The Price Companies Pay to Stay Competitive

One of the central ethical challenges facing the strategist is making decisions designed to deliver unique value to customers. A decision could, for example, focus on low cost and how it might result in reduced value for specific stakeholder groups.

Over the past few years, an increasing number of US companies have shut down US facilities and fired American workers as they have shifted their activities overseas to save money. For example, IBM laid off more than 1,200 employees in New York and Vermont because their jobs could be done more cost effectively in “Brazil, India, and now China.”32 In similar fashion, HP announced layoffs of 500 customer service workers in Arkansas due to global restructuring, the term often used to describe a company’s plan to fire workers and move activities from one location to another.33 And Eaton, a 101-year-old Cleveland-based manufacturer of electronic components, moved its corporate address to Ireland, where the top corporate tax rate is 12.5 per- cent versus 35 percent in the United States. These are only a few of the many examples of organizations making difficult decisions in order to stay competitive. But at what price?

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In each of these instances, the company’s leaders are responding to customer demands (lower prices) and shareholder demands (higher profit returns). But in doing so, they are neglecting employee demands ( job retention) and community demands (taxes provide community benefits). Some may question whether it is ethical to fire employees and avoid US taxes in order to better meet the desires of customers and shareholders. Others will argue that if the company does not keep its customers and shareholders happy, employees will eventually lose their jobs anyway because the company will not be cost competitive, and companies that go bankrupt cannot pay taxes. The challenge of meeting the sometimes-competing needs of various stakeholder groups is one that is constantly faced by a company’s leaders. A typical response is to prioritize stakeholders’ needs—with customers and shareholders needs coming first—and take strategic actions that best meet their needs. But actions that take unduly from employees and communities to compensate customers and shareholders are viewed by many as unethical.


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