Business Ethics
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Institutional Affiliation
Business Ethics
I once worked as a salesperson at a car sales. The place was mostly packed, and in a day, we sold over ten cars, which was great because the customers were loyal and always referred other people. The popularity of our car dealership was due to the affordability of the prices. More so, the advantage we had over other dealerships was selling used cars and offering discounts for frequent customers. We were only three salespeople, and I was the only student. The other two (Nelly and Jason) were in their mid-thirties and had families. At the end of the day when we would report to the manager about each of our sales of the day. On days that we sold more than the minimum number of cars required, we would go out and take coffee or for a drink, then Jason would drop us at our homes. It became a routine, and soon, we started visiting each other over the weekends for supper.
However, another car dealership opened up close to ours. They offered lower prices, better discounts, and their used cars had been refurbished and went at reasonable prices. At first, we thought that we will maintain our loyal customers and dismissed the thought by convincing ourselves that people are always in need of cars. Our customers kept coming in the few weeks, and we managed to sell the usual number of vehicles. However, the competition between the two-car dealerships became intense, and the rivalry between us became clear to the community. The customers started comparing our car dealership and the new one in terms of prices and quality. The manager did not allow us to alter the prices claiming that the supplier was demanding much more than usual.
After a month, the sales we made began to reduce to the point that on some days we only sold three cars. One day as we reported to work, the manager summoned us in his office and complained about the low sale we were making. He threatened to lay us off if, by the end of the day, we did not sell more than five cars. More so, he ordered us to sell second-hand vehicles for much more than they should go for, explaining that the suppliers had increased their prices and threatened to start supplying to the new car dealership the best cars. I tried to explain to the manager that it was wrong to expect the customers to purchase a used car at much higher prices. He reprimanded me for being less creative than the company expected me too. We left his office, ready to do what goes against our ethics to keep the job.
In Gilad’s book Business Blind Spots, he describes blind spot analysis as an assumption of inherent decision making biases that occur at the top of an organization. These biases and decision making do not consider the welfare and ethics of the organization’s workers or the customers of its services and goods. It explains that despite the level of education and achievements made by most of the top organization executives, they become quite vulnerable to biases that accompany their powerful organizational positions. Such biases include ego-involvement, overconfidence, cognitive dissonance, and motivated cognition. Such executives develop an impaired capability to view the situation of its customers and workers from a realistic perspective.
According to Gilad, there are three steps of uncovering blind spots. Step one involves conducting a Porter’s Industry Structure on a sector of an industry or market. The sector should have high number of cases and instances that have had a significant effect on the balance of power among the five forces. The Porters Industry Structure describes five forces which when their intensity is too much in a business, they inhibit the company’s returns on investment. However, when the forces are benign, the company becomes profitable. The five forces are: power of suppliers, threat of substitute services or products, rivalry among existing competitors, threat of entrants and power of buyers. For instance, new entrants bring a new desire to attain a market share and new capacity thus putting a strain on the necessary rate of investment, prices and costs. This therefore makes the existing companies to lower their prices or boost their investments to avoid losing its customers.
Under the power of supplies, powerful suppliers tend to increase the cost of their products and services or limiting quality of rendered services. For instance, when suppliers increase the cost of their products the company raises its prices and thus attracting less customers. This ultimately leads to a company making less profit and the suppliers getting more money than the worth of their products. Powerful buyers may also reduce profitability by forcing a reduction of prices through a demand of better quality of products and services. The threat of substitutes decreases profitability through putting a strain of choice between the initial product and the substitute. For instance, when a company exclusively sells beds and another company begins selling pull out coaches at a cheaper price, most customers might choose the pull out couch over the bed because it performs a similar function to a bed and a couch. Rivalry between competitors that gravitates solely towards price increases the power of buyers and thus reduces profitability. For instance, when two companies produce similar goods and offer them at almost similar prices, each company will keep altering its prices to attract more customers. The customers therefore end up purchasing the products giving the company low to zero profit margins.
Step two involves collection of competitive intelligence on the targeted top company executives regarding the company’s industry structure. Sources used may include autobiographies, conference calls with security analysts, congressional testimonies, public speeches and appearances, and interviews among others. This step may also be substituted with another technique that involves underlying assumptions and rationalization of the existing strategy. Step three involves comparison of the step one analysis and the results from step two. Contradictions, if any, are an indication of a potential blindspot.
The Gilad’s three step method would have greatly aided the situation at our car dealership. It would have aided in retaining of or customers, attracting new customers, gaining unwavering profits and upholding our ethical beliefs. In the first step, Gilad talks about Porter’s five forces. The strain in our car dealership was mainly due to the imbalance of the five forces. For instance, the moment a new car dealership opened up, the threat of entrants and rivalry between competitors became strong. The new dealership provided the vwith a substitute car dealership thus making the force of substitute services stronger. We tried dismissing the thoughts of competition but the manager kept altering the prices to increase the flow of customers. He failed to notice the reduction in the profit margin due to the price alteration. With time, customers realized the competition between the companies and decided to use it to their advantage thus raising the power of buyers. Whenever the customers came to buy cars and bargained for lower prices, they openly compared the prices of the two businesses. This comparison put a strain on our company. Furthermore, the suppliers realized the reduced profit margin of our business. It therefore increased the prices of the cars they sold us because they were aware that they were our only suppliers.
Eventually all the five forces became intensely strong and the profitability of the company reduced. The manager did not realize that the mistake was not on the sales people but on the strategy he used to manage the business after an episode of change. He thought that increasing the prices of the cars would return the company’s profitability to normal. He failed to realize that gaining the initial profitability of the company would require more work and commitment than an increase in prices.