week 7 case study

WEEK 7

CASE STUDY EXERCISE

OBLIGATIONS TO CUSTOMERS

CASES

Case 1: “A Shady Real Estate Deal?”

Text: “I knew we should have used a licensed real estate agent,” said Dillon, your best friend Chris’s new spouse. Chris and Dillon had been married just three months ago, and closed the deal on their first house only a month after the honeymoon. Chris and Dillon were both happy with the house, except for one thing: The trees in the back yard were dying. These trees provided shade to both the yard and the house itself. On this, your first visit to their new house, the July sun’s harsh rays were filtered through the leaves of several stately elm trees. The greenish tint to the light gave the landscaped back yard an almost magical feel. “It’s so beautiful. I wasn’t really sold on the house until I saw that back yard,” Chris had said on first seeing it.

But now that the signs of Dutch Elm Disease had been pointed out to you, you could tell that Chris was right in predicting that the trees would probably need to be removed within the next two or three years. “We had never even heard of Dutch Elm Disease–Chris didn’t even know what kind of trees these were,” said Dillon. But the Internet and a visit by their friend Will, a botanist working at the local college, had made them experts.

Chris was taking it pretty well, but Dillon was clearly bitter. “Look, the guy we bought the house from could tell that a big selling point for us was the back yard and the trees. He should have told us about the situation. From what Will says, they have to have known that something wasn’t right with the trees. But they did not tell us.”

“Well,” replied Chris, “We should have asked about them. But we just did not even think of it.”

“Yeah, but that doesn’t really matter,” said Dillon. “He should have told us since he knew that the trees were important to us. I mean, you were really kind of skeptical about the house until you saw that yard with the trees. I think that you even used the word ‘enchanting’ to describe it. And I remember saying that we had always hoped to have a house in the woods, and that this yard made this house the next best thing to it.” “Yeah,” continued Chris, “if he couldn’t tell from that that we cared a lot about the trees, then he’s an idiot. I think he was sleazy for not telling us–he had to know that something was wrong with the trees. Listen, I really would recommend not buying a house from a private individual. A licensed real estate agent has a code that forbids them from acting unethically, and I think you may be able to sue them or get their license revoked or something if they break it.”

“Maybe so,” replied Dillon, “but I am still not sure that what the seller did was unethical. I mean, it would have been nice for him to tell us, but we did not ask. Don’t your remember the saying, ‘Let the buyer beware’–I guess we should have ‘beware-ed'”

“That may be a good rule for buying fruit and vegetables, Dillon, but this is a house. We put up all our savings for the down payment, and took out a thirty year mortgage. And I’ll bet that once those trees die, we are going to have trouble trying to sell it for the money we have in it.”

Questions

1. Assuming that he knew that something was wrong with the trees, was it unethical for the seller not to tell Chris and Dillon? Why or why not?

2. If you were in their place, would you feel that Chris and Dillon had been treated unfairly? Why or why not?

3. What would David Holley say about this case?

Case 2: “Pat Jones”

Text: The text for this case is located in the section in the Mc-Graw-Hill supplementary reading materials titled “Personal Ethics Dilemmas” (page 45).

Questions

1. Is “the customer always right”?

2. Is it ethical to sell someone something that you know that they do not need? Why or why not?

3. Are there long-term business considerations that should be taken into account in this situation? If so, what are they, and what course of action do they support?

Case 3 : “Unethical Vision”

Text: (This case is based on an actual experience of Dr. Noggle.) Robert’s eyesight was getting worse, and it was time for new eyeglasses. He went to a local branch of the C.F. Eyecare chain and explained that he wanted new lenses for the frames he already had. They were very sturdy. As he explained to the sales person, durability was very important to Robert. He enjoyed being in the woods hiking and kayaking, and (not being the world’s most graceful person) often ended up getting hit in the head with branches. In addition, he explained that he was engaged in some home improvement projects in which his glasses might experience further trauma. For this reason, he wanted lenses that were light and strong, and he was willing to invest in quality. Happily the sales person set Robert up with lenses made from the newest polymer with an extra anti-scratch coating for good measure. Toward the end of the process of writing up the order, the salesperson asked about anti-glare coating. Robert noted that he spent a great deal of time in front of the computer, and the salesperson assured Robert that the anti-glare coating would be an asset. Based on this recommendation, Robert agreed to purchase the coating. It added a few dollars more to the total bill, but since the lenses were already rather expensive, it seemed silly not to spend just a bit more.

The new lenses were indeed light, and while he could not really tell that much difference from the anti-glare coating, it did seem to help a bit. Within a few months, however, Robert noticed that there were small scratches in the lenses. Less than a year later, they were so badly scratched that he had to replace them. Perhaps unwisely, Robert returned to the store where he had bought the lenses (partly because they had his prescription on file). As he discussed the need for new lenses with the salesperson (not the same one he had dealt with before, as it turns out), he expressed some consternation at the ease with which these lenses had scratched. The salesperson looked up his records, which included not only his prescription, but also a record of the composition of the lenses he had bought before. “Yeah,” she said, “it’s that anti-glare coating. It’s very prone to scratching. Do you ever use your shirt-tail to wipe them? If you do, that will scratch the coating, and there’s no way to get the scratches out.”

Questions

1. How would David Holley assess the behavior of the first salesperson?

2. Do you think that the first salesperson acted ethically? Why or why not? If not, then what should the first salesperson have done differently?

3. From a purely business standpoint, do you think that the first salesperson’s actions were good for the company? Why or why not?

Case 4 : “The Computer Enthusiast’s Dilemma”

Text: Mitch is what you might call a computer enthusiast. That’s one of the reasons he loves his job at Computer Solutions. He gets to see the latest equipment, and he gets a hefty employee discount. His considerable expertise and enthusiasm has made him one of the most successful salesperson in the store. Mitch is well-known by local computer afficionados as they guy to go to when you want to find out about the newest equipment. When he’s not selling computers, Mitch is generally working or playing on his own computer, which is always the latest model, customized, optimized, and upgraded to handle the most cutting-edge applications. His current computer has the fastest processor you can get, upgraded memory and graphics chips, and enough multimedia capabilities to run a small video production studio. Video editing is, in fact, Mitch’s latest interest. He’s been making a little extra money on the side producing instructional videos from digital recordings of training seminars for a local real estate office. Mitch is also an avid gamer, and has even worked with game designers testing out prototypes for new games. This makes him the envy of all of his friends, who congregate at Mitch’s apartment to play games that their own computers lack the power to run.

Today Mitch was at his job at Computer Solutions. It was a slow day, and Mitch was happy to see a new customer arrive. He was a senior citizen by the name of Sid, who was looking for his first computer. “My grand-kids won’t write or send pictures, but they’re big on email. My daughter tells me that they can even send pictures by some kind of digital something. I wanted to just use an old computer that they had, but she said it was only a 286, whatever that means. Anyway, she said that it’s too old and not good enough to do pictures. I don’t get to see the grand-kids much, and I really do want them to be able to send me pictures, so I figured I better get something good.”

Mitch started to explain the features of several of the more popular models. It was clear, however that Sid had no idea what he is talking about. “Son, I can’t make heads or tails out of any of this. My daughter’s gonna visit next week and set the thing up, but I want to have it bought before she gets here. I just want a good computer. Why don’t you just point me to something good.”

Mitch pointed out a good basic computer that would do a good job with email and basic graphics. It was a pretty lame machine by his standards, and his disdain for it must have been apparent to Sid. “Would you buy this one?” he asked.

“No,” replied Mitch.

“Well, why don’t you show me something that you would buy if you needed a new computer? If it’s good enough for you, then I guess that’s the one I want.”

Mitch hesitated at first, but then showed Sid the latest computer that just arrived. It really was the only one that the store carried that he would even consider buying, but he was sure that it was more than what Sid needed. But before he could explain this, Sid asked, “Is this the one you’d buy?”

“Yes,” answered Mitch.

“Then that’s the one I’ll take. It’s expensive, but I want to make sure that I get the right one. That way I’ll be sure that it will keep up with my grand-kids.”

Questions

1. Should Mitch try to talk Sid into buying a less powerful, and less expensive, computer? Why or why not?

2. What would Ebejer and Morden advise Mitch to do?

Case 5 : “The Gas-Guzzler”

Text: Mike was about to sell his car. There was nothing really wrong with it, but since he got a new job, he decided that it was time to buy his very first brand new car. The one he’s been driving, and now wants to sell, has served him well for quite some time. He bought it used from his brother-in-law, who had taken very good care of it, and Mike had never had any major problems with it. The main thing that he did not like was that the radio was very basic–no cassette or CD player, and it’s antenna (which was built into the windshield) did not pick up FM stations more than a few miles away. The only other thing about the car was that it got surprisingly bad gas mileage for a car its size. This had never really bothered Mike, since he mainly just drove the car around town. Other than that, though, the car was comfortable, solid, and reliable.

A potential buyer is now looking at the car. Elaine Daniels is her name, and she explains that the car looks like just what he is looking for. “I need something reliable that is comfortable enough for long distances. I’m a single mother, and I’ve been working two jobs to support my two-year-old ever since my idiot husband walked out on us. One of the jobs is clear over in the next town, 30 miles away. I hate to do all that driving, but it’s steady work and the pay is just enough to make it worth it. I can’t really afford to make a car payment, and I need a car that’s not going to break down on me. This one looks pretty good. Tell me, have you had any mechanical problems with it?”

Mike tells her (quite truthfully), “Not a one. It’s only been in the shop once in the last 5 years except for scheduled maintenance. My brother-in-law was the first owner, and it was the first car he ever bought new. He took really good care of it, and kept all the service records. I did the same when I bought it last year. So I can show you when it’s had the breaks serviced, all the oil changes, tune-ups, the works. I have the receipt for the tires that were put on it about a year and a half ago, and you can tell from the odometer that the car hasn’t had many miles put on it since then.”

Elaine is clearly impressed but a bit cautious, “Let me ask you, and I hope you don’t think I’m rude for asking, but if it’s such a good car, why are you selling it?”

“Well,” said Mike, “I just got a new job and I think it’s time for me to move on. I’ve always wanted something a little sportier, and I’ve got my eye on one of those new Falcon II’s. This has been a good car for me, but it’s just not what I want to be driving.”

“Fair enough,” replied Elaine. “Well, I think that the price is fair, and it looks like a good car for my needs. You told me about the crappy radio, but I think I can live with that or save up to get a new stereo put in it. If there’s nothing else I need to know, then I think I’m gonna take this off your hands today. Do you want cash, or can I write you a check?”

Questions

1. What advice would Holley give to Mike?

2. What advice would Ebejer and Morden give to Mike?

3. What do you think? Ethically, speaking, should Mike close the deal now?

Case 6 : “Hot Coffee at McDonald’s”

Text: The text of this case is located in Shaw, Case 6.2, page 237-238 (in the 8th edition, page 231). For your reference, water boils at 212 degrees Fahrenheit. The cup that the plaintiff had included a warning label that said that the coffee was very hot. Also, contrary to the impression many people have, Ms. Liebeck was not actually driving the car when the accident happened. Her grandson was in the driver’s seat, and he had parked the car while Ms. Liebeck was opening the lid to put cream and sugar into the coffee.

Questions

1. Did McDonald’s exercise an ethically responsible level of care toward its customers? Why or why not?

2. (Contrary to the impression that media reports of this case suggested) the jury did find that the plaintiff had been partly at fault for the accident. They determined that her actions were 20% of the cause of the actions. Based on what you have read here, do you think that this is correct? If not, then what would have been a more reasonable breakdown of the responsibility for the plaintiff’s injury?

3. Notice that jury awarded the plaintiff $160,000 in compensatory damages. This was the amount that the jury found that the plaintiff needed to cover the legitimate costs associated with being injured. The rest of the $2.7 million award to the plaintiff was in punitive damages meant to not to compensate the plaintiff but to punish the defendant (McDonald’s) for what they thought was reckless behavior, and to “send a message” to other fast food chains. If you were on the jury, what kind of an award would you favor?

Case 7 : “The Ford Pinto”

Text: The text of this case is located in Shaw, case 2.2, page 77-79 (8th edition, page 72).

Questions

1. It appears that at least some of the decision-makers at Ford were using simple utilitarian cost-benefit reasoning to justify their decision not to make the Pinto safer. Do you think that this reasoning was ethically sound? Does it provide a legitimate ethical justification for Ford’s decision? Why or why not?

2. Was the Ford Pinto defective? Why or why not?

3. Did Ford exercise due care in making the Pinto? Why or why not?

4. What might the later case of the GM pickup trucks with their side-mounted gas tanks suggest about the ability of lawsuits to get companies to behave ethically?

5. In the long run, do you think that Ford profited from the decisions it made about the Pinto? Why or why not?

Case 8 : “The Tylenol Recall”

Text: The text for this case is Shaw’s discussion of the Tylenol case on page 181-182 (8th edition: it starts with the last paragraph of page 174). Begin with the paragraph that begins “Johnson & Johnson is widely seen . . ..” and read to the end of the section. Shaw does not present this material as a separate case study, but the three paragraphs present the essential facts of the case.

Questions

1. Contrast the approach that Johnson & Johnson took toward the Tylenol situation with the approach Ford took toward the Pinto.

2. Contrast the approach that Johnson & Johnson took toward the Tylenol situation with the approach McDonald’s took toward its coffee.

3. From a purely business perspective, of the three companies (Ford, McDonald’s, and Johnson & Johnson), which one made the best decisions? Why?

4. Judging from its “Credo,” to which theory of corporate social responsibility does Johnson & Johnson subscribe?

 

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