Learning Activity Sheets

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Business Ethics and Social Responsibility
Quarter 4

Lesson 2: Major Ethical Issues in Entrepreneurship

In this challenging and competitive business world, most companies or business organizations are facing a
number of ethical issues. Any business organization, profit or non-profit, must develop a code of conduct
and ethics that every member of the organization must follow or abide by and put into practice.
Ethical Issue is a situation or problem that may occur when there is conflict with a society’s moral
principles. These conflicts might be complicated since some of the alternatives might be contrary to a
particular law.
Ethical dilemma arises when there is a conflict or situation, and a difficult choice has to be made between
what is morally right or wrong.
The Major Ethical Issues in Entrepreneurship
A. Basic Fairness
The decision process should be ethical, it must focus on the protection of employees, customers’
rights. The business operation must be fair and just and considers the welfare of the common good.
B. Personnel and Customer Relations
This describes the ways and means how a company relate with its customers and with its workers
to maintain a healthy customer service and an employer- employee relationship.
Common Issues:
a. Mistreating employees
b. Discrimination and harassment in the workplace
c. Family-run businesses
d. Employee behavior
e. Employee working conditions
f. Side deals and sub-standard work
C. Distribution Dilemmas
Ethics in dealing with customers is a major concern in Marketing. And it is important to understand
the significant role of ethics in product, pricing, placement, and promotion; for this will help the
company stay on the right side of the law while establishing a good reputation for setting high
ethical standards.
 pricing refers to the amount set for a particular good or service for consumers considering
the cost of inputs, distribution, and overhead.
 placement refers to the strategic positioning of products within the retail stores.
 promotion is a business scheme or strategy to increase sales which may involve short term
discounts or giveaways.
Each of these areas presents its own set of ethical dilemmas:
a. Pricing Strategy Ethics
Price collusion can be a major source of ethical dilemmas in many companies or industries, and
artificial price-fixing is illegal. Price collusions exist when a number of competitors agree to set
prices at a certain level, bypassing the natural market forces of supply and demand and creating an
unfair advantage on the consumers.
b. Product Placement Ethics
Demo kiosk or small display counters are examples of positioning which could harmless but be used
in unethical ways. Like for example, a candy distributor would usually display at children’s eye level
right before checkout counters in grocery stores knowing parents cannot refuse the annoying cries
 and pleas of their children. There is nothing illegal with this, but some consumers consider such
emotional manipulation to be highly unethical, especially when it involves children.
c. Ethics and Promotions
Promotions are designed to boost sales by offering an irresistible value propositions to consumers.
A company may advertise a good and tempting discount, but stocks only a small number of that
item the stores. Customers are attracted to the great deal, only to find out that a completely different
and inferior product is sold.
d. Other Ethical Considerations
Advertising ethics are highly regulated by law when it comes to honesty, discrimination, and young
audiences, but advertisers need to go extra mile to avoid offending viewers even within the
boundaries of the law.

D. Fraud
- a deceit committed by a person, group, or organization. It can be in the form of financial
misconduct or misinterpretation.
 Price- fixing is an example of financial misconduct, which is an illegal agreement between
industry competitors to “fix” the price of a product or service at an artificially inflated level.
 Corporate misrepresentation has many forms; it can be a misleading advertisement,
falsification of data, illegal workplace conditions or transactions, salesman lying or denying
safety problems with a product.
E. Unfair Competition
- A situation that usually occurs through false information about a company, advertising, or where
competitors compete on equal unequal terms.
The principles of fair competition in business are defined by law, and therefore unfair
competition may be unlawful.
The Most Common Actions falling under the banner of unfair competition:
a. Antitrust Law or Competition Law
- when one competitor attempts to force others out of the market, or prevent others from
entering the market by manipulating the market price or obtaining exclusive purchase rights to
raw materials used in making a competitive product.
b. Trademark Infringement
- This occurs when the producer of a good or product uses a name, logo, or other identifying
characteristics to deceive consumers into believing that they are buying the product of a known
competitor.
c. Misappropriation of Trade Secrets
- When one competitor do some spying, bribery, or outright theft to obtain economically
advantageous information in the possession of another.
d. Trade Libel
- The act of spreading false information about the quality or characteristics of a competitor’s
product or service.
e. Tortious Interference
- Occurs when one competitor convinces a party having, a relationship with another competitor
to breach a contract with, or duty to the other competitor.
f. Anti- competitive Practice
- This prevents or reduce competition in the market.
g. Dumping
- Selling a product at a loss to force other competitors out of the market, and after which the
company will be free to raise prices for a greater profit.
h. Exclusive dealing
- When a buyer is obliged by virtue of the contract to purchase only from the contracted supplier.
i. Price Fixing
- When companies or industries agree or collude to set prices to dismantle the free market.
j. Refusal to deal
- Two or more companies agreed to not to buy from a certain vendor.
k. Dividing Territories
 - Happens when two companies agreed to stay out of each other’s way and reduce competition
in the agreed-upon territories.
l. Limit Pricing
- The monopolist sets the price at a level purposely to discourage entry of competitors in the
market.
m. Tying
- Purchasing together products that aren’t naturally related.
n. Resale Price Maintenance
- Resellers are not allowed to set prices independently.
o. Religious/ minority group doctrine
- Giving tribute to a significant group of religious community in order to engage in trade with that
community.
p. Subsidies from Government
- Some companies receiving government subsidies may have an advantage over competition or
totally barred competition to be profitable.
q. Protectionism, tariffs and quotas
- Protectionism, tariffs, and quotas which give firms insulation from competitive forces
r. Patent misuse and copyright misuse
- Fraudulently obtaining a patent, copyright, or other forms of intellectual property; or using such
legal devices to gain an advantage in an unrelated market.
F. Unfair Communication
- Used to undermine relationships like spreading rumors, discussing a customer’s financial or
personal information with someone outside the company, or relaying information that was given
in confidence.
G. Non-respect of Agreements
- a breach of contract- a legal cause of action in which a binding agreement is violated by any one
or more of the parties in the contract by non-performance or interference with the other’s
performance.
H. Environmental Degradation
- the deterioration of the environment through depletion of resources and the destruction of
ecosystem and extinction of wildlife.
Activity 4. What’s the Issue
Name: _____________________________________
Grade and Section: ___________________________
Instruction: Read each case story below then answer the questions that follow.
1. Case Story: Toyota (Hastley, 2013)
 A. What ethical violation/s was committed by Toyota?
B. What do you think would be the consequence/s of such violation?

2. Case Story: Apple (Hastley, 2013; www.enkivillage.com)

 A. What is the ethical issue in this case story? Explain.
B. Would you still want to use Iphone? Why?

3. Case Story: “Endo” in the Philippines

A. Do you think this case story show non- respect of Agreements? Why?
B. Are you in favor of having “Endo” in our country? Explain your answer.

Rubrics for rating:

Activity 5. Entrepreneur Be Like
Name: _____________________________________
Grade and Section: ___________________________

If you are an entrepreneur, how would you handle the different ethical
issues in your organization?