aqa a2 business studies unit 4 – course … · aqa business studies unit 4 – the business...

AQA Business Studies Unit 4 – The Business Environment and Managing Change

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• Tying (i.e. stipulating that a buyer wishing to purchase one product must also purchase other products)

There are some pretty stringent penalties for any business found guilty of abusing a dominant market position:

• Up to 10% of annual turnover • Criminal prosecution • Disqualification as directors • Civil action by those affected

Health and safety

Health and safety is about preventing people from being harmed at work or becoming ill, by taking the right precautions and providing a satisfactory working environment.

An employer has important responsibilities for health & safety. Importantly, it is not just about protecting staff – health & safety applies to any people who come into contact with the business. Health & safety legislation aims to protect:

• Employees working at the business premises, from home, or at another site • Visitors to the premises such as customers or subcontractors • People at other premises where the business is working, such as a construction site • Members of the public - even if they're outside the business premises • Anyone affected by products and services the business designs, produces or supplies

Some industries have specific health & safety concerns and issues which have to be addressed through specialist legislation and regulation. These include:

• Food processing (hygiene) • Hotels (guest safety, hygiene) • Chemical production (dangerous processes, waste disposal) • Air travel (passenger safety) • Tour operators (holidaymaker safety)



Businesses and the Social Environment Business Ethics What are business ethics? Ethics are moral guidelines which govern good behaviour

So behaving ethically is doing what is morally right

Behaving ethically in business is widely regarded as good business practice. To provide you with a couple of quotes:

Ethical principles and standards in business:

• Define acceptable conduct in business • Should underpin how management make decisions

An important distinction to remember is that behaving ethically is not quite the same thing as behaving lawfully:

• Ethics are about what is right and what is wrong • Law is about what is lawful and what is unlawful

An ethical decision is one that is both legal and meets the shared ethical standards of the community

Businesses face ethical issues and decisions almost every day – in some industries the issues are very significant. For example:

Should businesses profit from problem gambling?



Should supermarkets sell lager cheaper than bottled water? Is ethical shopping a luxury we can’t afford?

You will probably note the link between business ethics and corporate social responsibility (CSR). The two concepts are closely linked:

• A socially responsible firm should be an ethical firm • An ethical firm should be socially responsible

However there is also a distinction between the two:

• CSR is about responsibility to all stakeholders and not just shareholders • Ethics is about morally correct behaviour

How do businesses ensure that its directors, managers and employees act ethically?

A common approach is to implement a code of practice. Ethical codes are increasingly popular – particularly with larger businesses and cover areas such as:

• Corporate social responsibility • Dealings with customers and supply chain • Environmental policy & actions • Rules for personal and corporate integrity

Ethics in practice You’ll find lots of examples of business ethical decisions and dilemmas in areas such as:

Let’s take one of the above – suppliers.



A business cannot claim to be ethical firm if it ignores unethical practices by its suppliers – e.g.

• Use of child labour and forced labour • Production in sweatshops • Violation of the basic rights of workers • Ignoring health, safety and environmental standards

An ethical business has to be concerned with the behaviour of all businesses that operate in the supply chain – i.e.

• Suppliers • Contractors • Distributors • Sales agents

The two articles below provide a good example of the ethical issues that arise in the supply chain: click on the images to read the stories:

Pressure for businesses to act ethically

Businesses and industries increasingly find themselves facing external pressure to improve their ethical track record. An interesting feature of the rise of consumer activism online has been increased scrutiny of business activities.

Pressure groups are a good example of this. Pressure groups are external stakeholders they

• Tend to focus on activities & ethical practice of multinationals or industries with ethical issues

• Combine direct and indirect action can damage the target business or industry

Some examples of business-related pressure groups can be found from the following links:



Direct consumer action is another way in which business ethics can be challenged. Consumers may take action against:

• Businesses they consider to be unethical in some ways (e.g. animal furs) • Business acting irresponsibly • Businesses that use business practices they find unacceptable

Consumer action can also be positive – supporting businesses with a strong ethical stance & record. A good example of this is Fairtrade.

Is ethical behaviour good or bad for business? You might think the above question is an easy one for businesses to answer? Surely acting ethically makes good business sense? As with all issues in business studies, there are two sides to every argument:

The advantages of ethical behaviour include:

• Higher revenues – demand from positive consumer support • Improved brand and business awareness and recognition • Better employee motivation and recruitment • New sources of finance – e.g. from ethical investors

The disadvantages claimed for ethical business include:



• Higher costs – e.g. sourcing from Fairtrade suppliers rather than lowest price • Higher overheads – e.g. training & communication of ethical policy • A danger of building up false expectations



Corporate Social Responsibility Introduction to CSR Corporate social responsibility has become a hot business topic in recent years and many well-known business people have expressed their support for it:

Niall Fitzgerald Former CEO, Unilever

"Corporate social responsibility is a hard-edged business decision. Not because it is a nice thing to do or because people are forcing us to do it... because it is good for our business"

Dame Anita Roddick Body Shop

“The business of business should not be about money, it should be about responsibility. It should be about public good, not private greed”

Warren Buffett Berkshire Hathaway

“It takes 20 years to build a reputation and five minutes to ruin it.”

There are many alternative definitions of CSR. Here are two:

• An obligation, beyond that required by the law, for a business to pursue long term goals that are good for society

• About how a company manages its business to produce an overall positive impact on society

So CSR involves:

• Conducting business in an ethical way and in the interests of the wider community • Responding positively to emerging societal priorities and expectations • A willingness to act ahead of regulatory confrontation • Balancing shareholder interests against the interests of the wider community • Being a good citizen in the community

Is CSR the same as acting ethically? The answer is yes and no! There is clearly an overlap between CSR and business ethics:



• Both are concerned with values, objectives and decisions based on something other than the pursuit of profit

• Socially responsible firms must act ethically

The difference is that:

• Ethics concern actions which can be assessed as right or wrong by reference to moral principles

• CSR is about the organisation’s obligations to all stakeholders – and not just shareholders

There are four main parts to CSR:

Economic Responsibility to earn profit for owners

Legal Responsibility to comply with the law

Ethical Not acting just for profit, but doing what is right, just and fair

Voluntary and philanthropic

Promoting human welfare and goodwill Being a good corporate citizen contributing to the community and quality of life

Does CSR really matter for a business? You should appreciate that there is a debate about the role and importance of CSR. Not all business organisations behave in a deliberately socially responsible manner, and some argue that it is not the job of businesses to be concerned about social issues and problems.

There are two main schools of thought:

• Free market view: the job of business is to create wealth for shareholders • Corporate social responsibility view: business should be concerned with social issues

as much as their commercial aims

Those who take the free market view and argue against over-reliance on CSR would make points such as:

• The only social responsibility of business is to create shareholder wealth • The efficient use of resources will be reduced if businesses are restricted in how they

behave • Businesses cannot decide what is in society’s interest- that is the role of government • Extra costs are incurred which must be passed on to consumers



• CSR is an unwelcome extra responsibility for businesses; another example of bureaucratic “red-tape”

The counter-arguments of the CSR lobby would be that:

• Businesses do not have an unquestioned right to operate in society • Those managing business should recognise that they depend on society • Business relies on inputs from society and on socially created institutions • There is a social contract between business and society involving mutual obligations

that society and business recognise that they have to each other

If you were asked to build the case for a business investing in CSR, you might include one or more of the following advantages of CSR:

• It is the ethical thing to do • It improves a business’ image and reputation • It is necessary in order to avoid excessive regulation • Socially responsible actions can be profitable • An improved social environment will be beneficial to a business • It will be attractive to some investors • It can increase employee motivation • It helps to corrects the social problems caused by business

Where does CSR apply in business? You can find examples of CSR applying in nearly all of the functional activities of a business. The table below illustrates some of them:

Dealing with customers

Value for money Product quality and safety Fair and honest advertising After sales service Country/place or origin Local sourcing Sustainable products Product testing Responsible selling and promotion Fair handling of complaints Labour rights in the supply chain Availability of information to make informed

decisions

Dealing with employees

Fair treatment at work Workforce diversity and equal opportunities Right to be kept informed Health and safety Work life balance / flexible working Opportunities for participation in decision-

making

aqa a2 business studies unit 4 – course … · aqa business studies unit 4 – the business...

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