividends by 20%.

3. Give two reasons why:

3.1 It might be short-sighted to focus solely upon the interests of shareholders

_________________________________________________________________________

__________________________________________________________________________________

3.2 Treating all stakeholders as equal may threaten a company’s performance

__________________________________________________________________________________

__________________________________________________________________________________

__________________________________________________________________________________


4. Data response:

Look at the following data relating to two producers of cement, then answer the questions below.

Producer A Producer B

Profit as a % of sales revenue (profit margin) 8.4% 6.7%

Staff absence for health & safety reasons (%

per day)

3.5% 1.6%

Average credit period before paying

suppliers

92 days 64 days

% cement dust emissions escaping from

factory

2.9% 1.3%

4.1 Which producer seems to act more responsibly towards its staff?

_______________________ .

4.2 Which producer seems more focused upon its shareholders than its stakeholders?

__________________.

Briefly explain why you say that:

__________________________________________________________________________________

__________________________________________________________________________________

4.3 Why may there be a conflict of interest between stakeholders, if company A was deciding

what to do about its cement dust emissions?

__________________________________________________________________________________

__________________________________________________________________________________

4.4 What evidence is there that producer A may be acting in a short-termist manner?

__________________________________________________________________________________

__________________________________________________________________________________


91. ANSWERS 91. ANSWERS 91. ANSWERS 91. ANSWERS ---- Stakeholders Stakeholders Stakeholders Stakeholders

1. liability, shareholders, stakeholders, shareholders

2.1 Suppliers

2.2 Staff

2.3 Residents/the community generally

2.4 Shareholders

3.1 If staff become alienated the business may become less competitive; profit

maximising pricing may alienate customers

3.2 Stakeholders’ interests can conflict, eg increasing capacity may please shareholders

and staff, but upset local residents, so total even-handedness may not work; decision-

making may become too slow

4.1 Producer B

4.2 Producer A; making good profit, but perhaps at the expense of its suppliers, staff

and local residents

4.3 Shareholders might want the cheapest solution, while residents want the best

solution.

4.4 Profit focus may lose staff and supplier goodwill, which may cause difficulties later

on.


Happy Christmas

One And All

No Scrooges in Knightsbridge With average earnings rising by 4.2% in 2006 and an inflation rate of 2.2%, real earnings are about 2% higher than in 2005. Coming on the back of more than 10 years of economic growth, this has led to some boom times for the luxury market. The upmarket jewellery retailer Boodles has reported sales 28% higher than in 2005, and a ‘pleasing’ level of demand for their £100,000 diamond necklace. Harrods boss Mohammed al Fayed has just paid himself a £72 million dividend and reported ‘strong trading’. Sales at the Knightsbridge store are set to hit £561 million in 2006 compared with £510 million in 2005. Of course, not everyone’s Christmas looks great. On October 13th 2006 Farepak was put into administration. Farepak had run a Christmas savings club since 1969. It was a way for low-earning families to cope with the cost of Christmas without running up debts. More than 4.5 million adults earn less than £6.50 an hour in Britain, making it tough to live week to week, let alone save. Farepak offered a responsible way to provide Christmas food, drink and presents for the family. Farepak’s collapse came at the worst possible time for its 120,000 customers. They had saved for most of the year, but not yet received a penny in return. For the same reasons, this was the best time of year for the company’s bankers and other creditors. About £40 million of savings were lost in the collapse of Farepak – most of this will go to bankers HBOS (Halifax & Bank of Scotland) and to those owed money by Farepak’s parent company EHR (European Home Retail). EHR itself went into administration in August 2006. According to its bankers HBOS, EHR’s practice was to ‘collect customer receipts from all the subsidiary companies and use them as working capital to fund the ongoing business of the group’. So the savings of some of the poorest families in Britain were being used as if they were bank overdrafts. Worse still, EHR used this capital in highly risky ways. In 2000 the firm bought DMG, a book and toy retailer, for £30 million; after years of losses, it sold it for £4 million in 2004. Although Sir Clive Thompson, EHR’s Chairman, pointed the finger at HBOS for allowing Farepak to collapse, most commentators realised that Thompson himself was hugely at fault. From the Frying Pan … But what of the savers, what are they to do? A compensation fund for the savers will result in payments of less than 10% of the sum they put in. As one single mother said to the BBC’s Working Lunch: “Not only have I lost the £240 I put in, now I have to find the money to get the food I thought I had.” A ‘solution’ to this problem was soon on offer. On Dec 2nd 2006 the Financial Times reported that ‘Farepak victims borrow at 365%’. The doorstep lender Provident Personal Credit was reported to be targeting Farepak victims with leaflets with Christmas trees and mocked-up £500 cheques. The literature makes it clear that the typical APR is 177%, but this rises to 365% for those who want to repay the debt within 30 weeks. It is clear from the literature that the company is confident that customers will not understand – or be put off by – APR figures such as 177%. (To see this, go to Provident’s website www.cash--loan.co.uk) When you see how high the interest charges are for unsecured loans to those on low incomes, it is easy to see why people signed up for a scheme such as Farepak. Tragic, then, that people showing a responsible attitude to saving should have been let down so badly in the Farepak collapse. Christmas has always been a tough time for the less well off. Sources include: Financial Times, Dec 2nd 2006, The Economist: Nov 16th 2006, plus websites: www.unfairpak.co.uk, www.statistics.gov.uk.


Glossary

Administration: when decision making powers are taken away from the directors of a failing company and placed with accountants who will oversee the closure or the sale of the business.

APR: Annualised Percentage Rate, i.e. the interest charges on a loan, calculated over a 12 month period (when the government interest rate is 5%, a figure of 177% is incredibly, greedily high).

Creditors: those owed money by a business, e.g. banks, suppliers, unpaid staff.

Questions (30 marks; 40 minutes) 1. Farepak’s cash was being used as working capital for the whole EHR group. a) What is meant by ‘working capital’? (2) b) Explain why working capital should not be used to make risky long term decisions such as buying a new business. (5) 2. At an APR of 177% per year, someone taking out a £500 Provident loan would end up repaying many thousands of pounds. Presumably they would never fall into the trap again. Examine the implications for a company such as Provident, of constantly needing new customers, because so few become loyal to the brand. (8) 3. Social pressures such as ‘Happy Christmas’ provide companies with the opportunity to push parents to spend more than they should. Discuss whether the managers of Provident Personal Credit are right to place Farepak savers at the heart of their pre-Christmas target market. (15)


Christmas Mark Scheme

1. Farepak’s cash was being used as working capital for the whole EHR group.

a) What is meant by ‘working capital’? (2)

2 marks for a clear account, e.g. finance for the day-to-day running of the business

1 mark for a woolly account.

b) Explain why working capital should not be used to make risky long term decisions such

as buying a new business. (5)

LEVEL 2

2 marks GOOD KNOWLEDGE AND UNDERSTANDING OF WORKING CAPITAL

3 marks ANALYSES THE RELATIONSHIP BETWEEN WORKING CAPITAL AND LONG TERM INVESTMENTS

Level 1

1 MARK Some knowledge shown

2-1 MARKS Some analysis of the question

Possible answers include:

• Working capital funds the day to day transactions, such as paying the bills or the wages … • … therefore it should not be used for long term investments, especially if they are risky • long term, risky investments should be financed by people prepared to share in the risks, such as

shareholders

2. At an APR of 177% per year, someone taking out a £500 Provident loan would end up

repaying many thousands of pounds. Presumably they would never fall into the trap again.

Examine the implications for a company such as Provident, of constantly needing new customers,

because so few become loyal to the brand. (8)

2 3 3

CONTENT APPLICATION ANALYSIS

2 3 3

Understanding of relevant

terms/issues

Relevant issues applied in some detail to the

case

Analysis of question set, using

relevant theory

1 2-1 2-1

Some understanding of the

relevant terms

Relevant issues applied to the case An attempt at building an argument,

but weakly


• repeat purchase from loyal customers enables the firm to minimize marketing expenditure;

costs are lowered when people come back without needing to be persuaded

• Provident is likely not only to create some very hostile, resentful customers, but also to

affect others who hear of its awful reputation; this will be extremely difficult to overcome

• Nevertheless, there will always be people in desperate need of ready cash; for as long as

Provident can provide that, some will go on ignoring the personal cost


3. Social pressures such as ‘Happy Christmas’ provide companies with the opportunity to push

parents to spend more than they should. Discuss whether the managers of Provident Personal

Credit are right to place Farepak savers at the heart of their pre-Christmas target market.

(15)

MARKING GRID (Out of 15)

3 3 4 5

CONTENT APPLICATION ANALYSIS EVALUATION

3 3 4-3 5-3

Understanding

of relevant

terms/issues

Relevant issues applied

in some detail to the

case

Analysis of question set, using

relevant theory

Judgement shown in discussing the

issues raised, reaching a balanced

conclusion

2-1 2-1 2-1 2-1

Some

understanding of

the relevant

terms


to the case

An attempt at building an

argument, but weakly

Some judgement shown in text or

conclusions


• It all depends on whether ‘right’ means morally or in relation to the self-interest of the company shareholders

• Morally, it seems horrifying that any business would be willing to exploit these poor families for a second time … though the families may feel they would rather have a reasonable Christmas now, and hope for the best regarding the money

• Of course, from a selfish point of view, targeting the Farepak families makes sense; all are in need of credit and all would need to find credit from a source that targets low-income families; HBOS may have been willing to lend to EHR, but you can be sure that they will not lend to many of its customers.


A BOOTIFUL

BUSINESS

The whole point of a brand name is that it’s a promise. A brand like McVitie’s promises a good biscuit – crisp and reliable. In 2006 Cadburys flirted with a public relations disaster when it allowed salmonella to contaminate its chocolate. It cost the company more than £30 million. Yet the limited nature of the problem, plus the strength of its brand name, meant that no-one expects there to be lasting damage. Then came a real turkey – Bernard Matthews. Over many decades 76-year-old Bernard Matthews had built his Norfolk turkey business into Britain’s 9th biggest food brand (one place behind McVitie’s). In the 1980s and 1990s he regularly appeared on TV commercials promoting ‘Turkey Breast Roast’ or ‘Turkey Drummers’, pronouncing them ‘bootiful’ in his thick Norfolk accent. His innovations in ‘Turkey Kievs’ and ‘Turkey Twizzlers’ turned the Christmas-day bird into an all-year-round food. In 2006 Bernard Matthews Ltd had sales of £400 million and employed 6,000 people. It provided one third of Britain’s Christmas turkeys and was the market leader in Hungary and Germany as well as Britain. Bootiful. Then came February 2007 and bird flu. At first the story was about a wild bird bringing avian flu to Bernard Matthew’s Lowestoft turkey farm. The flu killed 2,600 turkeys, but government vets insisted that another 160,000 must be destroyed. Rumours started to spread, though, of a link with an avian flu outbreak in Hungary, where the company had several factories. Mr Matthews said there ‘wasn’t a remote possibility’ of a link. Yet it soon became clear that the outbreak originated from Hungary. Most shoppers were surprised to hear that the company imported 37 tonnes of turkey meat per week from Hungary. They had assumed that the ‘bootiful’ turkeys all came from Norfolk. One of the puzzles about the outbreak was how several buildings at the plant had become infected by the deadly H5N1 strain of the flu virus. The answer emerged when health officials reported that they had already told the company about ‘deficiencies and non-compliance’ at the Lowestoft plant. An official report found that:

• Pest control workers noted in January that large numbers of gulls were attracted to uncovered bins full of turkey waste

• Gulls were observed carrying turkey waste away and roosting on the roof of turkey houses

• There were holes in the houses that could have allowed birds or rats in Unsurprisingly, by mid-February Bernard Matthews Ltd was admitting that sales of some of its turkey products had fallen by 40%. Worse, perhaps, was that an independent survey revealed that the company had come bottom of a ranking of 1,150 best-loved brands in Britain. Brand names rarely get so badly tainted that they become a liability. Suddenly the brand name Bernard Matthews might lower the value of the product rather than raise it.


The newspapers heaped bad news on the company. They reminded readers of an incident in 2006 when two Norfolk employees were filmed playing ’baseball’ with live turkeys. A vet had described the abuse as hideous, the worst he had seen in 25 years. When the men went to court for animal cruelty, their defence lawyer stated that their actions were influenced by ‘peer pressure’ and part of the ‘culture’ at the Norfolk plant. Nor would this be surprising, given the appalling factory farming conditions used by Bernard Matthews (and many other turkey producers). To keep costs as low as possible, the birds live a short, unpleasant life. The British Poultry Council gives a good insight into the mix of batch and mass production used to breed, grow and cull turkeys:

• An average of 1,000 turkeys are kept in each turkey house, where they grow from a day old to 21 weeks; they are kept inside permanently, in artificial light

• Human contact is kept to a minimum

• At 21 weeks the birds are caught and put into specially designed trays in groups of 8 or 10 and transported to a slaughterhouse

• On arrival the crates are removed and put aside for half an hour to calm the birds

• Each crate is put through a gassing machine … their bodies are taken from the crate and hung from their legs on a chain belt (see the chain conveyor belt in the photo). A slaughter man or machine then cuts the artery in their necks. On the chain, the carcasses pass into a de-feathering machine. Hot water and a series of vibrating fingers remove the feathers. A machine partially removes the heads and draws out the birds internal organs

• Once the head has been removed, the bird goes through a butchery process, which is normally carried out by hand. Whole birds have their feet and parts of their wings removed. Others are divided into portions. Each butcher does a particular cut.

When you read the jobs staff are being asked to do, day in day out, it is easy to see why the workforce culture at these factories can be so brutal towards the birds. Competent managers should understand the problems and tackle them head-on. The company’s reputation stands or falls on its attitude to - and treatment of - turkeys. Therefore all training and supervision should focus on quality in its broadest sense – both within the workforce culture and in the effectiveness of systems such as waste disposal. At Bernard Matthews, this seems not to have happened.


Questions (80 marks; 90 minutes)

1. Consider the extent to which Bernard Matthews could have prevented the problems it faced if it had used a full programme of contingency planning. (14) 2. To what extent should the management at Bernard Matthews be considered responsible for the workforce culture within the company’s turkey farms/factories? (16) 3. Discuss how Bernard Matthews’ management might tackle the possible long term impact of these events on the success of the business. (16) 4. Evaluate the main ethical issues raised in this case. (16) 5. For many years Bernard Matthews joined in with criticism by the food industry of ‘an overly interventionist approach by government … threatening the industry’s competitiveness’. To what extent does this case prove that government intervention in the food industry is essential both for the public and the industry itself? (18)


A2 Strategy Mark Scheme

1. Consider the extent to which Bernard Matthews could have prevented the problems it faced

if it had used a full programme of contingency planning. (14)


2 2 4 6


6-5

Judgement shown in the text

and in a conclusion that

weighs up the issues

2 2 4-3 4-3

Good understanding

shown of relevant

terms



case

Analysis of question

set, using relevant

theory


or the conclusion, discussing

the issues raised

1 1 2-1 2-1

Some

understanding of

the relevant terms


to the case

One or two points

developed in a limited

way

Some judgement shown in

text or conclusions

Possible themes might include:

• A contingency plan should have ensured that the management knew how to respond quickly and

effectively to the events – because they (or something like them) had been anticipated and discussed in

an unpressured environment, such as a day at a conference centre

• A plan should also have identified who would be dealing with the press – and how

• It should also have rehearsed important issues such as whether to be 100% open and honest from the

start, or whether to try to ‘hush things up’; Bernard Matthews did not help the situation by denying

what later proved to be true (the Hungary connection)

• However, no contingency planning process is likely to cover every eventuality, and so there may be a risk

that pre-agreed, but slightly inappropriate, measures are put into action; there’s no substitute for good

judgement

2. To what extent should the management at Bernard Matthews be considered responsible for

the workforce culture within the company’s turkey farms/factories? (16)


3 3 4 6


6-5


and in a conclusion that

weighs up the issues

3 3 4-3 4-3

Good understanding

shown of relevant

terms



case

Analysis of question

set, using relevant

theory


or the conclusion, discussing

the issues raised

2-1 2-1 2-1 2-1

Some

understanding of

the relevant terms


to the case

One or two points

developed in a limited

way

Some judgement shown in

text or conclusions


• Unless the management style is laissez-faire, culture tends to be established at the top, and filtered

down; it might be passion for quality, or passion for money-making, or contempt for customers – all exist

in big modern companies; here there is cynicism towards the business itself

• Having suffered the embarrassment of the ‘baseball’ incident, the management should have re-visited

their own attitudes to the turkey business, then led a retraining programme among all staff; there is no

evidence of any such approach


3. Discuss how Bernard Matthews’ management might tackle the possible long term impact of these events on the success of the business. (16)


3 3 4 6


6-5

Judgement shown in the text and in a conclusion that weighs up the issues

3 3 4-3 4-3

Good understanding shown of relevant terms

Relevant issues applied in some detail to the case

Analysis of question set, using relevant theory

Judgement shown in the text or the conclusion, discussing the issues raised

2-1 2-1 2-1 2-1

Some understanding of the relevant terms

Relevant issues applied to the case

One or two points developed in a limited way

Some judgement shown in text or conclusions


• Perhaps it should start with a strategic rethink; products such as Turkey Drummers are cheap (fatty) food, yet the company likes to present itself as a producer of ‘Bootiful, Norfolk country turkeys’. Using Porter’s strategic matrix one could say that now is the time for the company to rethink its strategy: either it should try to produce genuinely differentiated products, or it should concentrate on being the lowest cost producer; it should stop being a piggy in the middle of the market

• Whichever long-term strategy is decided upon, there are immediate priorities; the first is to try to estimate how long the current sales declines will persist; if sales are forecast to be 40% - or 20% down over the next 6 months, it will be essential to cut output; it may even be necessary to cut capacity, perhaps by putting a freeze on staff recruitment; the company needs to assess its break-even level, and make sure that it brings its costs down to ensure survival; only by sorting out the short-term financial pressures can the long term strategic changes be financed in comfort

• Historically the company has relied upon Matthews the man plus the Norfolk connection; they may now need to consider a new marketing strategy based upon a different message; perhaps the business needs to portray itself as refreshed, younger and more customer-friendly; perhaps it needs a new range of healthier-eating products to give a real sense that ‘Bernard Matthews has changed for the better’.


4. Evaluate the main ethical issues raised in this case. (16)


3 3 4 6


6-5


3 3 4-3 4-3





2-1 2-1 2-1 2-1






• Telling the truth, the whole truth and nothing but … In effect the business was living an advertising-image-based lie, using the cloak of ‘Norfolk turkey’ to disguise the cost-driven, multinational nature of the business; there are also ethical issues raised in relation to Mr Matthews suggestion that there ‘wasn’t a remote possibility’ of a link between the bird flue and Hungarian operations

• No less fundamental is the firm’s lack of moral leadership to its staff; giving people ‘idiot jobs’ (Herzberg’s phrase) is demeaning and is likely to lead to ‘revenge psychology’ (again, Herzberg); this might show itself in destructive actions towards the company (becoming strike-happy, perhaps) or – as here – in contempt for the live creatures in their care/within their power; ethical leadership is not a matter of responding to outside criticism or pressure, it means acting with moral responsibility and courage


5. For many years Bernard Matthews joined in with criticism by the food industry of ‘an overly interventionist approach by government … threatening the industry’s competitiveness’. To what extent does this case prove that government intervention in the food industry is essential both for the public and the industry itself? (18)


3 3 4 8


8-6


3 3 4-3 5-3





2-1 2-1 2-1 2-1






• The case for government intervention is strong, both from the point of view of advertising accuracy (hasn’t the Trades Description law been broken by its references to Norfolk turkeys?) and in relation to food safety; health officials identified ‘deficiencies and non-compliance’ at Lowestoft, perhaps the law should have forced them to be tougher with the company at the outset; this would have protected the public, perhaps given more protection to the workforce, and saved the company from itself, i.e. forced the company to take safety measures that may have prevented the incident from occurring

• These reasons may be considered sufficient to conclude that government intervention in the food industry is essential for the public, and even for the industry – however much it protests

• A counter-argument, though, is that it may be the regulations that pushed Bernard Matthews to develop its Hungarian business, i.e. the greater costs of operating within tighter controls in Britain; the food industry may have a case for saying that no-one in this country benefits if all food manufacturing is forced overseas; that argument assumes, though, that safety regulations add a significant amount to the costs of operating; that seems very unlikely; it costs little to cover up ‘uncovered bins of turkey waste’ or to repair the ‘holes that could have allowed birds or rats in’

• A good answer may see that government intervention adds costs, but these may be in the long term interests of the producers as well as consumers; perhaps Bernard Matthews has been too short-termist to see the potential benefits


7. Business ethics 1. Missing words

Businesses tackle social responsibilities for one or more of three reasons: legal requirements,

self-interest or ethical conviction. Business ethics are the moral basis upon which decisions are

(or are not) made. Senior managers have to make decisions on how to deal with issues such as

price-fixing (in 2007 British Airways was fined £270 million for this). Whether to offer bribes to

potential customers is also a real (if morally straightforward) ethical issue. Although

__________________________ (groups with an interest in the firm’s success or failure) may

urge a business to be ethical, many public _________________ companies focus largely on

shareholders/profit. So ethics can be pushed to one side.

2. Why Do They Do It?

Identify the possible reason or reasons why a company might do each of the following. Jot

down an L for legal requirement, an S for self-interest or an E for ethical reasons (there may be

more than one answer).

1. Equal pay for equal work 5. Paying for staff on degree courses

9. Running a computers for schools promotion

2. Providing company cars to staff

6. Ensuring high quality products

10. Advertising the company’s commitment to the environment

3. Providing safe work conditions

7. Using organic ingredients 11. Selling products that do what they say they will do

4. Zero pollution from the factory

8. Providing equal opportunities

12. Refusing to collude with ‘rivals’ to fix prices


3. Give two reasons why:

3.1 Looking after staff is in a firm’s best interest

__________________________________________________________________________________

__________________________________________________________________________________

3.2 A small firm might take short cuts over customer safety

__________________________________________________________________________________

__________________________________________________________________________________

3.3 An employee might turn down a personal bribe offered by a supplier

__________________________________________________________________________________

__________________________________________________________________________________

3.4 Firms with strong brand names have a strong incentive to act ethically

__________________________________________________________________________________

__________________________________________________________________________________

4. Ethical or unethical? You decide, then explain your reasoning 4.1 In 2007 Cadbury’s launched ‘Melts’, aimed at women. A 100gm pack contained more saturated fat than 25 packs of Walkers crisps.

4.2 From 1970, an advertising agency turned down all cigarette advertising work, even when it

was worth millions.

4.3 A major insurance company whose sales staff persuaded customers to buy inappropriate

pension plans.

5. Ethics or marketing strategy? Briefly state which you think and why. 5.1 The Coop Bank promising that they will not lend to arms manufacturers

__________________________________________________________________________________

__________________________________________________________________________________

5.2 Coca-Cola sponsoring the Olympics

__________________________________________________________________________________

__________________________________________________________________________________

5.3 A bank producing free teaching materials on money management

__________________________________________________________________________________

__________________________________________________________________________________


7. ANSWERS 7. ANSWERS 7. ANSWERS 7. ANSWERS ---- Business ethics Business ethics Business ethics Business ethics

1. stakeholders …. limited

2.1 L,S,E

2.2 S

2.3 L,S,E

2.4 E

2.5 S,E

2.6 L,S

2.7 S,E

2.8 L,S,E

2.9 S, E

2.10 S

2.11 L,S

2.12 L,E

3.1 Best morale; better productivity

3.2 May not be concerned about long-term reputation; may be very pressed for cash

3.3 For ethical reasons; or for fear of getting caught

3.4 Risk in losing reputation; the brand name adds value, but only when it is a good name.

4.1 Unethical, surely, to try to persuade women to buy something so fattening

4.2 Purely ethical, as – in those days – no business customer would have applauded them for it

4.3 Unethical, because ‘turning a blind eye’ is no excuse; managers should (and probably did)

know what was going on.

5.1 Marketing strategy, or else why boast about it?

5.2 Marketing strategy: it’s a practical way to help Coca-Cola’s poor image for fitness and health

5.3 Marketing strategy: they are interested in future customers, not education.


63. Corporate Social Responsibility

1. Missing words

Among the causes of the Credit Crunch were some exceptionally reckless decisions by some

exceptionally greedy bosses. In 2003-2008 greed was acceptable. In the _______________ that

followed the Crunch, greed was seen as unethical. As times change, firms change. When

_________ boss Terry Leahy chose, in 2007, to invest £1.25 billion of his company’s money in

America, few people noticed that he would receive a £10 million bonus if the strategy

succeeded. In 2008/09 Tesco America made an operating loss of £142million. Leahy lost

nothing. So if the strategy works Leahy gets very rich; if it fails Tesco ________________get

poorer. This unfair bargain is no longer considered acceptable. The ethical environment can

change quite quickly, so clever managements put senior people in charge of C.S.R., i.e. their

Corporate _______________ Responsibility. For some firms, CSR is a genuine commitment to

the ethical environment; for other firms C.S.R. is just a branch of P.R., i.e. Public

_____________.

Choose the missing words from: 1. social, Tesco, recession, relations, shareholders

2. Match the CSR activity to the intended benefit to the business (there may be more than one)

Corporate Social Responsibility Activity Ans Intended Benefit to the Business

2.1 Organising a welcome party (with free

drinks) for students new to University

A. To improve the workforce culture by

giving staff a greater sense of community and purpose

2.2 A major oil company embarks on an

environmental audit of all its activities, carried out by independent consultants

B. To improve the company’s image among

local residents (which can make it easier to win planning permission from local councillors)

2.3 A soft drinks company launches a national keepfit campaign, including organised

‘Funruns’ in different regions throughout the summer

C. To go beyond direct benefits to the business by genuinely helping society -

though there may knock-on benefits in staff morale and consumer image

2.4 A major steel producer allows staff to get (paid) time off to help with local environmental programmes

D. To attract high-calibre young people to apply for management training jobs at the company

2.5 In Colombia, General Motors has a programme to offer work training for people

who drop out of the rebel army that has been fighting against the government

E. To offset negative images about the business, e.g. a chocolate producer

sponsoring a TV programme on health and fitness


3. Fill in the missing words:

3.1 An _____________ decision is based purely on moral factors, not on profit.

3.2 Firms do not have to accept _____________ responsibilities; they may leave these issues to

government.

3.3 Large firms increasingly find that top graduates want to know about ______________ Social

Responsibility.

3.4 The ethical ____________________ changes over time, as attitudes change towards

business and morality.

3.5 Pressure for profit from faceless shareholders is a particular problem for ____________

limited companies.

3.6 The ____________ Bank stands out ethically for its willingness to turn away business from

dubious companies.

4. Explain why:

4.1 Publicly announced green initiatives have little impact unless they become part of the

workplace culture

__________________________________________________________________________________

__________________________________________________________________________________

4.2 Corporate Social Responsibility may not be driven by ethics.

__________________________________________________________________________________

__________________________________________________________________________________

__________________________________________________________________________________


63. ANSWERS – Corporate Social Responsibility

1. recession … Tesco … shareholders … Social … Relations

2.1 D

2.2 E (also poss C, A and B)

2.3 E (also poss D and A)

2.4 A and B (and perhaps E)

2.5 C (and perhaps A)

3.1 ethical

3.2 social

3.3 Corporate

3.4 environment

3.5 public

3.6 Coop

4.1 Staff have got to believe that the business is serious; only then will they focus their attention

and decision-making on topics such as recycling and sustainability

4.2 CSR is often driven by (and run by) P.R. managers, whose job is to improve the firm’s

reputation. If they can succeed in providing a green sheen without changing much of what the

company really does, promotion may beckon.

58. Corporate Aims and Objectives - sunny'sbiznuzz.weebly.com/.../4/2/1/8/42184325/4a_topic_1_-_objectives.pdf58. Corporate Aims and Objectives 1. ... ANSWERS – Corporate Aims and

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