COMMERCIAL ETHICS

• Related question:
  •   You bought a good for five hundred naira and sold it for five thousand naira. Critique this action under commercial ethics.
  
  
  What is Commercial Ethics?
  Commercial/business ethics is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and entire organizations. Commercial ethics are some of business practices that respect moral, social and legal issues within business, society and government; and that look for the well-being of the society as a whole. Business ethics reflects the philosophy of business, one of whose aims is to determine the fundamental purposes of a company. Hence, if a company's purpose is to maximize shareholder returns, then sacrificing its profits to other concerns is a violation of its fiduciary responsibility.
  Commercial ethics can be ambiguous, with no clear legal framework to guide the international businessman. Whilst it may seem logical that ethical conventions for doing business will be the same throughout the world, moral standards do vary considerably across different cultures. This can make it very difficult to make ethical decisions when running a business as an expatriate. Nevertheless, maintaining a high standard of business ethics is crucial for any company regardless of the local laws.
  An increasing number of companies do require employees to attend seminars regarding business conduct, which often include discussion of the company's policies, specific case studies, and legal requirements. Some companies even require their employees to sign agreements stating that they will abide by the company's rules of conduct. As part of more comprehensive compliance and ethics programs, many companies have formulated internal policies pertaining to the ethical conduct of employees. They are generally meant to identify the company's expectations of workers and to offer guidance on handling some of the more common ethical problems that might arise in the course of doing business. It is hoped that having such a policy will lead to greater ethical awareness, consistency in application, and the avoidance of ethical disasters.
  Furthermore, many companies are assessing the environmental factors that can lead employees to engage in unethical conduct. A competitive business environment may call for unethical behavior. For example, lying has become expected in fields such as trading. But, not everyone supports corporate policies that govern ethical conduct. Some claim that ethical problems are better dealt with by depending upon employees to use their own judgment. Practical examples of breaching commercial ethics are; stealing of a brand name or similar brand name, copying the design of a competitor, evading taxes and legal formalities, putting a similar business near that of a competitor (ex. same street), producing a significant pollution or making the environment toxic for people to be in the same area of the business.
  
  
  Our Critique
  Concerning the ethical validation of buying a good for five hundred naira and selling it for five thousand naira, there is no particular response, as it all depends on the circumstances involved. Nevertheless, in giving our response, we would like to begin by referring to a concept called “bait and switch”.
  Bait-and-switch is a form of fraud used in retail sales but also employed in other contexts. First, customers are "baited" by merchants' advertising products or services at a low price, but when customers visit the store, they discover that the advertised goods are not available, or the customers are pressured to “switch” by sales people to consider similar, but higher priced items. The intention of the bait-and-switch is to encourage purchases of substituted goods, making consumers satisfied with the available stock offered, as an alternative to a disappointment or inconvenience of acquiring no goods (or bait) at all. It suggests that the seller will not show the original product or service advertised but instead will demonstrate a more expensive product or a similar product with a higher margin.
  Bait-and-switch tactics are frequently used in airline and air travel advertising. Hotels widely use the form of bait-and-switch tactics known as 'resort fees'. They first attract customers by advertising the lower price (which appears on all promotional materials and rate comparison engines), and charge customers the mandatory "resort fee" when they arrive for check-in. Home service companies such as in the carpet cleaning, air conditioning, and security system industries often use bait-and-switch. Real Estate Brokers and Agents often advertise themselves as buyer agents without disclosing that they may not be able to provide that service if they work for a brokerage that lists homes and represents home sellers.
  Using diamonds as an example, most people suggest setting aside two to three months of one’s salary in order to pay for a diamond engagement ring. And “De Beers”, the world's leading diamond company, goes out of its way to tell you that a diamond is a rare thing. But, diamonds are made from carbon, which however, is one of the most abundant elements on the planet. As a monopoly, De Beers does not just control the supply of diamonds, they also create the demand. Their advertising campaigns have solidified the image of diamonds and marriage in the public's mind. People rarely sell diamonds back because they see them as family heirlooms. On average, a high-quality engagement ring can cost $3,000 to $4,000. Although, “De Beers”, is monopolizing the market, it is very profitable for the shareholders; and the aim of business is to make profit.
  Furthermore, there are many reasons for buying low and selling high. We think putting the commodity up for that price is a way of putting the item on hold. It can also be a way of making sure the items don't sell. Say you are heading out of town and can only take certain items with you while you need to leave others behind; one can just up the price ten times over to make sure the items would not sell while one is away, then readjusted the listing after one returns. So, instead of taking the product listing down, one can increase the price, knowing that no one will touch it, and then when one is really ready to sell the commodity, simply edit the price to the normal price.
  I am sure that unless a customer is utterly "desperate" to get that item, and of course, there are probably quite a few desperate people out there, this is very good for the business and its owner in terms of profit. For example, some students, if it meant repeating a class, would probably spend N25, 000 for a textbook considering that failure of that class could mean trouble.  Also, I have seen DVDs go for over N20, 000. This usually happens if the item is still in print, but hard to find in a retail store or through online retailers, therefore, some smart reseller will try to take advantage and sell it for a very inflated price. Hence, sellers use repricers to gain an advantage over those who do not. As far as I'm concerned there is nothing unfair or unethical about this.
              In support of this, referring back to the bait and switch method of commercial sales, in the United States, courts have held that the person using a bait-and-switch operation may be subject to a lawsuit by customers for false advertising, and can be sued for trademark infringement by competing manufacturers, retailers, and others who profit from the sale of the product used as bait. However, no cause of action will exist if the seller is capable of actually selling the actual goods advertised, but aggressively pushing a competing product. Likewise, advertising a sale while intending to sell out, a loss-leading item advertised is legal in the United States. The seller can escape liability if they make clear in their advertisements that quantities of items for which a sale is offered are limited. But, in England and Wales, bait and switch is banned under the Consumer Protection from Unfair Trading Regulations 2008. Breaking this law can result in a criminal prosecution, an unlimited fine and two years in jail. In Canada, this tactic is illegal under the Competition Act.
  Finally, now, for those faced with a serious ethical dilemma or left unsure as to whether this business practice is acceptable, this simple checklist is designed to help:
  •   Is access to fair pay and safe working conditions at risk?
  •   Is the practice illegal in one’s country?
  •   Does it conflict with your corporation’s policy?
  •   If it were reported in the news, would it adversely affect your company’s reputation?
  If the answer is YES to any of these questions, it may be wise and ethical to not apply such a policy in one’s business. Hence, in conclusion, the validity of a commercial action such as buying a good for five hundred naira and selling it for five thousand naira is relative. It depends on many factors as explained herein.
  
  
  
  
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