The retail industry in Australia is under pressure to regulate its operations by implementing the profit ethics. There are many factors that influence the profitability of the businesses and brands and in fact some of the biggest brands in the retail industry have failed to compete effectively in the market. The remaining firms in the industry have taken initiatives that can improve their performance and one way is reducing the cost of production. However, the decisions the businesses in the industry make differ but they must evaluated the strategies and select the best in the market (El–Adly 2007). According to the analysis of Bank of Australia, at the microeconomic level there is lack of price growth in the industry. The results indicate that the retailers prefer inflationary markets against the deflationary worlds because this impacts on the growth of their sales. The only problem of inflation is that the customers will have limited income to spend hence they will buy less.
On the contrary, they expect the retailers to reduce the prices of the products so that they can buy more. The international retailers have seen an opportunity in the retailing industry in Australia and that is why they are entering into the industry intensifying the competition. For instance, the Woolworths announced that it is restructuring its structure with the aim of improving its competitiveness by closing the stores that are not performing well in the market (Corstjens and Lal 2000). The new business strategies focus on improving the reliability and profitability of the business by reducing the cost of production. They focus on cost saving strategies in the industry so that they can maintain the macroeconomic conditions of prices being constant.
On the other hand, we need to understand the major players in the industry. The main players in the industry include the retailers, the competitors, suppliers and the business partners as well as the government. The biggest challenge businesses in the industry face are outsourcing some important elements that affect the business operations (Coleman 2006). For instance, outsourcing information and technology services can increase the cost of operations and eventually reducing the profitability of the business. In the process, most retailers are outsourcing its supplies from overseas because the products seem to be cheap instead of making the products. The garment industry employs about 60 million people but a majority of them work in Asia who supply most of the garments imported to Australia. It shows that the cost of production is higher in Australia and that is why they import most of the garments.
From the case study, we can understand the retail industry is facing the challenge of outsourcing its parts. The meaning is that the locally manufactured garments are costly as compared to the imported products. In the process, the retailers who important the products tend to compete effectively in the market because of the low prices of their products (Chernev 2006). This is where the pricing ethics affect the operations of the businesses. The prices are not equal because of the varying cost of production. Therefore, it is necessary to control the pricing strategies with the aim of promoting fair competition in the retailing industry.
1. The term good faith in this case study means that the retailers and the wholesalers should engage in business practices ethically. It means that they should not take advantage of any strong bargaining power to exploit the other party when doing business. In some cases, the wholesalers can take advantage of their reputation in the industry and exploit the others (Carpenter and Moore 2005). For effective supply chain to take place in the retail industry, the stakeholders must consider welfare of others the same way they are considering their welfare. In the first place, it is necessary to price the products effectively considering the changes in the market (Berman and Evans 2001). For instance, the wholesalers should sell the products considering the profit margin the retailers will make when selling the products. On the other hand, the retailers should not exaggerate the prices or charge low prices that focus on driving the competitors out of the market because they enjoy economies of scale. Therefore, when the retailers and wholesalers are engaging in any business, they should act in good faith to make the industry attractive.
2. The Food and Grocery Code of Conduct is a voluntary code implying that the ACCC has not moved to influence the government to legislate this code of conduct. These codes of ethics are not legislated in the law because it is just an agreement among the stakeholders in the industry to regulate the operations and conduct of the businesses (Bakewell and Mitchell 2004). It states the laws with which the individuals and businesses should abide by even though they are not regulated by law. However, under the law, the wholesalers and retailers are bound by various legislations that guide their behavior. On the other hand, applying the code is voluntary because it influences the bargaining power and reputation of the business. The most important thing is that it regulates the behavior of the suppliers and retailers. Any retailer who threatens the suppliers can face disciplinary action and ruin its reputation and in the process the suppliers can agree to stop supplying the products (Allard et al 2009). Further, the industry is self-regulated and this implies that the interested parties should act in good faith and promote healthy competition and every firm will have own market share thus benefiting the customers.
3. A strategic theory focuses on improving the performance of an organization by creating a competitive advantage. For any business, it is good to have power because it influences the business operations for the better. A firm that is powerless might not compete effectively in the market. The sources of power include pricing and bargaining powers (Baker and Haytko 2000). It is appropriate to use the powers in various circumstances. The first one is when competition is high. When the competition is high in any industry, a firm can use the powers to influence the market conditions. For instance, when the competitors are enjoying economies of scale, the management can use its powers to outsource and get quality supplies that can beat the competition in the industry. Further, the management can use the powers to engage in long-term contracts with the suppliers to ensure continues supply of the materials even during the period when the supply is low in the market (Dwivedi 2001). However, it is unethical to use the powers to exploit other stakeholders in the market like exploiting the suppliers. To only way to know if the power is legitimate is evaluating the code of conduct and make sure that the strategies used do not affect the business partners negatively.
4. One of the ethical responsibilities of doing business is building a good relationship with the customers. Every leader in any business must conform to professional ethics. One way of creating a positive working relationship with the suppliers is by paying them according to the stated agreement. In this case, it is not ethical to hold paying the suppliers because it is their due (Boettke 2001). It is not the best way to increase the financial position of the company but instead it creates conflicts with the suppliers and they can suspend their services of supplying to the business eventually affecting the business. They have activities to run that consume financial resources and in order to continue supplying they must be paid in accordance to the agreement. In this regard, the best response is to inform the CEO the financial implications of making such a move and advise the individual to allow the payment of the suppliers (Blaug 2002). The argument is based on Food and Grocery Code of Conduct that prohibits any retailer from exploiting the suppliers. This ruins the reputation of the business and its future relationship with the stakeholders.
5. A business operating in many countries can use the standards of a developed country in a developing country. For instance, the managers can apply the employment standards of a developed country in another country but cannot apply the standards of a developing country in a developed country (Gärtner 2006). This is because the customers of a firm come from across the globe and most customers are conscious of the reputation and business practices of the firm. However, the standards must align with the standards of the new country and this helps to avoid conflict of interest between the foreign and the local policies. The framework to use in determining what is best for the business is employment law. The management must consider the employment law in a foreign country and make appropriate decisions regarding the employment (Heijdra and Ploeg 2002). In addition, the leadership can consider the international labor law according to international associations and ensure appropriate application of the law. In fact, applying employment law of a developed country in a developing country will attract more employees because of the good working conditions that attract and retain competent employees.
6. The Australian customers are willing to pay more for the products as long as the businesses compensate the suppliers in the developing countries. This strategy is called price leadership strategy. However, the senior staff can be divided regarding this concept. It shows that the customers are conscious of the business operations in the market (Ireland 2002). Applying the cost leadership strategy implies that the business conditions have to change up to the supplier. Some of the managers can argue that they are not concerned with suppliers in the developing countries but the customers are interested to know this. In this regard, it is important to inform the chief executive officer that the strategy is effective because it helps to attract and retain customers as well as retaining competent suppliers from the developing countries (Morrison 2006). The customers can pay more for the products and the executive increase the rates to the suppliers. In the process, the business can achieve more income and in the process create a long-term working relationship with the suppliers. This will help to ensure price growth increasing company revenue.
7. Audit fraud is an issue when it comes to auditing function. It is the responsibility of the retailers to conduct auditing of the suppliers to know the working conditions and systems used in manufacture of the materials. This helps to determine the quality of the products and reputation of the suppliers that ca otherwise affect the performance of the company (Palmer and Hartley 2011). To manage the audit fraud, the leaders can use secrete agents who can collect relevant information regarding the production systems of the suppliers. The secret agent can collect information without the knowledge of the management and avoid using coached employees. Another way is to collect information randomly from the employees (McGrath 2013). Collecting data from few selected employees increases the chances of getting information from coached employees and this might not provide reliable results. The most important thing to take into account is to assure the respondents that they will be treated confidentially and they will not be exposed to the management. Therefore, privacy is the best way to encourage the participants to give the right information. They must know that their identity will not be disclosed and the information is used for official purposes only so that they are not victimized.
8. Integrated reporting is the process of communicating the details of the business to understand how the business has created value. It is the systems where the management communicates the overall performance of the business and governance as well as the business strategy. It contains the information relating to revenue and value creation of the business (Blanchard 2011). It seeks to ensure that the stakeholders understand the progress of the business and what it wants to achieve at the long-run. It attracts more investors and solving conflicts as a result of communication breakdown. The tool is used to change the system design and performance because it reports the effectiveness system and reveals the loopholes to improve on. Integrated reporting is very necessary because it evaluates all the processes taking place in the business, their weaknesses and recommends the strategies to improve (Eccles and Krzus 2010). In this regard, it looks into the efficiency of the financial strategy and how it influences employee motivation. From there, the management can revise the compensation strategy to meet the changes in the market focusing on how to improve the performance in the next financial year.
9. At risk component of remuneration is the concept used to refer to risks arising as a result of remuneration package. In some cases, the financial managers do not align the remuneration package with the goals and objectives of the business. The result is conflict of interest when doing the operations of the business (Weatherley and Otter 2014). Further, in most companies the senior staff exploits the junior employees since they take the largest share the employees take the least share and they are the majority who influence the operations of the retailers. As such, the staff does not motivate the employees well and they end up experiencing high employee turnover. This is the case because the senior staff considers selves as significant individuals in the success of the business but the employees perform critical role because they are in direct contact with the customers hence their services matter a great deal (Terry and Elaine 2014). The risk component affects the performance of the business and it is the responsibility of the top management to take necessary steps to manage the issues.
10. The stakeholders of the business are the individuals whose activities affect the business or whose activities of the business affect their existence. They are the parties that have an interest in the business. They are divided into primary and secondary stakeholders (Worthington and Britton 2014). The primary stakeholders include the employees, the senior staff and the customers while the secondary stakeholders include the competitors, the suppliers, the government and the community. This is because they do not have a direct relationship with the company but indirect relationship. The management of the supermarket should consider the needs and expectations of the stakeholders because failing to meet their needs is the beginning to fail and cannot compete effectively in the retail industry. A number of ethical concerns face the stakeholders. In some cases, the customers can provide deceitful information regarding the warranty with the aim of getting free services from the supermarket (Abdul–Muhmin 2010). For instance, when the customers buy equipment such as refrigerators, they are given guarantee that it will perform up to certain standards for a given period and some unethical customers can cheat when they damage the equipment with the aim that they will be compensated. This can damage the reputation of the supermarket in the retail industry.
Conclusion:
Regulating the retail industry is an important concept because it influences the day to day operations of people. Competition is high in the industry and this means that even the strong brands in the industry must develop strategies so that they can remain competitive. There are various forces that affect the competitiveness of a supermarket. They include the macroeconomic conditions including pricing and the cost of production. The retailers that used to be giants in the industry are facing issues that are affecting their business operations. For instance, globalization and technology developments have promoted online retailing and the companies are using the opportunity to enter into global markets. On the other hand, the cost of production is another concept that influences the competitiveness of the retailers. The production cost in Australia is higher against outsourcing garments from developing countries. In the process, pricing is an issue and it is affecting the success of many businesses. This is because the imported products are cost-effective as compared to domestically manufactured garments. Therefore, most supermarkets are considering the cost-reduction strategies such as outsourcing. Therefore, the retailers and wholesalers should act in good faith to promote health competition in the retailing industry. The best step to take to managing ethical issues in the industry is passing legislation that regulates the imports and encouraging domestic manufacturing so that pricing can be uniform.
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