lecture 5 bhj business ethics
TRANSCRIPT
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Business Environment Framework:
Free Market
MEC 479 - Spring 2011
Lecture 5
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Topics
1. Definitions of kinds of markets
2. Free market
Framing principles
Economic assumptions
3. Competition
4. Reading Assignments for Lectures 5 & 6
Beyond IntegrityChapters 4 & 5
Business Ethics Chapter 4
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Why consider business
environment frameworks?
1. Differing views exist.
2. Try to develop a frame of reference that
explains how business really operates
(is).
3. Try to connect that framework to CWV
and other views (aught).4. Framework should allow us to anticipate
issues rather than react to issues.
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Business environment framework
Alternatives:
1. Socialism
2. Totalitarian
3. Adventure capitalistic
4. Free market
5. Capitalism
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Business environment frameworkAre there exclusive differences?
1. No!
2. What are the implications to business?a. ___________________________________
b. ___________________________________
c. ___________________________________
3. Implications to society?a. ____________________________________
b. ____________________________________
c. ____________________________________4. CWV problem of the business environment
a. ________________________________________
b. ________________________________________
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Business environment framework:
Definitions
1. Socialistic:a. Dictionary.com:
a theory or system of social organization that advocates the vesting ofthe ownership and control of the means of production anddistribution, of capital, land, etc., in the community as a whole.
b. Enterprise ownership is by, on-behalf of, and for thesociety/community.
c. Note similarities to prior discussions:1. Social contract theory: _____________________2. _______________________________________
3. _______________________________________
d. Country examples:1. ___________________________________________
2. ____________________________________________
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Business environment framework:
Definitions2. Totalitarian:
a. Dictionary.com
2. absolute control by the state or a governing branch of a highlycentralized institution.3.the character or quality of an autocratic orauthoritarian individual, group, or government: thetotalitarianism of the father.
Government is controlled by dictator or small group. Succession is a power transfer
b. Implications:1. Government determines who gets to engage in business
a) Permits _________________________________________
b) Expropriation _____________________________________
c) Monopoly ________________________________________
d) Elements of competition appear to exist, but tend to operate underMMR
e) Key is this is not community owned or centrally planned.
2. Government extracts from engagers/business fees/tariffs at will for both civic andpersonal gaina) Generally this is referred to as corruption.
b) Can be an every level.
1. Biblical example is ____ collectors
c. Country examples:1. ________________________________________________
2. ________________________________________________
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Business environment framework:
Definitions3. Adventure capitalistic:
a. Term of Max Weber: Buccaneers, warlords, financiers who goforth solely to gain wealth for themselves.
1. Not ulterior motive: self wealth gaining.
b. Can operate/be found in most business environments.
1. Can be found throughout history.2. Can be found in every type of country
3. Why is this the case?
a. ___________________________________________________
b. ___________________________________________________
c. Examples:
1. Alexander the __________________________________
2. Barbarians at___________________________________
3. Adam _________________________________________
4. Milton _________________________________________
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Business environment framework:
Definitions
4. Free market: Laissez-Fairea. Dictionary.com
1.the theory or system of government that upholds the autonomouscharacter of the economic order, believing that governmentshould intervene as little as possible in the direction of economicaffairs.
2.the practice or doctrine of noninterference in the affairs of others,esp. with reference to individual conduct or freedom of action.
b. Individuals acting in their self interest will achieve an optimum
allocation of societys scare resources: Adam Smithc. Therefore, governments should minimize their influences on
the markets, allowing the markets to take care of themselves.
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Business environment framework:
Definitions5. Capitalism:
a. Dictionary.com
an economic system in which investment in and ownership of themeans of production, distribution, and exchange of wealth ismade and maintained chiefly by private individuals orcorporations, esp. as contrasted to cooperatively or state-ownedmeans of wealth.
b. Class definition: Three components:1. Privately owned enterprises determine what to produce, how
much to produce, at what price to sell, in order to make a profit.
2. Free labor sells their services to enterprises for production.
3. Profits are not consumed, but reinvested to expand the enterpriseand produce more profits.
c. Relationship to free markets: ___________
d. Country examples:
1. ______________________________________________2. ______________________________________________
[Note Purpose of business will directly affect view/CWV]
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Free Market: Government role1. Create laws to [Create the Market Box]
a. Respect property interests
1. Directly relates to capacity to exercise ones self interest
2. Underlies basics of capitalism
b. Allow free flow of goods and services so that pricing will reflectdemand
1. Issue is whether this is local, regional or global flow
c. Allow for efficient entry/exit of market players to maximizemarketable goods and services
1. Issue is how much influence over quality and consumption
2. Examples:
a) ______________________________________________
b) _____________________________________________
d. Issue is how big is the box?
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Free Market: Government role
2. Police and road examplea. Community sets traffic rules for
1. Safety2. Smooth movement of traffic/travelers
b. Police enforce the rules1. Keeping traffic flowing smoothly.
2. Keeping speeders at bay.3. Aiding in accidents.
c. What about road construction?1. Does community have to undertake this?
a) Toll roads
b) Freewaysc) Local streets
d. What about levels of rules?1. Speeding and accidents to resolve safety
2. Licenses and safety and speeding rules3. Enforcement, licensing, safety and speeding rules
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Free Market: Government role
3. General Aviation example
a. License rules
1. Pilots license and recurrent training required
2. Airplane inspection required
b. No police (limited FAA oversight)
c. Open space
d. Accidents fatal (risk/reward?).
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Free Market: Government role
4. Effects of Government:a. Absolute limits on entry
b. Costs of entry and exit
c. Limits on downside risks
d. Protections of players1. Sellers monopoly/licenses
2. Buyers consumer/investor
e. Done via regulation
f. However, see the issue of humanity in controllingthe market
1. Break down of regulation corruption
2. Break down of market priorities protection vs entrants vscaveat emptor.
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Free Market: basic econ.
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Free Market: basic econ.
1. equilibrium point
2. Gen 3:15 re
equilibrium
3. Cost effects on chart
4. Is this a
1. Concept
(aught)?__
2. Reality (is)
_______
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Free Market: basic econ.2. Labor market:
a. Uses similar curves:
b. What is the key problem with these curves in labor
market analysis?
1. _______________________________________
2. _______________________________________
c. Unemployment and Says law:
1. Says law says: __________________________2. Does this really happen? ___________________
a. See effective of destructive innovation in Chapter 5 Capitalism
3. What are the current politicians arguing about this?
a. _________________________________________
b. _________________________________________
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Free Market: basic econ.
3. Division of labor:
a. As labor specializes productivity increases.1. Shown by GDP per ___________________
2. The greater the division of labor the greater the_________________________
b. Leads to concept of Competitive Advantage1. Open markets increase available goods at
reduced costs because each community canexploit its ________________________
2. Thus open markets/laissez-faire lead to bestresource allocation and maximum availablegoods and services
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Problems with Free market
assumptions
1. Do governments stay out of the box?
a. _________________________________
b. _________________________________
c. _________________________________
2. Why does this happen?
a. Tribe? _____________________________b. Power? ____________________________
c. Lack of understanding? ________________
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Problems with Free market
assumptions
2. Competitive Advantage: does it exist?a. What about farming and Africa? __________
b. What about China and closed markets?__________
c. Why are these examples relevant to today?1. Outsourcing? ____________________________
2. Minimizing costs in manufacturing assumes_______________________
3. Other factors? ___________________________
d. Effect on running your business?1. _______________________________________________
2. _______________________________________________
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Problems with Free market
assumptions
3. Free labor markets
a. Why is free labor critical to free markets?
1. ______________________________________
2. ______________________________________
3. ______________________________________
b. Are unions positive to free market for labor?
1. _______________________________________
2. _______________________________________3. _______________________________________
c. What are unions analogous to? Implications?
1. ____________________________________________
2. ____________________________________________
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Can Governments participate in
Free Markets?
1. Buying goods and services?
a. _________________________________________
b. _________________________________________
c. _________________________________________
2. Does government demand cause a squeeze? If so, is it OK?a. _________________________________________
b. _________________________________________
c. Examples today: ___________________________
3. Is the Box idea helpful?
a. _________________________________________
4. Business implications:
a. ___________________________________________
b. ___________________________________________
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Competition1. Definition
a. Dictionary: http://www.merriam-webster.com/dictionary/competition
1: the act or process of competing : rivalry : as
a: the effort of two or more parties acting independently to securethe business of a third party by offering the most favorable terms
b: active demand by two or more organisms or kinds of organismsfor some environmental resource in short supply
b. Practical1. Father to daughter see that man over there? He works for the
competition. He wants to put you father out of business. He wants tomake sure I cannot ever get a job in this business. In short he wants
us to lose everything house, car, 2. Daughter thats awful! What are you going to do about it?
3. Father that is why I go to work everyday and even work on theweekends!!!
c. CWV see the wars in OT.
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Competition: Economic
perspectives
2. Economists view competition
1. Effective way to allocate ______________
2. Creates product _____________________3. Creative destruction is ________________
a. Only change is __________________________
4. Are these true?
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Competition3. Takes us back to the purpose of the company
a. Innovation is it
1. For the customer _____________________
2. For the company _____________________
b. Process of competition vs morality
1. James 1:12-17 temptation, James 4:13-15 Gods world
2. Scale affects a change in view
a) Start with survival lots of prayer and miracles
b) Become a stable company - ______________________
c) Abundance = dominion - _________________________
1) ____________________________________
2) 10th________________________________
Assignment 81. See if you can find business situations of competition
in the Bible:
a. Both OT and NT
b. See if God encourages or Jesus comments on competition
2. Read articles in Business Ethics readings 5-1 (pp.169-178) and answer the following questions:
a. Do you agree with Friedman that the sole goal of a corporation
is to increase shareholder wealth? Why or why not?
b. When management gives to charity, do you think that
management is actually stealing from shareholders as
Friedman asserts?
Maximum 3 pages
Due April 1828