MGMT 3610 Ethics Assessment Case Response

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Question Description

Focus on ethical decision making by responding to an ethical dilemma within a case study. After reading the MGMT 3610 Student Handout the Raider INC PLB Ethics Case, respond to the following questions [all eight] using material from both the ethics and decision making content segments and chapters. Write three to four sentences in response to each question, and be sure to include references to your text and course materials (I have attached text for chapters 4 & 6). Submit in a single spaced Word file.

Management 3610 Ethics Assessment Case

Jon, Rick, and Beth had been friends for a long time and their relationship had been very profitable. They met while each was working toward an MBA at the esteemed Jones College of Business – Middle Tennessee State University. Together, the three developed a business plan for a company that would acquire businesses and after graduation they “gave it a go.” Their company, Raider Inc., had purchased several distressed companies and had either developed them to become “cash cows” or had sold them for great profit. Beth’s strength was marketing, Rick was a finance specialist, and Jon was the management guru who developed strategy and kept the group on task.

Another company, Pacific Life Books (PLB), appeared on the radar as a possible acquisition candidate. Jon, Rick, and Beth visited the company and had gathered information related to their particular business discipline. This was not their “first rodeo.” The trio worked methodically, not wasting time by stepping on the turf of each other. It was now time to compare notes and determine if proceeding to acquire the PLB was a good move.

Jon called a meeting to consider the possibilities. As was their norm, the three met in Raider Inc.’s conference room. These intense sessions took most of a day and sometimes spilled over into a second day. In front of them lay all the related information: financial statements, marketing reports, lease agreements, etc.

PLB was a publishing company which specialized in novels related to life on the American West Coast under the theme “life near the ocean”. Beth reported that the company’s brand was solid and could be the basis of a strong marketing effort going forward. Rick identified the cause of the company’s distress. In an effort to lower unit costs, PLB typically purchased large quantities of books from its supplier; the result was a large and growing inventory that continually drained PLB’s cash. Jon provided insight into the organizational chart and management culture at PLB; vast improvement opportunities were available on that front. However, if a sale of PLB wasn’t soon consummated, PLB’s existence was threatened.

After much deliberation, a potential strategy was developed. Raider Inc. would purchase equity in PLB, converting it to a privately owned C-corp, and the previous owners would continue as minority owners. The newly formed company would reduce inventory through the utilization of new “digital printing techniques” designed to produce smaller quantities at lower unit costs. Jon would intervene as a “consultant”, working a couple of days per week, coaching PLB’s management team on how to organize, lead, and control the business. The prospects were good - with the strategy developed by Raider Inc.’s three leaders, PLB would soon be generating cash.

Then Rick asked, “What about Johnson Printing?” Johnson Printing had been a loyal and trusted PLB vendor, continuing to provide novels during both lean and prosperous times as a true strategic partner. Johnson Printing had inventoried books and allowed extended terms on its accounts receivables with PLB. Without Johnson Printing’s support, PLB might not have survived the last few years, much less enjoyed growth in the book segment of its business. PLB owed Johnson Printing $250,000. This by far represented PLB’s largest accounts payable.

“Of course, we’ll default on that unsecured debt,” Jon quickly replied. Jon’s answer didn’t surprise Rick. Rick countered, “I am not sure I am completely comfortable with that. Johnson Printing is a small company, a blow that big could put them out of business.” Surprised that Rick would question the strategy, Jon stated, “We’ll give them the opportunity to do business with us in the future. As for the $250,000, if they choose to pursue legal action we’ll just bankrupt PLB and continue to execute our strategy. As for you, me, and Beth, we’ll be protected by the C-corp status of both PLB and Raider Inc.”

Rick paused and said, “I know we’ve successfully executed this strategy in the past – walking away from a company’s previous debt. I recognize that we’ve never suffered legal recourse from vendors we’ve defaulted on. But several loyal vendors have suffered because of our actions; we drove more than a few companies out of business. We’ve made a lot of money buying and selling companies... a lot of money. In the first few years, the only way we could do a deal like this was to default on the accounts payable. But now, is it necessary that we put another good vendor like Johnson Printing in distress to get this deal done?”

This case is solely for the use of MTSU’s Principles of Management Classes and cannot be duplicated in any way.

Questions for Ethics Assignment:

  1. What is the ethical issue in the case? What makes this an ethical issue?
  2. Who are all of the stakeholders that are impacted by the ethical issue in the case? Discuss how the ethical issue impacts each stakeholder.
  3. If you were making a decision about what is the right thing for Raider Inc. to do using the deontological approach, what would your decision be and why? Explain how your decision represents the deontological point of view, and your specific decision making process.
  4. If you were making a decision about what is the right thing for Raider Inc. to do using the utilitarian approach, what would your decision be and why? Explain how your decision represents the utilitarian point of view, and your specific decision making process.
  5. Discuss at least three solutions for Raider Inc. to solve the ethical issue. Be sure to discuss the impact of those different solutions for the organization and stakeholders, and what decision making biases and constraints (e.g., bounded rationality) might enter into the process.
  6. Recommend a course of action for Rick to resolve the ethical issue. What steps should he take? Be sure to discuss the benefits and risks of this course of action.
  7. Assuming that the leaders of Raider Inc. do not want their employees to behave unethically, what are several (at least three) things that can be done to improve the ethical climate (from both an ethical and decision making standpoint)? What steps can the managers at Raider Inc. take to guide employees to make more ethical decisions?
  8. Discuss Preventative measures that you would enact to prevent the situation from recurring (e.g., training, policy, disciplinary measures) citing respective company examples.

Tutor Answer

agneta
School: Carnegie Mellon University

Attached.

Running head: CASE ANALYSIS

1

Case Analysis
Institution Affiliation
Date

CASE ANALYSIS

2

1. The ethical issue presented in the case is fraud as well as greed. This is due to the fact
that Jon intends to default the payment of the debt that PLB owes Johnson printings, a
move that will kick Johnson Printing out of the market. Jon, Beth, Rick are aware that
Johnson printings have been core to the growth of PLB. Nevertheless, due to the greed of
Jon, they do not want to settle the debt that PLB owes Johnson Printings before they
make the purchase. The only thing that Jon is concerned is to make a profit at the expense
of paying debts.
2. The stakeholders impacted by the ethical issue include PLB stakeholders, Rader Inc., and
Johnson Printing Stakeholders. Taking the move that is proposed by Jon, Johnson
Printing might take legal action against the business. As a result, PLB will be made
bankrupt and will be liquidated to pay the debts to accrue. By the fact that the debtors
(PLB) will default the repayment of the debts owed to Johnson Printings, such a move
will paralyze Johnson Printing's activities because they will not have enough working
capital to run their daily activities. In the end, Johnson might be eliminated out of the
market. Raider Inc. will be the beneficiary of the move in the sense that they will make
more money (Daft & Marcic 2017). However, if legal action will be taken against them,
they will have to protect the PBL workers whom they will need to push the business
forward.
3. If I were in charge...

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Anonymous
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