OBS 330:
Block 8
, CHAPTER LEARNING OBJECTIVES
1. When and how business diversification can enhance shareholder value
2. How related diversification strategies can produce cross business strategic fit capable
of delivering competitive advantage
3. The merits and risks of unrelated diversification strategies
4. The analytic tools for evaluating a company’s diversification strategy
5. What four main corporate strategy options a diversified company can employ for
solidifying its strategy and improving company performance
LO 1 DESCRIBE THE EVOLVEMENT OF BUSINESS ETHICS
ETHICS concerns principles of right or wrong conduct.
BUSINESS ETHICS deals with the application of ethical principles and standards to the
actions and decisions of businesses and the conduct of their personnel.
How the standards of ethical behaviour in business are no different from the
ethical standards and norms of the larger society and culture in which a
company operates?
Ethical principles in businesses are not different from ethical principles in general
because business actions have to be judged in the context of society’s standards of
right and wrong, not with respect to a special set of ethical standards applicable only
to business situations.
SCHOOLS OF THOUGHT describe the extent to which ethical standards travel across
whether multinational companies can apply the same set of ethical standards in any
and all locations where they operate.
SCHOOLS OF THOUGHT: ETHICAL STANDARDS
(1) the school of ethical universalism
(2) the school of ethical relativism
(3) ethics and integrative social contracts theory
THE SCHOOL OF ETHICAL UNIVERSALISM states that the most fundamental
conceptions of right and wrong are universal and apply to members of all societies, all
companies, and all business people. These universal ethical principles set forth the
traits and behaviours that are considered virtuous and that a good person is supposed
to believe in and display. This school of thought states that ‘one-size-fits-all’ in terms
of ethical behaviours and actions.
Due to the collective views of multiple societies and cultures to put clear boundaries
on what constitutes ethical and unethical business behaviour, a multinational
company can develop a code of ethics that applies across its worldwide operations.
This school of thought describes traits and personality values which are all universally
accepted e.g. everyone knows that stealing is wrong/ unethical. However, this school
of thought does not consider the fact that different nations and cultures have
different views on what is considered right or wrong, appropriate or inappropriate,
ethical or unethical, and moral or immoral.
, THE SCHOOL OF ETHICAL RELATIVISM states that a ‘one-size-fits-all’ template for
judging the ethical appropriateness of business actions and the behaviours of
company personnel is inappropriate. It states that differing religious beliefs, customs,
and behavioural norms across countries and cultures give rise to multiple sets of
standards concerning what is ethically right or wrong. These differing standards mean
that business- related actions will be considered right or wrong based on the
prevailing local ethical standards of the country or culture in which they take place in.
This implies that when there are cross-country or cross-cultural differences in ethical standards, it is
appropriate for local ethical standards to take precedence over what the ethical standards may be in a
company’s home market. This school of thought offers too much flexibility and relativism – too much
flexibility or lack of boundaries allows for disaster as there is no standardisation at a business level.
Ethical dilemmas of ethical relativism:
Social activities are adamant that child labour is unethical and that companies
should neither employ children under the age of 18 as full-time employees nor
Underage source products from foreign suppliers that employ underage workers. Exposing
labour children to dangerous work and long work hours is terrible, however poverty-stricken
families in many poor countries can’t go without the work efforts of young family
members.
Companies that forbid bribes and kickbacks in their codes of ethical conduct and
Bribes that are serious about enforcing this may have problems in countries where bribery
and and kickback payments are a local custom. Complying with the company’s code of
kickbacks ethical conduct in these countries often leads to losing business to competitors who
don’t comply
Using the principles of This method can create conflicting ethical standards for multinational
ethical relativism to companies. Business leaders have little moral basis for establishing
or enforcing ethical standards companywide. Additionally, when a
create ethical
company’s ethical standards vary from country to country, the
standards is
message being sent to employees is that the company has no ethical
problematic for standards and prefers to let its standards of ethical right and wrong
multinational be governed by the customers and practices of the countries in
companies which it operates.
ETHICS AND INTEGRATIVE SOCIAL CONTRACTS THEORY provides a middle position
between the opposing views of ethical universalism and ethical relativism. It states
that universal ethical principles are based on the collective views of multiple cultures
and societies and combine to form a ‘social contract’ that all individuals, groups,
organisations, and businesses in all situations have a duty to observe. Within the
boundaries of this social contract, local cultures or groups can specify what additional
actions may or may not be ethically acceptable.
Under this theory, the ethical standards a company should try uphold are
governed by:
(1) A limited number of universal ethical principles that are widely recognised as
putting legitimate ethical boundaries on behaviours in all situations
(2) The circumstances of local cultures, traditions, and values that further prescribe
what constitutes ethically permissible behaviour.
According to the integrated social contracts theory, adherence to universal or ‘first-order-
ethical norms should always take precedence over local or ‘second-order’ norms. This theory
offers managers in multinational companies clear guidance in resolving cross- country ethical
differences: Those parts of the company’s code of ethics that involves universal ethical norms
must be enforced worldwide, but within these boundaries there is room for ethical diversity
and the opportunity for host-country cultures to exert some influence over the moral and
ethical standards of business units operating in that country. This theory is ideal for
Block 8
, CHAPTER LEARNING OBJECTIVES
1. When and how business diversification can enhance shareholder value
2. How related diversification strategies can produce cross business strategic fit capable
of delivering competitive advantage
3. The merits and risks of unrelated diversification strategies
4. The analytic tools for evaluating a company’s diversification strategy
5. What four main corporate strategy options a diversified company can employ for
solidifying its strategy and improving company performance
LO 1 DESCRIBE THE EVOLVEMENT OF BUSINESS ETHICS
ETHICS concerns principles of right or wrong conduct.
BUSINESS ETHICS deals with the application of ethical principles and standards to the
actions and decisions of businesses and the conduct of their personnel.
How the standards of ethical behaviour in business are no different from the
ethical standards and norms of the larger society and culture in which a
company operates?
Ethical principles in businesses are not different from ethical principles in general
because business actions have to be judged in the context of society’s standards of
right and wrong, not with respect to a special set of ethical standards applicable only
to business situations.
SCHOOLS OF THOUGHT describe the extent to which ethical standards travel across
whether multinational companies can apply the same set of ethical standards in any
and all locations where they operate.
SCHOOLS OF THOUGHT: ETHICAL STANDARDS
(1) the school of ethical universalism
(2) the school of ethical relativism
(3) ethics and integrative social contracts theory
THE SCHOOL OF ETHICAL UNIVERSALISM states that the most fundamental
conceptions of right and wrong are universal and apply to members of all societies, all
companies, and all business people. These universal ethical principles set forth the
traits and behaviours that are considered virtuous and that a good person is supposed
to believe in and display. This school of thought states that ‘one-size-fits-all’ in terms
of ethical behaviours and actions.
Due to the collective views of multiple societies and cultures to put clear boundaries
on what constitutes ethical and unethical business behaviour, a multinational
company can develop a code of ethics that applies across its worldwide operations.
This school of thought describes traits and personality values which are all universally
accepted e.g. everyone knows that stealing is wrong/ unethical. However, this school
of thought does not consider the fact that different nations and cultures have
different views on what is considered right or wrong, appropriate or inappropriate,
ethical or unethical, and moral or immoral.
, THE SCHOOL OF ETHICAL RELATIVISM states that a ‘one-size-fits-all’ template for
judging the ethical appropriateness of business actions and the behaviours of
company personnel is inappropriate. It states that differing religious beliefs, customs,
and behavioural norms across countries and cultures give rise to multiple sets of
standards concerning what is ethically right or wrong. These differing standards mean
that business- related actions will be considered right or wrong based on the
prevailing local ethical standards of the country or culture in which they take place in.
This implies that when there are cross-country or cross-cultural differences in ethical standards, it is
appropriate for local ethical standards to take precedence over what the ethical standards may be in a
company’s home market. This school of thought offers too much flexibility and relativism – too much
flexibility or lack of boundaries allows for disaster as there is no standardisation at a business level.
Ethical dilemmas of ethical relativism:
Social activities are adamant that child labour is unethical and that companies
should neither employ children under the age of 18 as full-time employees nor
Underage source products from foreign suppliers that employ underage workers. Exposing
labour children to dangerous work and long work hours is terrible, however poverty-stricken
families in many poor countries can’t go without the work efforts of young family
members.
Companies that forbid bribes and kickbacks in their codes of ethical conduct and
Bribes that are serious about enforcing this may have problems in countries where bribery
and and kickback payments are a local custom. Complying with the company’s code of
kickbacks ethical conduct in these countries often leads to losing business to competitors who
don’t comply
Using the principles of This method can create conflicting ethical standards for multinational
ethical relativism to companies. Business leaders have little moral basis for establishing
or enforcing ethical standards companywide. Additionally, when a
create ethical
company’s ethical standards vary from country to country, the
standards is
message being sent to employees is that the company has no ethical
problematic for standards and prefers to let its standards of ethical right and wrong
multinational be governed by the customers and practices of the countries in
companies which it operates.
ETHICS AND INTEGRATIVE SOCIAL CONTRACTS THEORY provides a middle position
between the opposing views of ethical universalism and ethical relativism. It states
that universal ethical principles are based on the collective views of multiple cultures
and societies and combine to form a ‘social contract’ that all individuals, groups,
organisations, and businesses in all situations have a duty to observe. Within the
boundaries of this social contract, local cultures or groups can specify what additional
actions may or may not be ethically acceptable.
Under this theory, the ethical standards a company should try uphold are
governed by:
(1) A limited number of universal ethical principles that are widely recognised as
putting legitimate ethical boundaries on behaviours in all situations
(2) The circumstances of local cultures, traditions, and values that further prescribe
what constitutes ethically permissible behaviour.
According to the integrated social contracts theory, adherence to universal or ‘first-order-
ethical norms should always take precedence over local or ‘second-order’ norms. This theory
offers managers in multinational companies clear guidance in resolving cross- country ethical
differences: Those parts of the company’s code of ethics that involves universal ethical norms
must be enforced worldwide, but within these boundaries there is room for ethical diversity
and the opportunity for host-country cultures to exert some influence over the moral and
ethical standards of business units operating in that country. This theory is ideal for
