6.4 Business & Ethical Issues (Cambridge International IGCSE Business): Exam Questions

Define'business ethics'

Define 'child labour'

Identify two ways a business can avoid links to child labour.

Define 'fair wages'

[case-study] GreenTech Solutions is a multinational technology company that operates ethically across all its business activities. The company manufactures renewable energy equipment and has committed to fair trade practices, sustainable sourcing, and transparent supply chains. GreenTech Solutions recently announced plans to expand into developing countries, where it will maintain the same ethical standards despite potentially higher costs. The CEO stated: 'Our ethical approach is fundamental to our identity. We believe businesses have a responsibility to operate sustainably and treat all stakeholders fairly, even when this impacts our profit margins.'

Outline one advantage and one disadvantage to GreenTech Solutions of operating ethically.

[case-study] CLP is a social enterprise that provides educational technology solutions to underserved communities worldwide. The company operates with a strong ethical foundation, ensuring all its products are accessible and affordable. CLP sources materials from certified fair-trade suppliers and maintains transparent pricing structures. The company recently decided to donate 10% of its annual profits to educational charities, despite facing increased competition from larger technology firms offering cheaper alternatives. The Managing Director commented: 'Ethics isn't just about doing the right thing – it creates genuine value for our business and the communities we serve.'

Outline two advantages to CLP of behaving ethically.

Define 'customer boycott'

Do you think a business being ethical will always lead to lower profits? Justify your answer.

[case-study] ACP manufactures computers. Being ethical is important to ACP. The business employs 3000 workers in its factory. ACP imports 65% of its raw materials. As internal users of accounts, the directors plan to analyse ACP’s financial performance using profitability ratios. The Finance Director thinks making a profit is more important for a business than managing its cash flow.

Explain one benefit and one limitation to ACP of being ethical.

Do you think businesses should prioritise ethical practices over profit maximisation? Justify your answer.

[case-study] TechCorp manufactures smartphones. The business has recently been criticised for unethical practices. The company employs 2500 workers across multiple factories. TechCorp sources 70% of its components from overseas suppliers. As internal users of accounts, the management team regularly reviews TechCorp's financial performance using liquidity ratios. The Chief Executive believes that maximising shareholder value is the primary objective of any business.

Explain one drawback and one consequence to TechCorp of operating unethically.

[case-study] Green Tech Solutions is a renewable energy company that manufactures solar panels. The business has built its reputation on ethical practices and sustainable operations. Green Tech employs 2500 workers across three manufacturing sites and sources 70% of its components from certified ethical suppliers. The company's stakeholders include employees, customers, local communities, and environmental groups. The Managing Director believes that ethical behaviour creates long-term value for all stakeholders.

Explain two impacts on stakeholders of Green Tech Solutions behaving ethically.

Extract:

MainCity Bakery (MB)

MainCity Bakery (MB) MB is a small bakery that produces bread. Yasin started the bakery 6 months ago with help from the government. Yasin needed a business plan to support his application for government help. An extract from the business plan Yasin produced is shown in Appendix 1. The market research was carried out by Yasin. He asked a small sample of family and friends to fill in a questionnaire. Yasin’s business plan also contained forecast data. MB’s bread is freshly-made every day in the bakery, which is located at the back of MB’s small shop. The bread is then sold the same day. Yasin has 2 employees to help him produce the bread and 1 employee to serve customers in the shop. All employees work 5 days a week and are paid the legal minimum wage. Yasin uses a democratic leadership style. Yasin needs to keep costs low to be competitive. He uses packaging that cannot be recycled. Yasin also buys the cheapest ingredients, most of which are imported. He is planning to use lean production in the bakery but he has to decide which method to use. MB’s main competitors advertise that they only use ingredients from local suppliers. Yasin is thinking of changing the suppliers he uses for ingredients and packaging. He wants MB to have a good ethical image which he could use in advertising. Yasin plans to start making cakes. He is considering two options as outlined in Appendix 2. MB’s fixed costs will increase as there will be additional expenses whichever option he chooses.

Appendix 1

Extract from Yasin’s business plan for MB

Appendix 2

Forecast data for MB’s cake options

Appendix 3

Packaging supplier advertisement

We only supply packaging made from sustainable sources. This will keep your products fresh and protect the environment. We can deliver your packaging when you need it.

Consider the following three ways Yasin could improve the ethical image of MB.

• Buying all ingredients from local suppliers.
• Using only environmentally friendly packaging.
• Increasing wage rates to 20% above the legal minimum wage.

Which way would be most effective? Justify your answer.

Refer to the following insert when answering the question

Extract:

Everyone Theatre (ET)

Zane and Zaara are both actors. They plan to start up a theatre in a low-income area of Main City. Zane and Zaara believe that helping the community is as important as being successful entrepreneurs.

The theatre will be a private sector business and Zane and Zaara have to decide whether to start up as an unincorporated business (partnership) or as a limited company. Zane is planning to prepare a cash-flow forecast for the first year. Zaara knows they will need to set business objectives for the theatre and also decide on a leadership style to use when managing employees. ET will have 24 part-time employees as shown in the organisational chart in Appendix 1.

Zane and Zaara plan to put on performances in the evenings for local people and tourists. There will be 100 seats in the theatre but not all the seats will be sold if the price is too high. The Marketing Manager, Zaara, will need to decide which performances to put on, what price to charge and which refreshments to sell. Zaara will also need to decide between the two possible options for the first performance when the theatre opens. Information on the two options is shown in Appendix 2.

In the daytime the theatre building will be used by Daycare, a local social enterprise. Daycare takes care of young children up to the age of 5 so that low-income family members can go out to work. It also provides education for the children which helps their development and progress before they start school. Some of Daycare’s objectives are different to those of ET

Appendix 1

Proposed organisational chart for the theatre

Note: The numbers in brackets are the number of part-time employees who work in each department

Appendix 2

Forecast data for the two possible options for ET’s first performance at the theatre

Appendix 3

Email from Zane to Zaara

To: Zaara

From: Zane

Date: 1 April 2023

We want to support the local community and we need to make decisions about the following.

Should we:

• Pay fair wages even though they may be higher than those paid by competing theatres?
• Only buy costumes produced in the local community?
• Purchase all refreshments from suppliers that do not pollute the environment?

Consider the following three ethical issues for the theatre.

• Paying fair wages to employees
• Only buying costumes produced in the local community
• Purchasing all refreshments from suppliers that do not pollute the environment

Which ethical issue is likely to have the biggest effect on ET? Justify your answer.

Refer to the following insert when answering the question