Business ethics – stakeholder analysis

Question 1 (a)

According to Carroll & Buchholtz (2003, p.70) that the stakeholder to a firm may be thought as any individual or group who can affect or is affected by the actions, decisions, policies, practices or goals of the organization. On the basis of the case the stakeholders involved in are shareholders, employees, consumers, local government and competitors.

Shareholders are often the key stakeholders of one organization and in this case we can see the initial consideration of the shareholders in the firm of natural spring water is to gain profit and the rising of share price (Crane & Matten 2007). So once the incident of contaminated water is exposed, it may affect the profit of these shareholders. Firstly, the reputation of the company will be influenced so much which will directly affect its sales and reduce the profit of the shareholders. Secondly, the process of dealing with the various problems aroused by the contamination would be complicated such as regaining reputation and confidence from the society. And it may also affect the share price of the company and the income of these shareholders.

These employees are also the stakeholders because they have a closely integrated relationship with this firm both in the legal and economic side (Crane & Matten 2007). Due to the contacts with the company, these employees have to share the risks of the incident of contaminated water. Though the recent strike may result in the increasing of their wages, the contaminated water incident may change this situation. Even if this company dealt with this incident very successfully, it would still be a profit-losing result. The reputation of the firm may be affected which even worse may make it go bankrupt. So the employees may face layoff, income decreasing or even worse situation.

In the case, consumers of the firm are also the stakeholders. As the case mentioned 120,000 bottles of the spring water were contaminated. Although no consumer could possibly suffer harm unless drinking a lot in a long period, the consumers have the right to know the truth which is directly related to their self-interest. Just as Crane and Matten (2007) mentioned in their book, if a company wants to maintain its success, it had better motivate the sustainable consumption from the customers. So the consumers are also crucial stakeholders to the firm.

In the case, the government can be also the stakeholder, due to its role as the elected representative of citizen’s interests (Crane & Matten 2007). The government has the responsibility to protect the interest of its citizen and protect the local economy, but if the case of contaminated water is exposed, it may affect reputation of local government and the citizens may blame its negligence of its duty.

Meanwhile, the competitors of the firm are also the firm’s stakeholders. The performance of the firm has influence of these competitors. For example if the firm has a big market share, the competitors of it would have less market share relatively. So if the contamination incident affects the performance of the firm such as the sales, the competitors’ sales may be increased relatively. So we can conclude the relationship between the firm and its competitors is subtle. The loss of the firm may result in the gain of its competitors indirectly.

Question 1 (b)

In my view, and according to the case, the employees of this firm may suffer most, especially the senior management. Firstly, all of the employees of this company have signed contracts with this firm, which means they have to share the risks with the company together. So if the contamination can’t be dealt with appropriately, there may be lots of side effects. For instance, if the incident of contamination is exposed, the reputation and product sales may be affected dramatically, it will directly decrease the income and bonus of the employees, even worse it may lead to a great number of layoffs due to the financial dilemma of this firm. Secondly, for the senior management, they have already devoted so much on the new ad campaign to help the firm gain more. But the incident of contamination may destroy all of their effects and also affect their financial situation as other inferior employees. So we can see that the employees are the most suffered groups as the company’s stakeholders.

And meanwhile, for these shareholders of this company, they may also suffer a lot just ranking behind the employees. As the above mentioned the initial aim of them is to gain profit, and the incident of contamination will obviously affect the financial situation of the company, which would indirectly affect the profit of the shareholders.

And on the part of consumers, the loss suffered by them is also a lot just ranking behind the shareholders. Although till now there is no news about the sickness of consumers due to the contamination, it is still a malignant event for the consumers. As Trevino and Nelson (2007) mentioned in their book that the consumer has four rights including the right to safety, the right to be heard, the right to choose, and the right to be informed. So since the incident of contamination took place, the rights of the consumers were hurt, because the safeties of the consumers, the right to be heard and to be informed are insulted.

For the competitors, who are also as one group of the stakeholders may gain more than others. The loss of the natural spring water company can’t avoid, so whether the loss is on the reputation or money, it is good news for the competitors of the firm, because these losses will affect the competitiveness of this company, such as the loss of marker share, consumers and so on. This will let the competitors gain more from this firms’ lost territory including the consumers, market and so on.

While to the government, it may suffer less. The rise and fall of a firm may affect the economy of that region while to the government, which may just be an indirect influence. And it may be relatively easy for the government to use its power to control the fluctuation of the economy in the region.

Question 1 (c)

According to the situation in the case, it is wise for the company to call back the 120,000 contaminated bottles of the spring water. The reasons are as follows. Firstly, supposing the contamination is exposed, in another word, the company didn’t call back of the contaminated water. There would be two possibilities. One is that all the business of the company can go smoothly as it has planned. The other is that the incident of contamination is leaked out or revealed by some one purposely, which may direct hit the business of this company. And for a company who plans to have a continuous development, it can’t ignore any possibility. So to weight the benefit and cost based on the consequentialist theories (Trevino & Nelson 2007), it is better to call back the contaminated water than just keep it secretly. Although the calling back of the contaminated water may affect the business at some degree, the cost is less than just ignoring the incident. Secondly on the basis of deontological theories (Trevino & Nelson 2007), it is the moral obligation of the firm to call back the contaminated water.

Although, calling back of the 120,000 contaminated bottles of the spring water is obvious a risk for the business, it may be not as worse as some people thought. Let‘s just take the callbacks of Toyota and Johnson & Johnson for example. After the Toyota officially announced its decision of calling back its faculty cars in the U.S., the Toyota customers maintain their brand loyalty partly due to the calling back action (Admin 2010). Because of the calling back, Toyota advocates its image of “security” “Reliability” and “quality” to some degree, which will also help it gain confidence from its consumers (Admin 2010). And meanwhile the calling back of the Tylenol in 1982 has even helped Johnson & Johnson build good trust and reputation (Rehak 2002). So generally speaking, calling back of the 120,000 contaminated bottles of the spring water may be a relatively appropriate approach for the spring water company, which can help it build a good reputation of trustworthiness.

According to these practical steps in managing crises of business week magazine, this paper will thoroughly discuss the strategy of calling back issue for the natural spring water company in the following (Carroll & Buchholtz 2003).

The first step is to indentify the areas of vulnerability. In this case the vulnerable point is obvious the contaminated water (Carroll & Buchholtz 2003).

The second step is to develop a plan to deal with the trouble which I advocate the following steps.

At first, the full communication is very vital. So the company should inform all the inside stakeholders including the employees and key shareholders the contamination and the importance of calling back of the contamination water. And then it can call up all the employees and key shareholders to work together so as to get through the plight.

And the next step is to mollify consumers. As it mentioned above the consumers have the rights to safety, the right to be heard, the right to choose and the right to be informed (Trevino & Nelson 2007). So the consumers should also be informed the incident of contamination. The press conference may be a proper way. And as the case mentioned the new ad campaign of this natural spring water company is to emphasize the purity of its products, so the press conference is a proper means for the company to reemphasize its concept of the purity of its products and let that be the main reason of calling back. And meanwhile the firm can also declare the nearly no risk of harm to drink the water and give credible evidence. Under this precondition, the company can announce that the decision of calling back is due to its deep rooted concept of product purity. This kind of action may win and regain the confidence and reputation from the society just as Johnson & Johnson did in 1982 (Rehak 2002).

At last, the company should also take the compensation into account. There may be some consumers have already bought some bottles of the contaminated water. So the company should make some plans to deal with this situation.

After the second step, it is crucial for the firm to form crisis team to carry out the above approach as the second step mentioned (Carroll & Buchholtz 2003). So it is important to indentify executives who are qualified enough to deal with panic situation under heavy stress.

The fourth step is to stimulate crisis drills, which means using the experience or practice such as the contaminated incident to educate the company members and learn a lesson from it (Carroll & Buchholtz 2003). This step can help the company avoid the same problem and assess effectiveness from the crisis strategies.

Question 1 (d)

As the case mentioned, the hot potato for the natural spring water firm to deal with is the contamination. And the financial situation usually becomes one of the main factors for companies to handle their ethical dilemmas. In the case, the financial situation of the company is a crucial factor for it to deal with the contamination incident. Meanwhile the sound financial situation and bad situation will have different degree influences on the company’s approach and attitude to deal with the contamination incident.

Firstly, supposing that the financial situation of the natural spring water company is sound that the company has enough liquidity to meet the challenge. So it is easy for the company to make a decision on how to handle the contamination accident. The easiest way is to call back all of the 120,000 bottles of the spring water. Let’s just take Toyota’ calling back for example. Toyota has called back 3.8 million vehicles in the US to alter a part of accelerator pedals on these vehicles (Mainstream Media EC 2009). This big action of calling back faulty cars has obviously cost Toyota so much. But on the other hand it is an action to show their care on quality and credibility. So lots of consumers says that they still believe Toyota even after the calling back. And from this example we can see that the calling back of problematic products for a company may not be so bad. It is also a means to show the reliable reputation of the company since it takes the quality of its products so seriously. So for the natural spring water company, it can call back the 120,000 bottles of the spring water and show its care of product’s quality since its financial situation is sound. So the loss of the calling back for this company is almost on money. But the company can use its sound financial capability to meet this challenge and at the same time, the company can also use its strong financial power to propagandize its credibility of products’ quality due to the calling back case, which can be used as a means to strengthen the convincing degree of the new ad campaign on emphasizing the purity of its products. All in all under the sound financial situation, the problem of calling back of contaminated water for the natural spring water company can be handled out smoothly.

Secondly, as the case mentioned the strike of unionized employees of the company has already made its financial situation in a panic. So in fact the financial situation of the company may not be sound. Under this circumstance, all of the means to deal with the contamination incident should be considered deliberately to avoid further money losing. In my personal view, there are two ways for it to deal with the contamination. The first option is still to call back the 120,000 bottles of the spring water. And obviously, the company will suffer a lot such as the money losing on the 120,000 bottles of the spring water, the compensation asked by the consumers who have bought the contaminated water. To deal with this, the company may have to downsize to keep it business running. In the short term run, this calling back action is really a heavy hit for the development of the company. While from the other aspect, it can also help the company to build a reputation of quality care, which may convince consumers’ confidence and bring profit. But the reputation building is a long term project. So in the building course, the company has to suffer a lot.

The other option for the company is to keep silence of the contamination, since no consumer could possibly suffer harm unless he or she drank too much and the machine has already been sterilized, any risk of long-term exposure has been virtually eliminated. So it is reasonable for the company to keep silence. If it goes smoothly, the company will face almost no loss, while we can’t ignore other possibility that the contamination incident may be exposed by others. If the incident of contamination is exposed by others not the company itself, it will be a fatal blow for the company not only on its reputation but also on its financial situation, which worse still even make the company go bankrupt. Generally speaking this option has a higher risk than the former one when the company under bad financial situation.

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