Business Ethics Are Important in Conducting Business

Business ethics are important in conducting business transactions. There are several reasons for this. First, a firm that behaves ethically in conducting its business transactions reduces the cost of business transactions. For example, in conducting a business transaction, there is always a gap between order entry by the customers and shipping of the products by the company and payment made by the customers. The gaps between these different stages of business transactions are likely to create an unethical situation for the completion of the sale, because either customers can hold the company hostage by not making timely payment or the company can make the customer hostage by not delivering the products. If this situation becomes prevalent, the convenience for the customers and the firms who behave ethically will be still reduced in monitoring each of transaction step. Or let us take another example, where small mom-and-pop's stores do not accept checks from their customers because of the anticipation of the insufficient funds in their accounts. This example shows that the business incurs a cost because of the unethical behavior of some of the customers who don't keep sufficient funds in their accounts before making a purchase through the check. This, in turn, increases the cost for the store for confirming that customers have sufficient funds and it may also increase the inconvenience for customers as the store might refuse to accept the checks. Similarly, customer theft is a major problem that a business encounters in keeping the costs of its products down for all the customers. Unethical behavior of some of the customers increases the cost of doing business because the store requires elaborate security systems to monitor the workplace.

The other advantage of an ethical behavior is that it increases the likelihood of profit, as customers, employees, and suppliers are less likely to behave opportunistically. This also occurs because trust between customers, employees, and suppliers are unlikely to take the advantages of each other (Kotler and Armstrong, 703).

A company that puts ethics as a high priority on its business transactions is likely to hire and train people for creating trusting relationship between the company and its business transactions. In untrusting relationships, the supervisor functions as a policeman, while in trusting relationships, the supervisors work as a coach. Similarly a company that makes ethics a priority in business transactions will ensure that its employees are trained properly and empowered to make the business transactions honestly. The use of empowerment is a key element in any cost savings and customer satisfaction. Finally, ethical behavior is needed for successful research and development. This is because creative people are most productive in an environment with minimal monitoring and control. It is counterproductive to have knowledge workers fill out their weekly reports and work 9 am to 5 pm. Providing research scientists with the freedom and independence necessary to stimulate creative thinking requires a great deal of trust on the part of management. Another benefit of ethical behavior is that it provides a solution to the collective action problems. A collective action problem occurs when no one wants to take the responsibility to avoid the problem since resolution of a public problem by one person makes little effect. For example, all will benefit if many more people used public transportation. However, the reduction in congestion resulting from one taking the bus is very small, while the inconvenience he or she will suffer will be very large.