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Business & Society
Ethics, Sustainability, and Stakeholder
Management
Eighth Edition
Archie B. Carroll
Ann K. Buchholtz
© 2012 South-Western, a part of Cengage Learning
1
Chapter 14
Consumer
Stakeholders:
Product and
Service Issues
© 2012 South-Western, a part of Cengage Learning
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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 customer service, total quality management
(TQM programs), and Six Sigma.
© 2012 South-Western, a part of Cengage Learning
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Chapter Outline
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•
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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 Strategy and Process
Summary
Key Terms
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Two Central Issues
Quality
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•
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Product quality means different things to different
people.
Service quality usually means that the service was
performed as expected and on time.
Interest is driven by an increase in family income
and intense global competition.
Safety
•
•
Nearly all consumer products or services entail
some small degree of risk.
Interest about safety is driven by the public’s
concern with safety and risk-free products– and
business’ 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 Underpinnings of Quality
Contractual Theory
Due Care Theory
Social Costs View
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The Issue of Safety
• How safe should a product be made?
Historical Perspective
• 1800s caveat emptor:
•
“Let the buyer beware.”
• 1900s caveat vendor:
•
“Let the seller take care.”
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Top Ten 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’.
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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
• The sheer number of cases where products
resulted in injury, illness, or death and the
amount of the financial award.
• We have become an increasingly litigious
society.
• Rise in the doctrine of strict liability.
•
Anyone in the value chain of a product is
liable for harm caused to the user if the
product is unreasonably dangerous because of
a defective condition.
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Extensions of the Strict Liability
Rule
 Expansion of the strict liability rule is at
the heart of the explosion of litigation in
the U.S.
• Absolute liability
•
Is more demanding that strict liability.
• Market share liability
•
Evolved from delayed manifestation cases
where delayed reactions to products appear
years after exposure.
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Other Product Liability Issues
 Product tampering and product
extortion
 Product liability reform (Tort
reform)
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Consumer Product Safety
Commission
• An independent regulatory agency that was
created by the Consumer Product Safety
Act of 1972.
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
© 2012 South-Western, a part of Cengage Learning
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Consumer Product Safety Commission
(continued)
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
National Electrical Code
Handheld hair dryers
Automatic garage door openers
Swimming pools
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Problems Facing 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
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Food and Drug Administration
Food and Drug Administration
• Grew out of experiments with food safety
by Harvey W. Wiley in the late 1800s.
• The FDA resides within the Health and
Human Services Department.
• Engages in three categories of activity
 Analysis
 Surveillance
 Correction
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What does the FDA Do?
The FDA is responsible for
•
Assuring the safety, effectiveness, and security of
human and veterinary drugs, vaccines and other
biological products, medical devices, the U.S.
food supply, cosmetics, dietary supplements, and
products that give off radiation.
•
Regulating tobacco products.
•
Advancing the public health by helping to speed
product innovations.
•
Helping the public get the accurate, science-based
information they need to use medicines and foods
to improve their health.
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Customer Service Programs
• Building life-long devotion among
customers takes serious commitment and
hard work.
Companies address customer service
through
 Money-back guarantees
 Warranties
 Offices of consumer affairs
 Top management must be committed to
quality customer service.
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Seven Principles of Customer
Service
1. Keeping your word is where it begins.
2. Always be honest and tell it like it is.
3. Always think proactively.
4. Deal with problems as best you can yourself,
never passing the buck.
5. Do not argue with a customer because it is a
lose/lose situation.
6. Accept your mistakes, learn from them, and
do not repeat them.
7. Consistency is the name of the game for
lasting success.
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Creating a Customer-Oriented
Company
Top-down culture and commitment
are essential.
Identify internal champions and
uphold them.
Commit resources to the task.
Hire the right people.
Empower employees.
Make customer service training a
priority.
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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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Total Quality Management (continued)
TQM emphasizes eight key elements
1.
2.
3.
4.
5.
6.
7.
8.
Ethics
The foundation upon
Integrity
which all else is built
Trust
Training
Teamwork
Leadership
Recognition
Communication
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Business’ Response to Consumers
Define quality
in terms of
customer expectations
Convert customer
expectations to standards and
specifications
Realign the organization to
ensure quality is achieved
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Total Quality Management
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Strengths and Weaknesses of Quality
Definitions
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Six Sigma Strategy and Process
Six Sigma
• A general heading under which is grouped
a number of strategies, methodologies, and
techniques
• Aims to improve quality and reduce costs.
• It stresses the importance of customers.
• Six Sigma level of operation is 3.4 defects
per million.
•
Most companies have 6,000 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
© 2012 South-Western, a part of Cengage Learning
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Key Terms
• Absolute liability
• Consumer Product
Safety Act of 2008
• Consumer Product
Safety Commission
• Consumer stakeholder
satisfaction model
• Contractual theory
• Delayed manifestation
cases
• Due care theory
• Food and Drug
Administration
• Market share liability
• Product liability reform
• Six Sigma
• Social costs view
• Strict liability
• Tort reform
• Total Quality
Management
© 2012 South-Western, a part of Cengage Learning
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