1. Strategy and
Strategic
Management: An
overview
Global Business Consultants &
Partners Training Courses
Copyright 2020 Global Business Consultants

2. Chapter 4. Strategy
Development
Lesson 4: The Ethics Test

3. “A winning strategy must fit the company’s
external and internal situation, build
sustainable competitive advantage, and
improve company performance and be
based on awareness of the lens through
which it is perceived.”
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4. The Ethics
test
A strategy is only ethical if:
 It does not entail actions and behaviours that
cross the line from “should do” to “should not
do”.
 It allows management to fulfil its ethical duties
to all stakeholders.

5. The Ethics
test
Business Ethics.
 The school of ethical universalism holds that the
most fundamental conceptions of right and wrong
are universal and apply to members of all societies,
all companies and all business people.
 The school of ethical relativism holds that differing
religious beliefs, customs and behavioral norms
across countries and cultures give rise to multiple
sets of standards concerning what is ethically right or
wrong. These differing standards mean that whether
business-related actions are right or wrong depend
on the prevailing local ethical standards.

6. The Ethics
test
Business Ethics.
 Examples of ethical dilemmas facing many companies
include:
 The use of underage labour.
 The payment of bribes and kickbacks.
 Basing ethical standards on ethical relativism is
problematic for multinational companies.

7. The Ethics
test
Business Ethics.
 Apart from the “the business of business is business,
not ethics” kind of thinking apparent in many high
profiled business scandals, three other main drivers
of unethical business behavior standout.
 Faulty oversight, enabling the unscrupulous pursuit of
personal gain and self-interest.
 Heavy pressures on company managers to meet or
beat short-term performance targets.
 A company culture that put profitability and business
performance ahead of ethical behavior.

8. The Ethics
test
Business Ethics.
 There two reasons why a company’s strategy should
be ethical:
 Because a strategy that is unethical is morally wrong
and reflects badly on the character of the company’s
personnel.
 Because an ethical strategy is good business and
serves the self-interest of shareholders.

9. The Ethics
test
Business Ethics.
 Companies incur cost when ethical wrongdoing is
discovered:
 Variable Costs. Government fines and penalties, civil
penalties arising from class-action lawsuits aimed at
punishing the company for its offense and the harm
done to others, and the costs to shareholders in the
form of lower stock price (and possibly lower
dividends).
 Internal Administrative Costs. Legal and investigative
costs incurred by the company, the costs of providing
remedial education and ethics training to company
personnel.

10. The Ethics
test
Business Ethics.
 Companies incur cost when ethical wrongdoing is
discovered:
 Intangible or Less Visible Costs. Customer defections,
loss of reputation, lost employee morale and higher
degrees of employee cynicism, higher employee
turnover, higher recruiting costs and difficulty in
attracting talented employees, adverse effects on
employee productivity, and the costs of complying
with often harsher government regulation.

11. The Ethics
test
Business Ethics.
 An ethical framework includes Corporate Social Responsibility
which concerns a company’s duty to operate in an honorable
manner, provide good working conditions for its employees,
encourage workforce diversity, be a good steward of the
environment and support philanthropic endeavors in local
communities where it operates and in society at large.
 The triple bottom line is another ethical framework that refers
to a company’s performance in three realms: economic, social
and environmental.

12. Congratulations! You’ve completed lesson .
Recap: In this lesson you learned that Ethics concerns standards
of right and wrong. You learned that Business ethics concerns the
application of ethical principles to the actions and decisions of
companies and the conduct of personnel. You also learned that
Corporate Social Responsibility and the Triple Bottom Line
performance measures are good ethical frameworks.
Awesome work!
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