QUESTION PAGE

EVALUATE THE RATIONALE FOR MANAGEMENT TO STUDY BUSINESS ETHICS (100)

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1 INTRODUCTION
Business ethics is a very essential aspect of every organization, whether large or small. It is
crucial for management in an organization to study business ethics for reasons such as to limit
unlawful business practices, create better relations with employees, improve customer
satisfaction, as well as the profit value chain which clearly explains the collaboration b of
satisfied employees have on customer satisfaction.( Becker, C.U., 2018. Business ethics). In
addition, managers should study business ethics because it attracts investors to the
organization and generates trust. Given the mentioned reasons, one can argue that it is of
paramount importance for management to study and implement Business ethics.

2 DEFINITION OF TERMS
2.1 Rationale
It is the principles or reasons which explain a particular decision, course of action, or belief. (©
2022 Oxford University Press.)

2.2 Management
Management is the process of planning, decision-making, organizing, leading, motivating, and
controlling an organization's human resources, financial resources, physical resources, and
information resources efficiently and effectively to achieve organizational goals. It can be simply
defined as the process of dealing with or controlling things or people in an organization.
(Easterly-Smith, M 2021.)

2.3 Business Ethics

the moral principles that act as guidelines for the way a business conducts itself and its
transactions (Shaw, W.H., 2016. Business ethics: A textbook with cases. Cengage Learning.)

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3 DISCUSSION
3.1 Limit Unlawful business practices.
Unlawful business operations are those practices that are prohibited by the Law. Examples may
include employment discrimination, employment harassment; breach of a business contract
bribery, unfair competition, financial fraud, and theft. Business ethics directly influence the
operations of the business. Consequently, it is crucial for management to study business ethics
since it is the one that helps businesses in deciding what is wrong and what is right. These
ethics set certain rules and principles to be followed strictly by business, and their violation
leads to a penalty (De Bakker, F.G et al 2019). Implementation of these principles ensures that
the business does not indulge in any unfair practices like black marketing, providing misleading
advertisements, fraud in measures and weight, adulteration (Mahapatra, M.R. and Saputra, F.,
2021). Through business ethics works on providing better products to its customers at
reasonable prices. This is vital for an organization for the reason that business ethics helps the
organization in avoiding legal battles with employees, customers, or competitors.

3.2 Better Relation with Employees

An employee is defined as an individual hired by a Business to perform specific tasks and work,
under an employment contract, to get a salary or wage in return (Megha, S., 2016). Employees
are an important part of the business and necessary for the survival of the business. Business
ethics ensure that management should work for the welfare of employees working within their
organization. Managers are not only supposed to work to achieve organizational objectives
such as profit maximization and higher growth but should also focus on the people working
within the organization. These business ethics ensure that management provides better
monetary compensation and good working conditions to employees, active participation in
decision making, addressing complaints, and providing promotions as per their progress. (Reb,
J. et al R.S., 2019) This helps in maintaining a good relationship with employees which will in
turn have ripple effects on the organization as a whole.

When managers create good working relations with their employees, they earn trust from
them, and thus employee commitment and satisfaction increase and this leads to improved
quality of goods or services which will lead to increased revenue. Nonetheless, this author does
not advocate the improvement of the management-employee relationship simply for the
benefit of the financial bottom line. However, many scholars are pointing out that an increase
in employee satisfaction equals increased business success. The author finds this argument
reprehensible, in that humans should treat all living things with decency and respect without
regard for what type of profit the person may get in return. That being the case, if the manager
is genuine in developing good ethics, the data is overwhelmingly favorable in regards to the
payback. (Karnes, R.E., 2018.)

3.3 Improves Customer Satisfaction

Customer satisfaction refers to how happy customers feel about a certain product or service. In
other words, it can be expressed as the measurement of how well a business is able to meet
the expectations of the customer (McMurrian, R.C. and Matulich, E., 2016). The consumer is
termed as king in the market and is the one who decides the success or failure of every
business. Thus, it is of paramount importance that managers in organization study business
ethics because the business must fulfill the needs of its customers. In addition, business ethics
provides principles for business operations under which it is required to provide better quality
products at reasonable prices. It ensures that the business provides better customer support
and redressal of all complaints. This helps businesses in improving the satisfaction levels of their
customers. This customer satisfaction leads to higher levels of customer loyalty this then leads
to three very

profitable behaviors by customers. First, loyal customers purchase more from organizations
over a given period. Second, loyal customers repeat purchases from organizations on a more
frequent and longer period than do other customers. Third, loyal customers

refer other prospects for example friends, relatives, neighbors to the organizations they trust
and are highly satisfied with. Hence management that studies and implements business ethical
behaviors has the potential to generate sustained growth and higher revenues over a longer
period. (McMurrian, R.C. and Matulich, E., 2016.)
3.4 Value profit chain
The Value profit chain establishes relationships between profitability, customer loyalty, and
employee satisfaction, loyalty, and productivity authors of The service-profit chain (Hogreve, J.,
Iseke, A. and Derfuss, K., 2022) found strong correlations between three internal and
marketplace variables: customer loyalty and profit; employee loyalty and customer loyalty; and
employee satisfaction and customer satisfaction. When managers study and carefully
implement good ethics in the workplace, some of the results are high profitability and
increased revenue which is carefully explained by this model. These results come in place when
employees who are highly satisfied with their jobs are much more loyal to the organization and
far more productive in delivering high levels of quality service to customers. As a result of this
high level of service, the organization’s customers hold positive attitudes toward the company
exhibited in high levels of customer satisfaction. This high level of satisfaction is exhibited in
higher levels of loyalty. This high level of customer loyalty is expressed in customers’ behaviors
such as repeat purchases and referrals of additional customers. The result of this chain is long-
term and stable revenue growth and profitability

The following diagram (Figure 1.0) illustrates these relationships.

Employee
Loyalty Revenue

Business Internal Employee External Customer Customer

Ethics service satisfaction service satisfaction Loyalty
quality quality

Profitability
Employee
productivity

Figure 1.0 (Hogreve, J., Iseke, A. and Derfuss, K., 2022)

3.5 Attracts Investors
An investor is a person or an organization that invests money or capital in a business to gain
profitable returns, such as interest, income, or appreciation in value.

With suspicious and illegal investment on the rise, many investors are starting to insist that
companies they invest in are Ethical (Cianci, A.M et al 2019). This means treating their
employees with respect, creating healthy products, and services, and keeping away from
unethical business practices. When managers operate ethically create trust from Investors and
they tend to be attracted to organizations that have a good reputation.

4 CONCLUSION
While it is imperative for management to study business ethics, some managers, however

consider business ethics programs in their organizations to be very expensive activities that are
only societally rewarding (Ferrell, O.C. and Fraedrich, J., 2021). A more positive view, however,
is that there is a positive correlation between an organization’s ethical behaviors and activities
and the organization’s bottom line results. A reputation for ethical business activities can be a
major source of competitive advantage. High standards of organizational ethics can contribute
to profitability by reducing the cost of business transactions, building a foundation of trust with
stakeholders, contributing to an internal environment of

successful teamwork, and maintaining social capital that is part of an organization’s

marketplace image (McMurrian, R.C. et al 2016.)
5 REFERENCES
1. Becker, C.U., 2018. Business ethics: methods and application. Routledge.
2. Cianci, A.M., Clor-Proell, S.M. and Kaplan, S.E., 2019. How do investors
respond to restatements? Repairing trust through managerial reputation and
the announcement of corrective actions. Journal of Business Ethics, 158(2),
pp.297-312.
3. De Bakker, F.G., Rasche, A. and Ponte, S., 2019. Multi-stakeholder initiatives
on sustainability: A cross-disciplinary review and research agenda for
business ethics. Business Ethics Quarterly, 29(3), pp.343-383.
4. Easterby-Smith, M., Jaspersen, L.J., Thorpe, R. and Valizade, D., 2021.
Management and business research. Sage.
5. Ferrell, O.C. and Fraedrich, J., 2021. Business ethics: Ethical decision making
and cases. Cengage learning.
6. Hogreve, J., Iseke, A. and Derfuss, K., 2022. The service-profit chain:
Reflections, revisions, and reimaginations. Journal of Service Research, 25(3),
pp.460-477.
7. Karnes, R.E., 2018. A change in business ethics: The impact on employer-
employee relations. Journal of Business Ethics, 87(2), pp.189-197.
8. Mahaputra, M.R. and Saputra, F., 2021. Application of Business Ethics and
Business Law on Economic Democracy That Impacts Business Sustainability.
Journal of Law, Politic and Humanities, 1(3), pp.115-125.
9. McMurrian, R.C. and Matulich, E., 2016. Building customer value and
profitability with business ethics. Journal of Business & Economics Research
(JBER), 14(3), pp.83-90.
10. Megha, S., 2016. A BRIEF REVIEW OF EMPLOYEE ENGAGEMENT: DEFINITION,
ANTECEDENTS, AND APPROACHES. CLEAR International Journal of Research
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11. Reb, J., Chaturvedi, S., Narayanan, J. and Kudesia, R.S., 2019. Leader
mindfulness and employee performance: A sequential mediation model of
LMX quality, interpersonal justice, and employee stress. Journal of Business
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12. Shaw, W.H., 2016. Business ethics: A textbook with cases. Cengage Learning.