Business Ethics Case Study Analysis: Potato Chip Pricing, MKTG-04, Uni

This case study analyzes an ethical dilemma faced by Julie, a brand manager for potato chips, who must decide how to maintain profit margins in the face of rising production costs due to a drought impacting potato prices. The analysis explores two potential courses of action: raising prices or reducing the quantity of chips per package. The assignment identifies key stakeholders, including customers, suppliers, and shareholders, and evaluates the ethical implications of each decision. It considers ethical theories such as utilitarianism and the rights approach, examining the potential benefits and drawbacks of each alternative. The analysis also addresses practical barriers to implementing different strategies and recommends a course of action based on ethical considerations and potential long-term outcomes, including the importance of maintaining customer loyalty and supplier relationships.

BUSINESS ETHICS
CASE STUDY ANALYSIS

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Introduction
The term “ethics” as derived from the word “ethos,” is defined as collection of moral
and legal principles, which serves as a guide for the rightful conduct in a situation. The
significance of the matters of ethics is not just limited to the individuals, but business
organisations too because of the varied stakeholders therein (May, 2017). The following work
is an attempt to understand the various aspects of ethics, in context of a case study.
Relevant Facts
Julie the brand manager is contemplating on the ways to maintain the margin of the
products, as the draught has increased the manufacturing costs by 25 per cent in direct
materials. The said price rise may not be perceived well by the customers, as the same can be
observed very easily on the packets. On the discussion with the Marketing Manager of the
entity and the analysis of the historical market prices, she finds out yet another way that is the
reduction of the quantity of product which generally remains unnoticeable by the customers.
Ethical Issues
The case study represents the ethical dilemmas on part of the Brand Manager of the
organisation Julie. The ethical dilemma is focussed on operational profitability of the potato
chips manufacturing in the company. As the company is sustaining losses in the core business
operations due to the draught, the Brand Manager is faced with the following two courses of
actions to ensure the profitability of the company for the period in concern. The first course
of action in order to maintain the margin is to increase the prices of the products. The second
course of action is to downsize the quantity of the chips in the packet to reduce the net weight
while prices remain the same as previous prices.
Identification of the Stakeholders and evaluation of the Ethical Issues
The ethical implications of a business decision is not only limited to a single
shareholder group, yet the same effects various stakeholder groups of an entity in some or the
other way (Barry, 2016). The primary stakeholders in the concerned case scenario are
identified to be the customers of the entity. Whatever course of action is chosen by the

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organisation, that is the rise in the prices or the reduction of the net weight, in both the cases,
the interests of the customers would be affected.
This is followed by the suppliers and shareholders as well. The suppliers of the
company are currently facing the after effects of the natural calamity and the course of action
of the company may impact the future relationships with the supplying entities. Apart from
the listed, the course of the action would influence the goodwill of the company in the market
in the long run, and so the share prices and shareholder’s wealth would be impacted.
Possible Alternatives
The possible actions for the ethical dilemmas of Julie are listed below. The firs action
is to maintain the prices of the potato chips and thus, sustaining the losses in the chips
segment. This would be together with introduction of new snacks the core ingredient of
which can be something other such as rice flour or chickpeas. The shift in the ingredients
would thus lead to the shift in the products. The next possible alternative action is to
downsize the quantity of chips in the packet and thus reduce the amount of direct material per
unit of packet, to maintain the profits.
Analysis of Alternatives
Numerous ethical theories have been developed over the years to guide the business
managers in adopting an appropriate course of action towards a situation. One of the key
theories is that of Utilitarianism, according to which an action must be considerate of utility
or happiness or the interest of people at large (Shin, 2012). Thus, for an action to be regarded
as ethical it should not lead to benefits to a single group, rather the same must extend to
various associated groups (Mulgan, 2014). The alternative as per the above is to not reduce
the quantity of the chips in the packet, as it will lead to impact on the customer’s interests and
also the suppliers would suffer the volume loss. The cost of such action would be high in
short term as the customer may be wary of increase in the prices, and also in terms of the
margins the cost is high. Yet the same would lead to benefits in long run in the form of loyal
base of customers and suppliers. As stated in previous parts, entity can join hands with the
new suppliers of alternative raw ingredients to diverse the products. These actions would lead
to investment cost initially but not only the same would prepare the entity for similar event in

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future, but also create an alternative income stream. This action would further lead to an edge
over the competitors.
The Rights Approach, states that one must be free to choose the actions that lead to
the fulfilment of basic human rights such as free will and lead to the persuasion of happiness
Accordingly, Julie has a right to think on the lines of the interests of the company and the
shareholders in terms of decrease in quantity and increase in margins. The shareholders
additionally have the right to demand the profitable conduct of the business as they have
invested the capital therein.
Practical Barriers
Shareholders may not be willing to invest in the new line of snacks, especially when
the margins are already running low since past few years. The customers may turn to the
competitors who are selling the same products at lower prices, while sustaining the losses.
But the quality of the previous products, together with supporting the suppliers in the hard
times and marketing of the new products to justify the price rise could lead to promising
results to the entity.
Recommendation and Conclusion
The ethical analysis carried on the previous sections enables to recommend that
alternative one that is to increase the prices slightly is more ethical as the same falls in line
with keeping the customers of the company informed.

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References
Barry, N. (2016). Business ethics. UK: Springer.
May, L. (Ed.). (2017). Applied ethics: A multicultural approach. UK: Routledge.
Mulgan, T. (2014). Understanding utilitarianism. UK: Routledge.
Shin, Y. (2012). CEO ethical leadership, ethical climate, climate strength, and collective
organizational citizenship behavior. Journal of Business Ethics, 108(3), 299-312.