‘The Implications of Ethical Behaviour for a Business and its
Stakeholders’ (P2)
In this section of the assignment I will be explaining how Tesco and its stakeholders have
been affected by the business’s decision to conduct its business activities ethically.
Making ethical considerations in business is not just important for developing a positive
public image for the business. It can also help the company avoid lawsuits and the
potential consequences related to them, such as fines and negative media coverage. The
main implication of any business operating ethically is that it will cost them and take time to
build up a good ethical behaviour within the business. As mentioned before, Tesco is a
British multinational company that sells groceries and general merchandise and is the
biggest supermarket chain in the UK by market share which means that they have more
responsibilities.
Ethical Implications for Tesco
For Tesco, being ethical means applying principles of honesty and fairness to relationships
with co-workers and customers. Hence why behaving ethically can help Tesco to build
customer loyalty, avoid legal problems and attract and retain talented employees.
Tesco has always had a reputation of quality food at fair prices, however operating ethically
could affect their reputation. For example, if they start selling more fair trade products this
would increase the price of their food and existing customers may not want to shop there
again as they can’t afford it, giving advantage to its competitors such as M&S, Sainsbury’s
and ASDA. Despite this, it might attract a new group of customers that will buy the products
as it is fair traded gaining more respect for the business at the eye of the customer.
Operating the business ethically would also enhance the business reputation. A company’s
reputation that runs ethically can help it create a more positive image in the marketplace,
which can bring in new customers, investors, shareholders and make the employees proud
of working for a business with a positive ethical behaviour. In addition, Tesco running their
business ethically will have an effect on sales, costs and profit. If they sell more fair trade
products to the customers or even increase the price of the products, it would cost more for
Tesco to get the supply. Furthermore, if the customers don’t want to buy fair trade
products, this would lead Tesco to a loss in profits as they were not able to make as much
sales needed to cover the cost of fair trade products.
Another way in which Tesco could be operating the business ethically is by giving a certain
amount of sales to the charity organisations. This would have a positive impact on the
customers and encourage them to buy something or spend more at Tesco knowing that a
percentage of their money is going to help a good cause. However, this would mean for
Tesco that they won’t get as much profit.
On the other side, not operating an ethical business could cause bigger issues. For
example, following unethical behaviour could have an environmental impact such as
releasing pollutants into the air, that can affect cities, towns, waterways and masses of
people in which Tesco operates. Also, if Tesco had a reputation for unethical dealings that
would hurt the company’s chances to obtain new customers, especially in this age of social
networking where unsatisfied customers can quickly disseminate information about the
negative experience they had at Tesco. Despite the drawbacks, following a positive ethical
behaviour for the business is important to consider because significantly boosts a
company’s reputation, which has a knock-on effect on attracting and retaining customers,
sales, investors and employees.
1
, Ethical Implications for Stakeholders
Customers
Choosing to run the business ethically could have a good impact for Tesco’s customers.
When a company behaves ethically, they can attract customers to their products and
services and sway them towards loyalty. A lot of customers may prefer fair traded products
as it makes them feel better about themselves knowing they are doing good buying
products from an ethical company. Although having a positive ethical behaviour for the
business could have a good impact, a negative ethical behaviour could cause issues such
as higher product prices due to the fact that higher costs of ethical production/sourcing.
Employees
If Tesco choose to run the business more ethically it will have both benefits and
drawbacks. A benefit of running Tesco ethically is that it retains good employees and
create a positive work environment. Employees will feel more comfortable working for
Tesco that’s behaving ethically than one that’s not. After all, the employees don’t want to
be partially/fully responsible for any unethical consequences, such as contributing to the
deforestation of an area or poverty due to underpaying labourers.
Every talented individuals at all levels of an organisation want to be compensated fairly for
their work and dedication. They want career advancement within the organization to be
based on the quality of the work they do and not on favouritism. They want to be part of a
company whose management team tells them the truth about what is going on, such as
when layoffs or reorganizations are being contemplated. This led to the business having a
positive work environment. On the other hand, a negative ethical behaviour would have a
negative impact on the business. For example, a company abusing child labour and paying
low wages will produce goods and services that are much cheaper than competitor
company following labour laws and paying a healthy wage. This, in turn, impacts any
businesses looking for suppliers; they may not know why the price difference exists, and if
only looking at their budget, the cheaper supplier would win.
Suppliers
A supplier is usually a manufacturer or a distributor. This entity is part of the supply chain of
a business, which may provide the bulk of the value contained within its products.
If Tesco is running their business ethically it will have a huge benefit for their suppliers. This
means that the workers in the Third World countries will benefit more because they will be
treated well, equally and will be paid fairly. They will also then generally have better lives as
they would then be able to afford to live. Furthermore, ethical suppliers may gain business
customers as ethical businesses will stop using other suppliers that use child labour and/or
sweatshops. Nevertheless, ethical businesses may demand changes to the way in which
suppliers operate and some of the demanded changes may be very costly for the supplier
to implement. Suppliers may also lose supply contracts if they refuse to change their
operations in order to fit the ethical stance of a business
Local communities
A local community has been defined as a group of interacting people living in a common
location. It is a typical local community consists of business operators, public agency staff
and residents, and their interactions can include the sharing of resources, information and
assistance, as well as the establishment of commercial relationships between local
businesses and consumers. Tesco may decide to run their business ethically by helping
the community, the environment and the wildlife. They may decide to invest in local
schemes like youth projects or decide to hire more people of the community or even
employ people of the community to clean up the local area. This would benefit the local
community but will also benefit Tesco because it would create a good image of the
business in the eyes of the community and it would also reduce the unemployment
2
Stakeholders’ (P2)
In this section of the assignment I will be explaining how Tesco and its stakeholders have
been affected by the business’s decision to conduct its business activities ethically.
Making ethical considerations in business is not just important for developing a positive
public image for the business. It can also help the company avoid lawsuits and the
potential consequences related to them, such as fines and negative media coverage. The
main implication of any business operating ethically is that it will cost them and take time to
build up a good ethical behaviour within the business. As mentioned before, Tesco is a
British multinational company that sells groceries and general merchandise and is the
biggest supermarket chain in the UK by market share which means that they have more
responsibilities.
Ethical Implications for Tesco
For Tesco, being ethical means applying principles of honesty and fairness to relationships
with co-workers and customers. Hence why behaving ethically can help Tesco to build
customer loyalty, avoid legal problems and attract and retain talented employees.
Tesco has always had a reputation of quality food at fair prices, however operating ethically
could affect their reputation. For example, if they start selling more fair trade products this
would increase the price of their food and existing customers may not want to shop there
again as they can’t afford it, giving advantage to its competitors such as M&S, Sainsbury’s
and ASDA. Despite this, it might attract a new group of customers that will buy the products
as it is fair traded gaining more respect for the business at the eye of the customer.
Operating the business ethically would also enhance the business reputation. A company’s
reputation that runs ethically can help it create a more positive image in the marketplace,
which can bring in new customers, investors, shareholders and make the employees proud
of working for a business with a positive ethical behaviour. In addition, Tesco running their
business ethically will have an effect on sales, costs and profit. If they sell more fair trade
products to the customers or even increase the price of the products, it would cost more for
Tesco to get the supply. Furthermore, if the customers don’t want to buy fair trade
products, this would lead Tesco to a loss in profits as they were not able to make as much
sales needed to cover the cost of fair trade products.
Another way in which Tesco could be operating the business ethically is by giving a certain
amount of sales to the charity organisations. This would have a positive impact on the
customers and encourage them to buy something or spend more at Tesco knowing that a
percentage of their money is going to help a good cause. However, this would mean for
Tesco that they won’t get as much profit.
On the other side, not operating an ethical business could cause bigger issues. For
example, following unethical behaviour could have an environmental impact such as
releasing pollutants into the air, that can affect cities, towns, waterways and masses of
people in which Tesco operates. Also, if Tesco had a reputation for unethical dealings that
would hurt the company’s chances to obtain new customers, especially in this age of social
networking where unsatisfied customers can quickly disseminate information about the
negative experience they had at Tesco. Despite the drawbacks, following a positive ethical
behaviour for the business is important to consider because significantly boosts a
company’s reputation, which has a knock-on effect on attracting and retaining customers,
sales, investors and employees.
1
, Ethical Implications for Stakeholders
Customers
Choosing to run the business ethically could have a good impact for Tesco’s customers.
When a company behaves ethically, they can attract customers to their products and
services and sway them towards loyalty. A lot of customers may prefer fair traded products
as it makes them feel better about themselves knowing they are doing good buying
products from an ethical company. Although having a positive ethical behaviour for the
business could have a good impact, a negative ethical behaviour could cause issues such
as higher product prices due to the fact that higher costs of ethical production/sourcing.
Employees
If Tesco choose to run the business more ethically it will have both benefits and
drawbacks. A benefit of running Tesco ethically is that it retains good employees and
create a positive work environment. Employees will feel more comfortable working for
Tesco that’s behaving ethically than one that’s not. After all, the employees don’t want to
be partially/fully responsible for any unethical consequences, such as contributing to the
deforestation of an area or poverty due to underpaying labourers.
Every talented individuals at all levels of an organisation want to be compensated fairly for
their work and dedication. They want career advancement within the organization to be
based on the quality of the work they do and not on favouritism. They want to be part of a
company whose management team tells them the truth about what is going on, such as
when layoffs or reorganizations are being contemplated. This led to the business having a
positive work environment. On the other hand, a negative ethical behaviour would have a
negative impact on the business. For example, a company abusing child labour and paying
low wages will produce goods and services that are much cheaper than competitor
company following labour laws and paying a healthy wage. This, in turn, impacts any
businesses looking for suppliers; they may not know why the price difference exists, and if
only looking at their budget, the cheaper supplier would win.
Suppliers
A supplier is usually a manufacturer or a distributor. This entity is part of the supply chain of
a business, which may provide the bulk of the value contained within its products.
If Tesco is running their business ethically it will have a huge benefit for their suppliers. This
means that the workers in the Third World countries will benefit more because they will be
treated well, equally and will be paid fairly. They will also then generally have better lives as
they would then be able to afford to live. Furthermore, ethical suppliers may gain business
customers as ethical businesses will stop using other suppliers that use child labour and/or
sweatshops. Nevertheless, ethical businesses may demand changes to the way in which
suppliers operate and some of the demanded changes may be very costly for the supplier
to implement. Suppliers may also lose supply contracts if they refuse to change their
operations in order to fit the ethical stance of a business
Local communities
A local community has been defined as a group of interacting people living in a common
location. It is a typical local community consists of business operators, public agency staff
and residents, and their interactions can include the sharing of resources, information and
assistance, as well as the establishment of commercial relationships between local
businesses and consumers. Tesco may decide to run their business ethically by helping
the community, the environment and the wildlife. They may decide to invest in local
schemes like youth projects or decide to hire more people of the community or even
employ people of the community to clean up the local area. This would benefit the local
community but will also benefit Tesco because it would create a good image of the
business in the eyes of the community and it would also reduce the unemployment
2
