Mr. Benitez placed the following advert in his local newspaper: “Offer for sale, 22 sets of (a certain football team’s) football strip. Only 22 left, I will definitely sell to the first party who accepts this offer for £440, by 9am Wednesday morning”.
a) Consider and apply the law as to whether this is an offer in law, or only an invitation to treat. Give reasons for your answer.
With regards to whether a newspaper advertisement is an offer in law, or an invitation to treat, case law directs us to Partridge vs. Crittenden (1968). Here, Partridge placed an advertisement in a local paper, offering rare birds for sale. The RSPCA brought a court action against Partridge charging Partridge with ‘offering’ a wild bird for sale, which was contrary to the Protection of Birds Act 1954. It was held by the court that he could not be guilty of offering the bird for sale, as the advert amounted to no more than an invitation to treat. However, this was because the advert offered no specific method for a potential buyer to make acceptance, and there would be no consideration on the buyer’s part.
However, Carlill vs. Carbolic Smoke Ball Co (1891) set an entirely different precedent for newspaper advertisements. In this case, an advert by the Carbolic Smoke Ball Co stated that a £100 reward would be paid by to any person who contracted influenza, colds, or any diseases caused by taking cold, after having used the smoke ball daily for two weeks according to the printed directions supplied with each ball. In an attempt to avoid catching the illness, Ms Carlill bought a Smoke Ball as advertised, used it according to instructions and promptly caught influenza. In this case, it was held that there was a binding contract between the two parties, as Carbolic Smoke Ball Co had made an offer to the whole world, with specific terms for acceptance, and had deposited £1000 in a bank as a show of good faith. The consideration on Ms Carlill’s part was held to have come from her using the ball according to the instructions provided.
Thus, in the case of Benitez’s advert, it is arguably an offer, as it lays out specific terms of acceptance, and states that it is only available to a member of a specific class: whoever reads the local paper, and is first to reply to the advert. Indeed, being first to reply, and guaranteeing to pay £440 could be held to be providing consideration. There could be confusion over who is first to reply to the advertisement, as there is only one strip, and the postal rule would apply (see below). At first sight, I would be tempted to conclude that this is an offer, as is open to acceptance, shows willingness to be bound on specific terms, £440 by 9am Wednesday, is certain, and can only be accepted by a reader of the paper, or someone whom a reader informs. However, given that Mr Benitez has not specified how acceptance must be received, this advert is not open to the whole world and that there is no specified way to accept, I would have to conclude that it is in fact an invitation to treat. In my view, and supported by Partridge vs. Crittenden, what Mr Benitez is in fact saying is that he makes a promise to accept the first offer for £440 he receives by 9am Wednesday morning.
If Mr. Benitez had made a formal legal offer, consider which of the two would-be buyers below is more likely to have accepted the offer. Give full reasons why:
b) Mr. Dudek saw the advert and left a message on Mr. Benitez’s answer phone, at 9am Tuesday saying, “Does this include the goalies strip? If so, I will take the lot”.
Mr Dudek is making a request for information, which is not normally considered an offer, as Stevenson vs. Maclean (1880) showed. Indeed, Mr Dudek’s acceptance statement can also be considered a conditional acceptance, which Neale vs. Merrett (1930) states is in fact a new offer. In this case, case law states that Mr Dudek has made an offer himself of £440 for the 22 shirts provided one of them is “the goalies strip”. However, if the original offer included “the goalies strip”, then Mr Dudek could have been considered to have accepted the offer, as Stevenson vs. Maclean showed that a request for information does not terminate the original offer, hence Mr Dudek’s second statement would be viewed as an unconditional acceptance of the offer, as the requested information would have been supplied.
c) Mr Gerrard also saw the advert, and he wrote a letter to Mr. Benitez, saying “I will give you £400, and I enclose a cheque to this value”. The letter was posted first thing on Wednesday morning, but did not get there until Thursday morning.
Mr Gerrard is making a counter offer to buy the goods for £400. As the case of Hyde vs. Wrench (1840) decided, a counter offer to buy goods for a different price to that specified in the offer effectively over rules the original offer. Had Mr Gerrard sent a cheque for £440, he would have accepted the offer, as the postal rule states that acceptance occurs at the time of posting. In this case, the counter offer removes the original offer, so had Mr Gerrard posted his cheque for £400 at 8am, he could not have then accepted the offer by sending a £440 cheque at 8:30am, as the original offer would no longer apply. Mr Benitez will now have to decide whether to accept Mr Gerrard’s £400 offer, or continue negotiations.
Thus, Mr Gerrard cannot possibly have accepted the offer, as he has not made any form of acceptance, conditional or otherwise. He has in fact made a completely new offer, which Mr Benitez may consider for a reasonable period of time. In contrast, Mr Dudek’s acceptance can be seen as conditional, and thus would overrule the original offer. However, the wording of the message suggests otherwise: it is composed of two distinct statements, thus Mr Dudek is not making a conditional acceptance, he is making a request for information, and if this is fulfilled, he is making an unconditional acceptance. However, if “the goalies strip” is not included, then neither Mr Dudek or Mr Gerrard has accepted the offer, and Mr Benitez would then be free to negotiate with either, or neither, of the two in order to determine the final purchaser of the strips.
The current ongoing debate discusses the added value of HRM in relation to best practice versus best-fit. Best practice suggests the universal success of certain HR practices, while best-fit acknowledges the relevant impact of contextual factors. This paper will discuss the impact they have on the employee and the organisation.
The exploration for the effect of types of HRM on organisational performance has focused on a universally applicable best practice model of high commitment management. There are fundamental problems with this approach in the theory on the lack of a link with the organisational strategies. Recently authors have demonstrated that good practice in HRM has an affect on the bottom line. The Sheffield study Patterson et al, (1998) suggests that “if managers wish to influence performance of their companies, the most important area they should emphasise is the management of people” (Patterson et al, (1998) cited in Purcell, J 1999:27).
The concept of human resource management has emerged from the 1980s into a core consideration of corporate strategy in the 1990s, (Legge, L 1995). There is no single definition of HRM in the literature yet the emphasis has to a large extent been on the strategic role of human resource management in organisations. Some research has identified HRM with strategic aspects of ‘best-fit’ or aligning people to the needs of the organisation as expressed in corporate strategy and others have examined HRM as a means of gaining enhanced organisational performance, (Golding, N (2004) cited in Beardwell, I. et al 2004). However the contribution that human resource may make to an organisation’s performance and effectiveness has been linked closely to the changes in different business environments including macro and micro contexts.
Recognition of the importance of HR has increased in recent years; this is a result of competition from overseas economies. In countries for example Japan, Germany and Sweden investment in employee development is higher that the UK. This has led to some organisations reviewing their policies on training introducing continuous investment in their employees. Although when multi national organisations have entered the UK, they have introduced their global HR policies (Beardwell, I. et al 2004).
For HR to succeed it must take on a proactive role within the organisation. Strategic HR creates value by providing opportunities for organic learning, development of intellectual capital and enhances core competencies. This value is crucial to the organisation’s future success (Treen, D. 2000). Employers are increasing extorting the best possible performance from employees. Best practice will increase the skills of the current workforce, and with recruiting it will reinforce the culture of a highly skilled work force (Mullins, L. 2005). Strategic HRM has gained both credibility and popularity over the past decade, specifically with respect to its impact on organisational performance (Paauwe, J & Boselie P. 2003).
There is a need for a higher value to be placed on employees, and therefore get the best performance from the employees. This resource requires development to gain and maintain competitive advantage According to Delany (2001) “successful organisations keep people issues at the fore front of their thinking and at the core of their decision making and planning”. Delany adds “organisations that get the people things right are the organisations likely to be around in the future” (Delany (2001) cited in Mullins, L. 2005:748).
There are fundamental differences in the approach to HR. Storey (1987) discussed these as ‘hard’ and `soft’ versions of HRM. The ‘hard’ version places little emphasis on workers’ concerns and, therefore, within its concept, any judgments of the effectiveness of HRM would be based on business performance criteria only. In contrast, ’soft’ HRM, while also having business performance as its primary concern, would be more likely to advocate a parallel concern for workers’ outcomes (Storey cited in Guest, D. 1999).
These models of HR theory, will justify why there has been an increase in this management practice. Walton (1985) defined HR as “mutual goals, mutual influence, mutual respect, mutual rewards, and mutual responsibility” Walton further added that the ‘psychological contract’ under this unitarist, high commitment model is one of mutuality, but it is a mutuality strictly bounded by the need to operate within an essentially unitary framework (Walton cited in Beardwell, l. et al 2004)
This view reflects a longstanding capitalist tradition in which the worker is viewed as a commodity. The consequential exploitation may be paternalist and benevolent; but, equally, it may operate against the interests of workers. Essentially, workers are simply resources to be squeezed and disposed of as business requirements dictate. More importantly, the interests of workers and their well-being are of no significance in themselves. As John Monks (1998) stated “In the wrong hands HRM becomes both a sharp weapon to prise workers apart from their union and a blunt instrument to bully workers” (Monks (1998) cited in Guest, D 1999:258).
Although some commentators have argued that the role of human resource what ever model is used explicitly views employees as another resource for managers to exploit. In the past, managements had failed to align their human resource systems with business strategy and therefore failed to exploit or utilise their human resources to the full. The force to take on HRM is therefore, based on the business case of a need to respond to an external threat from increasing competition (Guest, D 1999).
Today’s HR departments will recruit and develop the real strategic human resource needs of a modern business. The image of recruiting, training and development has changed and can be used a key driver for delivering shareholder value (Rogers 2004:25). Employers are increasing extorting the best possible performance from employees. Best practice will increase the skills of the current workforce, and with recruiting it will reinforce the culture of a highly skilled work force (Mullins, L. 2005). Organisational strategy is at the heart of the best fit/best practice debate. Therefore if best fit prevails, then it is possible to model the type of HR required for a given type of business, and this practice can be adopted in a wide number of firms in similar circumstances (Purcell, J 1999).
Commentators now agree that there is no need to look any further than the human resource to gain competitive advantage, although the models use vary. Pfeffer (1998) discharges all other models in the search for alternative sources of organisational competitive advantage, arguing that the only advantage is to “manage people right” in an employee-centred approach, introducing a model of “seven practices of successful organizations” This is the foundation for best practice, demonstrating how human resource practices can be aligned with the skills and behaviours needed for business strategy. These practices includes employment security, selective recruiting, self-managed teams and the decentralisation of decision-making, comparatively high compensation contingent on organizational performance, extensive training, reduced status distinctions, and extensive sharing of financial and performance information throughout the organisation (Pfeffer, J 1998).
Pfeffer (1998) further suggests that effective performance depends upon the link between HR policies and the business strategies. Firms with a cost minimisation approach to HR can be successful in cost-competitive markets whereas adopting high-performance work practices may match competition on the basis of quality and service. The role of HR managers in identifying and building core competencies, there is a close fit between strategy and human resources. Competencies are complex, multidimensional, interrelated and interdependent knowledge systems. Consequently, if HR managers design HR policies to match the core competencies of an organisation, they may also build in rigidities that simultaneously work against future change (Pfeffer, J 1998).
Johnson and Scholes, (1997) discussed “organisations which successfully manage change are those which have integrated their human resource management policies with their strategies and the strategic change process… training, employee relations, compensation packages and so on are not merely operational issues for the personnel department; they are crucially concerned with the way in which employees relate to the nature and direction of the firm, and as such they can both block strategic change and also be significant facilitators of strategic change”. Concluding that aligning HR practices with organisational strategy will add value to the organisations resources (Johnson G & Scholes K 1997:494)
Both models advocate the value that is placed in the human resource and aligned to the organisational strategy. Best practice will place the emphasis on the core competencies of the employee and develop these to address the overall organisation’s strategy. Whereas Best fit HR will compliment the strategy and fit in with the organisations culture. Neither model is a panacea; organisations should choose HR practices and strategies that fit with their culture, and requirements. The employee should be a valued resource, integrated into the organisational strategy.
Bibliography
Books
Beardwell, I. et al. (2004) (4th Edition) Human Resource Management a Contemporary Approach Prentice Hall, Harlow
Johnson G & Scholes K (1997) (4th Edition) Exploring Corporate Strategy
Prentice Hall, Hemmel Hempstead.
Legge, L. (1995) Human Resource Management: Rhetoric’s and Realities,Macmillan Business, USA.
Mullins, L (2005) (7th Edition) Management and Organisational Behaviour
Prentice Hall, Pearson Education, Edinburgh
Pfeffer, J (1998) The human equation building profits by putting people first
Harvard Business School Press, Boston
Journals
Guest, D (1999) Human Resource Management–The Workers’ Verdict
Human Resource Management Journal, London, 1999.Vol.9, Iss. 3;
Marchington, M & Grugulis, I (2000) Best Practice Human Resource Management: Perfect Opportunity or Dangerous Illusion? The International Journal of Human Resource Management
Paauwe, J & Boselie, P. (2003) Challenging ‘Strategic HRM’ And the Relevance of The Institutional Setting Human Resource Management Journal 2003.Vol.13,
Purcell, J (1999) Best practice and best fit: Chimera or cul-de-sac?
Human Resource Management Journal, London: 1999.Vol.9, Iss. 3
Rogers, S. (2004) Power To The People Managers
People Management, London: Sep 2004. Vol. 10
Wal – Mart is one of the world’s biggest and most successful retail organisations. Its reach spans the whole of the US, the United Kingdom, and parts of Asia. It has over 1.2 million employees in America alone, and worldwide that figure can be said to be approximately 1.7 million. With profits rising to $10.3 billion dollars in 2005, an increase of 13% from the previous year, there is no doubt that it has been successful in the retail sector. However, its success has come at a price that does not tally with established service marketing theories as we will see.
In order to have a good understanding of Wal-Mart’s human resource practices in light of its success in relation to relevant services marketing theories, one will first need to identify and evaluate these relevant theories.
In recent times many developed countries have seen a dramatic increase in the importance of services to national economies and to the individual consumer. In the major European countries, the US and Japan, more people are employed in services than in all other sectors of the economy put together. Both public and private sector services in these countries account for between 60 and 75 percent of gross domestic product (Torrington et al. 2005). Now, a service is any activity or benefit that one party can offer to another which is essentially intangible and does not result in the ownership of anything.
Its production may or may not be tied to a physical product. The retail sector offers both tangible and intangible continuum for goods and services, i.e. a physical product is what customers want and the employees of a particular retail organisation provides a service that makes that experience easy so that customers come back (Lovelock 1996).
Successful service marketing theories recognise that the specific nature of services requires tailored marketing approaches and that traditional product-based marketing is unlikely to be effective if principles are transferred without adaptation. Just like manufacturing firms smart service businesses use marketing to create powerful brands which are positioned strongly in chosen target markets. However, because service firms differ from tangible products, they require additional marketing approaches (Levitt 1981). In a product business, products are fairly standardised and can sit on the shelves waiting for customers. But service business, the customer and front-line service employee interact to create the service. Thus service providers must work to interact effectively with customers to create superior value during service encounters. Effective interaction, in turn, depends on the skills of front-line service staff, and on the service production and support processes backing these employees. Established service marketing theories states that successful service companies focus their attention on both their employees and customers. They understand the service-profit chain, which links service firms’ profits with employee and customer satisfaction (Heskett et al. 1994). This chain consists of five links:
• Internal service quality: superior employee selection and training, a quality work environment and strong support for those dealing with customers.
• Satisfied and productive service employees: more satisfied, loyal and hardworking employees.
• Greater service value: more effective and efficient customer value creation and service delivery
• Satisfied and loyal customers: satisfied customers who remain loyal, repeat purchase and refer other customers
• Healthy service-profits and growth: superior service firm performance.
Therefore, reaching service profits and growth goals begins with taking care of those who take care of customers. All this suggests that, in order to achieve favourable service outcomes, service marketing requires more than just traditional external marketing, it also requires both internal marketing and interactive marketing (Brooks 1998). Internal marketing means that the service firm must invest heavily in employee quality and performance. It must effectively train and motivate its customer-contact employees and all the supporting service people to work as a team to provide customer satisfaction.
For the firm to deliver consistently high service quality, everyone must practise a customer orientation. It is not enough to have a marketing department doing traditional marketing while the rest of the company goes its own way. Marketers must also encourage everyone else in the organisation to be customer-centred. Infact, internal marketing must precede external marketing. It makes little sense to advertise excellent service before the company’s staff is ready, willing and able to provide it (Bateson 1989). Thus, the service organisation must orient its employees carefully, instil in them a sense of pride and motivate them by recognising and rewarding outstanding service deeds. Interactive marketing means that perceived service quality depends heavily on the quality of the buyer-seller interaction. In product marketing, product quality often depends little on how the product is obtained. But in services marketing, especially in high-contact and professional services, service quality depends on both the service deliverer and the quality of the delivery (Gronroos 1984). Effective service deliverer customer interaction is important for achieving a satisfactory service transaction. Service marketers cannot assume that they will satisfy the customer simply by providing good technical service. This is because the customer judges service quality not just on technical quality, but also on its functional quality. Also, each interaction is a moment of truth for the provider, where not just the service encounter, but also the organisation, will be decisively judged by the customer. Thus, professionals cannot assume that they will satisfy the client simply by providing good technical service. They have to master interactive marketing skills or functions as well (Bitner 1996). Effective buyer-seller interaction may help to secure a satisfied customer. As competition and costs increase, and as productivity and quality decrease, more marketing sophistication is needed. Service companies therefore face three major marketing tasks: they want to increase their competitive differentiation, service quality, and productivity.
With this in mind we can now evaluate Wal – Marts human resource practices with regard to the service marketing theory stated above.
Wal – Mart is a retail success compared to a wide range of other retail organisations in the US and around the world that have tried and failed in the retail sector. Its success has come about from the wide range and far reaching goods and services it provides in the retail sector.
However, there is a dilemma with regard to this. In established service marketing theories as stated above, it argues that for an organisation to be successful it will have to hire, train, maintain, and reward, the best employees, so that they provide the best services to customers, which lead to customer satisfaction and retention, which also leads to increased profits for the organisation. This established theory differs from the practice of Wal – Mart which has faced increased criticism with regard to employees being pressured into working unpaid overtime, alleged sexual discrimination towards female employees, which constitute two thirds of its workforce (Adams 2005), low pay, poor worker safety, disability discrimination, etc (Miller 2004), and the company still enjoys outstanding profitability and growth whilst its employees are not treated fairly . Possible reasons for the success of Wal – Mart in light of such human resource practice and the theories mentioned can be said to come from the fact that it is a large organisation with outlets in and outside the US as well, i.e. when an organisation becomes too big, bureaucracy and red tape tends to filter through, therefore, employees have been slow to call for these damaging claims about the organisation possibly of fear of loosing their only job.
Also, because it has a strong hold on the retail sector, i.e. there are not a large number of retail outlets that provide the goods and services that Wal-Mart provides in bulk, it deems every employee as tangible, i.e. they can always hire someone else with no hassle whatsoever, thereby they do not pay as much attention to taking good care of their staff. Also, because most of their employees are women (two thirds), management within Wal – Mart can be said to be negligent of gender advancement. I.e. it is deemed that most women will one day return to the home to take care their family and children. Therefore, there is no incentive on the part of management to increase staff pay, provide rewards to the best performing staff, and improve worker safety, as mentioned previously because of the size of Wal-Mart bureaucracy and red tape prevails, thereby making it difficult for the most simple and important aspect of human resource management to be bypassed.
In addition critics dismiss Wal –Mart’s seemingly progressive HR Policies as cosmetic attempts to maintain its public image rather than a real effort to address the underlying problems it has, which shows that there is a lot of bureaucracy which only tends to be prevalent in large organisations. Under established theories on service marketing, for an organisation to be successful with regard to profitability and customer retention, management within the organisation would have to invest in hiring the best people, rewarding outstanding employees, all mentioned previously, does differ from the success of Wal – Mart with regard to the theoretical aspect of identifying employee treatment as the key to running a successful organisation rather than the problems which Wal – Mart faces. In addition, the fact that Wal – Mart is a privately owned company means that although it is subjected to the laws and regulations pertaining employee relations, it can do as it pleases. I.e. each and every employee that is hired by Wal – Mart takes the job under certain terms of agreement which the organisation should not be called upon if an employee is not happy with the way they have or are being treated by the company, because they have taken the job according to the terms of their employment. Also, because it is a privately owned organisation there is no worker representation which makes it very easy for Wal – Mart to do as it so pleases. Although, certain laws governing employee relations does state that employees should be treated fairly with regard to pay, health benefits etc, most organisations are in a business to make money, i.e. to be profitable and if what they do enables them to achieve this then they will continue doing what they have always been doing. Wal – Mart however seems to be trying to do something about this problems that have risen, i.e. the company’s CEO arguing that the company prides itself on its open door policy, and its fair treatment of what it terms ‘associates’. However, due to the size of the company (bureaucracy) any policy changes in favour of employee relations will be slow to trickle down to those most sort after, and will cost money to the company, in which theoretically company’s are always trying to cut costs to make a profit. Imagine a policy change that affects 2.2 million employees, that is a lot of money to spend which will surely affect its profit intake.
The implications of this finding is that although the issue of employee relations within Wal – Mart differs from established theories of service marketing, it can be said that this is a special case. Reasons being that if Wal – Mart does not get its act together in time it will be subject to court proceedings which will result in a large payout to employees, which will in turn dent its image and profitability. Theories in service marketing have boundaries. These boundaries are to do with the law on employee relations. If an organisation like Wal – Mart does not treat its employees fairly as stated within service marketing theory then it is subject to legal proceedings. Service marketing theories are established according to the law in a particular country and anything outside that can be said to be an unlawful practice. This can be said to be the major block as to why established theories on service marketing differs from the human resource practice of Wal – Mart. In addition to this, the fact that established theories in service marketing differs from the practice of Wal – Mart’s human resource means that academics would need to have a rethink about the boundaries of the validity of such theories, i.e. they would need to incorporate other aspects that are unforeseen such as the law governing employee relations within the private sector, the psychological aspect of being in a job because that is all an employee is reliant on to earn a living, etc. These are issues which academicians within the service marketing field will need to look into and address.
CONCLUSION
One can conclude here that although the norm from which established theories of service marketing states that the key to a successful organisation is making sure that the right employees are hired and taking care off, which waters down to customer satisfaction and retention, which then leads to profitability, differs from the HR practice of Wal – Mart, service marketing theory is still a new phenomenon and like any other established theory it is prone to refinement and amendment as we humans are constantly evolving, so do trends in marketing, the sciences, economics, and other theories, etc are also evolving. Therefore, the theory is still valid it will need to incorporate other aspects of service marketing which are unforeseen as mentioned in the latter.
REFERENCES AND BIBLIOGRAPHY
Adams, R (2005) “Nickle & Dimed (and passed over): Dukes V. Wal-Mart Proceedings of the 12th Annual Conference of the European Institute of Retailing and Service Studies.
Bateson, J.E., (1989), Managing Services Marketing: Text and readings, Hinsdale, IL: Dryden Press.
Brooks, R.F., and Lings, I.N., (1998), Implementing and measuring effectiveness of internal marketing, Journal of Marketing Management, 14, pp. 325 – 351.
Cole, C., and Palmer, A., (1995), Services Marketing: Principles and practice, Upper Saddle River, NJ: Prentice Hall, pp. 56 – 60.
Bitner, M.J., and Zeithaml, V., (1996), Services marketing, New York: McGraw Hill, pp. 8 – 9.
Gronroos, C., (1984), A service quality model and its marketing implications, European Journal of Marketing, 18, 4, pp. 36 – 44.
Heskett, J.L., Jones, T.O., Loveman, G.W., Sasser Jnr, and Schlesinger, L.A., (1994), Putting the service – profit chain to work, Harvard Business Review, March.
Kotler, P., Wong, V., Saunders, J., and Armstrong, G., (2005), Principles of Marketing, 4th European Edition, Prentice Hall.
Levitt, T., (1981), Marketing intangible products and product intangibles, Harvard Business Review, May – June, pp. 94 – 102.
Miller, G (2004) “Every day low wages: The hidden price we all pay for Wal-Mart” A report by the Democratic of the Committee on Education and the Workforce, US House of Representatives.
Normative Philosophy in business ethics is focused upon the analysis of the behaviour of an organization with respect to a set standard as argued by George D. Chryssides and John H. Kaler (1993) . This method even though argued to risk the unreal philosophy by some authors is extensively used to analyse the behaviour of an organization for ethical and un-ethical behaviour. In this essay the normative theories are used to compare and contrast an ethical fund and un-ethical fund. For the discussion purposes, Ethical funds from Canada and Vice fund from United States of America are analysed using the theories of Normative Philosophy. A factual evidence of both the companies is first presented to the reader followed by the critical analysis in the form of discussion to the reader. This is followed by the conclusion on which the ethical fund and the un-ethical fund are identified based upon the results from the analysis.
2: Company Information
2.1: Ethical Funds
This company is a Canadian mutual fund investment company that pioneers in providing a wide range of mutual fund solutions to its customers in Canada. The company details extracted from the website (www.ethicalfunds.com) is presented to the reader below.
President & Chief Executive Officer: Don Rolfe
Year Formed: 1992 (The first Ethical Fund® (Ethical Growth Fund®) was launched in 1986)
Assets Under Management: $1.8 billion*
Number of Unit Holders*: 180,000
Number of Employees 243*
*As at February 2005
From the overview on the company annual report (2004) it is also clear that the company provides mutual funds solution to the customers with focus upon value added services and optimum rates of interest to provide maximum benefit to the clients. Furthermore, the policies of the company reveal that the company is not only interested in socially responsible investment but also explicitly stated that the investments will not be made in the following categories of business
Tobacco: The Company will not invest in the companies under the category of Tobacco manufacture and sales.
Military: Under this category the company will not invest in organizations that are involved in the manufacture weapons of destruction to support military action.
Nuclear: The company will not only refrain from investing in organization that employ nuclear reactor but also refrain from investing in companies that are involved in any for of nuclear business.
2.2: Vice Fund
Vice Fund is an US based mutual fund organization that provided investment advice to its clients through the long-term growth of the capital. The key facts about the organization extracted from the company’s annual report (2005) are as follows
President: Dan Ahrens
Assets Under Management: $31.482 million *
Number of Unit Holders*: Not Available
Number of Employees Not Available*
*As at February 2005
Unlike the Ethical Funds, the Vice Fund invests upon any organization irrespective of the nature of the business. The company also provides services through other subsidiary organizations like Generation Wave Fund.
The company also does not provide a standard set rate to the customers and does not take the liability for any minor changes in the market.
3: Discussion
Andy Crane and Dirk Matten (2003) argue that the normative analysis of the organizational behaviour and business ethics comprise of three essential tools (or theories) as discussed below
3.1: Objectivism
Andy Crane and Dirk Matten (2003) say that the objectivism whish is the synonym for ‘epistemological realism’ mainly corresponds to the factual analysis of the numbers (i.e.) the analysis of the company’s activities and their transaction policies that establish a logical track. This makes it clear that the Objective approach of the normative analysis is predominantly concerned with the ability of the organization to establish ethical behaviour through their business process and policies embracing the business.
In the light of the above statement, the insight into Ethical Funds makes it clear that the company not only provides a wide range of financial investment solutions but also discloses the information on the rate of interest and the returns guaranteed for the investment (if applicable). Alongside, the company’s annual report also justifies that the shareholders were provided with the complete information on the financial performance along with the return from the investment on every organization by the company during the financial year. Also it is clear from the company annual report (2004) that it provides services under only one business name. This makes it clear that the company is adhering an uncomplicated method of business management.
Vice Fund on the other hand provides financial investment solutions under two trading names namely Vice Fund and Mutuals.com This method of providing services under two different trading names obviously increases the complications in the management eventually leading to un-ethical business activities between the organizations. Also, the company does not disclose all the relevant information to the shareholders and investors thus making the business process more translucent rather than transparent method as in the Ethical Funds above.
3.2: Subjectivism
Subjectivism unlike, its counterpart above mainly concerns with a company’s external dealings like for example the kind of organizations that the company invest upon and the extent of risk etc. This also includes the organization’s responsibility to account for liability and protect the investment by the investors. This makes it clear that the subjectivism approach of the normative philosophy not only evaluates the external elements that influence the company but also provide the bigger picture on apprehending vital flaws in the business that leads to un-ethical business management. This makes it clear that this theory actually analyses the moral philosophy in a normative manner (i.e.) the subjectivism approach provides a logical approach to analysing the moral philosophy attributes of the business.
The overview on Vice Fund’s investment strategies has revealed that the company invests upon any organization only focusing upon the rate of return from the investment rather than considering the nature of the business. This apparently increases the risk associated with the business and the investments of the organization. For example the investment in an organization in military sector will result in a loss when it becomes the prime target for terrorist attack. Also, the investment by the company in casinos and gaming organizations without having specific policies in the investment has increased the level of risk to a very high level.
Furthermore, it is clear from the exploration into the company’s website which states that the organization will not take any liability for loss due to a specific investment. This makes it clear that the company’s adherence to the business ethics is minimal or negligible. The above arguments also justify that the risk involved with the investment by the general public on this company is very high.
The factual representation of the company Ethical Funds on the other hand has revealed that the company adheres to strict policies on investment. This is not only as part of the social responsibility of the organization that attributes to the moral philosophy but also to the normative philosophy due to the fact that the company evaluates the risk associated with the investment. This makes it clear that Ethical Funds is not only operating at a lower risk level but also value the investment of the customers by refraining from investing on business sectors that involve high level of risk.
Furthermore, the company also takes special interest in investor benefits and also eliminates the liability through avoiding risk-involving investments. The rate provided by the organization are also competitive to that of the vice Fund counter part.
From the above arguments it is clear that the Vice Fun is not following an ethical route to the business management in the market.
3.3: Monism and Pluralism
The normative philosophy of analysing the business includes the Monism and Pluralism approach when the organizational policies on a single concept have multiple dimensions (i.e.) when the organizational policies have different sections that influence upon the same concept or terms and conditions. This approach as argued by James Surowiecki (2005) provides a profound analysis on the hidden clauses of the business terms that are essential to be identified in order to establish the validity of the business. Even through the hidden clauses appear¬ to be part of the moral philosophy, the fact that the information as such when analysed without performing a qualitative analysis (moral) justifies the approach under normative philosophy.
An investigation into the company policies with respect to the investors and investment by the organization reveals that the company adheres strictly to its policy with respect to the investment. It is also clear that company through the risk management by strictly refraining from investment on Nuclear, Tobacco and Military sectors of business justifies that the company’s policy on investment is strictly controlled by more than one conditional clause. Since this is for the company to invest, the funds deposited by the investors of the organization, this plural form of sections under one condition makes it clear that the organization is trust worthy for investment.
On the other hand, an insight into the Vice fund reveals that the company doe not have any set rules to follow in terms of the investment. This is clear from the varied range of company funds that comprises its investment. This makes it clear that the company’s high risk approach is also risks the investment by the clients in the organization. This singular approach where a set of policy framework is essential makes the company prone to risk.
Furthermore, the company’s multiple conditions on the investors end where it takes no liability for the loss on investment, further shows the plural approach of the organization in preventing the any liability to the customers.
4: Conclusion
The discussion on the two companies has revealed that Ethical Funds is more subjective, has an objective approach to the customer relations as well as the overall business and above all adheres pluralism in the investment of the money invested by the investors to the funds. Furthermore, it is also established that the company adheres to strict rules and regulations whilst performing the business transaction and also provides comprehensive information on the company’s policies, assets and other details.
It is also established that the Vice Fund the counterpart organization in the analysis not only involves high level of risk in the investment eliminating objectivism as well as the subjectivism through the high level of risk involved in the investment by the customers rather than accepting all or some of the liability. Furthermore, the pluralism established in the terms and conditions with the investors further makes it clear that the company is not adhering to healthy business methods.
It is also proved that the normative analysis of the business ethics adhered by an organization not only provides consistent results but also provides clarity in the discussion through the use of justifiable information to derive upon a valid decision.
Thus to conclude this report, it is clear that the Vice Fund is explicitly un-ethical in nature whilst the Ethical Funds is explicitly ethical in nature.
5: References:
Books
Andy Crane and Dirk Matten (2003), Business Ethics, UK: Oxford University Press
George D. Chryssides and John H. Kaler (1993), An Introduction to Business Ethics, UK: International Thomson Business Press
Journals and Reports
Annual report (2004), Ethical Funds, Canada
Annual report (2005), Vice Fund, United States of America
James Surowiecki (2005), The Wisdom of Crowds, UK: Abacus
This essay explores the rationale behind MG-Rover’s attempt to forge alliances. It begins with a brief history of the brand because in order to understand the rationale for alliances, you must understand where the company found itself at the start of the new millennium.
The Rover brand emerged over a century ago and provided high-quality cars to the middle-classes. Rover was then assimilated into the nationalised British Leyland in the mid 1960s. However this was, in hindsight, seen as a failure as it starved the brand of investment and seriously harmed its reputation for quality. In 1982, the Austin Rover Group was spun-off and a recent strategic alliance with Honda was giving them access to Honda’s engineering expertise and produced some excellent results. However the group was then sold to British Aerospace in 1988 who in turn sold it on to BMW in 1994. This ended the alliance with Honda.
Within a year, Rover was, within BMW circles called “the English patient” as they believed they had bought a chronically sick car company. The production and labour facilities were seen as antiquated and the model range in urgent need of updating. BMW persevered and invested billions of pounds in revamping the whole operation to try to modernise it. They finally gave up in 2000 when the drain on BMW’s resources was threatening their own strong balance sheet. The company was sold to a group of private investors, the Phoenix Consortium, for a nominal sum. This newly formed entity was named the MG-Rover group. This group had, however, lost two key niche brands along the way – the Mini and the Land Rover. MG-Rover had, in effect, been picked clean of key satellite brands and what was left was a company with essentially three models; the Rover 25, 45 and 75. The very problems it faced at this juncture were the reasons it attempted to forge alliances over the next five years with other firms including Proton, Tata , China Brilliance and SCIA . These reasons included:
Lack of production volume
MG-Rover lacked any serious production capacity. The top five car producers all manufactured over three million units a year each in 2003 . In comparison, MG-Rover’s production of 107,000 units in 2003 was almost derisory. The key to success in the automobile industry is either volume or a successful niche product. With volume, you get economies of scale which can carry the high costs of developing a new model. MG-Rover’s 107,000 cars alone could not justify carrying all the overhead necessary to justify new models. Without new models, sales fell. The attempt to forge an alliance was an attempt to escape from this vicious circle. The attempted collaboration with Chinese firms was an attempt to rapidly scale up production in a single market with huge potential. Equally the Chinese were eager to acquire a ‘Western’ brand and technology.
Lack of R&D Capacity
When BMW sold the Land-Rover brand to Ford, the Research and Development facility at Gaydon also went with it. This deprived Rover of most of its R&D capability which is vital in today’s car market where constant innovation is the key to success. Combined with its lack of production volume, MG-Rover lacked any ability to perform serious innovate research itself. The joint ventures with Honda and BMW had shown what MG-Rover was capable of but without deep-pockets it was stuck in a time-warp.
Poor Model Range
This is obviously linked to the lack of R&D but exposes even deeper strategic problems within MG Rover. Even when BMW owned Rover, the only new model it launched was the Rover 75 - an executive saloon . Yet the growing segments in the market were the super mini, the Sports Utility Vehicle and the MPV. MG-Rover had little or nothing in these segments. Ironically MG-Rover had, under BMW, drastically improved its quality of the range it had. However, the result of this model gap, was that it was haemorrhaging market share in its only real market; the UK. In 1990, it had 13.62% of market share in the UK, by 2004 it was down to 2.99% - see graph below. MG-Rover simply did not have the full range of models to keep attracting younger customers. An alliance was needed to flesh out their model range. In hindsight, now it can be seen that the strategic alliance with Honda was probably Rover’s best chance of success. It allowed Honda easy access to the UK market and Rover would have gotten access to their R&D and a wider product range. They had jointly developed five models before the break-up of their alliance. It is clear that Rover was probably seeking what it already had had with Honda.
Graph from p.17 ‘Who Killed MG Rover’: A special Report from Cambridge MIT Institute’s Centre For Competitiveness and Innovation: Trumpington St., Cambridge, UK
Lack of International Markets
MG-Rover was essentially an English company. The only internationally recognisable brands it possessed was Mini and Land Rover. When these were gone, it was tied to the vagaries of the UK economy and could never achieve the global economies of scale that, for example, Toyota or VW had. This weakness repeatedly hindered Rover over its history. Because when it did have good models like the Montego, Maestro and Metro, it simply did not have the distribution network to sell them internationally to gain volume and higher marginal profits.
The alliance with BMW gave it a renewed potential for accessing the European market and beyond but when BMW was gone, Rover was back to square one. It needed alliances to rectify this and help it to expand geographically. However, established world markets were oversupplied and the only real place it could turn was developing markets. Rover still had the technological experience which was marketable in these regions - this is why China drew their interest. China had the mass market that would allow it to scale up production in a low labour cost economy – it seemed an ideal solution to Rover’s problems.
Negative Publicity
It is worth noting that the weaker MG-Rover became, the lower its sales went. The public did not want to buy a brand that might not exist next year. A successful alliance may well have stemmed this effect and even turned it. MG-Rover needed the imprimatur of another successful company. The only period when their image was really improving was when BMW owned it and its prestige and technology rubbed off – but even this was not enough to support sales.
Lack of Cash
This real issue at the core of MG-Rover’s problems from the moment it broke from BMW was cash. Without a rich parent pumping money into the company, it was consuming its own capital to cover the day to day losses it was making. By 2003, it had even sold its main production plant, Longbridge for 45 Million pounds and was leasing it back. In 2001, it had sought investment from China Brilliance in order to fund new models but this deal eventually fell through. Again in 2004, Rover and the Shanghai Automotive Industry Corporation (SAIC) were courting but the consummation never took place. SAIC was just not willing to pour in the cash necessary. Their logic was incredibly sound - if BMW cash and technology could not turn Rover around, could anyone do it? The Chinese also realised that they knew more about their own markets than Rover did and all they were really after were Rover’s models and technology; not a potential money-pit. In the end, all that was bought – by the Nanjing Group – was the rights to the MG-Rover’s models and technology for 67 Million pounds. Later the Longbridge plant was physically stripped of the machinery and this was shipped to China.
It must be asked if the real rationale for a search for alliances may really have been a quest for someone to finally buy any value that was left within MG-Rover. The men behind the Phoenix Trust were not new to the industry, they must have know the situation MG-Rover was in.
In the final analysis, when MG-Rover split with BMW it was too big to be a niche market player and too small to be the global player it wanted to be. It needed to forge alliances to rectify these problems. It needed technology, a new model range and a brand boosting connection with another firm. But most of all, it needed cash.
Bibliography
Holweg, M, Oliver, N, Who Killed MG Rover? , Centre for Competitiveness and Innovation, Cambridge University, Cambridge, 2005.
Rover’s Billion Pound Plunder, Retrieved from http://news.bbc.co.uk/1/hi/ business/4574603.stm, November 2005.
Rover Sold To Nanjing Autos, Retrieved from http://news.bbc.co.uk/1/hi/ business/4708739.stm, November 2005.
Williams, K, William, J, Haslam, C, 1987, The Breakdown of Austin Rover: A Case Study in The Failure of Business Strategy and Industrial Policy, Berg Publishers, Oxford.
