4.4.2 - Ethics
This lesson explains why ethics matters in international business decisions. In exam questions, the strongest answers show that ethical issues are not vague moral ideas: they create clear conflicts between stakeholders over pay, safety, pollution, sourcing, and promotion, and those conflicts can affect costs, reputation, and long-term performance.
Stakeholder conflicts
Ethics
The principles and acceptable norms that govern behaviour in business.
In international business, ethics is difficult because legal rules differ across countries, but stakeholder expectations do not always move in the same way. A business may follow the law in one market and still be criticised by customers, pressure groups, or investors for acting unfairly or irresponsibly. That is why ethics often appears in exam answers as a source of stakeholder conflict.
A stakeholder conflict happens when one decision helps one group but harms another. For example, cutting labour costs may please shareholders through higher profit, but it may damage employees through worse pay or unsafe conditions. The key exam point is that ethical issues force businesses to balance short-term gain against wider long-term consequences.
The main conflicts in this topic can be mapped like this:
| Stakeholder | Typical ethical issue | Why conflict arises |
|---|---|---|
| Consumers | Misleading labelling or promotion | Sales may rise in the short run, but customers are misled and trust falls |
| Employees | Low pay, unsafe conditions, redundancies | Lower costs may increase profit, but staff welfare worsens |
| Shareholders | Pressure for higher returns | Investors may want low costs, while managers also need to protect the brand |
| Communities and countries | Emissions, waste disposal, local environmental harm | Production may create jobs and output, but it can also harm the local environment |
The best way to analyse stakeholder conflict is as a chain: a business decision changes costs or sales, this affects one group positively, another group negatively, and that tension then creates reputational, legal, or operational pressure.
Pay and working conditions
Pay and working conditions are a major ethical issue when businesses operate across countries with very different labour laws and enforcement. A multinational may be tempted to produce where wages are low and regulation is weak because this reduces costs. However, if workers are underpaid, overworked, or exposed to unsafe conditions, the business may be seen as exploiting its workforce rather than competing fairly.
Working conditions include safety, hours, space, treatment by managers, and whether employment is freely chosen. Poor conditions might cut costs in the short term, but they can also increase accidents, absenteeism, labour turnover, and bad publicity. Therefore, a decision that looks efficient on a cost basis may weaken performance once disruption and reputational damage are included.
The 2013 factory collapse in Dhaka, Bangladesh, is a powerful reminder of why this matters. When overseas factories are unsafe, retailers and brands higher up the chain may still be blamed because customers often judge the whole business, not just the subcontractor. That means ethical failures in working conditions can quickly become a commercial problem as well as a moral one.
Starbucks has also faced criticism over whether coffee producers receive a living wage. This shows that pay ethics is not only about the firm's own staff in its own buildings; it can also involve the people who supply raw materials far earlier in the production process.
Low labour cost is not automatically an ethical advantage. If lower cost comes from unsafe or unfair treatment, the business may face bigger long-term costs later.
Emissions and waste disposal
Environmental considerations matter because businesses can shift costs onto communities and future stakeholders. A factory that releases harmful gases or disposes of waste cheaply may reduce its own costs, but the environmental damage does not disappear. Instead, the cost is pushed onto other people through pollution, health risks, or clean-up costs.
Emissions
Substances released into the air by an activity. Harmful or excessive emissions can cause pollution, health risks or environmental damage.
For an international business, emissions are especially sensitive because environmental rules vary between countries. A firm may produce in a place with looser controls, but customers and investors in other markets may still judge the business harshly. That creates a chain of reasoning that is useful in exams: weaker controls reduce costs, but higher pollution increases stakeholder criticism, which can then damage the brand or bring tighter future regulation.
Waste disposal
The process of getting rid of unwanted materials.
Waste disposal is another ethical issue because businesses can choose the cheapest option rather than the safest one. This is particularly important with products such as electronics, where waste can be hazardous and difficult to process safely. Poor waste disposal may save money immediately, but it can create long-term environmental harm and undermine the firm's reputation for responsible behaviour.
Nissan's published environmental targets show why businesses increasingly take emissions seriously. For a global manufacturer, reducing carbon output is not just about public relations; it can help reduce conflict with governments, communities, and environmentally aware consumers across many markets.
Continue this lesson.
You’re previewing NovaLearn without an account. Create a free account to read the rest.
Create free account