The first scenario involves Tesco, a multinational company that increased its state in 2012 by 5 percent. The increase raised a strong message that the firm would rebound from the aggressive attempt to compete with US companies. The company estimated profits to be over £ 250 million. The move was a timing issue that meant that price could be booked at a later time and related to the recognition of cost and revenue on deals with the company’s suppliers. The company wrote off 26 million pounds of total profit, but only £ 118 million related to the previous financial years. The finance director asserted that a significant proportion related to the recognition of revenues rather than costs. The plan worsens after £ 382 million impairment charges booked by Tesco. The amount included payment protection insurance that amounted to £ 27 million. £ 63 million stock write down, £ 42 million for valuation office and £ 136 million of impairment charges on firm’s assets in Europe and the UK. The company did not want to damage its image from its financial scandal. As a result, the Tesco change its top leadership to keep the company operation and competitive in the market (Anderson & Bray, 2015).
Despite, Price Water Coopers reporting that Tesco commercial revenue was manipulated and flagged up the problem facing Tesco, the firm has not done much to address the issue. British boardroom works asserted that most audit committees refused to verify the report and directed PwC to ensure that there was no manipulation. The argument was that a public corporation could not risk its auditors who refused to sign off accounts that set off serious alarm bells because an agreement could be reached between the two companies. Tesco overinflated commercial income and stood at a point of making suppliers lower profits that they previously thought as the retailer was claiming money that they were not aware. Main suppliers for Tesco include Coca-Cola, Unilever, and Nestle. The ethical dilemma facing Tesco is two deals that could lead the retailer overstating its profit to keep suppliers. The company could have signed an agreement that was in the hand of the suppliers that risked the operation of the company in the US and possible closure. The firm faced a dilemma of risking its business operation by revealing it financial status to its suppliers. Suppliers could have terminated the contract with Tesco on the ground that it was not in a possible to make payments for good supplied. Contrary, the firm should save the business by overstating profits and show its suppliers which the firm perform and improve its capital investment (Anderson, 2014).
Positive impacts
The aim of manipulating profits was to ensure suppliers do not terminate the agreement to continue supplying good and keep the business running. Tesco was in a position to remain relevant in the market and compete with other retailers and be in a position to pay suppliers. The intention was to save the company from collapsing and attract investors.
Negative impact
Tesco move had an implication on the financial credibility of Tesco.
Scenario 2
The second scenario involves Toyota dilemma involving the production of low-quality good including acceleration issue, improper floor mat, and sticky gas pedal. Since its establishment, Toyota conducts business under the guiding principle of contributing to the development of a prosperous society through manufacturing of automobiles. Apart from quality defect, customers started to accuse Toyota of on its ethics before and during the recall. In the effort of protecting the company image and business interest, Toyota decided to take a chance that did not involve vehicle recall. The company argued that the electronic throttle control system had nothing to do with the safety issues arguing that the supplier produced pedal safety. As a result, Toyota vehicles developed acceleration problems, malfunctioning of the car and caused consumers to have injuries. The acceleration problem reported by other users of the Toyota and conducted investigation being since the floor mat explanation. Toyota was faced with the ethical dilemma of accepting responsibility and assured consumers of a better product. Measures were taken by Toyota affected reputation and its position with the consumers and other competitors. After the recall, Toyota face the U.S criminal probe and litigation, making Toyota paid the terrible price due to ethical dilemma rather that quality problems. By the end of 2008, Toyota was the largest automaker, but the move was at the expense of cost control and lowered its concern for quality (Liker & Ogden, 2011, p. 61). Apparently, the company was committed to expanding economic benefits and business scale while undermining the importance of product safety. The management revealed a trend of diversification and proliferation.
Positive implications
There was the positive implication of vehicle recall by Toyota. First, Toyota restored the situation and reaffirmed the mission of the company to manufacture quality and safety vehicles. The recall became one of the recognizable practice of protecting corporate reputation after the emergency of a quality crisis and problem. The recall increased the production cost and had a negative implication on Toyota brand, but allowed consumers to experience Toyota’s faith and sincerity. Its ethical commitment responsible enabled the company wins more loyal customers. The company profile should be lowered to cooperate all stakeholders including those in the investigation department for the purpose of developing a clear description of the incident actively. Secondly, Toyota re-established image and credibility of its business. Before the recall, customers had a good image towards to the company but was subverted as a result of the recall. Toyota has to take positive actions and re-establish its image and credibility by winning the support and confidence of the consumers. Also, the firm began to evaluate the opinion and feedback of the customers and address their concerns. Toyota could have made a collaborative effort with powerful media to publicize the effort of addressing quality issues. Toyota management invested with the media to re-create its image as a noble company and restore the confidence among consumers. Finally, Toyota took the recall as an opportunity to revise vulnerabilities encountered by the company. Toyota failed to meet the expectations of its customers and media to handle the problem properly because there are flaws in respect to communication management that was burdensome and procrastinate. The lesson learned from the crisis enabled the firm to enhance communication approaches on conflict management strategy. Communication is crucial in addressing ethical conflict.
Negative implications
The recall damaged Toyota image in the automobile industry in manufacturing of low-cost vehicles. The recall reduced the confidence of customers on company products due to the negligence of safety standards. The cost of operation was increased while the profits reduced after the recall (Kirchhoff, 2010, p. 8).
Conclusion
Toyota recall became one of the recognizable practice of protecting corporate reputation after the emergency of a quality crisis and problem. The recall increased the production cost and had a negative implication on Toyota brand, but allowed consumers to experience Toyota’s faith and sincerity. Tesco manipulating profits was to ensure suppliers do not terminate the agreement to continue supplying good and keep the business running.
Reference
Anderson, J. (2014). Tesco Accounting Scandal Draws Scrutiny of Serious Fraud Office in Britain - The New York Times. Retrieved from http://www.nytimes.com/2014/10/30/business/international/another-british-watchdog-opens-inquiry-into-tesco-accounting-scandal.html?_r=0
Anderson, J., & Bray, C. (2015). Tesco Posts $9.5 Billion Loss in Latest Hurdle - The New York Times. Retrieved from http://www.nytimes.com/2015/04/23/business/international/tesco-posts-9-5-billion-pretax-loss.html?ref=topics
Kirchhoff, S. M. (2010). Unintended acceleration in passenger vehicles. DIANE Publishing.
Liker, J. K., & Ogden, T. N. (2011). Toyota under fire: Lessons for turning crisis into opportunity. New York: McGraw-Hill.
