This American Life, a weekly public radio show, featured a podcast on January 6 from Mike Daisey’s highly acclaimed Off-Broadway show, The Agony and the Ecstasy of Steve Jobs. Ira Glass hosted the podcast. Mike Daisey is a self-proclaimed Apple worshipper. He is obsessed with technology products, and he is particularly obsessed with Apple’s technology products. One of the main questions that Daisey addresses in his show is where do all of these technology products come from? Who actually physically makes them? To answer these questions, Daisey took a trip to Shenzhen, China to talk to factory workers at the Foxconn plant. During his time in China, he also posed as a businessman to receive private tours of the factories. Daisey then came home, wrote his play, and delivers his monologue across the country by giving his audience a dramatic account of what he learned and what he saw. Daisey was positively reviewed not only for the content of his story, but also the way he tells his story. He delivers the monologue in a powerful and dramatic way. Even Steve Wozniak, co-founder of Apple, was reached by email after seeing the show and commented: “I will never be the same after seeing that show” (Carstensen). The excerpt on This American Life received 888,000 downloads, which was the most in the history of the show (Stanglin). After Daisey released the script of his show to public, over 60,000 people downloaded it in just a couple of days (Rao).
Built on the formula “buy cheap, sell for less than the other guy, and make a profit on high volume and fast turnover,” Wal-Mart today is the world’s largest retailer. Founded in 1962 by Sam Walton, the company’s key focus is selling goods at the lowest price possible. Wal-Mart places what seems like a fanatical emphasis on the slogan “Always low prices. Always.” Although this business strategy may appear to be very appealing in a consumer’s point of view, Wal-Mart has faced significant criticism for the way it operates. Over the years, Wal-Mart has appeared to favor one group of stakeholders: its consumers. Wal-Mart has placed so much emphasis on satisfying one group of stakeholders that it has neglected the other groups of stakeholders, like employees, or other businesses. Wal-Mart has affected communities and businesses both nationwide and worldwide, but one big question remains – is Wal-Mart worth really worth price? In other words, does the money consumers save ultimately translate into a better quality of life for the majority of people?
In order to fully understand the criticisms of Wal-Mart, one must first grasp the phenomenon better known as “The Wal-Mart Effect.” In The Wal-Mart Effect and a Decent Society: Who Knew Shopping Was So Important, Charles Fishman discusses what the Wal-Mart effect is and how it is shaping everyday life in both the United States and around the world. Fishman says that the “Wal-Mart Effect” is this:
“It is when Wal-Mart comes into town, reshapes shopping habits, and drains the viability of traditional local shopping areas or mom-and-pop shops. It is the relentless downward pressure on the prices of everyday necessities that a single vast retailer can exert on behalf of customers. It is the suburbanization of shopping; the downward pressure on wages at all kinds of stores trying to compete with Wal-Mart; the relentless scrutiny of unnecessary costs that allows companies to survive on thinner profits; the success of large business at the expense of its rivals and the way in which that success builds on itself” (Fishman, 2006).
Clearly, Wal-Mart effects more people than simply those who shop at the stores. Fishman furthers his argument about the Wal-Mart effect and claims that the effect can be felt both directly and indirectly. “Those who never shop at Wal-Mart typically pay 5% less for their groceries if Wal-Mart is in their town” (Fishman, 2006). When a Wal-Mart opens in a surrounding area, businesses are forced to compete with the lower prices, and thus will lower their prices as well. Even if people never set foot in a Wal-Mart, they still reap the benefits – specifically, lower prices (Fishman, 2006). However, the real question is about how much Wal-Mart really saves the consumer, and whether or not those saving dramatically offset the costs of the Wal-Mart effect.
It is clear that Wal-Mart has a significant impact on businesses and communities in the area, but what is it that makes Wal-Mart so unique? In other worlds, how are they able to lower prices to unprecedented amounts? According to Professor Edna Bonacich of U.C. Riverside, featured in the Frontline documentary “Is Wal-Mart Good for America?” Wal-Mart operates by using something called the “pull system”. Essentially, this involves retailers, like Wal-Mart, deciding what is being sold, collecting information on what is being sold, and then telling manufacturers what to produce and when to produce it (Frontline, 2004).
According to John Lehman, a former Wal-Mart store manager, this kind of business is apparently very one-sided. In the documentary, Lehman discusses how Wal-Mart doesn’t leave much room for negotiation. Essentially, Wal-Mart tells a company what price they want to sell something for, and then the manufacturer must find a way to make the product such that they can meet this demand. If a manufacturer cannot meet these expectations, Wal-Mart will find another manufacturer who can fulfill their needs. This usually means outsourcing to Asian manufacturers, where they can meet these needs because standards of living are much lower, and companies can produce goods at a cheaper cost. Skip Hartquist, an attorney at Five Rivers, mentioned in the documentary, discusses how outsourcing is affecting American manufacturers.
“It’s not fair trade. It’s not free trade. The Chinese are pricing their products in a manner contrary to the obligations they undertook when they joined the World Trade Organization a few years ago. The Chinese system has built-in advantages that no one else in the world has. Their currency is undervalued by, we estimate, about 40 percent. Their workers are not treated fairly in terms of worker rights. The government provides subsidies to Chinese producers at preferential interest rates that may not even have to be repaid. It’s a rigged system” (Frontline, 2004).
While Wal-Mart is now the leading retailer in the United States, their business model is not sustainable as they favor only one group of their stakeholders: their consumers. Wal-Mart must operate as a social institution, not just a corporate system. In other words, Wal-Mart must realize the connections between the private troubles and public issues in order to create a harmonious balance between stakeholders. Connecting private troubles and public issues is imperative for companies, as discussed in The Sociological Imagination, by C. Wright Mills. In this case, Wal-Mart is the public sector and its stakeholders make up the private sector. The sociological imagination, according to Mills, is the capacity to shift from one perspective to another (Mills, 1959). Wal-Mart must shift their paradigm and realize that focusing solely on low prices comes at the cost of many people. People are not just consumers – they also need to earn a living as well.
In order to be a sustainable company, Wal-Mart must find a balance among its stakeholders. In Stakeholder Theory of the Modern Corporation, Ed Freeman argues its management’s duty to look after the health of the corporation. This means paying attention to anyone who is a stakeholder of Wal-Mart. As companies get bigger, other groups of stakeholders, such as governments, NGOs, critics, etc. become equally as important. Although Wal-Mart started out as a small company, it has grown to be the largest retailer in the United States. Since the company has grown significantly, their responsibilities have grown as well. According to The Wal-Mart Effect and Business, Ethics, and Society, Wal-Mart cannot view its stakeholders purely in economic terms. R. Edward Freeman argues that Wal-Mart is focusing its business strategy only within the context of the traditional stakeholder theory – maximizing profits.
One example of a similar company that has managed to find a harmonious balance between stakeholders is Costco. Costco’s business model is simple: sell a limited number of items, keep costs down, rely on high volume, pay workers well, have customers buy memberships, aim for upscale shoppers, and don’t advertise (Cascio, 2006). The fundamental difference between Wal-Mart and Costco is that Costco delivers low prices in a more stainable manner, by focusing on satisfying all stakeholders, rather than just favoring one group of stakeholders, like Wal-Mart. Costco not only pays its employers higher than the average Wal-Mart employee, but Costco also has better relations with their suppliers. While Wal-Mart is notorious for having very one-sided relationships with their suppliers, Costco has a different approach. According to Wayne Cascio in Decency Means More than “Always Low Prices”: A Comparison of Costco to Wal-Mart’s Sam’s Club, Costco is tough on its suppliers to keep prices low, but instead of refusing to do business with a supplier if they can’t exactly meet Costco’s needs, Costco simply warns suppliers not to offer other retailers lower prices than what they get (Cascio, 2006). Furthermore, Cascio warns that Wal-Mart’s cheap-labor model is very costly in the long run. “It can lead to poverty and related social problems, and transfer costs to other companies and taxpayers, who indirectly pay the health-care costs of all the workers not insured by their frugal employers” (Cascio, 2006).
In conclusion, The Wal-Mart effect is not a new phenomenon, nor is it going away any time soon. Indirectly or directly, people who live in an area with a Wal-Mart store feel the effects of the retailer. Although Wal-Mart prides itself on its ability to set the precedent for low prices, the reality is this: low prices come at the cost of many people. Moving forward, Wal-Mart must recognize that favoring one group of stakeholders is both unsustainable and unethical. Wal-Mart should adopt a business model more similar to Costco’s – one that balances the interests of all groups of stakeholders.
Cascio, Wayne F. Decency Means More Than “Always Low Prices”: A Comparison of Costco to Wal-Mart’s Sam’s Club. Academy of Management Perspectives (Aug., 2006), pp 26-37.
Fishman, Charles. The Wal-Mart Effect and a Decent Society: Who Knew Shopping Was So Important? Academy of Management Perspectives, Vol. 20, No. 3 (Aug., 2006), pp 6-25. Published by Academy of Management. Article Stable URL: http://www.jstor.org/stable/4166248
Freeman, Edward. “Stakeholder Theory of the Modern Corporation.” General Issues in Business Ethics: 39-49. Print.
Freeman, R. Edward. The Wal-Mart Effect and Business, Ethics, and Society. Academy of Management Perspectives, Vol. 20, No. 3 (Aug., 2006), pp 38-40. Published by: Academy of Management. Article Stable URL: http://www.jstor.org/stable/4166250
Frontline. 2004. Is Wal-Mart Good for America? November 16. Retrieved from http://www.pbs.org/wgbh/pages/frontline/shows/walmart/view/ on April 3, 2012.
Mills, C. Wright. “The Sociological Imagination.” Oxford University Press (1959). Print.
Today, regional airline carriers account for more than half of all domestic flights in the United States, as major airlines have been outsourcing more of their flights. According to the U.S. government Accountability Office, the regional airlines are responsible for the last six fatal commercial airline accidents (Dillingham). Thus, their business operations, especially with respect to safety standards, implicate a variety of ethical dimensions and perspectives.
THE STORY OF THE REGIONAL CARRIERS IN THE AIRLINE INDUSTRY
Over the past thirty years, a major transformation has been occurring in the United States airline industry. It began in the late 1970s when the U.S. government deregulated the airline industry, which inevitably led to increased competition among the major airlines to offer lower airfares (Cunningham, et al). In response, the airline companies created the regional industry and developed a new business operating strategy called the hub and spoke model as a way of lowering costs. Basically, the major airlines created central hubs in large cities or metropolitan areas and began relying on small regional carriers or commuters to feed their domestic network system (Wei & Yanji). (See Appendix A) Continue reading
Almost everyone has heard of the membership warehouse retailer, Costco Wholesale, whether or not you actually choose to shop there. You can find one of their warehouses in over 400 locations around the United States, as well as an additional 200 warehouses in Canada, Mexico, Australia, the United Kingdom, and parts of Asia. Although they are not quite as instantly recognizable as their main competitor, Sam’s Club of Wal-Mart Inc., Costco has attracted somewhat of a cult following due to their unusual business operations. In many financial comparisons, Costco seems to beat out all of their industry competitors. Even in the recent economic downtown, Costco still posted growth in their stock, as well as higher than industry average profits. So what exactly makes Costco so successful? Many business analysts argue that Costco’s focus on corporate social responsibility is what sets them apart from other retailers such as Sam’s Club or BJ’s Warehouse. Their focus on doing “the right thing” for all of their stakeholders, as well as a vision that aims for long-term success, is a unique business model that has interesting implications for many debates within the business world today. Should a company’s main focus be profit? Do they have a responsibility to act in the best interest of all stakeholders? What are the effects of these decisions? Using Costco as a prime example of a socially responsible corporation, I hope to prove that acting in a socially responsible manner towards all stakeholders is ultimately more beneficial for a company. Continue reading
A short while ago, we read an article comparing the business practices of Cost-co and Walmart, and the differences between the two have stuck with me. The closest Cost-co to my home is almost 40 minutes, and as I wasn’t familiar with the membership-based warehouse club, I never paid much attention to Cost-co in the news. However, after we read that article, I was fascinated. An attitude of “nice guys finish last” seems to appear often in the business world, and it was refreshing to see a company that stuck to its core values so strongly and thoroughly do so well.
With that article in mind, I ventured off to the Web Of Knowledge, and searched for Edward Freeman’s Thesis on Stakeholder Theory. I have liked Freeman’s basis for morality in a company’s operations; almost everyone involved in the company is a stakeholder. Not just actual shareholders, but employees, community members, governments, maybe even competitors. It is not enough to just focus on profits anymore. So I was pleased to find Freeman cited in an article discussing the positive effects of labor-friendly policies, titled “Labor-friendly Corporate Practices: Is What is Good for Employees Good for Shareholders?“. Continue reading
I chose to explore Edwin Hartman’s article “Donaldson on Rights and Corporate Obligations” for this week’s cited reference search blog post. Just to recap, the article discusses Donaldson’s belief that certain fundamental human rights generate correlative duties for the corporation, including 1) the duty to avoid depriving people of their rights, 2) the duty to help protect people from such deprivation, and 3) the duty to aid those who are deprived. Hartman introduces a fourth category of duty to the list, which he refers to as the duty to avoid helping to deprive. He argues that the corporation is not obligated to contribute to protecting anyone from deprivation, but it needs to make sure that no action it takes helps the depriver succeed in depriving.
Since the article was published in 1991, I thought that it would be interesting to see what other publications have cited it since then. Using Google Scholar, I found that Hartman’s original article had only been cited by 3 other publications.
The one I chose to examine more closely is “La responsabilidad moral de la empresa. Una revisión de la teoría de Stakeholder desde la ética discursiva”/”The moral responsibility of the business. A review of the Stakeholder theory from discursive ethics”. It is a doctoral thesis presented by Elsa González Esteban and directed by Dr. Domingo Garcia-Marza of the Universitat Jaume I de Castellón. It was published in 2011, so it is rather recent information. In total, it has 576 pages and it is written in Spanish. Continue reading
For the blog posting this week I chose to use a “piece of knowledge” on Freeman. An optional reading for our session 4 class back in February was Edward Freeman’s Stakeholder Theory of the Modern Corporation. Ever since taking Management 101 the concept of stakeholders has interested me: how to identify who is a stakeholder, are their various levels, how does one encapsulate the needs of stakeholders and somehow make that align or fit within what the mission of the overall corporation is, etc.
I searched Stakeholder Theory and Freeman within the Web of Knowledge database. Since Stakeholder Theory of the Modern Corporation itself is within another piece of work, I browsed around a bit, checking out other pieces of work by Freeman regarding stakeholder theory. I spent some time searched within those for different terms, such as Wal-Mart, but did not come up with many results nor any I was particularly interested in. I eventually narrowed my focus onto Stakeholder Theory and “the corporate objective revisited” . This has been cited 76 times within the Web of Knowledge database! In settling on this document, I began sifting through the 76 items cited; I wasn’t really thrilled with this set of resources either. I eventually found an article that, from it’s abstract at least, appeared really interesting: Social Sustainability in Selecting Emerging Economy Suppliers by M. Ehrgott, F. Reimann, L. Kaufmann, and C.R. Carter. The source of the article is Journal of Business Ethics. I did a cited reference search on this article as well, but it has only been cited 3 times within Web of Knowledge.
The abstract provides great insight into what the study was about Continue reading
Admittedly, what comes to mind when I think of Apple is the former head honcho, Steve Jobs. But then again, who doesn’t? As creative and innovative as Jobs was, there are many powerful brains that contribute to the success that Apple has had over the years. Perhaps one of the most noteworthy contributors is Scott Forstall: Senior Vice President, iOS Software.
Before joining Apple, the Stanford grad worked at an American computer company called NeXT, Inc. where he developed core technologies. In 1997, Forstall joined the Apple team when Apple purchased NeXT. Today, Scott Forstall is the Senior Vice President of iPhone software at Apple. Bloomberg Businessweek, in an article published in October 2011, named Forstall as the Sorcerer’s Apprentice at Apple. Undoubtedly, Forstall has transitioned from once being a behind the scenes computer science genius to a much more visible member of Apple’s leadership team, particularly after the death of CEO Steve Jobs. Not only is Forstall responsible for Apple’s mobile software division, which accounts for 70% of Apple’s revenues, but he is also the youngest senior executive at Apple. Pretty remarkable, don’t you think?
Fast Company certainly seemed to agree, as they listed Scott Forstall as number two on their 2011 list of “The 100 most creative people in business.” In today’s world, Apple is known for their cutting edge innovations. The company’s slogan, “think different” certainly describes the business model well. Without a doubt, Apple’s success can be attributed to the company’s ability to innovate products that are not demanded by consumers. This is not saying that these consumers don’t want Apple’s technologies, but rather that they don’t know they want them…yet. According to an Outside Innovation article, Jonathan Seybold praises both Apple’s ability to look at where technology is going and the ability to innovate a new product that is not only better than an existing product, but one that is much different. Not to mention, Apple is always a step or two ahead of the competition.
Over the past few weeks we’ve spoken a lot about the stakeholder theory and what responsibility a company has to its stakeholders. It’s clear Apple’s identifies its stakeholders as Edward Freeman believes a company should. Freeman believes that business must figure out how to create value for their customers, rather than solely focus on maximizing profits. Apple operates by constantly innovating and creating value for their customers. Although customers cannot imagine all of the new possibilities of products, Apple nevertheless spends each day finding ways to make their existing products better. Steve Jobs once said, “we put ourselves in the customer’s shoes and ask: What do we want?”
Undoubtedly, Apple has created a powerful brand by never being complacent and always working to improve their existing products. By putting themselves in the customer’s shoes, Apple has innovated products consumers never even imagined they could want. Companies who struggle to create value should look up to Apple. While not everyone on the Apple team can be recognized for their pivotal role in value creation, I’m very pleased that Scott Forstall had the opportunity to gain recognition for all of his hard work and dedication to the company.
After skimming through many successful young entrepreneurs, Christy Liu caught my eye. According to Fast Company, Liu is one of eleven that is a part of the change generation. Liu is a cofounder of the travel site Wanderfly (check it out!). Traveling is something that I wished I had the time and money to do more often. After checking out the site, I was immediately interested in knowing more since the site offered me ways to budget the future traveling that I want to do.
Wanderfly is designed to plan travel for people that are on a budget. The site is very simple and organized, unlike many of its competitors, and allows a user to find a trip that meets many of their requirements. The user of the site will fill in where they want to leave from, where they want to go, what interests them (landmarks, nightlife, luxury, adventure, entertainment, family, watersports, eco, romance, shopping, outdoors, islands, beach, singles, history, food, art, and extreme), their budget per person, when they want to travel, and for how many days. After filling in their information, the traveler will be presented with multiple trip options. Each option includes a description of the place, pictures, things to do there, and hotels and flights that can be booked immediately. Continue reading
Ahhh, Hershey’s. How much more relevant could they be on this day of excessive chocolate consumption? Lamentations on Single’s Awareness Day aside, Hershey’s is a company with a very high profile, both domestic and abroad. You can find a Hershey’s product calling out to every young child in the checkout aisles of grocery stores the whole world around, or in every baking aisle in a store, or dancing across our TV screens in one chocolatey form or another. Additionally, they’re considered a local company for Bucknell students – collaborations with the Milton Hershey school are not uncommon, nor are trips to the beloved Hershey Park.
For those of you who studied abroad, everyone knows the tricks of the trade when it comes to booking a weekend getaway. You want to find the cheapest hostel in the best location, hit the best bars and clubs, eat local delicacies, and most importantly, find the most efficient mode of transportation for getting there. Living in Prague for four months, I traveled mostly in Central and Eastern Europe,often relying ontrains and buses to get me to and from Praha Hlavni Nadrazi (Prague’s main station – see below for a picture) to Berlin, Munich, Krakow and Vienna. But, flying was a whole other booking strategy. The cheapest airlines that everyone used included, Wizzair, Smart Wings, EastJet and the infamous Ryanair. Although I never flew on Ryanair, I knew that the company has faced an array of scandals and controversies over the years and decided to dig a little deeper.
I was purposely looking for ethical issues that plagued the company in regards to employee relationships or hidden fees, which they have had issues with both in the past. However, I was unaware of the sexist advertisements they have produced over the years. As evident by my previous post about John Stewart Mills and Feminism, I am passionate about women’s rights and the study of women’s history. So, when I first saw a few of the print advertisements Ryanair had publicized, I was disgusted by the degrading and negative portrayal of the lingerie wearing woman used in the ads. In the case of one particular ad, which was launched in December of 2011, Ryanair depicts a stewardess as a model on a cover of a racy magazine. To me, it seems as if the airline was equating their stewardess to Playboy models. The pictures were taken from Ryanair’s charity calendar that is produced yearly. Executives have said that the charity calendar has been published for the past five years and they were going to continue to encourage employees to take off their clothes to raise money for the less fortunate. Continue reading
According to the Stanford Encyclopedia of Philosophy, there is a difference between the concept of business ethics and what is actually put into practice. There are many debates among academic business ethicists over the different aspects of business ethics. However, in my opinion, these debates focus only on the conceptual ideas behind business ethics and what they think should be taught in universities throughout the country instead of on practical and helpful information regarding ethics. Another issue is that the business ethics discussed in this article only revolve around large, publically traded companies. In reality, this type of business is a minority compared to the multiple styles of business so the article cannot really represent all business ethics.
In the article, business ethics is discussed in segments starting with the history, the role of the corporation, employment relations, international business ethics, and criticisms. The history section of the article is pretty Continue reading
The Stanford Encyclopedia of Philosophy’s article entitled Business Ethics was interesting to read. Although it was published in April of 2008, many of the issues addressed are still relevant at the present time. First, the entry discusses business ethics on a broad level, defining the concept as “the applied ethics discipline that addresses the moral features of commercial activity.” But, what exactly is business ethics in practice? The article goes on to explore the answer(s) to this question, touching upon the role of the corporation, the employment relation, international issues, and criticisms of the focus and methodology of business ethics.
I would agree with the idea presented in the article that business ethics is rooted in corporate social responsibility. According to Forbes, corporate social responsibility refers to “demonstrating concern for the environment, human rights, community development and the welfare of their employees both in the U.S. and abroad.” In order for a business to be perceived as socially responsible, it must behave in an ethical manner. As a result, the business may become even more profitable by appealing to increasingly socially and environmentally conscious consumers.
I also liked the idea that business ethics encompasses a business’s relationship to the well-being of society. This point ties into our class discussion from last week regarding stakeholder theory. As you might recall from Freeman’s Business Ethics at the Millennium, stakeholder theory argues that a business should be managed in a way that achieves a balance among the interests of all stakeholders, or those who can have some effect on the firm or may be affected by the firm’s actions. A business needs to be accountable to others and society as a whole by attending to the interests of stakeholders when creating policies and making decisions.
I found the section of the article that described international business ethics particularly interesting as it brought up the emergence of globalization. I had never really considered the fact that ethical norms may not always be consistent across cultures. The article explores the question of which ethical norms should guide one’s business conduct in other countries and cultures, with a particular focus on business in less developed countries. The basic guidelines call for the avoiding harm, doing good, respecting human rights, respecting the local culture, cooperating with just governments and institutions, and accepting ethical responsibility for one’s actions.
In addition, international ethical business conduct is directly tied to the debate over sweatshop labor, or the hiring of workers in less developed countries, usually at minimal wages and under poor work conditions, to manufacture products for the developed world. It is troublesome to me that many multinational firms outsource labor and exploit poor working and wage conditions in less developed countries. They engage in this practice to increase their profits. This is unethical. These firms need to consider the stakeholders involved and pay reasonable living wages and ensure better working conditions for those involved.
C. Wright Mills rode a motorcycle. He was a sociologist at Columbia U. Some people may think he does not fit into a management or business class since he was more well known for describing the way the elites in US society wielded power. He did not believe in value-free social science (in contrast to many sociologists of the day and now). A book list is here.
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