Ethical behaviour of UK supermarket Tesco Essay

Introduction I carried out a research on UK supermarkets’ social responsibilities and business ethics, I decided I will use Tesco plc for this assignment. The reason being Tesco has a wide range of policies regarding their supplier, customers, shareholders and the community. â€Å"At Tesco, we aim to make a positive contribution to society. Our CSR programme builds on this commitment and is backed by our ‘Every Little Helps’ approach.† John Gardiner, chairman, Tesco Tesco adopted both the agency theory and the stakeholder theory and it has the intelligent self-interest (Mullins 2002). Tesco uses a combination approach of deontology, utilitarianism, teleology and egoism (Boddy 2002) to the ethical of the society. An ethical assessment will consider the position of the staff, the nature and interrelationship of activities, product and service ranges, mixes and balances, relationships with the community and the environment. Stakeholders of Tesco Stakeholder is defined by Mullins (2002:145) as â€Å"individuals or groups who have an interest in and/or are affected by the goals, operations or activities of the organisation or the behaviour of its members†. Stakeholders can be categorised into three main groups: Internal stakeholders * Employees – Social responsibilities to employees beyond the employment contracts. Employees need to face the implications such as job security, safe working conditions, fair treatment, the creation of rewarding work and personal development. Employees require equal opportunities, promotions, trade union, training and job satisfaction. * Management – Management concerns about the growth of the organisation and to achieve the organisational objectives. Management have strong influences on staff, lead by example and management by walking about can encourage its staff to produce their best performance. External stakeholders * Community & environment – The demands for the community and environment are: potential of pollution, noise and disposal waste should be kept to the minimum, raw materials are used economically and environment friendly production. * Society – Society is the broader place in which business operates. The quality of all our lives will depend on how well the organisation balances its profit and the environment. Connected stakeholders * Shareholder – There are three types of shareholders: short term investors, long term investors and ethical investors. Short term investors simply concentrate on the performance of the organisation, they will have no time for considerations of social responsibilities. Long term investors may be willing to consider evidence that managing in a socially responsible way helps long term profits. Ethical investors place social priorities higher than maximising their own personal wealth and are willing to invest in organisations that follow clear socially responsible policies. * Customers – Customers expect organisations to provide them with goods and services. They want the goods/service to be good quality, durable, good value for money, safety and performance. Consideration of Power All stakeholder groups have influence throughout the organisation. These influences effect the organisational performance and their existence within its market sector. * Employees – They can reflect their thoughts through the trade union, i.e. request pay raise, better working conditions, equal opportunities etc. If the employees are mistreated they can take industrial actions against the organisation or have an industrial strike to force the organisation to meet their needs. * Community & environment – If there is a potential of pollution, noise, disposal waste or the local county council can apply laws and regulations to limit those actions or to take legal actions against the organisation. * Society – If the quality of our life is affected by the organisation, campaigners can hold daily protests outside the organisation, this will attract bad publicity for the organisation. * Shareholders – They can simply withdrawn their investment from the organisation, i.e. selling their shares. Alternatively shareholders can attend the annual meeting and vote against the organisational suggestions. * Customers – They can simply stop consuming the goods or services from the organisation. I considered the customers have the main power over an organisation, without any customers the organisation simply cannot survive. Any organisation needs to take its stakeholders’ interests into account. A good balance of the decisions is vitally important, we can see how the influences have impact upon the organisation and any unbalance decision will affect the existence of the organisation. Tesco’s Mission Statement â€Å"Creating value for customers, to earn their lifetime loyalty† We can see from the above statement that Tesco concentrates on the long-term relationship with its customers. Tesco focused on providing exceptional value and choice for customers to ensure that they continue to grow market share. Tesco had expended significantly in the past 10 years, it started in non-food retailing in 1997 and now Tesco is creating value on a wide range of products from grocery to financial services such as personal loan, home and motor insurance and credit card services. From these evidences we can see Tesco is working very hard to follow its mission statement to achieve its goal. Tesco’s actions towards the society Tesco combined the agency theory and the stakeholder theory (Mullins 2002) when they make any ethical decisions. Milton Friedman’s view (Mullins 2002:148) suggested the agency theory is that â€Å"†¦the social responsibility of business is to make as much money as possible for the shareholders, within the rules of the game.† Mullins (2002:149) defined the stakeholder theory is that â€Å"†¦a business is for its stakeholders and its actions should be designed to balance stakeholder interest.† Tesco uses the agency theory to decide its main objective, it is to provide excellent goods and services to earn their customers’ loyalty. This will ensure their existence on the market and to maximise the shareholders’ investment. On the other hand, Tesco uses the stakeholder theory to act on behalf on its stakeholders interests, such as contribution towards the society, care for the environment and responsible to the supplier chain. Tesco also uses a combination approach of deontology, utilitarianism, teleology and egoism (Boddy 2002) to the ethical of the society. Deontology Approach â€Å"Deontology is based on the idea that we are morally obliged to follow fundamental rules of thumb or principles. (Frankena 1963)† Fulop & Linstead (1999:339) Part of the Tesco strategy of â€Å"Treat people how we like to be treated† uses the deontology approach to the ethics of the people, the policies are as follow: * All retailers, there’s one team†¦The Tesco Team * Trust and respect each other * Strive to do our very best * Give support to each other and praise more than criticise * Ask more than tell and share knowledge so that it can be used * Enjoy work, celebrate success and learn from experience Tesco acts only on those principles so that they are not only â€Å"Treat people how we like to be treated†, but also wish others to do the same. Utilitarianism Approach â€Å"Utilitarianism judges the moral worth of actions by the utility of their foreseeable consequences for each and every person affected by a certain set of actions.† Fulop & Linstead (1999:339) Tesco aims to be responsible in their commercial and trading activities. Tesco is a member of the Ethical Trade Initiative since it was founded in 1998, on top of that, it also supports the work of Fairtrade Foundation. They sell and promote Fairtrade production such as tea, coffee, banana and chocolate. Fairtrade Foundation was set to give better deal for third world producers, regardless of the world market conditions. There are several reasons why Tesco uses the utilitarianism approach to the ethics of the society. First it wants to build a strong relationship with its supplier and to maintain their reputation within the market sector. From the result of having strong relationship with its suppliers, they will have a stable supply for its goods and services. Teleology Approach â€Å"It considers whether the outcome of an action accomplishes the original goal.† Boddy (2002:133) Tesco uses the teleology approach to consider whether the outcomes achieve the original goals. Boddy (2002) suggested that if an act ensures the continuation of the organisation then it is right. From Tesco’s mission statement we can see that the original goal for Tesco is to keep its market share and continue to grow within its market sector by creating value for its customers. It is obvious that Tesco is performance very well in its industry, they keep expanding their services and products (from grocery to financial services), which indicates the continue growth for Tesco. Egoism Approach â€Å"This is the ‘ethics of self-interest, claiming that personal or corporate benefit is the only rational criterion for judging economic actions.† Boddy (2002:133) Tesco is a financial contributor to the Fund for the Replacement of Animals in Medical Experimentation (FRAME), and they are seeking ways to end animal testing. Tesco also carries out the Computers for Schools vouchers, which support local school to improve their computer equipments, to create a better learning environment for children. Tesco is a national sponsor of Cancer Research UK’s Race for Life, this is only part of the charity works that Tesco has, there is also a Tesco Charity Trust which helps local and national charities as well as voluntary organisations to provide practical support for children, the elderly, and people with disabilities. Tesco uses this approach to take above actions to contribute towards the local community. Boddy (2002) suggested that if people follow this principle it will result in general good. Because of the contribution Tesco made (Computers for Schools vouchers and charity’s activities), customers are more happy to shop in Tesco because they are able to maximise their personal self-interest towards the society. Improvement in ethical behaviour of Tesco Tesco has a wide range of ethical policies to cover different areas, they include the following: * Human right * Local community sponsorship * Charity * Ethical trading * Fairtrade * Animal Testing * Environment These are only a small selection of Tesco’s policies which I can find on its website, there are many more policies to cover different area of the ethical aspect. Since we are in a dynamic business world and there is no set policy can cover all changes, Tesco should expand its policies and to improve and maintain its reputation. Conclusion Survival or long-term performance is the main ethical duty of the organisation, its staff, customers, community and other stakeholders. For this to happen, a long-term view must be taken. Organisation must distinguish between right and wrong. It is necessary for the organisation to recognise the nature and legitimacy of the interests of the different stakeholder groups and interested parties, and to take steps to see that these are widely understood and satisfied as far as possible.    Bibliography Boddy D, (2002), 2nd Edition, Management – An Introduction, Pearson Education Ltd, Harlow Fulop L & Linstead S, (1999), Management – A Critical Text, Macmillan Press Ltd, Hampshire Hannagan T, (1995), Management Concepts & Practices, Pitman Publishing, London Megginson L, Mosley & Pietri P Jr, (1986), 2nd Edition, Management: Concepts and Applications, Harper & Row Publishers Inc, New York Mullins L, (2002), 6th Edition, Management & Organisational Behaviour, Pearson Education Ltd, Harlow Pettinger R, (2002), 3rd Edition, Introduction to Management, Palgrave, Hampshire Robbins S & Coulter M, (2003), 7th Edition, Management, Pearson Education Inc, New Jersey Internet Resources: http://www.tesco.com/corporateinfo/ 14/03/2004 http://www.tesco.com/everylittlehelps/ 14/03/2004 Reference Boddy D, (2002), 2nd Edition, Management – An Introduction, Pearson Education Ltd, Harlow Fulop L & Linstead S, (1999), Management – A Critical Text, Macmillan Press Ltd, Hampshire Mullins L, (2002), 6th Edition, Management & Organisational Behaviour, Pearson Education Ltd, Harlow Internet Resources: http://www.tesco.com/corporateinfo/ 14/03/2004 http://www.tesco.com/everylittlehelps/ 14/03/2004