2. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved 13-1 Chapter 13 Consumer Stakeholders: Product and Service Issues 1 Consumer Stakeholders: Product and Service Issues Search the Web The American Society for Quality provides a web site with an aray of information on quality topics: www.asq.orgwww.asq.org

3. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved 13-2 Chapter 13 Consumer Stakeholders: Product and Service Issues 2 Chapter Thirteen Objectives Define quality and product safety issues Explain the role of the Consumer Product Safety Commission and the Food and Drug Administration Consider the concern about product liability, as well as strict liability, absolute liability, and market share liability Outline business’s responses to consumer stakeholders

4. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved 13-3 Chapter 13 Consumer Stakeholders: Product and Service Issues Chapter Thirteen Outline Two Central Issues: Quality and Safety Consumer Product Safety Commission Food and Drug Administration Business’s Response to Consumer Stakeholders Summary

5. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved 13-4 Chapter 13 Consumer Stakeholders: Product and Service Issues Introduction to Chapter Thirteen The chapter focuses on product quality and safety, product liability and tort reform.

6. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved 13-5 Chapter 13 Consumer Stakeholders: Product and Service Issues Quality and Safety Two Central Issues The Issue of Quality Driven by an increase in family income and intense global competition The Issue of Safety Driven by the public’s increasing concern with safety and risk-free products—and business’s responsibility to address this concern

7. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved 13-6 Chapter 13 Consumer Stakeholders: Product and Service Issues Quality Issues Performance Features Reliability Conformance Durability Serviceability Aesthetics Perceived quality Critical Dimensions of Product Quality

8. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved 13-7 Chapter 13 Consumer Stakeholders: Product and Service Issues Quality Issues Ethical Dimensions of Quality Contractual theory Due care theory Social costs view

9. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved 13-8 Chapter 13 Consumer Stakeholders: Product and Service Issues Safety Issues Historical View Caveat Emptor Caveat Vendor

10. Top 10 List of Safety Principles Build safety into product deign Do product safety testing for all foreseeable safety hazards Keep abreast of and implement latest developments in product safety Educate consumers about product safety Track and address your products’ safety performance Fully investigate product safety incidents Report product safety defects promptly If a defect occurs offer a comprehensive recall Work wit the CPSC to make sure your recall is effective Learn from mistakes – yours and others 13-9

11. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved 13-10 Chapter 13 Consumer Stakeholders: Product and Service Issues Product Liability Reasons for the Growing Concern... FIRST... Product liability has become a major issue because of the sheer number of cases where products resulted in injury, illness, or death and the amount of the financial award. SECOND... We have become an increasingly litigious society. THIRD…Rise in the strict liability doctrine

12. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved 13-11 Chapter 13 Consumer Stakeholders: Product and Service Issues Product Liability Extensions of the Strict Liability Absolute liability Market share liability –Delayed manifestation cases

13. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved 13-12 Chapter 13 Consumer Stakeholders: Product and Service Issues Product Liability Other Issues Product tampering and extortion Product liability reform –Tort law

14. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved 13-13 Chapter 13 Consumer Stakeholders: Product and Service Issues Consumer Product Safety Commission 1.Protect the public against unreasonable risks of injury associated with consumer products. 2.Assist consumers in evaluating product safety. 3.Develop uniform safety standards. 4.Promote research into preventing product- related deaths, illnesses, and injuries.

15. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved 13-14 Chapter 13 Consumer Stakeholders: Product and Service Issues Consumer Product Safety Commission Develop voluntary standards with industry Issue and enforce mandatory standards Ban a consumer product if public cannot be protected Recall a product or arrange for its repair Research potential product hazards Inform, educate and respond to consumers CPSC Risk Management

16. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved 13-15 Chapter 13 Consumer Stakeholders: Product and Service Issues Consumer Product Safety Commission Challenges Facing the CPSC Lack of corporate compliance Limited public access to key information Inadequate consumer notification Insufficient funding

17. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved 13-16 Chapter 13 Consumer Stakeholders: Product and Service Issues Food and Drug Administration Some major responsibilities... Regulate the labeling of foods Develop safety standards for drugs Conduct product recalls Premarket test new drugs Regulate safety of medical devices (implants, etc.)

18. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved 13-17 Chapter 13 Consumer Stakeholders: Product and Service Issues Business’s Response to Consumers Consumer Affairs Offices Establishing Consumer Affairs Offices Product Safety Offices Establishing Product Safety Offices Total Quality Management Programs Instituting Total Quality Management Programs Costumer Satisfaction Measurement Undertaking Costumer Satisfaction Measurement

19. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved 13-18 Chapter 13 Consumer Stakeholders: Product and Service Issues Business’s Response to Consumers Consumer Affairs Offices (CAO) Basic mission is to heighten management’s responsibilities to consumer stakeholders Essential functions –Establish a database –Audit programs –Recommend programs, policies and practices –Establish effective communications

20. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved 13-19 Chapter 13 Consumer Stakeholders: Product and Service Issues Business’s Response to Consumers CAO Factors for Success or Failure Proximity to CEO’s office Clear access to all information about the company’s customers and authority to create the information Availability of quantified information about consumers Accessibility to effective performance measures to evaluate all employees in the company

21. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved 13-20 Chapter 13 Consumer Stakeholders: Product and Service Issues Business’s Response to Consumers Product Safety Offices Need for Greater Organization 1.Complexity of products 2.Subtlety of hazards generated during product use 3.Coordination problems in large organizations

22. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved 13-21 Chapter 13 Consumer Stakeholders: Product and Service Issues Business’s Response to Consumers Levels at Which to Locate Product Safety Offices Divisional level Corporate level

23. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved 13-22 Chapter 13 Consumer Stakeholders: Product and Service Issues Business’s Response to Consumers Other Functions of Product Safety Offices Set the tone for the product safety effort Structure and enforce penalties Develop links to other quality and safety initiatives Assist with product safety litigation Assist the regulatory liaison Set up product safety committees Perform safety audits and tests Design contingency plans for product recalls

24. Total Quality Management 13-23

25. Total Quality Management 13-24

26. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved 13-25 Chapter 13 Consumer Stakeholders: Product and Service Issues Total Quality Management Sigma Six Version of TQM TQM on steroids –3.4 defects per million versus sigma four 6,000 defects per million

27. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved 13-26 Chapter 13 Consumer Stakeholders: Product and Service Issues Total Quality Management

28. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved 13-27 Chapter 13 Consumer Stakeholders: Product and Service Issues Absolute liability Consumer Product Safety Commission (CPSC) Contractual theory Delayed manifestation cases Due care theory Food and Drug Administration (FDA) Market share liability Product liability reform Six sigma Social costs Strict liability Tort reform Total quality management (TQM) Selected Key Terms