Business Ethics - Ethics of strategic decision 3.4.4

Business ethics - The moral principles that guide the way a business behaves

Trade-off - is when one decision results in the loss of an alternative outcome, for each decision made there may be multiple trade-offs

In business ethical standards play a crucial role in the decision-making:

• Used by individuals to make choices about how to behave
• They define acceptable conduct in business
• Should underpin decision making
• An ethical decision is one that is both legal and meets the shared ethical standards of the relevant business community
• Note: different countries and cultures have different attitudes to what constitutes acceptable ethical behaviour.

Ethics in strategic decisions include:

1) Location decisions

• Ability to exploit workers
• Impact on the environment

2) Mergers, takeovers and retrenchment (reducing costs of the business e.g. staffing)

• Impact on workers
• Ability to exploit customers or control suppliers
• Transparency of deals

3) Corruption

• Dealing with authorities
• Power over suppliers or customers

4) Working with suppliers

• Ethical sourcing e.g. Fairtrade 
• Fair payment terms

TRADE OFFS BETWEEN PROFITS AND ETHICS

In an ideal world, ethical considerations in business would be based purely on what is morally correct. However, other pressures (such as profit targets) make this difficult to achieve.

Benefits of ethical strategic decisions may include higher revenues due to positive consumer support, improved brand and business awareness and recognition, better employee motivation and recruitment, and new sources of finance e.g. ethical investors
Drawbacks include higher costs and higher overheads, such as training, as well as the danger of building up false expectations.