Chapter 9 - Suppliers, Competitors and Business Ethics

Who counts as a stakeholder, and how are firms linked to suppliers?

• A stakeholder is anyone who is harmed or benefited by the corporation, or whose rights the corporation can violate or must respect (Evan & Freeman, 1993).

• Organizations and suppliers are mutually dependent—each relies on the other to operate.

What is a stakeholder of a corporation?

Anyone affected by the corporation (harmed or benefited) or whose rights the corporation can violate or must respect.

How are organizations and suppliers connected?

They are mutually dependent — each relies on the other for resources, operations, and stability.

Why are competitors considered stakeholders?

Some call them “forgotten stakeholders” because they have:

• Legal rights (e.g., not having pricing manipulated)

• Moral rights (e.g., fair play in the market)

How should businesses be viewed in relation to competitors?

Businesses operate in an industrial network, not in isolation.

• They are connected through mutual interests and resource flows.

• Competitors can influence how a firm’s industry reputation evolves 

What ethical issues arise from power, loyalty, and conflicts of interest?

• Misuse of power: power comes from dependency (resource dependence theory).

• Loyalty dilemmas: loyalty doesn’t fit economic models but can create mutual benefits.

• Conflict of interest: obligation to act for someone else is potentially interfered with by a competing interest.

What are the two main types of conflicts of interest?

• Professional vs. organizational interests

  • Professionals may act to secure future work (e.g., accountants/lawyers making problems “go away”).

• Personal vs. organizational interests

  • Employees may favour external salespeople who give “gifts,” shaping procurement to benefit them.

How do we evaluate gifts, bribes, and hospitality ethically? 3-part

Ask three questions:

• Intention: Is the giver trying to gain an advantage or just showing appreciation?

• Impact: Does it change the receiver’s behaviour toward the giver?

• Perception: Would others see this as a bribe?
  Also:

• Many organizations have purchasing ethics codes

• Professional guidelines exist

Which negotiation tactics are ethically questionable?

Ten tactics (Reitz et al., 1998):

• Lies

• Puffery

• Deception

• Weakening the opponent

• Strengthening one’s own position

• Non-disclosure

• Exploiting information

• Changing one’s mind

• Distraction

• Maximization

Why avoid unethical negotiation tactics?

• It’s the right thing to do

• These tactics create costs:

  • Rigid negotiating → narrow options

  • Damaged relationships → enmity

  • Ruined reputation → harder future bargaining

  • Lost opportunities → less innovation and progress

• Ethical idea: negotiation is a chance to build mutually beneficial relationships

What privacy and confidentiality issues apply to corporations?

• Corporations have a more boundaryless presence than individuals

• They consist of and interact with many people, making privacy harder

• Their activities occur in public spaces, weakening claims to strong privacy rights

What ethical problems arise from overly aggressive competition?

1. Intelligence gathering & industrial espionage → unethical when:

• Tactics are questionable

• Private/confidential info is obtained

• Info is used against public interest

2. “Dirty tricks”

• Negative advertising

• Stealing customers

• Predatory pricing

• Sabotage

3. Anti-competitive behaviour

• Actions that unfairly restrict competition or harm market fairness

You are a purchasing manager deciding whether to switch from your long-term cosmetics supplier (Beauty to Go) to a cheaper competitor. What are the key ethical issues you must identify in this situation?

• Loyalty vs duty to the company

• Power imbalance (Beauty to Go relies on you for ⅔ of its business)

• Fairness & transparency in supplier treatment

• Ethical sourcing concerns (new supplier has better non-animal testing standards)

• Stakeholder impacts: employees, customers, animals, your company

• Conflict of interest created by long personal relationship

In the scenario where Beauty to Go has supplied your company for 10 years and depends heavily on you, what loyalty-based ethical concerns must you consider?

• Beauty to Go’s survival may be threatened if you switch

• Loyalty suggests giving them notice and a chance to improve

• Long-term relationships create expectations of fairness

• Personal rapport with the account manager may influence your judgment

• Abrupt switching could be harmful and morally questionable

“Which ethical theories may help in deciding an appropriate course of action?” (In the scenario of choosing between Beauty to Go and a new cosmetics supplier)

• Utilitarianism: Weigh total benefits (savings, ethics) vs harms (supplier damage).

• Kantian ethics (duty): Act fairly, honestly, and respect obligations.

• Virtue ethics: Show integrity, fairness, loyalty, responsibility.

• Justice/Fairness theory: Give both suppliers equal opportunity to respond.

• Stakeholder theory: Consider all affected groups (company, suppliers, customers, animals).

“How would you proceed?” (As the purchasing manager evaluating whether to leave Beauty to Go for a cheaper, more ethical competitor)

• Verify the competing supplier’s claims (price + ethical practices).

• Meet Beauty to Go and explain:

  • The lower price offered

  • The higher ethical standards (non-animal testing) you now require

• Give Beauty to Go a fair chance to match or improve.

• If they can match → consider staying (loyalty + fairness).

• If they cannot → move ethically (phased or partial switch to reduce harm).

• Document your reasoning and ensure transparency.

• Choose the supplier that best supports long-term ethical, financial, and stakeholder responsibilities.