Link:
http://www.nytimes.com/2009/09/17/business/energy-environment/17green.html?ref=business
Summary:
This article is about concerns from consumers about the chemicals in household cleaning product. In many of such products, there are small amount of chemicals within which is not put on the label because the producers do not want to reveal to their competitors about what exactly is in their products, preventing the competitors to copy their products. However, although only a small amount of the “secret chemicals” is applied and no immediate effects of such chemicals are found, the consumers are concerned with the long term health effects of those small amount of chemicals.
Units:
Unit 1.3 Organizational Objectives; Unit 1.4 Stakeholders
Commentary:
This article deals with the ethical issue companies in a specific industry faces. In this case, the ethical option is to put the information about chemicals, which is of small amount and is secret that add a specialty to the product, on the label, but the compliance cost to follow this actions is to lose values added to the products. That's because if a company was to put the information about the chemical on to the label, the chemical, which may serve to some special functions that specialize the product, may be used by the company's competitors. Therefore the product lose the “specialness” from the chemical added, and thus the chemical's value added to the product is lost.
However, the consumers are concerned with what health effects does those chemicals do, especially in the long term. They even filed lawsuits against some of the companies in the household cleaning industry. In all, this is a stakeholders conflict between the internal stakeholders, such as the owners of the company and the managers, and the consumers. However, this conflict extends further than between these two stakeholders. The government and special interest groups of both sides, which are the industry association and the consumer group. This conflict thus turns out into a big fight.
In my opinion, if I were a company in household cleaning given this situation, I would take the ethical option despite the compliance cost of losing the “specialness” of the chemicals in the product. That's because I think in this industry, it is essential to be market-oriented, that is to fulfill the consumer's needs and wants since this industry gets profit totally from the consumers. Although this may give my competitors an advantage, if those competitors do not reveal their own secret chemicals they added to their products, consumers, whom are mostly also customers, will choose my products over theirs because I reveal the information. Therefore, I am essentially at fair grounds with the competitors. Thus, I would stick to the ethical option. Moreover, I would have gain status in being a socially responsible corporation.
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Cool article. If I am in the same position, I will also choose to reveal the chemical used, because customer safety should always be the priority of a company. Furthermore, revealing the product's formula might not be as devastating to a firm as it looks. Look at soft drink companies such as Coca Cola and Pepsi, they all showed their ingredients and yet they are still highly competitive. I think it takes more than just the ingredients to "steal the specialness" of the product, for example the way they mix the chemicals. Product differentiation is not the only way a company can add value to its product; ethical practices not only can boost staff morale but also gain a better reputation in the society. These advantages should be sufficient to compensate for the loss in product differentiation, as Jason mentioned.
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ReplyDeleteCool article Jason! I would also agree with the ethical stance of revealing chemicals used as it would increase consumer confidence when the product is being purchased and therefore resulting in more profit gained by the company. Furthermore, in regards to the compliance costs, I believe that it is necessary, because consumers ultimately determine the financial performance of a business and provides most of the revenue.
ReplyDeleteIn addition, I also agree with JL that revealing the product's chemicals may not be as devestating to the firm since the effectiveness of a firm's marketing of a product is actually the major factor in attracting consumers and that such ethical act can increase customer loyalty which is beneficial to the business
Interesting article Jason, I especially like how you chose an article that focuses on ethical problems companies may face rather then expansion and such. Your own personal decision and justification on the situation is also a good addition to your analysis.
ReplyDeleteLike the previous two posters, I would have agree with your choice on revealing the chemical names. Besides, huge companies like Procter & Gamble, owner of "Mr. Clean" (and products like "Bounty Paper Towels", "Crest Toothpaste", and amazingly Pringles Chips, thought you might like to know) have already created a renowned status with several years of marketing, i.e. the jingle, the mascot, the commercials etc. So even if other companies do create cheap spin-offs, it is a small compliance cost to pay to maintain ethical. It is also important for them to do so as questions do not surround simple problems, but concerns itself with huge issues, chemicals creating birth defects, asthma and fertility problems.
In most similar cases, it is almost certain that companies who are questioned about selling harmful products must forfeit their secrets or face even more problems from the press, pressure groups and even lawsuits-which your article states has happened already. When I researched the company "Procter & Gamble", I in fact found that they had dealt with several issues on problems with the product and environmental ethics. If a company with a such a reputation refuses to reveal its 'secret ingredients' controversy will, without a doubt, stir in the public its ethics on exploitation of customer welfare.