Course Project Part 1
GM545 Business Econcomics (Fall Session A 2010)

November 9, 2010

Ethical Issues in Business

Ethics is an everyday occurrence in the corporate world as well as one's personal life. Business ethics is the same as normal ethics. In both cases, ethics is knowing what is right or wrong, and/or learning what is right or wrong in the environment in which one is involved. An ethical issue may not have a concrete answer; therefore a person's decision may depend on that person's situation. This may happen because "ethics is a broad and murky area and the workplace is full of ethical dilemmas and issues" (Orinsi, 1999). Therefore, employees feeling the pressure to perform may resort to unethical decisions in order to meet the goals that they feel are unreasonable. This can happen at any level of management (Orinsi, 1999). I work in a industry full of healthful living and fitness plans, one of the most recent corporate ethical dilemas I believe is reasonable to discuss, centers around Susan G. Komen (SGK) for the Cure and chosing cause-marketing partner, Kentucy Fried Chicken (KFC). Questions have been raised by various media, including The Washington Post and The Huffington Post (one specifically about pesticides and their link to corn, chickens and cancer) to which Andrea Rader' SGK's director of commnications, responded with dollar amounts of SGK's contributions to research and education. (Stengel, 2010) In the majority of its responses to the media, SGK seems to be saying "The end justifies the means." More money for our cause is all the matters, never mind the health implications for our supporters, KFC's customers, or for those fighting obesity and heart disease. Repeatedly the responses list what SGK will do with the money while failing to address the possibility of doing harm. It is not always about the bottom line, especially not to the public, including breast cancer suvivors. Almost immediately, protests against the campaign appeared online about KFC's supposed hypocritical stance. In a diffent ways this ethical quandry will effect both the SGK foundation and KFC. As we look at things from a economic perspective we may be able to note some effects on demand and on supply because the companies goods and services have been changed. SGK is a very large non-profit organization dedicated to breast cancer research. They are likely to grow more support from different donors because of this decsion. SGK changed their perspective and took an ethical risk by letting the potential for millions of dollars in its own coffers, for its own particular kind of cancer, outweigh its responsibility to what it represents: ending cancer and helping women survive to lead long, healthy lives (Stengel, 2010). KFC is continuing to be mindful of the link between fried foods and obesity and is working closely with SGK to ensure that the promotion highlighted KFC’s grilled chicken and vegetables, and that the website broadcasts educational messages. The promotion generated a very significant response. In the first two weeks, some 200,000 people visited the www.BucketForTheCure.com website. Another 170,000 ‘liked’ it on Facebook, many posting comments to thank KFC and SGK. Helped by a national ad campaign and collateral in KFC restaurants, the partnership is touching millions, many in areas not directly served by a SGK for the Cure Affiliate (Lucero, 2010).
Chapter 5 Question 17

a. A rise in demand for potato chips is more responsive in the short and long-run because they are more easily grown or imported. Additionally, potatoes currently being used for some other purposes can be used to make potato chips. The manufacturing of potato chips is not as complex, costly or time-intensive as that of computer chips. The equipment can be produced and setup within a short period of time. The labor required to manufacture potato chips is not required to be as highly skilled or trained as that of the computer chip industry. Should the demand for computer chips rise, the suppliers would require a much longer time frame to respond, especially if the rise in demand is large and there is little excess capacity. This is primarily due to the large lead-time to procure computer chip making plants. Raw materials may have to be imported or sourced and the delivery times will be far greater than those of the potato chips. Prices of computer chips may rise in the short-run until supplies procured.

b. In the short-run, the manufacturer of both may try to increase the price to respond to higher demand. But soon they will try to increase their output by hiring extra laborers and/or working over-time or put into operation spare machines to produce chips. They might also reduce their level of inventory of raw materials and finished chips to cater to extra demand. All of this is far easier and quicker for potato chip producer to do compared to the computer chip producer.

c. Long-run responsiveness will be far greater. With a permanent shift in demand, new producers may enter the market. Existing producers may expand their capacity for production, recruit more laborers, workers, and managers and give them advanced training. More potatoes will be grown and more chip making raw materials will be sourced. The full responsiveness will be completed in the case of potato chip making industry faster than for computer chip making for similar reasons explained earlier.
Chapter 8 Question 14

With the technology improvement making an additional profit of $5 per unit, these producers with improved technology will increase their profits in excess of normal profit. This will most likely encourage other producers and new entrants to adopt the new technology and supply accordingly. This will also mean the increase in supply, causing the prices fall from increased demand and new equilibrium will be reached. If we were to look at this visually, the prices with the new technology reducing average costs by $5, the average and the long-run marginal cost curves would shift downward. In competitive markets prices cannot be changed. Hence our marginal revenue curve will remain the same as in the past as a horizontal straight line. The producers will find the new profit maximization point where the, upward rising, new marginal cost curve will intersect the old marginal revenue curve. We would plot this point to the right of the earlier equilibrium point.
Bibliography
Lucero, M. K. (2010, May). Reflections on Buckets for the Cure. Retrieved May 10, 2010, from Susan G. Komen for the Cure: http://causemarketingforum.com/page.asp?ID=1226

Orinsi, B. a. (1999, June). Fraudbusting Ethics. Retrieved May 6, 2010, from CMA Management: http://unx1.shsu.edu:2270/topicsearch/fulltext.asp

Stengel, G. (2010, May 9). Ethical Lapse Costs Susan G. Komen Goodwill, Credibility. Retrieved May 10, 2010, from Business Ethics: http://business-ethics.com/2010/05/09/1042-ethical-lapse-costs-susan-g-komen-goodwill-credibility/

Zeleny, J. (2010, March 4). Rash of Scandals Tests Democrats at Sensitive Time. Retrieved May 9, 2010, from NYTimes.com: http://www.nytimes.com/2010/03/05/us/politics/05memo.html