Ethics are the moral principles that should underpin decision making. A decision made on ethical grounds might reject the most profitable solution in favour of one of greater benefit to society as well as to firm.

What are business ethics?

Ethics can be defined as code of behaviour considered morally correct. Our individual ethics are shaped by a number of factors including the values and behaviour of our parents, those of our religion, our peers and the society in which we live and work.

Business ethics can provide moral guidelines for the conduct of business affairs. This is based on some assertion of what is right and what is wrong. An ethical decision is not a matter of scientifically calculating costs, benefit and profit. Most actions and activities in the business world have an ethical dimension. This has been highlighted in relation to whole industries (such as cigarettes) and to businesses which use cheap labour in less developed countries.

Two major influences shape the moral behaviour of businesses. First, an organisation is comprised of individuals. All of these have their own moral codes, their own values and principles. Second, businesses have cultures that shape corporate ethical standards. These two factors combine to determine the behaviour of businesses in a variety of circumstances having an ethical dimension.

Business ethics and business objectives

A useful starting point may be to consider business objectives in relation to ethical behaviour. We can pose the question: Why do businesses exist? For many businesses the answer would be ‘to make the maximum profit possible in order to satisfy the owners of the businesses’.

Milton Friedman, a famous American economist, holds the view that all businesses should use the resources available to them as efficiently as possible. Friedman argues that making the highest possible profit creates the maximum possible wealth to the benefit of the whole society.

Theodore Levitt (1980) distinguishes between

• Generic product
• Expected product
• Augmented product
• Potential Product

Generic product
Generic means type
Generic product is the basic product
This first product level = core product = core benefit
What is the basic thing that people are buying?
The core benefit of buying a drill is making holes
The core benefit of a car is transportation

The expected product
People are not satisfied with the core benefit of a product or service
They expect additional things
This product level comprises all the attributes offered in the actual product
It includes the design of the product, packaging, quality levels, features and brandnames
If these features exceed the buyers expectations they will be satisfied.
A CD or DVD player is expected to offer a certain quality of sound, a choice of battery, control lights, look sophisticated

The augmented product
Competition forces firms to offer more than the excpected products.
The augmented product has to offer additional aspects or elements that support the core and actual product features
Customer service, delivery, after-sales service, guarantee
Many products are marketed at augmented product level  – USP

The augmented product
Products can be augmented by
Image
Assistance
Credit
Delivery
Installation
Service
Guarantees

Example: Dell computers

Problem: today‘s augmented products become tomoorow‘s ecpected products

The potential product
Comprises all the augmentations and transformations a product might undergo in the future.
The emphasis is put on future product improvements to keep the product competitive
The marketers must be creative, innovative
The potential product has to include everything that might be done to attract and keep customers

Essential aspects of a product
Product benefits: all the elements of an offer which consumers perceive as meeting their needs and wants and provide satisfaction through performance and image
Product attributes: quality, features, styling, design, branding, and packaging
The marketing support services: aftersales service, installation, delivery, guarantee, etc.

Delivery

The seller sends a dispatch note to announce delivery.

The buyer can prepare for the arrival of the goods and make decisions for resale. He can investigate if the goods do not arrive on time.

The delivery note is sent with the goods. The original remains with the buyer, the first copy is signed by the buyer to confirm acceptance.

The correspondence is largely routine and mostly carried out using order forms. Every letter written to the customer should be a silent salesman and therefore careful wording is required.

Preparation for the order

• which goods are needed?
• which quantity, quality?
• when are they needed?
• which supplier?

Acknowledgement of an order

An acknowledgement of an order is useful if

• it was a non-binding offer
• the order differs considerably from the offer
• the order was placed verbally.

You should use order forms, if they are available.

Sales Note

This is drawn up

• if it is quite a large business with complicated terms of delivery and payment, e.g. delivery by instalments, purchase on specification or
• in order to sum up the contents of the contract if the sales contract is agreed upon after a longer period of negotiation.

Irregularities in connection with the order

• cancellation or modification of the order by the buyer
• refusal of the order or cancellation of the order by the seller

The cancellation has to be made before the order is received by the partner. Usually both partners agree on an informal settlement.

A delay in accepting the goods occurs, when the seller delivers according to the contract and the buyer does not accept the goods because he thinks the goods have not been delivered according to the contract.

From the legal point the seller has the following possibilities:

• He can store the goods in a warehouse.
• He can allow the buyer an additional period of time to accept the goods and threaten with a public auction (perishable goods can be sold in by auction without any warning).
• He can cancel the contract.

The supplier does not deliver the goods within the agreed delivery period at the agreed point of delivery.

Scheduled contract

1. the buyer must allow the seller an additional period of time
2. the buyer must tell the seller the consequences in case of non-delivery within the agreed period of time

The legal consequences could be the cancellation of the contract or the buyer must insist on delivery. The buyer may ask for compensation if there is a provable damagte.

Fixed date of delivery

You don’t have to allow an additional period, and the legal consequences are the same as stated above.

We all are participants of the economy.

Here is a handout about the very basic terms.

http://maryraab.wordpress.com/handouts/economy/

Types of fault
major faults: the buyer cannot use the goods in the ordinary way
minor faults: the goods can be used
repairable faults: the fault can be repaired
irrepairable faults: the fault cannot be repaired
visible faults: the faults can be seen by investigating the goods. The have to be claimed immediately after accepting the goods
invisible faults: these faults cannot be seen immediately when investigating the goods. They have to be claimed on discovery.

The legal possibilities for the buyer in Austria are:
major and irreparable faults
the buyer can cancel the contrackt
the buyer can claim exchange of goods

minor faults
the buyer can claim the repair of goods
the buyer can claim a reduction in pirce.

In case of a provable damage due to faulty goods, the buyer could additionaly ask for compensation.

The EU guideline to the warranty law means a clear improvement for Austrian consumers. It determines a two-year period for all
mobile consumer goods bought in the European Union (one year for second-hand purchase). If a fault occurs within this period, the
consumer has the following options:

He can claim repair or exchange of the product.
If this is not possible, he can insist on discount or cancellation of the contract.

The burden of proof of damage occurring within the first six months remains not with the buyer. The seller has to prove that he
sold the commodity according to the sales contract.
If the customer does not announce the damage or fault within two months after discovering the damage, he loses his claims.

According to David Mitrovica (Internet article on International Negotiation: http://www.cseg.ca/publications/recorder/2001/03mar/mar01-intl-negotiations.pdf)
team members preparing for an international negotiation should:

learn as much as possible about the foreign culture,
its negotiation patterns and
the style of negotiation with outsiders
approach the actual bargaining sessions with a wide range of options and alternatives

In initial meetings, negotiators should emphasise developing a relationship with their bargaining partners. During the discussions, negotiators should assume differences in negotiating style until similarity is proven.

Effective negotiators have high expectations and make high initial offers. They ask a lot of questions and make very many commitments. They search for synergetic solutions,  that means solutions in which both sides win.

In order to succeed, managers and firms need to have strong cross-cultural skills.

Negotiator’s global report card contains the following requirements
 competence 
 preparation
 synergistic approach (win-win) 
 cultural IQ
 adapting the negotiating process to the host country environment 
 patience
 listening 
 linguistic abilities
 using language that is simple and accessible 
 high aspirations
 personal integrity 
 building solid relationships

It is necessary to understand cultural differences and their impact on negotiating styles.Joint ventures, mergers and acquisitions and sales – crucial aspects are face-to-face negotiations. The proportion of foreign trade increases –  more negotiations between different countries and cultures. People need to know how to communicate with members of other cultures and recruitment practices abroad need to change.

Negotiation = process of persuading another person to change his ideas or behaviour, at least two partners with different viewpoints try to reach an agreement on matters of mutual interest. Becomes cross-cultural  –  parties involved belong to different cultures (do not share same ways of thinking and behaving)

Managers spend 50 % of their time negotiating. Styles of negotiation vary across cultures. Key aspects: amount and type of preparation, time on task versus interpersonal relationships, use of general principles versus specific details and number of people present and their influence (Americans like to give one negotiator complete control).

Negotiation is the preferred strategy to create win-win solutions. Businesspeople should consider selecting negotiation when: their power position is low (relative to their partner), the trust level is high, available time to explore need, resources and options, commitment is important to ensure success. Effective negotiators base their strategies on the characteristics of situations and people (but no guaranteed formula exists). Most important for international negotiators: good listening skills, orientation toward people, willingness to use team assistance, high self-esteem, high aspiration, attractive personality and credibility and influence.

Process is the single most important factor in predicting success or failure of negotiations. Effective process: managing the overall strategy, its stages and tactics used. Other aspects of negotiation process vary across cultures.