BUSINESS ETHICS AND CORPORATE SOCIAL RESPONSIBILITY

BUSINESS ETHICS The term business ethics refers to the system of moral principles and rules of conduct applied to business. This means that the business should be conducted according to certain self-recognized moral standards. Business, being a social organ, shall not conduct itself in a way detrimental to the interests of society and the business sector itself. A profession is bound by certain ethical principles and rules of conduct which reflect its responsibility, authority and dignity. The professionalisation of business management, should therefore, be reflected in the increasing acceptance of business ethics. NOTE: In the 1930s Rotary International developed the code of ethics that is still used extensions. It uses 4 questions that are called the 4 way of ethical behavior for any business forces Is it truth? Is the fair to all concerned? Will it build goodwill and friendship? Will it be beneficial to all concerned? LIST OF IMPORTANT ETHICAL PRINCIPLES THAT A BUSINESS SHOULD FOLLOW: 1. Do not deceive or cheat customers by selling substandard or defective products by under measurements or by any other means. 2. Do not resort to hoarding, black marketing or profiteering. 3. Do not destroy or distort competition 4. Ensure sincerity and accuracy in advertising, labeling and packaging. 5. Do not tarnish the image of competitors by unfair practices. 6. Make accurate business records available to all authorized persons. 7. Pay taxes and discharge other obligation promptly

8. Do not farm cartel agreements, even informal, to control production, price etc to the common detriment. 9. Refrain from secret kickbacks on payoffs to customers, suppliers, administrators, politicians etc. 10. Ensure payment of fair wages to and fair treatment of employees. ISSUES IN CORPORATE GOVERNANCE Corporate governance is defined as the process and structures by which business and affairs of corporate sector is directed and managed. The concept of corporate governance primarily hinges on complete transparency, integrity and accountability of the management. Corporate governance is concerned with the values, vision and visibility. It is about the value orientation of organization, ethical norms its performances, the direction of development and visibility of its performances and practices. Objectives 1. To build up an environment of trust and confidence amongst those having completing and conflicting interest. 2. To enhance shareholders value and protect the interest of other shareholders by enhancing the corporate performances and accountability. Transparency Accountability Investor protection Societal needs Value creation for stakeholders

ECONOMIC ROLE OF GOVERNMENT The government plays an important role in almost every national economy of world. Business fortunes and strategies are influenced by the economic characteristics

and economic dimension. The government normally plays four important roles in an economy. They are, 1. Regulatory Role Government regulation of the business may cover a broad spectrum extending form entry into business to the final results of business. The reservation of industries to small scale, public and co-operative sectors, licensing system etc., regulate the entry. Regulations of product mix, promotional activities etc., amount to regulation of conduct to business. The state also regulate relationship between enterprises. 2. Promotional Role The promotional role played by the government is very important is developed as well as in duping countries. In developing countries, where the infrastructural facilities for development are inadequate and entrepreneurial activities are scarce, the promotional role of the govt. assumes significance. The state will have to assume direct responsibility to build up and strengthen infrastructure such as power, transport, finance, marketing, institutions for training and other promotional activities. The promotional role of the state also encompasses the provisions of fiscal, monetary and other incentives and development of priority sectors and activities. 3. Entrepreneurial Role Entrepreneurial role includes establishing and operating business enterprises and bearing risks. A number of factors such as socio-political ideologies, dearth of private entrepreneurship, absence of inadequate competition in certain segments and resultant exploitations of consumers have contributed for the growth of state owned enterprises. 4. Planning role State plays a important role as planner. GLOBAL ENVIRONMENT

Globalization is an attitude of mind which views the entire world as a single market so that the corporate strategy is based on the dynamics of the global business environment. Globalization encompasses the following: 1. Expanding business globally 2. Giving up distinction between domestic and foreign market and developing global outlook of business. 3. To maximize profit 4. For growth

Essential conditions for globalization 1. Business freedom: There should not be necessary govt. restriction like import restriction, foreign investments etc. 2. Facilities: Enterprise can develop globally from home country bare depends on facilities available like the infrastructural facilities. 3. Govt. support: Govt support can encourage globalization, like infrastructural facilities, R & D support, financial market reforms. 4. Resources: It decides the ability of firm to globalize. Resourceful companies may find it easier to thrust ahead in global market. Resources include finance, R&D, company and grand image, HR etc. 5. Competitiveness: A firm may drive a competitive advantage from any one or more of the factors such as low costs and price, product quality, product differentiation, technology superiority, marketing strength etc.

How to go global? Important foreign market entry strategies 1. Exposting: Exporting the most traditional mode of entering global market. 2. Licensing & franchising: It involves minimal commitment of resources and effort on the part of international marketer, are easy way of entering foreign markets.

Finalizing is a form of licensing in which a parent company grants another independent entity the right to do business. 3. Contract manufacturing; a company doing international marketing contracts with firms in the foreign countries to manufacture the products while retaining the responsibility of marketing the product. 4. Management contracting: In this supplier brings together a package of skills that will provide an integrated service to clients without risk on owner. 5. Turnkey contracts A turnkey contracts is an agreement by seller to supply a buyer with a facility fully equipped and ready to be operated. 6. Wholly owned manufacturing facilities: It provides the firm with complete control over production and quality. It does not have risk in the development. 7. Assembly operations: Assembly facilities in foreign markets is very ideal when there are economies of scale in the manufacture. A when assembly operations are labour intensive and labour is cheap in foreign country. 8. Joint ventures: Joint venture is a very common strategy of entering foreign market. Any form of association which implies collaboration for more than a transitory period is a joint venture. A joint venture may brought about by a foreign investor buying an interest in a local company. 9. Third country location: Third country location is also an entry strategy, when there is no commercial transaction between two nations for some reasons, a firm in on of there nations which wants to enter the other market will have to operate third country base. 10. Mergers and acquisitions: It have very good market entry strategy as well as expansion strategy. It provides instant access to markets and distribution network. 11. Strategic alliances: It is also used as market entry strategy it is also known as coalition, this strategy seeks to enhance the long term competitive advantage of the firm by farming alliance with competitors. 12. Counter trade: It is a form of international trade in which certain export and import transaction are directly linked with each other.

Types of Mergers 1. Horizontal Merger: Takes place where the two margin companies products similar product in the some industry. E.g. in 1998 combination of Chrysler cooperation and similar sense to create Dainles Chrysler. 2. Vertical Merger: Occur when two firms each working at different stages in the production of the same good combine. E.g. General Motors acquisition of fisher body company (an auto parts manufacturer).