Scenario 1:
1.
What is the ethical dilemma or issue?
The ethical dilemma in
this situation would be the amount of consumption that the company plans to go
through with. The part that makes this into an issue is the drought that is
going on through the area during this time. The government is advising
residents and businesses to restrict their water usage to a certain level to
avoid making the problem more severe. It is up to management to decide how much
water consumption they are planning to go through with by comparing revenues
and costs associated with it (which will apparently not change according to the
government). From a purely business perspective to this issue, a production or
sales oriented approach, the decision seems clear cut. Produce the same amount
for the same level of costs. But when it comes to a marketing approach, value
based and more focused on the customer’s wants and needs, this is when the
decision can be problematic. Managing Customer Relationships is a huge part of
business and their survival. Building customer loyalty is something that can
make or break a business. That is what makes this simple management decision
into a dilemma. Different courses of actions can lead to different outcomes,
either directly or indirectly.
2.
What are the alternatives or possible courses of action?
Identify at least 3 alternatives.
Some alternatives that the
Wholesome Hamburger Company can go through with could be to keep water
consumption at the same level, lower it, or even increase their amount of water
usage. The first and most simple choice would be to keep levels the same. They
incur no additional expense for their current usage and their production cycle
is already linked to the amount they currently use. There is little to no
planning involved with this choice. It is just business as usual. The next
choice would be to adhere to the government’s request and lower their water
usage. This can be done to all products or the most water demanding ones
(chicken and beef). This choice has direct effects. It will instantly lower
productivity, profitability, and the survivability of the business. Although,
it would benefit the state of California as the company isn’t contributing to
making the drought more severe than it already is. The third choice would be to
ignore anyone else and decide to increase water consumption. This also has
direct effects on productivity and profitability. If one of the resources that is
material to your business is scarce, why not use it up while you can before
anyone else takes it first? This would be the impression that one would get
after reading the two articles, “The Economics of the California Water Shortage”
by Alex Tabarrok (2015) and “California’s Drought: The Meat of the Matter” by
Amelia Sadler (2015). California agriculture takes up around 80% of water
consumption, and the government isn’t going to crack down too hard on the
industry because it is vital to the economy. Most, if not even more, water will
still be used by the agricultural industry, so why should the company let them
have it? Shouldn’t all the profit go to them rather than other people or
competitors? Technically, there is another alternative that the company could
take and that would be to completely shut down production and use no water. That
is an extreme choice that will likely lead to many negative consequences, so
most would not use this choice.
3.
What are your recommendations? In other words,
of the several alternatives you identified, what do you think the company
should do?
In my opinion, I believe
that the company should take the second choice and adhere to the government’s
requests to lower their water consumption, even if it may lead to an impact on
their revenues and productivity. The company should reorganize their operations
for the time being in order to make these corrections due to the severity of
the situation. As seen with the crisis going on in Cape Town, South Africa right
now (and for the past decade for that matter), the problem will continue
becoming worse if no one takes action now. The more people ignore the problem,
the worse the future will become. Instead of temporarily losing sales due to
the shift in production, the company may completely go out of business if this
problem persists to grow. In addition to this, I also recommend that the
business takes action to make this a public announcement so that the public
will be informed about their decision. This will not only affect customer’s
perceptions (which will be spoken of in the next question), it may also affect
the actions of other businesses and make them follow suit. The best movements
are done in groups, and where would the movements be if no one moved with it?
4.
What is your rationale for your recommendations?
In other words, why do you recommend this course of action?
Like stated previously,
the customers wants and needs are important to businesses and their marketing
techniques. One major influence on that would be the customer’s perceptions of the
business. For example, a customer’s preferences will be influenced by a company’s
unethical or illegal practices. Customers care about business practices as it
directly affects them, they are among the many stakeholders that business and
marketing affects. If the company decides to maintain or raise their water
usage, what effects will that have on the market and consumers? Well, other
businesses will see their choice and take appropriate actions needed to
compete. Water consumption will continue to increase due to this free market
competition. This affects consumers in the sense that because it continues to
contribute to the problem, the drought will become more severe. With that, more
restrictions may be put in place on California residents (the consumers).
Customers will be left off being forced to use less water, and they will blame
it on businesses such as the Wholesome Hamburger Company. This directly affects
their perceptions of the business and will affect one of marketing’s macro strategies,
Customer Excellence. Companies need to maintain a sustainable competitive advantage
by doing something that others cannot to become prosperous. One item that
directly affects this is retaining both loyal customers and excellent customer
service. Customers with negative perceptions on the business may not retain
that same loyalty they once had, so making this decision by using a social perspective
may help the business in the long run (lifetime profitability, short run is
affected by loss of productivity). Where will the company’s market share be if
they can’t retain loyal customers? Will the owners of shareholders be content
with this outcome? Customer satisfaction is directly tied to customer
excellence and the business’ success.
Scenario 2:
1.
What is the ethical dilemma or issue?
The ethical dilemma here
would be if the company should label their products with the term “free range”
to affect profitability while only taking the minimum requirements that the
legal definition requires. This situation is not an issue using a business
perspective alone. If you could increase prices and profit margins by only
including 2 words on the packaging for your product (and very little resources
spent), you would instantly take that chance to do so. What makes this into a
dilemma would be the public’s reaction to the choice that the company decides
to go through with (assuming the meeting of the minimum requirements are made
public). Different customers may react to this in different ways, while some
may not react at all, but there is a good chance that the market will be
affected in some way. Some customers may be environmentalists and animal
activists that fight for the rights of animals to live a life free from human
control (to a certain level). Letting the chickens “out” for five minutes of
the day (less than 0.5% of the day) may not be sufficient to meet the needs for
these customers. Some customers may not be affected whether “free range” is on
the package or not. It is all based on context.
2.
What are the alternatives or possible courses of
action? Identify at least 3 alternatives.
The alternatives that the
business may decide to go through with may be to start using the term on their
products, decide not to use it on their products, or only use it on some of
their products. The first action would be to take advantage of the minimum
requirements now and begin using the term on the chicken products. The
resources spent on meeting the minimum requirements will most likely be
relatively small (other than outliers), so this business will take it on for
its profit opportunity (using SWOT analysis). The second option would be to not
use the term on the products and decide that it is not worth the risk
associated with customer’s reactions if their actions of only meeting the
minimum requirements were made public. The company may not want to be subject
to public scrutiny, which may directly affect profitability and customer
loyalty. The third option would be to test out public reaction to this choice
and only put the term on certain products. This will test not only demand of
the product after the change, but also customer reaction to the details of how
the term was able to be used on the product. This choice may also have some of
the same effects of first choice if the information was made public, but it may
be more limited (maybe to a geographic area or a certain type of product).
3.
What are your recommendations? In other words,
of the several alternatives you identified, what do you think the company
should do?
Out of the alternatives
that I presented, I recommend that the company go through with the third option
to apply the term to certain products only. This choice may limit the negative outcomes
that result and it can lead the way into implementing it into more products if
it becomes successful. The results can be measured by using marketing metrics. If
the company can take advantage of this situation to increase profitability by just
associating a term with their products, why wouldn’t they at least try it out?
If this can create better value for the products towards the customers, the company
should take this action to sustain their competitive advantage. Price and
promotion are only two items within the marketing mix, and they are imperative
to the company’s success.
4.
What is your rationale for your recommendations?
In other words, why do you recommend this course of action?
Using the term “free
range” on the company’s chicken products in which they only meet the minimum
legal requirements to place the term on their products may have a negative
impact on customer retention. Like stated previously, 5 minutes a day may not
be enough for some customers to believe that a company’s chickens are “free
range.” Everyone had different perspectives, and this applies to every single
customers’ perceptions about the business. This choice will affect the business
in some way, whether it be in a positive or a negative way. This is why I
recommended the third option, to implement it to a certain number of products
or to a specific region or location. This will allow the negative consequences
to be limited and allow a type of testing to occur before it is made universal.
It would be best to implement this action into an area that has more animal
activist within its population, but not a central location for activists. Another
important item to take into consideration is the setting of the price after the
term is associated with the product. Customers pay the price for a good for what
they can get out of it. If the price of the chicken product is too high for
them, it won’t matter to the customer whether or not they are considered “free
range.” For those who are affected, this is where promotion comes into play.
Promotion is where this value within the product is communicated to the
customer. The company should make this decision known and understandable by
customers if they want to try and persuade or influence the customer’s
decisions. This can be done through market segmentation, which is where the
company divides its customers into groups with different needs, wants, and
characteristics. Market positioning may also be important to consider as the
company should have a process set in place to ensure the customer understand
what the product does or represents. Similar to the first scenario, a negative
response to this decision may worsen customer retention, which negatively
affects lifetime profitability for the company.
