Santa Clara University

Global Jesuit Dialog on Business Ethics
RSS

Global Jesuit Dialogue on Business Ethics

This blog features dialog among students at Jesuit business schools around the world.

  •  The Issue of Price Cutting

    Thursday, Feb. 28, 2013 3:01 PM

    Background

    The increased competition among the Cement dealers in Kerala (India) has resulted in many of them selling cement at a lesser price than the stipulated market price. The intense price cutting has been worrying the cement companies and the KCDA (Kerala Cement Dealers Association) as it negatively affects the market price of cement and also the profit margin of the dealers. This has also resulted in unhealthy competition among the dealers. After many discussions and trials, the KCDA and the cement companies have arrived at a conclusion that they’ll suspend the dealers, for a stipulated period, if they are caught in price cutting. This decision has been able to bring things under control to a certain extent.

    However, the rule breakers have started finding their way out to beat the system. They do not mind running the risk of a suspension as the punishments currently in place are not stringent enough. Some of the dealers use false proofs with which, the chances of getting caught are bleak. Some of them negotiate with the customers and promise them to give them the cement for a lesser price, provided they keep it a secret. Some of them promise the customers to give huge discounts on other items they buy. Due to many such issues, which are beyond control, the company and the association have not been able to bring in a fool-proof system. This is making the life very difficult for dealers who are ethical. Furthermore, the rule breakers end up making undeserved profits. Hopelessness in finding a fool-proof solution has forced some dealers who are ethical to take up unethical ways.

    My view

    As it is difficult to make the system fool-proof and as it is hard to bring proof against the offenders, the KCDA and Cement companies should make the punishments harsh. In the present scenario, if a dealer breaks the price limit and sells a cement brand say ‘xyz’ to a customer, he is suspended from selling only the brand ‘xyz’ for 3-7 days. However, this does not affect him much as he still has the freedom to sell other brands. So, I feel that if a dealer is caught for price breaking, his minimum suspension should be for 2 weeks and he should be suspended from selling all the other brands. Repeated offence should attract punishments as severe as dismissal. Fear of harsh punishments would force many dealers to refrain from indulging in such unethical practices. KCDA and companies should also look at identifying (though it is very difficult) and rewarding those following ethics, since rewards are more influential than punishments (Trevino and Youngblood (1990)).

    This ethics case was written by Skaria Ephrem, a student at Loyola Institute of Business Administration, Chennai. 

  •  Instagram and the Ethics of Privacy

    Monday, Feb. 4, 2013 3:06 PM

    Background

    Founded in 2010, Instagram considers itself to be “a fun and quirky way to share your life with friends through a series of pictures.” By downloading the free Instagram mobile application (or app), users snap a photo with their mobile phone, then choose a filter to transform the image, and can share it on various sites such as Facebook and Twitter. The company views itself as more than just a photo-storage tool but a way “to experience moments in your friends' lives through pictures as they happen. We imagine a world more connected through photos.”

    In April 2012, the 13-employee company was acquired by social networking giant Facebook for approximately $1 billion. In less than three years, Instagram has become one of the fastest growing social media platforms as seen by its estimated 12 million daily users.1

    Dilemma

    In December 2012, several months after being acquired by Facebook, Instagram announced new changes to its privacy policy and terms of use. According to the updated terms, "a business or other entity may pay Instagram to display users' photos and other details in connection with paid or sponsored content or promotions, without any compensation to you," and there was no apparent option to opt out.2 The backlash was immediate. Photographers and celebrities were particularly upset, given that their photos were a part of their own businesses and brand images.

    Instagram was quick to respond that its intention was simply to improve advertising. Co-founder Kevin Systrom posted, “Our intention in updating the terms was to communicate that we’d like to experiment with innovative advertising that feels appropriate on Instagram. Instead it was interpreted by many that we were going to sell your photos to others without any compensation. This is not true and it is our mistake that this language is confusing. To be clear: it is not our intention to sell your photos.”3

    Instagram's privacy policies and terms of use were once again updated in January 2013. The current terms state, “You hereby grant to Instagram a non-exclusive, fully paid and royalty-free, transferable, sub-licensable, worldwide license to use the Content that you post.”4 Instagram also reserves the right to share users information (including analytics information, log files, cookies, and location data, as well as the content users post) with companies affiliated with Instagram (mainly Facebook), third-party service providers, third-party advertisers, and “other parties.”5

    While the initial backlash against Instagram has been quelled, there is still uneasiness among users regarding privacy issues. Instagram has to walk a fine line to keep its users happy and still turn a profit. On one hand, Instagram offers a free service to users, which up until this point has been free of advertisements, unlike other social media platforms like Facebook. In order to remain a viable company, Instagram has to bring in revenue somehow, and advertising seems the obvious choice.

    Our Response

    We believe that it is not unreasonable for Instagram to try to make money using member photos for several reasons. Firstly, it would be foolish for Instagram to walk away from such a lucrative revenue opportunity. On January 17, 2013, it announced the following powerful statistics6 :

    • 90 million Monthly Active Users
    • 40 million Photos Per Day
    • 8,500 Likes Per Second
    • 1,000 Comments Per Second

    With staggering numbers such as these, how could a zero-revenue company not optimize these opportunities? And let us not forget that Facebook purchased the company for $1 billion in cash and equity in April 2012. Facebook owes it to its shareholders to try to monetize Instagram considering how much it spent on this company in addition to Facebook’s subpar performance since going public last year.

    Secondly, users pay absolutely nothing for using Instagram's services; there is no price per photo uploaded, monthly/annual subscription required, or pricing scheme of any sort. Individuals and celebrities are not the only ones who derive personal benefit from Instagram, but businesses, too. Many small businesses like to use Instagram as a marketing tool because it is free and effective. For instance, some will upload pictures of new product arrivals to lure new and/or existing customers to come in and purchase. Not to mention, businesses like to have Instagram accounts because the service allows them to build their brand and customer loyalty through daily/weekly posts, thus, giving them the venue to engage and interact with customers in ways they could not do previously.

    Question

    How much, if any, of our information should Instagram be able to share with third-parties and advertisers? OR Why are Instagram users making such a fuss about the revised privacy policy if they are gaining so much personal satisfaction and/or business from a service that is free?

     

    1 http://www.theatlanticwire.com/technology/2013/01/how-many-users-does-instagram-have/61139/

    2 http://money.cnn.com/2012/12/18/technology/social/instagram-sell-photos/index.html?iid=s_mpm#comments

    3 http://blog.instagram.com/post/38252135408/thank-you-and-were-listening

    4 http://instagram.com/about/legal/terms/

    5 http://instagram.com/about/legal/privacy/#section3

    6 http://www.forbes.com/sites/tjmccue/2013/01/21/instagram-reports-90-million-active-monthly-users-plus-three-business-tips/

     

    This ethics case was written by Alexis Babb and Amanda Nelson, both seniors at Santa Clara University and Hackworth Fellows in Business Ethics at the Markkula Center for Applied Ethics.