The Ethical Consumerism Practices in the Business Market - Ford - Case Study Example

Ethical Sourcing and Ethical Practices Executive Summary The ethical business activities are becoming increasingly important in the global market perspective. The firms are ensuring that all the operational activities are in line with the ethical code of conduct and global industry standards. This as a result allows them to conduct a sustainable low risk business operation that has the potential of future growth and expansion. However, certain firms particularly in the poor economies overlook the importance of the ethical practices and they are often blinded by their myopic approach towards short term objectives. This as a result leads to certain unforeseen incidents that have severe adverse effects on the stakeholders and the society. Ford is one of the best ethical companies that is known for its code of conduct and strict enforcements. It sets an example for all the business firms on how the ethical practices can be followed and what are its positive implications. Table of Contents Introduction 4 Ethical Practices and Ethical Sourcing 4 Ethical practices of Ford 6 Conclusion and Recommendation 8 Introduction This paper is focused on the ethical consumerism practices in the business market and how the companies can take steps to improve ethical sourcing of products and services. The concept of ethical sourcing has recently become a topic of concern among the customers. Moreover it also determines the attractiveness of a company to its stakeholders. Ethical practices are overlooked by many large companies who are blinded by their short term goals, this as a result lead to long term adverse consequences. This paper discusses how a firm can responsibly adopt ethical practices to ensure sustainable business activities. It also highlights the ethical practices of Ford Motors, which is considered to be one of the most ethical companies in the world. Ethical Practices and Ethical Sourcing The incident mentioned in the case study is a clear indication towards the long term adverse effects of avoiding ethical practices. The collapse of the Rana plaza building could have been avoided if the companies were more concerned about its maintenance (case study). The ethical practices of a firm include taking care of the sustainability of the industry, environment and the interest of the stakeholders. Most of the companies overlooked the necessity of ethical practices and sustainable marketing and is often perceived as an added cost to the company. However, they fail to realize that these ethical practices are the ones that allow the company to maintain a steady growth and help to avoid unforeseen circumstances. The collapse of the Rana Plaza building has affected a lot of firms that sourced garments from the supplier companies in that building. This incident had drastically cut of the product supply for the companies and at the same time it has also led to severe financial loss for the supplier companies (case study). The ethical business practices have become highly standardized in a lot of developing countries. However, Bangladesh being one of the weaker economies of the world, finds it difficult to enforce ethical practices in a holistic manner. The firms seek out for new ways to follow unethical practices and make quick revenue which often becomes hard for the government to track. Therefore, it becomes more difficult for the government to avoid unforeseen incidents. Ethical practices can only be implemented when the firms along with the government will take actions and initiatives to promote them. The consumers also have an important role to play in ethical consumerism. The government should create awareness among the consumers regarding the unethical practices of the firm and how they are adversely affecting the consumers and the society in the long run. This as a result will create a sense of morale among the consumers and they will choose not to purchase unethically produced products and services (Preuss, 2009; Gordon, Carrigan, and Hastings, 2011). The major market firms are also accountable for ensuring the ethical sourcing and business activities. The companies which source their products from the supplier companies can also compel the supplier firms to follow ethical practices. Now-a-days several well established firms have designed their own code of ethical practices that not only looks after the ethical sourcing but also their internal operational activities (Roberts, 2003). Companies which sourced garments from Rana plaza included Bennetton, Mango, Primark, Bonmache, etc (case study). These companies must take steps to avoid any further incidents of building collapse or fire. They should develop a suppliers’ code of conduct on the grounds of ethical practices. The code of conduct should include that the supplier companies must provide a proper working condition for the employees, the building or factories must have all the necessary safety measures and the employees are properly trained to use the machineries and equipments so that any damage out of machinery handling can be avoided. Moreover, maintenance of the working condition will also ensure that there will be no unforeseen incidents like the one with Rana Plaza. The companies should create strict regulations for implementation of the code. There should be frequent auditing to make sure that the suppliers are following the required regulations. Any breach of contract must lead to revoking of business agreements (Ferrell and Fraedrich, 2014). In order to operate in a sustainable environment the companies should engage in the CSR activities that supports ethical business activities and highlights environmental issues. The firms should conduct activities to support the environment and help the society to improve its condition. The CSR activity not only increases the sustainability of the firms, but it also increases the brand image and consumer preference. The firms that source the garments from the suppliers at Rana plaza should conduct activities like helping to repair the building and offer education and to the underprivileged. This as a result will improve the social standard and will also help the companies to create a human resource base of skilled workers. Government should also take drastic measure to ensure that the firms are taking all the necessary precaution to avoid accidents and are conducting their business ethically. There should be strict trade laws on the grounds of following operational standards (Ferrell and Fraedrich, 2014). Only by following these steps the working condition of the companies will improve and will reduce accidents and impact over the environment and the society as a whole. It is evident that there is an increasing level of awareness among the consumers regarding the ethical practices of the firms (Siu, Dickinson, and Lee, 2000). According to the reports of The Co-operative Group (2012), there is an increased level of awareness among the UK consumers about the ethical sourcing of the products that they are consuming. The report has also highlighted that in between the year 2000 to 2011, the overall ethical consumerism has increased by 2.30 %. Moreover, the guilt feeling among the customers about unethical purchase has also increased from 17% to 31% from 2000 to 2012. These suggests that the trend in consumerism is changing gradually, which will eventually be reflected in the consumer behaviour of the poorer economies as well. This changing consumer behaviour needs to be addressed by the firms by following ethical practices on the grounds of their operational activities (Rick et al, 2014). The ethical practices are not only limited to internal practices and regulations. The firms also need to be responsible about the impact of their business activities on the society and the environment. Ethical marketing may increase the operating costs of firm but should be seen as a long term investment for sustainable growth (Ottosson and Parment, 2015). The contemporary business market is characterized by the increased level of competition among the rival firms. Each one of the market players are trying to seek out new ways to develop competitive advantage, to ensure that they gain more consumer preference and run their business for long term in a profitable manner. Long term profitability can only be achieved by following ethical practices and industry standard regulations; this will allow a firm to gain advantage over the firms that avoid these practices. Thus, ethical practices are becoming increasingly important for the business houses to ensure their sustainability (Carrington, Neville and Whitwell, 2014). Ethical practices of Ford According to the reports of Ethisphere (2015), Ford is one of the most ethically operated companies in the world and is the most ethical companies in the automotive sector. Ford’s organizational culture is centred on its ethical practices that are incorporated at every level of the organizational hierarchy and business activities. In order to ensure that all the activities are in line with the desired ethical planning, the company has developed a department dedicated to monitor and review the operational activities of the firm (Reliable Plant, 2015). The compliance program of the company encompasses a wide area of activities and is overseen by the Audit committee of the board of directors and the senior management. The compliance program of the company is responsible for creating awareness of the ethical practices conducted by Ford and it also helps to define the corporate regulations by policy letters to ensure that the operational activities are in compliance with the ethical program of the company. It also ensures that all the world wide business units of the group follow the same practices. This has been achieved by conducting investigations and operational audits. Ford’s handbook of code of conduct consists of the regulations that the employees need to follow. Moreover, the company has also taken the initiative to redesign its ethical codes develop region specific practices. Ford has realized that the cultural background of the different countries varies significantly; therefore implementing a single code of conduct for all the countries may not be an effective strategy (Ford, 2014). The ethical practice of Ford covers several aspects of the internal as well as external practices. The internal practices include developing a good workplace environment which offers sufficient safety and comfort to the employees. The company also ensures that the employees are being properly take care of by offering them gifts, favours and avoiding any conflict of interest. Ford also ensures that the stakeholders are given proper treatment and their interests are prioritized. In order to do so, the company maintains proper transparency of financial records and maintains good communication with them (Ethical Performance, 2013). The company also ensures that the code of conduct is properly reinforced, so it provides rigorous training to the employees to guide them on how to conduct ethical practices. The training is also available online so that the employees can easily access at their convenience. Ford follows strict regulations against corruption and bribery, which is implemented to all the suppliers companies. The company also follows strict regulations of ethical sourcing that compels the supplier firms to follow ethical practices including the necessary human rights. The business contract with the supplier companies also highlights that any breach of contract may lead to penalty and termination of business deals (Ford Foundation, 2015). Since the Automotive industry is one of the primary reasons for environmental pollution, so Ford ensures that all the vehicle produced by the company have the lowest carbon emission possible. Moreover, the manufacturing process is also designed in such a manner that it has minimum impact on the environment. Ford maintains responsible disposal of the wastes so that the effect on the environment and the ecosystem is as low as possible. Thus it can be stated that Ford has successfully maintained its ethical practices to ensure that it can run its business in a sustainable manner. The company not only implements ethical program internally but also on the external bodies like the supplier companies. This as a result ensures that the firm is operating in an ethical manner from a holistic perspective (Ford Foundation, 2015). Conclusion and Recommendation Most of the unforeseen incidents and financial downturn of a firm are the results of unethical activities. Thus, in order to avoid them, the firms must redesign the organizational activities to conform to ethical programs and industry standard regulations. The major market players must make it mandatory for the supplier firms to follow ethical business activities so that being a stakeholder the sourcing companies are affected by their unethical practices. The government must also take initiative to improve the ethical practices of the companies by making strict laws. The government should also create a general awareness among the consumers highlighting that they should not purchase unethically manufactured products (Sekerka, McCabe and Bagozzi, 2015). This as a result, will increase the concerns among the firms and drive them to follow ethical sourcing and standardized regulations to conduct their business, thereby improving the sustainability of their business operations as well as the society. Reference List Carrington, M. J., Neville, B. A. and Whitwell, G. J., 2014. Lost in translation: Exploring the ethical consumer intention–behavior gap. Journal of Business Research, 67(1), pp. 2759-2767. Ethical Performance, 2013. 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