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Jdt Task 2

In: Business and Management

Submitted By Callie3
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Memo
I wanted to bring to your attention a memo I received from quality control and the proposed solution. Quality control sent a memo out Monday regarding toy whistles: lots 436 to 449. While the toys were going through the required inspection, the whistles were found to contain a higher content of lead then what is required by the U.S. regulations for children. These whistles fall under the elementary toy division and were made to complete an order that would be shipped to South America at the end of the week and the cost of remaking the product would be $100,000. Three solutions were proposed: cancel the shipment to South America, ship the half completed order and then send the final parts after they are fixed, or ship the toys to an area with less strict criteria.

A1. Present 3 possible decision alternatives
A1a. Alternative Process
Human Resources has taken the best interest of the company and has concluded on three decisions to resolve the issue presented by quality control. This company understands that making a good decision does not end with making the decision, but also needs follow-up. As presented in the Task 2 Webinar there are Decision Models that can be used to aid in identifying, processing and evaluating any decision (Jewell, 2011). The Third Decision Model was used to aid HR in the three options presented in this memo. The toy company has lost revenue on a shipment of toy whistles. The company has to decide how to resolve the loss in revenue while keeping stakeholders and clients the priority. The company needs a resolution that minimally affects the overall budget, but also retains current clients. The three options available display an area of considerations that affect the budget, the stakeholder perception of the company and the reputation between the Toy Company and clients. The first option of canceling the whole order to South America would decrease both the reputation and its profit. The second option allows the company to keep a good name with reputable product and demonstrates good ethic of the company by fixing products before shipping and requesting payment. The third option puts the company’s reputation at risk for a lawsuit, costing over the required $100,000 amount to fix the products. Making a decision requires that all options are listed, considered, and then discussed. The final decision made needs to reflect the core values of the company. It is vital to carry out the decision efficiently and in a timely manner. Human Resources recognizes in The Third Decision Model that after a decision is made the company needs to evaluate the decision and the outcome of carrying out the decision had on the company. Each option that is presented has been discussed with management and the legal department. All aspects of the decision will affect the company’s reputation and Human Resources keeps the ethical aspect of the decision a priority.

A1b. Alternative Advantages and Disadvantages

Options 1
Canceling a whole order due to a few parts not meeting quality controls standards is a huge decision. The disadvantages are it will reflect poorly on our reputation, could cause decease in orders from the current clients, and wavering support from stakeholders. Canceling an order without explanation hinders the opportunity for growth within South America. The name and reputation the company has been campaigning to South America will be lost without product delivery. In addition, more money will be spent on marketing products in South America to recover for the lost product delivery. The advantages of choosing option one would uphold the company's character by abiding by the U.S. Regulations and the Mercosuer resolution No 23/04 that governs many South American countries and shows the company as a child safe toy company (Miller, 2007).

Option 2 Providing the completed product that passes quality control and informing the South American client about the reason for the delay has more advantages for the company. This option establishes a relationship with the South American clients based on the company’s core values by allowing the clients to see the company’s attentiveness to safety and quality thus building a foundation as a reputable toy company. We will have the sales department contact the clients and discuss the rational behind sending only the finest quality and safest toys and any concerns the South Americans have about the delay. By providing sales representatives to speak with the company it continues to cultivate a relationship built on the company’s core values. These actions will keep the company in good standing with U.S Regulation agencies and the company’s stakeholders. By maintaining a high reputation there is a potential for other organizations to support and recommend our toy company. In conclusion, this action allows for company growth. Disadvantages for holding the order, the company will see a financial impact of $100,000 in repairing the whistles, an employee morale and productivity impact, and the clients must wait on the full delivery of the whistles. Within our company there will be a high demand to reproduce new products quickly. As the demand affects the employees, stress levels may rise and decrease overall productivity for a short amount of time. In addition to the increased stress level, there will also be an increase in overtime hours that the toy company will have to absorb.

Option 3 Trying to sell whistles tainted with lead to another market or without passing U.S. Regulations knowingly is a highly reprimandable offence. If or when the stakeholders and current clients found out the situation, the company’s reputation would be smeared. Restoring the company to good faith would be difficult and would cost much more than the $100,000 needed to repair the whistles. The company would also face legal issues for placing a child’s health in danger. There may be instant financial benefits of selling the product and delivering the product as scheduled, but there would be no long-term advantages. In addition, the message we promote to our employees is that we produce safe toys. By sending out unsafe toys to other areas we have tarnished the values and principles our company was founded on.

A1c. Alternative Considerations
Option 1
The overall financial loss and possible loss of customer contract is a major disadvantage. Canceling a whole order without explanation will hinder profits from this quarter and may decrease the company’s stock. Depending on how the company responds to the drop in stock, this loss may not be able to be financially recovered. Reviewing the currant contract with the South American Clients, the product fits the criteria for not shipping; there would be no legal repercussions. However, it is only half of the order that does not meet the quality control criteria, so if our South American clients found out we withheld the other half we are legally bound to ship the product. In conclusion, the company would be ethically correct by preventing unsafe toys from entering another country. The company would be abiding by U.S. Regulation agencies and the governing agencies of South America for safe toys.

Option 2
By providing half the product to the South American Company our company maintains a reputable name and continues to show our attention to quality. Although the company will have to remake the product and take a loss in gross income, this option is the most ethical and beneficial decision for children's health. The company may need to review the current contract to determine if we are at risk for breach of contract thereby risking litigation. However, this option provides opportunity to discuss the delay and product delivery with the South American company, and shows the company as a child safe toy company. The penalty for incomplete delivery is less expensive then litigation for delivering unsafe toys. There would be a loss in revenue for the current quarter; however, the company has a high potential for retaining other company's business and thus increasing revenue for the following quarter. This option does not put the company’s stock at risk. Ethically it is maintaining the company’s core values, is in agreement with both the U.S Regulations agencies and the governing laws of the Mercosuer, and delivers the safe portion of the order. All departments of the company can support this decision because it is ethically, financially and legally sound.

Option 3
Ignoring U.S. Regulations and the governing laws of the Mercosuer resolution is illegal and unethical. The potential of lawsuits, loss of customer relations, and loss of future sales outweigh the potential profit from the sale. This decision places the company at risk for legal action from all regulating agencies and places the company’s license to sell at risk. In addition, this option is not based on the company’s core values. The initial sale of toys may cover current production cost and meet the requirements of the sale contract; however the long-term legal fees, loss of reputation, and loss of future sales hinder any potential profit.

2A. Recommend 1 of the Possible Decisions
Human Resources would highly recommend going with option two because it would be the responsible decision ethically, financially, and legally. The other options place the company at risk for jeopardizing its reputation with major legal and financial repercussions. By choosing the second option, the company would continue to gain a stronger reputation among other buyers. The company understands the effect of lead on a child’s body and how long-term exposure places the child at risk for medical complications. The effects of lead poisoning can be as tragic as carcinogenetic or an alternation in electrolyte or lead to anemia. The unknown complications give the company more reason to remake the product (Yamni, 2012). Withdrawing the products from delivery and remaking the whistles within the guidelines of U.S. Regulations, will then acknowledge the company as a child safe toy company. By following this option, the company would continue to gain a strong reputation.
The loss of commission and investments of making new products are far less then the possible scandal and loss of reputation and loss of possible sales what would have occurred with exposure of selling lead tainted toys (Parsons, 2007). By making products that not only meet the standards of U.S. Regulations, but also exceed the standards, the company will gain a strong reputation among customers and buyers. The company is also showing social responsibility by ensuring safe toys to all children around the world and setting precedence with high safety markers in the company’s products that will benefit the consumer. Social responsibility is the theory of how the obligations of a company are displayed through company actions. These actions are intended to benefit the surrounding community and not directly generate revenue for the company (Investopedia, 2013).
I have attached the report which will be presented at our upcoming board meeting addressing current ethical decision making.

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