Business Ethics _ A Field Study

Jan-Feb 2010

Anchit Gaurav Dept of Mechanical Engineering Indian Institute of Technology, Gandhinagar

1. Introduction..................................................................................................................... 2 2. Business and Business Strategies of the firm .................................................................... 3 3. Current Market Trends ..................................................................................................... 4 4. Partnership and Business Arrangements .......................................................................... 4 5. Customers ........................................................................................................................ 5 6. Competition ..................................................................................................................... 5 a. Competition ............................................................................................................... 5 b. Competitive Advantage.............................................................................................. 6 7. Ethical and Unethical Practices of the of the Firm ............................................................ 6 8. Analysis ............................................................................................................................ 7

I.

Introduction

To a layman, business seems nothing except making good money or in more apt way profit. But profit or money comes through a process, we need to make it, earn it. Yet there are market players who know how to make money but do not earn it. They thrive on unethical market practices. Customers are generally cheated by such businessmen and sometimes they also foray into a greater gamble and cheat their partners, share holders, and in extreme case the national economy. What does it then take to be a good businessman and still make maximum profit? For this, it was necessary to step outside the classroom and study the market trends, competition, strategies, standards and greed of the businesses or firms. I hereby present a field study report on the Ethical and Unethical Practices of a firm. The firm I have chosen is a very common one found in the Indian market, probably at every corner of the Indian streets. From Pan Parlor in urban India to Panwari in rural India, they are everywhere in the Indian terrain and most of them are doing flourishing business. All of these shop owners are brilliantly practical minded and know how to get things done and turn tides in their own favor. At the same time, they are not even big crooks or prominent players of the economy of the nation. They build up a relationship not only with the all their customers, be it the local goons or the government officials. Even then, they remain as pan walas throughout their life and some of them even run the shop as a family or hereditary business. I could well foresee an ethical corner in their strategies and business layout. And hence, I became inquisitive to delve into a field report on the local brand of Indian shops the pan parlors. I have covered only one shop named Vipul Pan Parlor, New CG Road, Ahmedabad. Following points will exhaustively discuss my report and understanding of the report which is followed by an analysis and comparison with classroom theories of the same.

Contact Details: +91 9998931530 ; near IIT Gandhinagar, Chandkheda - 382424

II.

Business and Business Strategies of the firm

Vipul is name of the founder of the shop. The shop is now run by Vipul Bhais two sons. The shop primarily started off as a refreshment shop, mainly focusing on pan lovers commuting on the Ahmedabad Gandhinagar highway. Subsequently with the upcoming of residential areas near the shop, its income has increased over the years. In fact they have now expanded their horizons and also cater cigarettes and toiletries. So, all in all Vipul Pan Parlor is a business of refreshments and daily commodities. The aim of their business is very trivial, to make money, to cater to a larger group of customers. And to do that they like most professional business follow a set of strategies. Most of them have been learned and implemented by them through experiences. For instance: y The shop opens at 8 am to cater to the daily wage labors, night shift guards, early school drivers etc (maximizing profit). y The shop closes by 11 pm sharp to ensure a healthy group of customers, plus the income in the night hours is not worth keeping the shop open and taking the risk of the law. y The shop has a television set installed to ensure new customers particularly during sports matches. y The shop has some chairs too, to keep the customers at its doorstep for longer durations and tempt them to purchase more commodities, thereby an additional income. y During summer season, the shop covers its front area with a canopy, for the same reason. y It offers discounts to regular customers. y It offers momentary loans to regular and trusted customers. y They maintain a good repot with the wealthy and government-service customers, to ensure their safety during emergency situations. y In addition to pans and cigarettes, they also sell toiletries, playing cards, cold drinks, mineral water and other refreshments, thereby attracting a varied pool of customers. y Its location is apt to cater to the highway traffic (located adjacent to a bus stop), to the college students (located adjacent to a college) and to the local residents. y In addition, it has many shops besides it of various varieties, particularly and predominantly eateries. This does not at times give the customers any specific reason to visit the pan parlor. y The variety, be it of the pans, or of cigarettes is exhaustive from local and national brands to international ones for different categories of customers. y The price offered is highly competitive when it comes to raw material commodities like pan masala etc. y There is a large parking space in front of the shop, thereby attracting customers on bikes, mainly college students.

It has been an observed trend that the shop never falls short of customers, particularly in the evenings and during lunch hours when you can easily spot groups of people chatting and enjoying in its arena and the shopkeeper smiling.

III.

Current Market Trends

The current market trends are in the favor of the shop. The pan being the ever famous refreshment of Indian household ensures the majority of the profit for the shop. Then, there are tobacco rolls which attracts regular and addicted customers varying from labors, students and officers. In addition, with the ongoing cricket season and more sports channels in the block ensures a cluster of viewer-turned-customer for the shop. The commodities offered by the shop are not expensive ones, hence there are days when it does not make large profits but then it has a regular customer base which ensures a minimum income flow for the shopkeeper. At the same time, there are bulk and party orders, which fill their pockets in a single transaction. Whatever be it, Vipul Bhai cares nonetheless. He is very confident of his constant monthly income, and believes that it will continue to grow, even if the government increases the duty on tobacco or carries out awareness campaigns. He says, Once a customer of mine, will always be one!

IV.

Partnership and Business Arrangements

Now, when Vipul Bhai has himself grown old his shop is run by his two sons. Vipul Bhai came up with the innovative idea that his only property, the shop will not be divided in terms of land or sold away for equal distribution of money by his sons. Instead he has distributed the timings of the shop equally between the two of them, each one getting a peak hour in their slot too. This way, whatever income comes to the shop during that time is pocketed by person sitting behind the counter. So, it a matter of luck and building a good customer base for themselves for the brothers to earn more than the other. This way there is a partnership in the shop. In addition there is a healthy competition within the shop. This competition goes in favor of the shop and increasing it total profit. Each of the brothers has a regular customer base during his time-slot. The business arrangements were not revealed in detail by Vipul Bhai, saying that the quality is ensured and refusing to name the suppliers. May be, there might be an agreement between them or he fears competition from the fellow pan-parlors. He also proclaims that he has contacts with the direct-suppliers, meaning the producers.

V.

Customers

There are categories of customers for this shop. Be it based on the income group or on the age groups. Mostly, the shop has a regular and trusted customer pool, all of them from relatively nearby areas and some of them being the regular commuters through the route. Office workers and college students of the age group from 18 to 30 form the largest base of customers for the shop. In addition the shop sees new faces each day and sometimes the same customer on a regular but periodic basis, say in a week. There are also pan parlors in the adjoining areas. So Vipul Bhai makes sure that the quality at his store is not played with and tries his best to attract the customers of the nearby pan parlors to his and offer them discounts and keep them roped in. Strangely, there are also female customers of the shop, which Vipul Bhai proudly boasts off saying that his shop not only offers commodities but also quality and trust. He is confident of his customers. Infact, the shop never steps behind in offering discounts to its regular customers. Not only this, it also lends commodities on promise of paying the money later. The most attractive feature of the shop is the account system, where anyone can open an account with minimal deposit, but only restricted and trusted customers are encouraged. This way, it ensures regular and increased flow of money into the locker of the shop.

VI.

Competition

Like any other pan parlor, Vipul too faces a lot of competition. There is competition not only from nearby pan parlors, but also from other refreshment centers like juice corners, tea shops etc. sometimes they contribute in a positive way to the income of Vipul and sometime they dont.

a. Competition
The competitors are mainly fellow pan parlors, like Vaibhav Pan Parlor, which is some 5 shops away from Vipul. It is a new player in the market, but has gained momentum in the initial stage because of its location besides and being more approachable from the road. Then, across the street there are a couple of pan parlors, but they are not a threat to the business of Vipul. Vaibhav at times eats away from the customer base of Vipul, which hurts Vipul Bhai a lot. But Vaibhav does has a better discounted rates and schemes.

Apart from these obvious competitors, there are nearby juice shops which offer competition mainly during the summer season. Many people do not wish to remain for a longer duration under the roof of the pan parlor during the summers. The tea shop at times serves as a combination and complimentary partner for Vipul but at times, it doesnt. Infact, low income groups, upon reaching the doorsteps of Vipul later decide for a cup of tea than a pan or tobacco roll, mainly during the winter season.

b. Competitive Advantage
The advantages of this competition are not much noticeable. Vipul earns mainly through its trusted and regular customer base. Vipul Bhai believes that however be the tough times ahead, his regular customers will not leave the premises of his shop. However, there are eateries besides Vipul, worth mentioning is the ice-cream parlor Farki, which adds to the income of Vipul substantially at times. Then, the tea-shop also compliments the business of Vipul. Apart from that, Vipul Bhai himself keeps his business on the toes, constantly looking out for better options, marketing through trusted customers, ensures the best quality, regular discounts and sometimes special offers on its own, to keep the customers within its pool and attract new customers. Even the quality of the television set used by Vipul has been upgraded to the LCD version to meet to the demands of the customers. In addition, he always keeps varieties with himself, particularly of the international brands, which is difficult find elsewhere. Infact, Vipul Bhai says that he will be soon expanding the horizons of his business, and introduce new commodities like tea, coffee, ice-cream and STD booth as a supplementary business scheme.

VII.

Ethical and Unethical Practices of the of the Firm

However long be the duration of the shop in the market, every business delves into some or the unethical practice. Same is the case with Vipul pan parlor. To start with selling of tobacco is unethical on its own. Vipul never checks the age of the customers and so at times, helps in getting the young kids addicted. Apart from that, the suppliers of Vipul are not known, particularly of the international brands of the commodities. Quality at times is also played with, where local made commodities; mainly tobacco rolls are replaced with unhygienic local stuff. At times, it also charges the nonexperienced customers more than the actual price. Vipul also does not pay the income tax and always shows it income below the threshold level.

Apart from all this, there is not any more unethical market practice carried out by Vipul, mainly because it is not a very big player in the market. I personally believe that larger is the business, greater is its ability to play fraud. And hence, Vipul cannot play a lot with the customers because it is directly dependent on them and that to on a daily basis.

VIII. Analysis
Business ethics is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and business organizations as a whole. In the increasingly conscience-focused marketplaces of the 21st century, the demand for more ethical business processes and actions is increasing. Simultaneously, pressure is applied on industry to improve business, ethics through new public initiatives and laws. Businesses can often attain short-term gains by acting in an unethical fashion; however, such behaviors tend to undermine the economy over time. Some part of the business ethics overlaps with the philosophy of business, one of the aims of which is to determine the fundamental purposes of a company. If a companys main purpose is to maximize the returns to its shareholders, then it should be seen as unethical for a company to consider the interests and rights of anyone else. On a personal note, I believe that the business practices of Vipul are good and not much questionable on the moral or ethical grounds. However, the basic question of ethics knocks my brain now when I think from the other perspective is not sale of tobacco or pan for that matter unethical. These so called refreshments do harm humanity, and it is the Moral Responsibility of an individual to ensure that no such incidents take place when he has the knowledge of it being wrong. Infact, there is no potential benefit to the society from Vipuls business. However, if I put in the argument of Ethical Relativism now into the discussion, Vipuls business becomes acceptable to a part of the society. Vipul also forays into the black - marketing of International brands of tobaccos which is not only unethical but also unlawful. Most of the customers of Vipul are from the Conventional or Post-Conventional stages of moral development. The question of Normative Ethics also arises here, questing the business as a whole is smoking wrong? In addition, this business is a small member of the Capitalist setup and is very highly Globalized which provides it the edge above its competitors. Vipul is not a big market player, yet small acts like installing a television set with good speakers is

unknowingly a Utilitarian act, as in the long term it reaps the shop more profit. At the same time, there is no Monopoly of Vipul, as there are competitors around the shop providing a near-perfect condition. However, there are at times that they do fix the base price of certain commodities which again is unethical, but in such scenarios the customer is left with no option. As far as Environmental Ethics is concerned, Vipul is a culprit. Be it the smoke of the tobacco or the dirtying of the streets through pans, Vipul does not help in environmental preservation, at all. Now, under the Employee Issue, there is a conflict of interest between the two sons of Vipul Bhai. And surprisingly, Vipul Bhai is aware that his younger son plays fraud with the daily income of the shop, but then he refuses to complain a special case, where employees are relatives. However, Vipul hardly cheats his customers. The shop believes in its reputation and creation of goodwill. It aims at long terms business relations with its customers. the shop knows how to build and maintain relations. It is very well aware of the fact that its income comes on a daily basis and the threshold of the profit is maintained by some selective few customers. Vipul Bhai ends it by saying, It might be a shop to you but for me it is my home, my life-long PROJECT.