Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 1-1 BA Business Environment Chapter 13 Consumer Stakeholders: Product and Service Issues BA Business Environment Week 9 ~ Part 2 Fall 2003

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 1-2 BA Business Environment Chapter 13 Consumer Stakeholders: Product and Service Issues Agenda Chapter 13 - Product Quality and Safety Current Events Presentations Search the Web OSHA provides a web site that serves as a clearinghouse for information about employee safety and health:

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 1-3 BA Business Environment Chapter 13 Consumer Stakeholders: Product and Service Issues Overview Quality & Safety: Increasingly Important Government Involvement –Consumer Product Safety Commission –Food and Drug Administration Business’s Response

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 1-4 BA Business Environment Chapter 13 Consumer Stakeholders: Product and Service Issues Quality and Safety The Issue of Quality Driven by an increase in family income, less free time and intense global competition The Issue of Safety Driven by the public’s increasing concern with safety and risk- free products—and business’s responsibility to address this concern

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 1-5 BA Business Environment Chapter 13 Consumer Stakeholders: Product and Service Issues Critical Dimensions of Product Quality Performance Features Reliability Conformance Durability Serviceability Aesthetics Perceived quality

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 1-6 BA Business Environment Chapter 13 Consumer Stakeholders: Product and Service Issues Ethical Dimensions of Quality Contractual theory Due care theory Social costs view

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 1-7 BA Business Environment Chapter 13 Consumer Stakeholders: Product and Service Issues Safety Issues - Historical View Caveat Emptor –Let the buyer beware Caveat Vendor –Let the seller take care

Top 10 List of Safety Principles Build safety into product deign Do product safety testing for all foreseeable safety hazards Keep abreast of and implement latest developments in product safety Educate consumers about product safety Track and address your products’ safety performance Fully investigate product safety incidents Report product safety defects promptly If a defect occurs offer a comprehensive recall Work wit the CPSC to make sure your recall is effective Learn from mistakes – yours and others 13-9

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 1-9 BA Business Environment Chapter 13 Consumer Stakeholders: Product and Service Issues Product Liability Reasons for the Growing Concern... FIRST... Product liability has become a major issue because of the sheer number of cases where products resulted in injury, illness, or death and the amount of the financial award. SECOND... We have become an increasingly litigious society. THIRD… Rise in the strict liability doctrine

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 13 Consumer Stakeholders: Product and Service Issues Extensions of the Strict Liability Absolute liability Market share liability –Delayed manifestation cases Product tampering and extortion Product liability reform –Tort law

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 13 Consumer Stakeholders: Product and Service Issues Consumer Product Safety Commission 1.Protect the public against unreasonable risks of injury associated with consumer products. 2.Assist consumers in evaluating product safety. 3.Develop uniform safety standards. 4.Promote research into preventing product- related deaths, illnesses, and injuries.

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 13 Consumer Stakeholders: Product and Service Issues CPSC Risk Management Develop voluntary standards with industry Issue and enforce mandatory standards Ban a consumer product if public cannot be protected Recall a product or arrange for its repair Research potential product hazards Inform, educate and respond to consumers

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 13 Consumer Stakeholders: Product and Service Issues Challenges Facing the CPSC Lack of corporate compliance Limited public access to key information Inadequate consumer notification Insufficient funding

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 13 Consumer Stakeholders: Product and Service Issues Food & Drug Administration Some major responsibilities... Regulate the labeling of foods Develop safety standards for drugs Conduct product recalls Premarket test new drugs Regulate safety of medical devices (implants, etc.)

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 13 Consumer Stakeholders: Product and Service Issues Consumer Affairs Offices (CAO) Basic mission is to heighten management’s responsibilities to consumer stakeholders Essential functions –Establish a database –Audit programs –Recommend programs, policies and practices –Establish effective communications

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 13 Consumer Stakeholders: Product and Service Issues CAO Factors for Success or Failure Proximity to CEO’s office Clear access to all information about the company’s customers and authority to create the information Availability of quantified information about consumers Accessibility to effective performance measures to evaluate all employees in the company

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 13 Consumer Stakeholders: Product and Service Issues Product Safety Offices Need for Greater Organization –Complexity of products –Subtlety of hazards generated during product use –Coordination problems in large organizations Location –Divisional level vs. Corporate level

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 13 Consumer Stakeholders: Product and Service Issues Functions of Product Safety Offices Set the tone for the product safety effort Structure and enforce penalties Develop links to other quality and safety initiatives Assist with product safety litigation Assist the regulatory liaison Set up product safety committees Perform safety audits and tests Design contingency plans for product recalls

Total Quality Management 13-23

Total Quality Management 13-24

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 13 Consumer Stakeholders: Product and Service Issues Six Sigma Version of TQM TQM on steroids –3.4 defects per million versus sigma four 6,000 defects per million –Fixing the process rather than the product