Relations between Suppliers - Distributors - Customers

Relations between Suppliers - Distributors - Customers
Core Competencies Resources and superior capabilities that are sources of competitive advantage over a firm’s rivals Strategy An integrated and coordinated set of actions taken to exploit core competencies and gain competitive advantage Business-level Strategy Providing value to customers and gaining competitive advantage by exploiting core competencies in individual product markets Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Mission: To provide customers with the right parts at the right time in the right place at the lowest cost and the best quality Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Our Success Depends on Delivering:
The Challenges We Face Maintaining high quality as volume increases Hyper-competitive market; Lots of good products High customer expectations Our Success Depends on Delivering: Quality/Value Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Supply Chain continues to evolve based on The Toyota Way and TPS:
Supply Chain Overview Supply Chain continues to evolve based on The Toyota Way and TPS: 1. Customer First 2. Respect for humanity 3. Continuous Improvement (Kaizen) Key Point Now let’s review the NAPO supply chain in detail using the map Please refer to your handout as I trace the flow of information and materials Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Supply Chain Philosophy
Customer First: Customer-driven supply chain Respect for Humanity: Environmentally responsible and safety first Collaboration with business partners Associate engagement Continuous Improvement (Kaizen) Process improvements through PDCA cycle with associate engagement Logistics Quality Accuracy and damage reduction Lead-Time Consistency and reduction (sequential integrity) Cost Maximizing use of cubic space Elimination of waste and incidental work Associate Development Growing Sales Volume Increasing Complexity Key Points: Review the basic philosophy of NAPO supply chain and its business standards (basic rules) Dealers should order based on “max-max” ordering to ensure that pure market demand is passed onto the supply chain. The pure market demand is the “pull” which drives the supply chain. The integrity of the pull is critical as it is the reflection of “Customer First” thinking and the customer demand signal is what drives the TPS pull system. “Max-max” effectively means that every sale generates an order…this would be pure market demand Distributor orders or orders from PDC’s should be pure reflection of the pure market demand. This is made possible because PDC’s do not manipulate the customer orders. Parts Centers play a very important role of being the “shock absorber” for the supply chain. In addition to carrying slower moving parts, they must create “heijunka” for the supply chain by absorbing fluctuations of the pure market demand. By doing so, they create heijunka, which is effectively means an even flow (example is on-ramp meters for freeways). Parts Centers help suppliers and their ability to produce service parts. Suppliers are expected to maintain flexibility to absorb some demand fluctuations. They are also expected to comply by meeting our Delivery Due Date thereby ensuring that parts TMS orders are shipped on time per TMS request. This supports heijunka at the Parts Center as well. Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

People Strengthen Associates Expand TPS Knowledge & Application
Lead Under the Toyota Way Provide Opportunity and Learning Improve Two-Way Communication Associates made Toyota stronger in SG1, and need to keep moving the needle in SG2. Give them what they need to keep the momentum moving forward We’ll do this by… Expanding TPS Knowledge & Application Lead Under the Toyota Way Opportunity and Training Provide developmental opportunities – Including increased Kaizen and TPS Certification activities Improve Two-Way Communication Outlook Meeting, Yuki mentioned the 3 C’s (Communication, Consideration and Cooperation), highlighted that Communication is mostly about listening People Associate Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

15% Reduction Lead-time & Days of Supply
Process Supply Chain Leadtime Reduction Vendor (NA/JP) PC O/H Inventory PDC O/H Inventory PC Fill Transit PDC Bin Vendor Fill PC Bin NAPO calculates lead-time as the sum of On Hand Days of Supply, Operational Lead-time and Transit lead-time. The SG2 target is to reduce this by 10%. Only 10% you might ask? Is that aggressive? Yes, it is when you consider that transit times are largely fixed. We know that our Logistics Partners deal with the reality of congested ports, rail yards and increasing truck volume on a road network that is not increasing. Our strategy is to focus on identifying ‘dead’ time where lack of information stops the physical flow of parts. We need your help. Many times it will be our Logistics Partners who see a problem before we do. Please partner with us to improve the flow of material and information, especially at points of interaction with suppliers or distributors. 15% Reduction Lead-time & Days of Supply Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Early does not equal “on-time”! 15% Reduction Lead-time Variability
Preparedness Supply Chain Variability Vendor (NA/JP) PC O/H Inventory PDC O/H Inventory PC Fill Transit PDC Bin Vendor Fill PC Bin Now let’s turn our focus to Preparedness or what we’ll call, “Variability”. This is how we will help manage the impact of growth on our inventory. Less variability, or “Heijunka”, which means smooth flow will provide a strong foundation for minimizing the need for inventory, space, equipment and processing costs. For NAPO, Variability is the number of days before or after vendor shipments arrive compared with the average. That means we must have sufficient inventory to cover the worst possible variation. Real world example, say if it takes you on average 30 minutes to get to work. Sometimes it takes you 20 minutes and sometimes it takes you 40 minutes. So what do you do to ensure that you always arrive on time? You leave 40 minutes before work. In other words, you plan for the worst. However, what if you found a different route that consistently to 30 minutes? You’d take it wouldn’t you. Sure, it is never as fast as the 20 minutes it sometimes takes to get to work, but you would shave 10 minutes from the 40 minutes you normally plan for. In SG2 we want to reduce variability by 10%. Basic policy: high frequency / small lot. Order unit to match 1 day’s volume. This will increase order lines, but optimize NAPO operations Early does not equal “on-time”! 15% Reduction Lead-time Variability Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Rising Volume Associate Creativity Lead Time Reduction
I mentioned the 3 Ps of People, Process and Preparedness. Let me show you how they interact to Increase Supply Chain Velocity to create the capacity to absorb future volume growth. To absorb rise in parts volume, we need to increase our supply chain “velocity” which means simply the “rate at which parts move through our supply chain”…notice we’re NOT asking people to work faster, instead we are trying to minimize need for inventory space Speeding up supply chain means less inventory on shelves and will open up more storage space in our facilities We will do this by engaging our Associates and Logistics Partners creativity to reduce standard lead-times, which will reduce the amount of cycle stock inventory necessary to cover normal demand. Next we’ll need your ideas to reduce “lead-time variability” which is how much our lead-time fluctuates on a daily basis. That means levelizing through increasing Heijunka (smooth flow). Reducing variability will allow a reduction in the amount of Safety Stock inventory. Together, a reduction in lead-time and variability will take inventory off the shelf, and make room to absorb future volumes with minimal impact to operations. Let’s take a look at how together we can build a bridge to the future… Lead Time Reduction Variance Reduction Supply Chain Velocity Cycle Stock Inventory Reduction Safety Stock Inventory Reduction More Space Capacity Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Reduces Variability 1 WEEK
Small Lot / High Frequency Increases Velocity DEALER Supplier PC PDC PDC PC Splr Dlr Shorten the Chain Reduces Variability 1 WEEK 1 DAY Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Why are we making these changes?
Sales Volume (UIO) Size of Parts Proliferation More Piece Volume Bigger Truck Parts More Part Numbers More Inventory Bigger Locations More Locations System, Space and Storage Challenges! Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Prepare Distribution Network to Respond to Growth & Complexity
Strategic Drivers: Prepare Distribution Network to Respond to Growth & Complexity Develop Associates Meet Rising Customer Expectations Globalize Supply Chain Reduce Impact on Environment Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Customers: Business-Level Strategic Issues
Customers are the foundation of successful business-level strategy Who will be served by the strategy? What needs those target customers have that the strategy will satisfy? How those needs will be satisfied by the strategy? Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Customers: Who, What, Where
Firms must manage all aspects of their relationship with customers Reach: firm’s success and connection to customers Richness: depth and detail of two-way flow of information between the firm and the customer Affiliation: facilitation of useful interactions with customers Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Determining the Customers to Serve
Customer Needs—Who? Determining the Customers to Serve Customers Industrial Markets Consumer Market Segmentation Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Basis for Customer Segmentation
Consumer Markets 1. Demographic factors (age, income, sex, etc.) 2. Socioeconomic factors (social class, stage in the family life cycle) 3. Geographic factors (cultural, regional, and national differences) 4. Psychological factors (lifestyle, personality traits) 5. Consumption patterns (heavy, moderate, and light users) 6. Perceptual factors (benefit segmentation, perceptual mapping) Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Customer Needs—What? Customer Needs to Satisfy
Customer needs are related to a product’s benefits and features Customer needs are neither right nor wrong, good nor bad Customer needs represent desires in terms of features and performance capabilities Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Customer Needs—How? Determining the Core Competencies Necessary to Satisfy Customer Needs Firms use core competencies to implement value creating strategies that satisfy customers’ needs Only firms with capacity to continuously improve, innovate and upgrade their competencies can expect to meet and/or exceed customer expectations across time Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Types of Potential Competitive Advantage
Achieving lower overall costs than rivals Performing activities differently (cheaper process) Possessing the capability to differentiate the firm’s product or service and command a premium price Performing different (valuable) activities Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Two Targets of Competitive Scope
Broad Scope The firm competes in many customer segments Narrow Scope The firm selects a segment or group of segments in the industry and tailors its strategy to serving them at the exclusion of others Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

How to Obtain a Cost Advantage
Determine and control Reconfigure, if needed Cost Drivers Value Chain Alter production process New raw material Change in automation Forward integration New distribution channel Backward integration New advertising media Change location relative to suppliers or buyers Direct sales in place of indirect sales Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Examples of Value-Creating Activities Associated with the Cost Leadership Strategy
Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Value-Creating Activities for Cost Leadership
Cost-effective MIS Few management layers Simplified planning Consistent policies Effecting training Easy-to-use manufacturing technologies Investments in technologies Finding low cost raw materials Monitor suppliers’ performances Link suppliers’ products to production processes Economies of scale Efficient-scale facilities Effective delivery schedules Low-cost transportation Highly trained sales force Proper pricing Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Cost Leadership Strategy: New Entrants
The Threat of Potential Entrants Can frighten off new entrants due to: Their need to enter on a large scale in order to be cost competitive The time it takes to move down the learning curve Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Cost Leadership Strategy: Suppliers
Bargaining Power of Suppliers Can mitigate suppliers’ power by: Being able to absorb cost increases due to low cost position Being able to make very large purchases, reducing chance of supplier using power Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Cost Leadership Strategy: Buyers
Bargaining Power of Buyers Can mitigate buyers’ power by: Driving prices far below competitors, causing them to exit, thus shifting power with buyers back to the firm Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Cost Leadership Strategy: Substitutes
Product Substitutes Cost leader is well positioned to: Make investments to be first to create substitutes Buy patents developed by potential substitutes Lower prices in order to maintain value position Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Cost Leadership Strategy: Competitors
Rivalry with Existing Competitors Due to cost leader’s advantageous position: Rivals hesitate to compete on basis of price Lack of price competition leads to greater profits Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Cost Leadership Strategy (cont’d)
Competitive Risks Processes used to produce and distribute good or service may become obsolete due to competitors’ innovations Focus on cost reductions may occur at expense of customers’ perceptions of differentiation Competitors, using their own core competencies, may successfully imitate the cost leader’s strategy Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Differentiation Strategy
An integrated set of actions taken to produce goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them Nonstandardized products Customers value differentiated features more than they value low cost Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

How to Obtain a Differentiation Advantage
Control if needed Reconfigure to maximize Cost Drivers Value Chain Lower buyers’ costs Raise performance of product or service Create sustainability through: Customer perceptions of uniqueness Customer reluctance to switch to non-unique product or service Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Value-Creating Activities and Differentiation
Highly developed MIS Emphasis on quality Worker compensation for creativity/productivity Use of subjective performance measures Basic research capability Technology High quality raw materials Delivery of products High quality replacement parts Superior handling of incoming raw materials Attractive products Rapid response to customer specifications Order-processing procedures Customer credit Personal relationships Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Examples of Value-Creating Activities Associated with the Differentiation Strategy
SOURCE: Adapted with the permission of The Free Press, an imprint of Simon & Schuster Adult Publishing Group, from Competitive Advantage: Creating and Sustaining Superior Performance, by Michael E. Porter, 47. Copyright © 1985, 1998 by Michael E. Porter. Figure 4.3 Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Differentiation Strategy: New Entrants
The Threat of Potential Entrants Can defend against new entrants because: New products must surpass proven products New products must be at least equal to performance of proven products, but offered at lower prices Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Differentiation Strategy: Suppliers
Bargaining Power of Suppliers Can mitigate suppliers’ power by: Absorbing price increases due to higher margins Passing along higher supplier prices because buyers are loyal to differentiated brand Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Differentiation Strategy: Buyers
Bargaining Power of Buyers Can mitigate buyers’ power because well differentiated products reduce customer sensitivity to price increases Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Differentiation Strategy: Substitutes
Product Substitutes Well positioned relative to substitutes because Brand loyalty to a differentiated product tends to reduce customers’ testing of new products or switching brands Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Differentiation Strategy: Competitors
Rivalry with Existing Competitors Defends against competitors because brand loyalty to differentiated product offsets price competition Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Competitive Risks of Differentiation
The price differential between the differentiator’s product and the cost leader’s product becomes too large Differentiation ceases to provide value for which customers are willing to pay Experience narrows customers’ perceptions of the value of differentiated features Counterfeit goods replicate differentiated features of the firm’s products Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Focus Strategies An integrated set of actions taken to produce goods or services that serve the needs of a particular competitive segment Particular buyer group (e.g. youths or senior citizens Different segment of a product line (e.g. professional craftsmen versus do-it-yourselfers Different geographic markets (e.g. East coast versus West coast) Types of focused strategies Focused cost leadership strategy Focused differentiation strategy To implement a focus strategy, firms must be able to: Complete various primary and support activities in a competitively superior manner, in order to develop and sustain a competitive advantage and earn above-average returns Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Factors That Drive Focused Strategies
Large firms may overlook small niches. A firm may lack the resources needed to compete in the broader market A firm is able to serve a narrow market segment more effectively than can its larger industry-wide competitors Focusing allows the firm to direct its resources to certain value chain activities to build competitive advantage Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Information Networks Link companies electronically with their suppliers, distributors, and customers Facilitate efforts to satisfy customer expectations in terms of product quality and delivery speed Improve flow of work among employees in the firm and their counterparts at suppliers and distributors Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Risks of the Integrated Cost Leadership/ Differentiation Strategy
Often involves compromises Becoming neither the lowest cost nor the most differentiated firm Becoming “stuck in the middle” Lacking the strong commitment and expertise that accompanies firms following either a cost leadership or a differentiated strategy Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Ethics and Social Responsibility
Explain the relationship between ethics and the law Discuss why it is important to behave ethically Differentiate between the claims of the different stakeholder groups that are affected by managers and their companies actions Describe four rules that can be used to help companies and their managers act in ethical ways Identify the four main sources of managerial ethics Distinguish between the four main approaches toward social responsibility that a company can take Ethical Dilemma quandary people find themselves in when they have to decide if they should act in a way that might help another person even though doing so might go against their own self-interest Ethics and Social Responsibility McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.

The Nature of Ethics Ethics
The inner-guiding moral principles, values, and beliefs that people use to analyze or interpret a situation and then decide what is the “right” or appropriate way to behave There are no absolute or indisputable rules or principles that can be developed to decide if an action is ethical or unethical Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Ethics and the Law Neither laws nor ethics are fixed principles

Ethics and the Law Ethical beliefs lead to the development of laws and regulations to prevent certain behaviors or encourage others Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Ethics and the Law Laws can change or disappear as ethical beliefs change Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Changes in Ethics Over Time
Managers must confront the need to decide what is appropriate and inappropriate as they use a company’s resources to produce goods and services Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Question? Who has a claim on a company’s resources? Employees
Customers Suppliers Stakeholders The correct answer is “D”, stakeholders. A, B, & C are types of stakeholders and are partially correct answers. See next slide for definition of stakeholder. Students should be able to discuss different types of stakeholders and why each has a claim on resources. Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Stakeholders and Ethics
people and groups affected by the way a company and its managers behave supply a company with its productive resources and have a claim on its resources Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Stakeholders and Ethics
When the law does not specify how companies should behave, managers must decide what is the right or ethical way to behave toward the people and groups affected by their actions Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Types of Company Stakeholders

Stockholders Want to ensure that managers are behaving ethically and not risking investors’ capital by engaging in actions that could hurt the company’s reputation Want to maximize their return on investment Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Managers Responsible for using a company’s financial capital and human resources to increase its performance Have the right to expect a good return or reward by investing their human capital to improve a company’s performance Frequently juggle multiple interests Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Managers Problem has been that in many companies corrupt managers focus not on building the company’s capital and stockholder’s wealth but on maximizing their own personal capital and wealth Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Discussion Question: Managers
Is it ethical for managers to receive vast amounts of money from their companies? Yes No Sometimes Never This question can be used to discuss basic compensation, severance packages, “golden parachutes”, and retirement benefits. Students may discuss what level of compensation is okay (or ethical). Retirement benefits received at GE by Jack Welch are appropriate to discuss. Did his success give him the right to more benefits than a retiring VP? Ask students if they were the recipient, would they turn down money/benefits if offered because of their ethical position. Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Employees Companies can act ethically toward employees by creating an occupational structure that fairly and equitably rewards employees for their contributions Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Suppliers and Distributors
Suppliers expect to be paid fairly and promptly for their inputs Distributors expect to receive quality products at agreed-upon prices Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Vendor Conduct Gap’s Code of Vendor Conduct

Customers Most critical stakeholder
Company must work to increase efficiency and effectiveness in order to create loyal customers and attract new ones Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Community, Society, and Nation
Physical locations like towns or cities in which companies are located A community provides a company with the physical and social infrastructure that allows it to operate A company contributes to the economy of the town or region through salaries, wages, and taxes Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Ethical Decision Making
Figure 4.3 Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Question? Which ethical decision rule produces the greatest good for the greatest number? Utilitarian Rule Moral Rights Rule Justice Rule Practical Rule The correct answer is “A” – Utilitarian rule. See next slide for definition. Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Ethical Decision Models
Utilitarian Rule Decision that produces the greatest good for the greatest number How do you measure the benefits and harms that will be done to each stakeholder group? How do you evaluate the rights and importance of each group? Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Effects of Ethical/Unethical Behavior

Moral Rights rule Decision that best maintains and protects the fundamental or inalienable rights and privileges of the people affected by it Justice rule Decision that distributes benefits and harms among people and groups in a fair, equitable, or impartial way Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Practical rule - Decision that a manager has no hesitation about communicating to people outside the company because the typical person would think it is acceptable Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Practical Decision Model
Does my decision fall within the acceptable standards that apply in business today? Am I willing to see the decision communicated to all people and groups affected by it? Would the people with whom I have a significant personal relationship approve of the decision? Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Why should managers behave ethically?
The relentless pursuit of self-interest can lead to a collective disaster when one or more people start to profit from being unethical because this encourages other people to act in the same way Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Trust and Reputation Trust – willingness of one person or group to have faith or confidence in the goodwill of another person Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Trust and Reputation Reputation – esteem or high repute that individuals or organizations gain when they behave ethically Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Determinants of Ethics

Societal Ethics Standards that govern how members of a society should deal with one another in matters involving issues such as fairness, justice, poverty, and the rights of the individual People behave ethically because they have internalized certain values, beliefs, and norms Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Occupational Ethics Standards that govern how members of a profession, trade, or craft should conduct themselves when performing work-related activities Medical & legal ethics Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Individual Ethics Personal standards and values that determine how people view their responsibilities to other people and groups How they should act in situations when their own self-interests are at stake Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Organizational Ethics
Guiding practices and beliefs through which a particular company and its managers view their responsibility toward their stakeholders Top managers play a crucial role in determining a company’s ethics Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Social Responsibility
Way a company views its duty or obligation to make decisions that protect, enhance, and promote the welfare and well-being of stakeholders and society as a whole Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Approaches to Social Responsibility

Obstructionist approach – Companies choose not to behave in a social responsible way and behave unethically and illegality Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Defensive approach – companies and managers stay within the law and abide strictly with legal requirements but make no attempt to exercise social responsibility Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Accommodative approach – Companies behave legally and ethically and try to balance the interests of different stakeholders against one another so that the claims of stockholders are seen in relation to the claims of other stakeholders Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Proactive approach – Companies actively embrace socially responsible behavior, going out of their way to learn about the needs of different stakeholder groups and utilizing organizational resources to promote the interests of all stakeholders Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Why Be Socially Responsible?
Demonstrating its social responsibility helps a company build a good reputation If all companies in a society act socially, the quality of life as a whole increases Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Role of Organizational Culture
Ethical values and norms help organizational members: Resist self-interested action Realize they are part of something bigger than themselves Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Ethics Ombudsman Responsible for communicating ethical standards to all employees Designing systems to monitor employees conformity to those standards Teaching managers and employees at all levels of the organization how to appropriately respond to ethical dilemmas Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Obligations of member states
Competent Authorities FPS Employment, Labour and Social dialogue FPS Economy, SMEs, Self-employed and Energy Central Contact Point FPS Mobility and Transport Consumer Safety Commission FPS Health, Food Chain Safety and Environment FPS Finance Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Obligations of member states Competent Authorities

Obligations of member states Ext. experts and mediation
Consumers Industry Authorities RAPEX Advisory commissions Central Contact Point Consumers, industry, notified bodies ... Ext. experts and mediation Market surveillance Product control Follow up Administration Market surveillance by the authorities Commercial Economics Market System (suppliers, distributors, customers) Ethics and Social Responsibility

Relations between Suppliers - Distributors - Customers

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