Read and reflect on the assigned readings for the week. Then post what you thought was the most important concept(s), method(s), term(s), and/or any other thing that you felt was worthy of your understanding in each assigned textbook chapter.Your initial post should be based upon the assigned reading for the week, so the textbook should be a source listed in your reference section and cited within the body of the text. Other sources are not required but feel free to use them if they aid in your discussion.
Also, provide a graduate-level response to each of the following questions:
Research how Toyota handled complaints that it received from 2008–2010 regarding runaway acceleration problems. Specifically, note how the company dealt with the vehicle problem, those directly impacted by acceleration issues, and its own shareholders and employees. Compare Toyota’s response to Johnson & Johnson’s response to the Tylenol crisis. Based on this comparison, evaluate Toyota’s response. What did the company do right? What should it have done differently? How could a company that had been held out as an exemplar of product quality produce over 8 million vehicles with safety issues?
Identify and discuss briefly what you think are the major trade-offs that firms face as they think about offshoring and reshoring. When substantial layoffs are involved, what are firms’ responsibilities to their employees and their communities?
Business & Society: Ethics,
Sustainability, and
Stakeholder Management,
11e
Chapter 14: Consumer
Stakeholders: Information Issues
•Carroll/Brown,
Carroll/Brown,
Business
Business
& Society:
& Society:
Ethics,
Ethics,
Sustainability
Sustainability
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& Stakeholder
Management;
Management;
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Icebreaker: Ever Heard of the FTC?
Have students research the Federal Trade Commission and explain to each other how this
agency affects their personal lives.
•
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2
Chapter Objectives (1 of 2)
By the end of this chapter, you should be able to:
1. Describe the consumer movement and identify the Consumer’s Magna Carta and
explain its meaning.
2. Identify product information issues that are affected by business’s social and ethical
responsibilities. Identify the major abuses of advertising and discuss specific
controversial advertising issues.
3. Describe the role and functions of the Federal Trade Commission (FTC).
•
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3
Chapter Objectives (2 of 2)
4. Explain important consumer-related legislation that has been passed—Credit Card Act
(CARD) and the Consumer Financial Protection Bureau (CFPB).
5. Discuss the strengths and weaknesses of self-regulation of advertising. How does selfregulation vary from being socially responsible and ethical?
6. Identify the three moral models and their likely perspectives on consumer
stakeholders.
•
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4
Unit 14.1
The Consumer Movement
•Carroll/Brown,
Carroll/Brown,
Business
Business
& Society:
& Society:
Ethics,
Ethics,
Sustainability
Sustainability
& Stakeholder
& Stakeholder
Management;
Management;
11th11th
Edition.
Edition.
© 2023
© 2023
Cengage.
Cengage.
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Reserved.
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5
How Important are Consumers as Stakeholders?
• As business seeks to come out of the COVID pandemic, the pace of consumer spending
has been growing.
• Consumers expect economic growth and stable prices.
• Businesses need to pay careful attention to customer stakeholders, and their fair
treatment.
• Customer Relationship Management (CRM), the ability of an organization to effectively
identify, acquire, foster, and retain loyal profitable customers.
• “Satisfied customers tell three friends, but angry customers tell 3,000.”
•
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6
The Consumer’s Magna Carta
•
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7
The Consumer Movement (1 of 2)
• A social movement seeking to augment the rights and powers of buyers in relation to
sellers.
• In addition to the rights enumerated in The Consumer’s Magna Carta (see next slide),
consumers today want.
• Fair value for money spent.
• A product that meets reasonable expectations.
• One with full disclosure of its specs.
• Truthfully advertised – and safe.
•
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8
The Consumer Movement (2 of 2)
The following definition of consumerism captures the essential nature of the consumer
movement • Consumerism is a social movement seeking to augment the rights and powers of buyers
in relation to sellers
• Ralph Nader is considered the father of the modern consumer movement.
• The impact of his book, Unsafe At Any Speed criticizing the auto industry and
General Motors 40 years ago, was momentous.
• Nader’s book gave rise to auto safety regulations and devices.
• Nader built a new era—that of the consumer.
•
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9
Consumerism Today
• Many groups make up the loose confederation known as the consumer movement.
• The power held by consumers is not the result of organized groups lobbying; their
efforts are at the grassroots level.
• Involves grassroots organizations, social media activism, and the rise of nonprofit
organizations.
• Major issues fall into two groups:
• Product/service information
• Product/service itself
•
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10
Consumer Problems with Business
• High prices of products
• Poor quality of products
• Failure to live up to advertising claims
• Feeling that consumer complaints are a waste
of time
• Inadequate guarantees and warranties
• Failure of company complaint handling
• Hidden fees
• Poor quality of after-sales service
• Product breakage
• Misleading packaging or labeling
• Slack filling
•
• Dangerous products
• Absence of reliable product/service information
• Not knowing what to do if something is wrong
with product
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scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
11
Product/Service Information Issues
• Companies understandably want to portray their products in the most flattering light.
• But efforts to paint a positive portrait of a product can easily cross the line into
misinformation or deception—or absurdity.
• An ad implores readers to switch to Verizon high-speed internet at a price that will
“never go up.” But the fine print reveals, “rates increase after two years.”
• What part of “never go up” do they fail to understand?
• Product and service information is relayed by advertising.
•
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scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
12
Advertising Issues
Arguments For Advertising
Arguments Against Advertising
Informs consumers
It is wasteful and inefficient-and decreases our
standard of living
Increases consumer satisfaction
Raise the price of products and is an unnecessary
business cost
Promotes efficiency in the supply chain
Inefficient means of disturbing information
Effective at reaching consumers
Ineffective
An economical means of reaching consumers
High cost
•
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scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
13
Advertising Abuses
•
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14
Specific Advertising Issues (1 of 2)
• Comparative Advertising – The practice of directly comparing a firm’s product with the product of a
competitor: Coke vs. Pepsi, and Mac vs. PC.
• Use of Sex Appeal in Advertising – This has been an ongoing ethical issue for decades. While ads using
sex appeal work, they can have a serious impact on the physical and mental health of girls.
• Advertising to children – “Kid-vid” advertising: the average child to sees 25,000–40,000 ads per year,
including one promoting “shopaholic best friends.” Lacking cognitive development, children under the
age of 8 are easy targets.
• Marketing to the poor – High interest rates yield significant profits, but can bury the poor in debt.
• Advertising alcoholic beverages – A voluntary ban on advertising hard liquor on TV has ended; youth
exposure to liquor ads has increased 30-fold; some products target children.
•
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scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
15
Specific Advertising Issues (2 of 2)
• Cigarette Advertising – Many oppose advertising a dangerous product, one that kills half its
users; ads target the young and less-educated markets.
• Health and Environmental Claims – We are environmentally aware and health-conscious, and
ads make health and environmental claims they may not meet.
• Ad creep – Advertising has crept everywhere, into places that were once not considered
acceptable for advertisements, including school buses, textbooks, doctors’ offices, movies and
historical monuments.
• Social Media Advertising – Used in all of the above. Controversial because of rapid growth and
questionable use.
•
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scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
16
Warrantees and Guarantees (1 of 2)
• Initially used by manufacturers to limit the length of time they were responsible for
products.
• Came to be viewed by consumers as tools to protect the buyer against defective
products.
• Implied Warranty: Unwritten promise that there is nothing wrong with the product and
its intended use.
• Express Warranty: Promise or affirmation of fact that the seller makes at the time of
the sale.
• Guarantee: A promise regarding product quality, less likely to be written.
•
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17
Warrantees and Guarantees (2 of 2)
• The Magnuson-Moss Warranty Act of 1975 set standards for what must be contained
in a warranty, and its ease of being understood.
• Full Warranty: Covers the entire product.
• Limited Warranty: Certain parts or types of defects are not covered under the
warranty.
• Extended Warranty: Service plans that lengthen the warranty period and are offered at
an additional cost.
•
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18
Packaging and Labeling
Abuses in packaging and labeling were fairly frequent before the passage of the:
• Federal Packaging and Labeling Act of 1967
• Prohibits deceptive labeling on consumer products.
• Requires disclosure of certain important information on consumer products.
• The FTC and the Food and Drug Administration (FDA) have responsibilities under the
Act.
•
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19
Other Abuses Led to Passage of These Laws
• Equal Credit Opportunity Act: Prohibits discrimination in extending consumer credit.
• Truth-in-Lending Act: Requires all suppliers of consumer credit to fully disclose all
credit terms.
• Fair Credit Reporting Act: Ensures that consumer-reporting agencies provide
information in a manner that is fair and equitable.
• Fair Debt Collection Practices Act: Regulates the practices of third-party debtcollection agencies.
•
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scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
20
Discussion Activity 14.1.1
Break into small groups and discuss: In addition to the basic consumer rights expressed in
the consumer’s Magna Carta, what other expectations or rights do you think consumer
stakeholders have of business? Do consumers have some moral rights that have not yet
been articulated in law?
•
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scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
21
Discussion Activity 14.1.2
Break into small groups and discuss: What is your opinion of the consumer movement? Is
it “alive and well” or is it fading away? Why has consumerism been such an enduring
movement for so long?
•
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scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
22
Discussion Activity 14.1.3
Break into small groups and discuss: Give an example of a major abuse of advertising via
social media from your own observations and experiences. How do you feel about this as
a consumer?
•
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scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
23
Discussion Activity 14.1.4
Break into small groups and discuss: Are companies genuinely interested in marketing
sustainable products or is this just a marketing strategy that is popular today. Do you
think “green fatigue” has set in? If so, what should companies now do?
•
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scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
24
Unit 14.2
The Federal Trade Commission (FTC)
•Carroll/Brown,
Carroll/Brown,
Business
Business
& Society:
& Society:
Ethics,
Ethics,
Sustainability
Sustainability
& Stakeholder
& Stakeholder
Management;
Management;
11th11th
Edition.
Edition.
© 2023
© 2023
Cengage.
Cengage.
All Rights
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Reserved.
Reserved.
MayMay
not be
not be
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scanned,
copied
copied
or duplicated,
or duplicated,
or posted
or posted
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publicly
a publicly
accessible
accessible
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website,
in whole
in whole
or inorpart.
in part.
25
The Federal Trade Commission (FTC) (1 of 2)
• The government’s major instrument for ensuring that business lives up to its
responsibilities.
• Major Activities of the FTC • To prevent unfair methods of competition and anticompetitive pricing.
• To protect consumers from unfair or deceptive acts or practices.
• Administers consumer protection laws.
•
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scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
26
The Federal Trade Commission (FTC) (2 of 2)
• Created the National Do-Not-Call Registry, which forbids telemarketers from calling
consumers who sign up with the registry.
• Required telemarketers to show their contact information on consumers’ caller ID
systems.
• Sued firms that made misleading claims for weight loss products, and recovered
millions in settlements.
• FTC preference was that business self-regulate when possible, and FTC action a last
resort.
• Current issues include robocalls, children’s online privacy, and data brokers.
•
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27
The Federal Trade Commission
FTC’s Mission
To prevent business practices that are anticompetitive or deceptive or unfair to consumers; to enhance informed consumer choice and public
understanding of the competitive process; and to accomplish this without unduly burdening legitimate business activity.
FTC’s Vision
A U.S. economy characterized by vigorous competition among producers and consumer access to accurate information, yielding high-quality products
at low prices and encouraging efficiency, innovation, and consumer choice.
FTC’s Strategic
Goals
1. Protect Consumers: Prevent fraud, deception, and unfair business practices in the marketplace.
2. Maintain Competition: Prevent anticompetitive mergers and other anticompetitive business practices in the marketplace.
3. Advance Performance: Advance the FTC’s performance through organizational, individual, and management excellence.
FTC’s Benefits
to Consumer
As a consumer or businessperson, you may be more familiar with the work of the Federal Trade Commission than you think.
The FTC deals with issues that touch the economic life of every American.
The FTC is the only federal agency with both consumer protection and competition jurisdiction in broad sectors of the economy.
The FTC pursues vigorous and effective law enforcement; advances consumers’ interests by sharing its expertise with federal and state legislatures and
U.S. and international government agencies; develops policy and research tools through hearings, workshops, and conferences; and creates practical
and plainlanguage educational programs for consumers and businesses in a global marketplace with constantly changing technologies.
Sources: Federal Trade Commission, “About the FTC,” https://www.ftc.gov/about-ftc, accessed April 28, 2021; Federal Trade Commission, “Protecting Consumers,”
mail.google.com/mail/u/0/?tab=wm#inbox/FMfcgxwLtkSFKzTFlrZFlxwQZcgHxplW, accessed April 28, 2021.
•
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scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
28
Unit 14.3
Consumer Financial Protection Bureau (CFPB)
•Carroll/Brown,
Carroll/Brown,
Business
Business
& Society:
& Society:
Ethics,
Ethics,
Sustainability
Sustainability
& Stakeholder
& Stakeholder
Management;
Management;
11th11th
Edition.
Edition.
© 2023
© 2023
Cengage.
Cengage.
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29
Consumer Financial Protection Bureau (CFPB)
• Enforces consumer financial protection laws
• Restricts unfair, deceptive, or abusive acts
• Takes consumer complaints
• Promotes financial education
• Researches consumer behavior
• Monitors financial markets
• Enforces laws that outlaw discrimination
• Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (CARD) –
• Rates and fees more fair and transparent
•
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30
Discussion Activity 14.3.1
Break into small groups and discuss: Does the new Consumer Financial Protection Bureau
make sense? How do you keep politics out of government agencies? In a free market,
why shouldn’t consumers be left to fend for themselves with respect to consumer
financial products?
•
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31
Unit 14.4
Self-Regulation in Advertising
•Carroll/Brown,
Carroll/Brown,
Business
Business
& Society:
& Society:
Ethics,
Ethics,
Sustainability
Sustainability
& Stakeholder
& Stakeholder
Management;
Management;
11th11th
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Edition.
© 2023
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Cengage.
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Reserved.
MayMay
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copied
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a publicly
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or inorpart.
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32
Self-Regulation in Advertising
• Self Regulation: The control of business conduct by the business itself or business associations.
• The National Advertising Division’s Program: The most prominent organization for advertising
self-regulation by business.
• NAD was created to help sustain high standards of truth and accuracy in national advertising.
• Initiates investigations
• Determines issues
• Collects and evaluates data
• Determines whether an advertisers claims are substantiated.
•
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33
Moral Models and Consumer Stakeholders
• How would the three types of moral managers models view consumer stakeholders?
• The Moral Management Model best represents the highest ethical standards of
consumer treatment, and is therefore the recommended model for business to follow.
•
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34
Unit 14.5
Moral Models and Consumer Stakeholders
•Carroll/Brown,
Carroll/Brown,
Business
Business
& Society:
& Society:
Ethics,
Ethics,
Sustainability
Sustainability
& Stakeholder
& Stakeholder
Management;
Management;
11th11th
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Edition.
© 2023
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Cengage.
Cengage.
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Reserved.
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35
Three Moral Management Models
•
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36
Summary (1 of 2)
• Describe the consumer movement and identify the Consumer’s Magna Carta and
explain its meaning.
• Identify product information issues that are affected by business’s social and ethical
responsibilities, as well as the major abuses of advertising.
• Describe the role and functions of the Federal Trade Commission (FTC).
• Explain important consumer-related legislation that has been passed—Credit Card Act
(CARD) and the Consumer Financial Protection Bureau (CFPB).
•
Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
37
Summary (2 of 2)
• Discuss the strengths and weaknesses of self-regulation of advertising.
• Identify the three moral models and their likely perspectives on consumer
stakeholders.
•
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scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
38
Business & Society: Ethics,
Sustainability, and
Stakeholder Management,
11e
Chapter 15: Consumer
Stakeholders: Product and Service
Issues
Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1
Icebreaker: What Products Make you Mad?
Ask students to share in groups their frustration with products that routinely seem to
disappoint in their quality? How do they feel about the businesses making these
products? What seems to be the root of the quality issue?
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scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2
Chapter Objectives (1 of 2)
By the end of this chapter, you should be able to:
1. Describe and discuss the two major product and service issues: quality and safety.
How are they both related?
2. With respect to product safety, what are the key laws and concepts governing the?
3. Explain the role and functions of the Consumer Product Safety Commission (CPSC).
Provide an example of a recent action taken by the CPSC.
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3
Chapter Objectives (2 of 2)
4. Explain the role and functions of the Food and Drug Administration (FDA). Provide an
example of a recent action taken by the FDA.
5. Outline and describe business’s responses to consumer stakeholders, including
customer service programs, and quality initiatives such as Total Quality Management
(TQM), Six Sigma, Lean Six Sigma, Kaizen, and ISO 9000.
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4
Unit 15.1
The Issue of Quality
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5
Consumer Stakeholders: Product and Service Issues
Sam Walton, founder of Walmart –
• “There is only one boss. The customer. And he can fire everybody in the
company…simply by spending his money somewhere else.”
• Takata, Japanese auto supplier, becoming more well known. Many of today’s autos
have Takata air bags.
• In early 2016, bursting air bags linked to 10 deaths (9 in the U.S.) and dozens of injuries
worldwide.
• 29 million air bags recalled. Later another 40 million rupture-prone air bags were
recalled, the biggest in U.S. History.
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6
Service Quality
• Responding quickly
• Acting on feedback
• Demonstrating empathy
• Maintaining customer self-service options
• Providing omnichannel support
• Going the extra mile
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Critical Dimensions of Product Quality
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8
Ethical Underpinnings of Quality
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Discussion Activity 15.1.1
Identify the major dimensions of quality. Give an example of a product or service in
which each of these characteristics is important.
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Unit 15.2
The Issue of Safety
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Who is liable for a defective product?
• Historical Perspective –
• Caveat emptor – “Let the buyer beware.”
• This doctrine assumed that the buyer had as much knowledge of the product as the
seller, but this was not correct.
• Modern Day • Caveat venditor – “Let the seller beware.”
• But how safe should a product be?
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Product Safety Best Practices
• Practice safety by design. Make safety a priority at the product design state.
• Build safety in your supply chain. Use suppliers who can reliably and consistently provide compliant
materials and subassemblies.
• Be knowledgeable and aware of the business and regulatory environment. Review and monitor
consumer feedback reported by customers using SaferProducts.gov.
• Be prepared. Have a recall plan in place should you need to act quickly.
• Document, Document, Document. Document the work you have done toward meeting compliance
standards.
• Challenge yourself to manufacture the safety possible consumer product. Go above and beyond the
mandatory and voluntary standards. Seek an outside perspective.
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Food Safety
The government’s regulation of food safety is primarily driven by the Food Safety
Modernization Act (FSMA), requiring companies to:
• Create and implement written plans for keeping food safe.
• Identify hazards in manufacturing.
• Create measures to reduce the risk of contamination.
• Design methods to verify that the controls are working.
FDA is authorized to access a company’s plans and take action.
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14
Food Safety Issues in the News
Company or Product
Food Safety Issue
Breese Hollow Dairy milk
Listeria monocytogenes contamination
Michelina’s Spaghetti
Undeclared allergen and misbranding
Shetler farm products
Raw milk butter, not pasteurized
Art’s Food Market beef
Beef tainted with Escherichia coli (E. coli) bacteria
Baby foods, some organic, sold as Parent’s Choice,
Sprout Organic Foods, Campbell Soup Company
Contaminated with heavy metals, including arsenic, lead, and
cadmium
Real Water, Inc.
Outbreak of nonviral hepatitis
Peanut Corporation of America
Deadly salmonella outbreak
Chipotle Mexican Grill
E. coli outbreak
Blue Bell Ice Cream
Listeria infections
Pilgrim’s Pride
Chicken contamination with multiple materials
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Other Safety Issues
Categories of consumer products most frequently associated with injuries are:
• Sports and Recreation
• Chemicals
• Toys and Children’s Products
• Fuel, Lighters, and Fireworks
• Furniture and Décor
• Home Maintenance and Construction
• Kitchen and Dining
• Public Facilities and Products
• Older Adults
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Discussion Activity 15.2.1
What ethical theories can help us to better understand the issue of quality? Discuss.
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Unit 15.3
Product Liability
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Product Liability (1 of 3)
Reasons for the concern –
• The sheer number of cases where products resulted in illness, harm, or death.
• The amount of the financial award.
Doctrine of strict liability –
• Anyone in the value chain of a product is liable for harm caused to the user if the
product is unreasonably dangerous because of a defective condition.
• The U.S. is a litigious society.
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Product Liability (2 of 3)
Extensions of the strict liability rule –
• Courts in several states and some countries have established a standard more
demanding than strict liability:
Absolute liability – A manufacturer could be held strictly liable for failure to warn of a
product hazard, even if the hazard was scientifically unknowable at the time of
manufacture and sale.
Market share liability – Manufacturers who made the product share in the liability for
injury according to their market shares. This doctrine was applied in delayed
manifestation cases, but limited to those.
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Product Liability (3 of 3)
Product Tampering and Product Extortion–
• The Tylenol tampering cases of the 1980s are best known. As a result, firms began to
use tamper-evident packaging.
• Other cases include: Jell-O pudding, bottle water, oranges, candy, baby food, and Girl
Scout cookies.
Product Liability Reform –
• These issues have raised calls tor product liability reform, also known as tort reform.
Tort law requires that the one causing injury pay the injured party. Businesses seek tort
reform; consumer groups oppose it.
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Discussion Activity 15.3.1
Identify the principal reasons why we have a product liability crisis. Have any reasons
been omitted?
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Discussion Activity 15.3.2
Differentiate the doctrine of strict liability from the doctrines of absolute liability and
market share liability. What implications do these views have for the business community
and for future products and services that might be offered?
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Unit 15.4
Consumer Product Safety Commission
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Consumer Product Safety Commission
An independent regulatory agency created by
the Consumer Product Safety Act of 1972,
which works to reduce the risk of injuries and
deaths from products by:
• Developing voluntary standards with
industry
• Issuing and enforcing mandatory standards
• Banning consumer products if no feasible
standard would adequately protect the
public
• Obtaining the recall of products or arranging
for their repair
• Conducting research on potential product
hazards
• Informing and educating consumers through
media, state and local governments, private
organizations, and by responding to
consumer inquiries
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CSPC Strategic Plan, 2011-2016
Mission
Protecting the public against unreasonable risks of injury from consumer
products.
Vision
The CPSC is the recognized global leader in consumer product safety
Goal 1
Leadership in safety
Goal 2
Commitment to prevention
Goal 3
Rigorous Hazard Identification
Goal 4
Decisive Response
Goal 5
Raising Awareness
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Unit 15.5
Food and Drug Administration
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Food and Drug Administration
• Grew out of experiments with food safety by Harvey W. Wiley in the late 1800s.
• The FDA resides within the Health and Human Services Department.
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The FDA regulates
• Foods
• Electronic products
• Human prescription and non-prescription
drugs
• Cosmetics
• Vaccines, blood products, and other
biologics
• Veterinary products
• Tobacco products
• Medical devices
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Discussion Activity 15.5.1
Given the current business and consumer climate, what do you anticipate the future to
be for the CPSC and the FDA? What role does politics play in your answer?
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Unit 15.6
Business’s Response to Consumer Stakeholders
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Business’s Response to Consumer Stakeholders
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Unit 15.7
Customer Service Programs
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Customer Service or Self Service?
• Retailers of all types have been pushing the idea of self-service. We check out our own
groceries, pump our own gas, print our boarding passes, and fix our cable tv, following
a computer voice.
• Customers are frustrated with after-sale problems not quickly and easily remedied.
• Experts know that the key to customer retention is customer service.
• Building life-long devotion among customers takes serious commitment and hard work.
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Seven Principles of Customer Service
1. Keeping your word is where it begins.
2. Always be honest and tell it like it is.
3. Always think proactively, looking around the corner.
4. Deal with problems as best you can yourself, never passing the buck.
5. Do not argue with a customer because it is a lose/lose situation.
6. Accept your mistakes, learn from them, and do not repeat them.
7. Consistency is the name of the game for lasting success.
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Creating a Customer-Oriented Company
Top-down culture and commitment are essential.
Identify internal champions and uphold them.
Commit resources to the task.
Hire the right people.
Empower employees.
Make customer service training a priority.
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36
Unit 15.8
Total Quality Management Programs
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37
Total Quality Management (1 of 2)
Has many characteristics, but essentially means –
• All business functions are blended into an integrated philosophy built around quality,
teamwork, productivity, and customer understanding and satisfaction.
• TQM focuses on product quality and safety, focuses on the customer, and uses
continuous improvement.
• The customer is the final judge of quality.
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Total Quality Management (2 of 2)
TQM emphasizes eight key elements • Ethics
• Integrity
• Trust
• Training
• Teamwork
• Leadership
• Recognition
• Communication
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Unit 15.9
Six Sigma Strategy and Other Processes
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Six Sigma Strategy and Other Processes
(1 of 2)
Six Sigma –
• A development within TQM that has become a way of life for many corporations.
• Sigma is a statistical measure of variation from the mean; higher values of sigma mean
fewer defects.
• Six Sigma level of operation is 3.4 defects per million.
• Most companies have 6,000 defects per million.
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41
Six Sigma Strategy and Other Processes
(2 of 2)
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42
Discussion Activity 15.9.1
What is your assessment of business’s response to product and service quality and
safety? Have they done enough? What is missing from their approaches?
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Discussion Activity 15.9.2
How do consumers as well as society benefit from quality and safety initiatves in
products and services? How are these related to sustainability?
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Summary (1 of 2)
• Describe and discuss the two major product and service issues: quality and safety.
• Identify, with respect to product safety, what are the key laws and concepts are
governing them.
• Explain the role and functions of the Consumer Product Safety Commission (CPSC).
Provide an example of a recent action taken by the CPSC.
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Summary (2 of 2)
• Explain the role and functions of the Food and Drug Administration (FDA) and provide
an example of a recent action taken by the FDA.
• Outline and describe business’s responses to consumer stakeholders, including
customer service programs, and quality initiatives such as Total Quality Management
(TQM), Six Sigma, Lean Six Sigma, Kaizen, and ISO 9000.
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Business & Society: Ethics,
Sustainability, and
Stakeholder Management,
11e
Chapter 16: Community
Stakeholders and Philanthropy
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1
Icebreaker: Feeling Generous?
Ask students to share in groups their own charitably giving. Have they ever donated, and
if so, for what cause? How did they decide on whom to donate to?
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Chapter Objectives
By the end of this chapter, you should be able to:
1. Discuss reasons for community involvement, various types of community projects, and
management of community stakeholders.
2. Explain the pros and cons of corporate philanthropy, provide a brief history of corporate
philanthropy, and explain why and to whom companies give.
3. Differentiate between strategic philanthropy, cause-related marketing, and cause branding.
4. Characterize the detrimental impacts of business in the community, including the loss of jobs
in the contexts of offshoring, reshoring, and plant closings.
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3
Unit 16.1
Community Involvement and Engagement
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Community Involvement
Business involvement in the community represents enlightened self-interest, because
businesses help themselves in the process of helping others.
• Volunteer Programs – such programs reflect the resourcefulness and responsiveness to
communities, and are essential for attracting and retaining the best talent in the
workforce.
• Employees want to work for the “good guys.”
• Managing Community Involvement – focuses on the contribution of managerial and
employee time and talent.
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Standards of Excellence in Corporate Community
Involvement
Standard 1: Leadership
My company is committed to the mutual success of business and
the community and demonstrates leadership around this issue
both internally and externally.
Standard 4: Infrastructure
My company provides the resources and support needed to
ensure the successful execution of its community involvement
strategy.
Standard 2: Strategy
My company takes a strategic approach to community
involvement to add demonstrable value to the business and to
society.
Standard 5: Measurement and Evaluation
My company measures and evaluates the results and
effectiveness of its community involvement programs to improve
performance.
Standard 3: Relationship Building
My company builds and maintains trusting and productive
stakeholder relationships in the community to advance both
business and community goals.
Standard 6: Communication
My company effectively and transparently communicates about
its community involvement, mission, strategy and performance.
Sources: Center for Corporate Citizenship at Boston College, “New Standards of Excellence and Diagnostic Tool,” https://ccc.bc.edu/content/ccc/ blog-home/2009/04/blog-2009-04-conference-exclusive-new-standards-of-excellence-and-diagnostic-tool.html, accessed
June 5, 2021; Boston College Center for Corporate Citizenship, “Updating the Standards of Excellence,” https://ccc.bc.edu/content/ccc/blog-home/2009/01/blog-2009-01-updating-thestandards- of-excellence.html, accessed June 5, 2021.
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Volunteer Programs
• Paid Release Time
• Company-Wide Day of Service
• Skills-Based Pro-Bono Service
• Dollars for Doers
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Benefits of Employee Volunteerism
Benefits to the employee
Benefits to the corporation
Benefits to the community
Improves morale
Builds company image and reputation
Addresses community needs
Increases meaningfulness of work
Improves employee attraction and
retention
Saves community resources
Develops teamwork and leadership
skills
Develops employee skills
Builds pool of future volunteers and
contributors
Improves mental and physical health
Builds awareness of community needs
Builds relationship with and loyalty
from consumers
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Business Stake in the Community
• The actions of a business affect a range of communities. Managers must be aware of
these impacts, and manage in a way that respects community stakeholders.
• We focus on the immediate locale, but instant communication means that the relevant
community includes the region, nation, or the world.
• For business and community stakeholders, there are two major kinds of relationships:
• The positive contributions business can make to the community.
• The harm business can cause to community stakeholders.
• We discuss here community involvement and corporate philanthropy.
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Developing a Community Action Plan
• Knowing the community.
• Assess the company’s resources.
• Design a community action program making the community needs and resources
available.
• Monitor performance of the community actions program and make adjustments.
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Discussion Activity 16.1.1
Have you participated in community involvement at work? What type of program did the
company endorse? Outline what you experienced to be the benefits of employee
volunteerism.
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Unit 16.2
Corporate Philanthropy or Business Giving
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Corporate Philanthropy or Business Giving
(1 of 8)
• Philanthropy – A desire to help mankind as indicated by acts of charity and love of
mankind.
• Corporate Philanthropy – Business giving, the motive for which can be difficult to
assess.
A Brief History of Corporate Philanthropy –
• Community chest efforts dominated early giving.
• Since 1960, giving has grown to address a variety of initiatives
• Now, the watchword is “strategic philanthropy” which benefits both society and the
business.
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Corporate Philanthropy or Business Giving
(2 of 8)
A Call for Transparency –
• Companies need not disclose direct donations to charities, but proposed legislation
would require disclosure.
• Proponents say the money belongs to the shareholders, and they should make the
decision, not managers giving to their favorite charities, which would not benefit
the business.
• Some fear that disclosure would result in fewer donations, and would reveal
company strategy.
• Non-disclosure has led to a rise in “dark money” political funding to nonprofits from
undisclosed sources.
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Corporate Philanthropy or Business Giving
(3 of 8)
• Giving to the Nonprofit Sector
• Business and government are supported by profits and taxes.
• The nonprofit sector – (churches, museums, hospitals, libraries, colleges, and more)
depends on philanthropy.
• Why do companies give?
• Charitable – (no expected benefit for the business)
• Community – (gifts support business goals)
• Commercial – (giving that benefits the business)
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Corporate Philanthropy or Business Giving
(4 of 8)
• To Whom Do Companies Give?
• During any budget year, firms receive numerous requests for contributions from a
variety of applicants, and decide which to honor.
• Giving Patterns
• Health and human services
• Education
• Civic and community activities
• Culture and the arts
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Corporate Philanthropy or Business Giving
(5 of 8)
• Giving in a Time of Crisis:
• Reordering matters of policy and practice during crises like COVID-19:
• Fund Innovation
• Give to Crisis-Adjacent Charities
• Be Open to Funding New Needs
• Support Inclusive Leadership
• Sponsor Special Events
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17
Corporate Philanthropy or Business Giving
(6 of 8)
• Managing Corporate Philanthropy
• Two aspects to the pressure on businesses to be more businesslike in their
philanthropy:
• Base giving on business skills, resources, and capabilities to enhance philanthropic outcomes.
• Focus on philanthropy that will enhance corporate profitability and also make a difference in
the community (a strategic approach).
• Community Partnerships – Broad response to growing need to reconcile financial and
social goals.
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scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
18
Corporate Philanthropy or Business Giving
(7 of 8)
• Strategic Philanthropy – Corporate giving and other philanthropic endeavors are
designed in a way that best fits overall mission, goals, or objectives.
• Factor (Supply) Conditions – The available inputs for production.
• Demand Conditions – Concerned with the nature of the company’s customer and the
local market.
• Context for Strategy and Rivalry – Businesses are helping to build a better competitive
environment—one that rewards fair competition.
• Related and Supporting Industries – Can also be strengthened through strategic giving.
Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
19
Attributes of an Effective Strategic Philanthropy
Program
An effective strategic philanthropy program should have the following attributes:
1. The program should fit with the company’s 4.
strategic goals and mission.
2. The program should be connected with
5.
the community involvement programs.
3. The budget and infrastructure should be
6.
sufficient to meet goals.
7.
Company policies and guidelines should
be made clear.
Employees should be involved in
philanthropy-related activities.
Stakeholders should be made fully aware
of the program.
Long-term business–nonprofit
partnerships should be developed.
Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
20
Corporate Philanthropy or Business Giving
(8 of 8)
• Cause-Related Marketing – A direct linking of a firm’s product or service to a specified
charity; each time a consumer buys the product, a donation is given to the charity by
the business (is this really philanthropy?).
• Global Philanthropy – Depends on the size of the firm’s workforce in international
markets.
Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
21
Discussion Activity 16.2.1
Explain the pros and cons of corporate philanthropy, provide a brief history of corporate
philanthropy, and explain why and to whom companies give.
Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
22
Discussion Activity 16.2.2
Differentiate among strategic philanthropy, cause-related marketing, and cause branding.
Provide an example of each not discussed in the text.
Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
23
Unit 16.3
Detrimental Impacts on Communities
Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
24
Detrimental Impacts on Communities
• A negative consequence of a firm’s actions; has a detrimental impact on the
community.
• Offshoring and Reshoring –
• Offshoring – The relocation of business processes to a different country.
• Popular when tech jobs became cheaper to do overseas – thanks to high-speed data and the
Internet.
• Began with blue-collar, factory jobs, more recently effected white-collar jobs.
• Reshoring – Returning of business processes to their original location; the costs
often outweighed the benefits.
Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
25
Business and Plant Closings (1 of 2)
Business and plant closings have dramatic impact in the community.
• What rights and responsibilities does business have in relation to employee and
community stakeholders?
• Consider:
• Before the Decision to Close is Made –
• Is this the only option?
• Diversification
• New ownership or employee ownership.
Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
26
Before Deciding to Close
Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
27
Business and Plant Closings (2 of 2)
• After the Decision to Close is Made –
• Community-impact analysis
• Advance notice to employees or community
• Transfer, relocation, and outplacement benefits
• Gradual phase-outs
• Helping to attract replacement industry
Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
28
After Deciding to Close
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scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
29
Community Impact Analysis
Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
30
Worker Adjustment and Retraining Notification Act
(WARN)
• Requires firms with 100 or more workers to provide 60 days advance notice before
shutting down or conducting layoffs.
• Regular federal, state, and local government entities that provide public services are
not covered by WARN.
• Legislators have tried to strengthen the law by closing loopholes.
Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
31
Communicating With Employees Who are Being Laid
Off
• Be complete
• Be consistent
• Inform affected employees first
• Inform retained employees
Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be
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32
The Needs of Survivors
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33
Discussion Activity 16.3.1
Identify and discuss briefly what you think are the major trade-offs that firms face as they
think about offshoring and reshoring. When substantial layoffs are involved, what are
firms’ responsibilities to their employees and their communities?
Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
34
Discussion Activity 16.3.2
In your opinion, why does a business have a responsibility to employees and community
stakeholders in a business- or plant-closing decision?
Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
35
Discussion Activity 16.3.3
How serious is the plant and business closing phenomenon? Are their responsibilities
companies have to their communities that extend beyond those discussed in the
chapter? Explain.
Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be
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36
Summary
• Discuss reasons for community involvement, various types of community projects, and
management of community stakeholders.
• Explain the pros and cons of corporate philanthropy, provide a brief history of
corporate philanthropy, and explain why and to whom companies give.
• Differentiate between strategic philanthropy, cause-related marketing, and cause
branding.
• Characterize the detrimental impacts of business in the community, including the loss
of jobs in the contexts of offshoring, reshoring, and plant closings.
Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
37
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