Transcript Chapter 14 - The University of Texas at Arlington

Consumer Stakeholders:
Product and Service Issues
Chapter
14
Prepared by Deborah Baker
Texas Christian University
Business and Society: Ethics and Stakeholder Management, 7e • Carroll & Buchholtz
Copyright ©2009 by South-Western, a division of Cengage Learning. All rights reserved
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Chapter 14 Learning Outcomes
1. Describe and discuss the two major product
issues: quality and safety.
2. Explain the role and functions of the Consumer
Product Safety Commission and the Food and
Drug Administration.
3. Enumerate and discuss the reasons for concern
about product liability and differentiate strict
liability, absolute liability, and market share
liability.
4. Outline business’s responses to consumer
stakeholders, including TQM programs and Six
Sigma.
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Chapter 14 Outline
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Two Central Issues: Quality and Safety
Consumer Product Safety Commission
Food and Drug Administration
Business’s Response to Consumer Stakeholders
Total Quality Management Programs
Six Sigma
Summary
Key Terms
Discussion Questions
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Introduction to Chapter 14
The chapter focuses on product quality and
safety issues. In connection with safety, product
liability and tort reform are discussed.
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Two Central Issues:
Quality and Safety
The Issue of Quality
Driven by an increase
in family income
and intense global
competition
The Issue of Safety
Driven by the public’s
increasing concern with
safety and risk-free
products—and
business’s
responsibility to
address this concern
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Critical Dimensions of Product Quality
Performance
Perceived
Quality
Aesthetics
Features
Dimensions
of
Quality
Serviceability
Reliability
Conformance
Durability
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Ethical Dimensions of Quality
Contractual Theory
Due Care Theory
Social Costs View
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The Issue of Safety
Historical Perspective
1800s
Caveat Emptor
“Let the buyer beware”
1900s
Caveat Vendor
“Let the seller take care”
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Top 10 List of Safety Principles
1. Build safety into product design
2. Do product safety testing for all foreseeable hazards
3. Keep informed about and implement latest developments in
product safety
4. Educate consumers about product safety
5. Track and address products’ safety performance
6. Fully investigate product safety incidents
7. Report product safety defects promptly
8. If a defect occurs, promptly offer a comprehensive recall
plan
9. Work with the CPSC to make sure your recall is effective
10. Learn from mistakes—yours and others’
Figure 14-1
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Consumer Product Injuries
1. Sports and recreational activities and equipment
2. Home structures and construction materials
3. Home furnishings and fixtures
4. Housewares
5. Personal use items
6. Home workshop apparatus, tools, and attachments
7. Packaging and containers for household products
8. Home and family maintenance products
9. Toys
10. Space heating, cooling, and ventilation equipment
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Product Liability
Reasons for the Concern
FIRST . . . Product liability has become a major issue
because of the sheer number of cases where
products resulted in injury, illness, or death and the
amount of the financial award.
SECOND . . . We have become an
increasingly litigious society.
THIRD… Rise in the doctrine of strict
liability.
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Product Liability
Extensions of the Strict-Liability Rule
 Absolute liability
 Market share liability
• Delayed manifestation cases
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Product Liability
Other Issues
 Product tampering
 Product extortion
 Product liability reform (tort reform)
@
http://www.cgood.org
@
http://www.atlanet.org
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Consumer Product Safety Commission
1.
2.
3.
4.
5.
6.
Develops voluntary safety standards with industry
Issues and enforces mandatory standards
Bans consumer products if no feasible standard would
protect the public
Obtains the recall of products or arranges repair
Conducts research on potential product hazards
Informs and educates consumers through media,
government and private organizations, and by
responding to consumer inquiries
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Consumer Product Safety Commission
VOLUNTARY SAFETY STANDARDS
Indoor Air Quality Hazards
Carbon monoxide detectors
Formaldehyde in wood
Children’s Product Hazards
Bunk beds
Drawstrings on children’s clothing
Fire / Electrical Hazards
Other Hazards
Figure 14-3
National Electrical Code
Handheld hair dryers
Automatic garage door openers
Swimming pools
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Consumer Product Safety Commission
Problems Confronting the CPSC
Having adequate resources to do the job
Having sufficient staff to address current needs
Being forced to shift priorities
New challenges from a changing world
Figure 14-4
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Food and Drug Administration
The Mission of the FDA
The FDA is responsible for protecting the public health by
assuring the safety, efficacy, and security of human and
veterinary drugs, biological products, medical devices, our
nation’s food supply, cosmetics, and products that emit
radiation. The FDA is also responsible for advancing the
public health by helping to speed innovations that make
medicines and foods more effective, safer, and more
affordable; and helping the public get the accurate, sciencebased information they need to use medicines and food to
improve their health.
Figure 14-5
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Total Quality Management
TQM
All business functions are blended
into an integrated philosophy built
around quality, teamwork,
productivity, and customer
understanding and satisfaction.
The customer is the final judge
of quality.
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Business’s Response to Consumers
Define quality
in terms of
customer expectations
Convert customer
expectations to standards
and specifications
Realign organization to
ensure quality is achieved
@
http://www.asq.org
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Total Quality Management
Figure 14-6
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Strengths & Weaknesses
of Quality Definitions
Figure 14-7
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Six Sigma
Methodologies and techniques
for improving quality and
reducing costs.
Six Sigma
It stresses the importance of
customers.
Six Sigma level of operation is
3.4 defects per million.
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Consumer-Stakeholder
Satisfaction Model
Continued
Purchases by
Consumers
Product Quality
and Safety
Consumer
Satisfaction
Firm
Profitability
Service Quality
and Safety
Firm
Reputation
Figure 14-8
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Key Terms
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Contractual theory
Due care theory
Social costs view
Strict liability
Absolute liability
Market share liability
Delayed manifestation
cases
Product liability reform
 Tort reform
 Consumer Product Safety
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
Commission
Food and Drug
Administration
Total Quality Management
Six Sigma
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