The key problem In this case Is whether Frank Colonel, working on behalf of San Taco Steel Corp.. (SETS), should donate money to Camera Fabrication’s (Camera) annual sales meeting, effectively bribing them into staying as a client. There are three reasons why this is such an issue. First off, company policy and Franks policy as well is to not give large donations to customers. Giving the money would be going against the fabric of what the company stands by.
Second, due to the competitive tauter of the industry, there is a strong likelihood that another company will give the money and potentially steal Camera as a customer. Giving the money to Camera would be Stet’s way of Influencing Camera to stay with them as a client. Finally, while this was once an accepted business practice in the ass and ass, laws such as the Omnibus Act have come into effect preventing companies from “wining and dining” their clients Into staying with them. 2) George Colonel is a primary stakeholder In this case.
He believes very strongly In keeping his word. Part of what e preaches to his workers Is to always keep your word, no matter what. If he agrees on the phone to Camera to donate at least $5,000 to their annual sales meeting, then he would be showing to his employees that his word is not as sacred as he preaches. The entire infrastructure of the company, with regards to delivering something on time or keeping promises with a customer, will not be treated with the same level of respect as it was in the past.
If Frank does not keep his word, neither will his employees. SETS is also a primary stakeholder. Giving a donation of any kind to Camera will not only be bad for business, but also in the market. As mentioned in the case, there are customers who will buy from a company based on the price and there are those who will buy based on comfort and familiarity with their supplier. SETS, by giving the money to Camera, affects Itself with both of these customers. The price- based customers will use that Information for leverage In negotiating a contract with SETS.
The relationship-based customers will be insulted by this shocking move by SETS, and will potentially “fire” SETS as a supplier, since they do not feel like they are Ewing treated fairly by SETS. Finally, Camera is a primary stakeholder in this case. While it is unknown what the motive for this request is for (whether it is for the cash they need, it is for leveraging, or both), they will have some closure as to their relationship with SETS depending on what happens.
If they get the money, they see that SETS values them highly in keeping them as a client and they can continue these actions moving forward. If Camera does not receive any money from SETS, then they will undoubtedly get a donation from another supplier trying to snatch them up as a customer and they can go ahead using this new supplier In the future. 3) The Incident with the food being donated to Stet’s golf tournament for their clients Is an Important example of demonstrating Franks character.
The fact that he scolded one of his workers for allowing a customer to donate the food shows just how much Frank clients. Another critical fact to the case was the demonstration of where Camera once stood as a customer to SETS (they were their largest customer at one time) and their subsequent drop off as a result of the recession and reduction in military spending. The reason why these facts, especially the reason for the drop off, are important is because they demonstrate Just how important Camera is to SETS. Camera is only struggling for reasons beyond their control.
Once the recession levels off and military spending increases, which will inevitably happen, Camera has the chance to once again be a big buyer in the steel industry. If the case did not tell us why Camera was not doing so well, then it would be obvious that Frank would be able to tell them to go Jump in a lake. A third critical fact to this case is the exclusivity in he past that Camera demonstrated when dealing with purchasing steel. The reason why this is such an important fact is because it is evident that Camera has been a loyal customer to SETS in the past.
However, now it appears they are angling toward being the type of client that tries to attract the supplier most likely to help them out. If Camera was always this type of client, then Frank would not have been surprised nor would he have been faced with such a dilemma when he received that letter. A fourth key fact in this case, which will be discussed in more detail in the next question, is the yearly contract negotiations that take place between SETS and Camera. The fact that this contract is negotiated on a yearly basis could give Frank an out when trying to figure out a solution to this problem.
He can agree to restructure the next year’s contract to deduct $5,000 or more from the contract without donating to the annual sales meeting, thereby saving face. Finally, a key fact in this case is the letter itself. As was discussed later in the case that the steel industry used to be a wining and dining one and now it is not, it is evident that Camera appears to be ongoing back to the old days. Even if their only intention was to raise capital and/or get suppliers to discuss the product to their salespeople, Camera is still giving off the impression that they are willing to do business with the highest bidder.
They want to be wooed and this letter shows that. 4) The first option for Frank is to give in and give the donation. However, he cannot give the donation in an obvious way since this may lead him to be exploited by other customers and could potentially damage the company severely. He would also feel like he blatantly let his morals as well as Stet’s orals die. Rather he should give the donation via a reduction in the contract price for Camera. They can take the difference between the old and new contract price as a sort of donation.
This is better for Camera than an actual donation, since now they do not have to declare a donation as income. At the same time, this donation remains hidden from the public eye. The other option would be for Frank to simply say no to any donation whatsoever. At the end of the day, you are looking to come out of this situation feeling like the company held true to its moral code, even though there is thing in writing about this type of scenario. You want the employees to have a higher morale and continue to work productively, which they will since they know their company did what is right.
From a financial point of view, giving a donation to Camera in any form would hurt Stet’s credibility with Camera and will enable the buyer to gain an upper hand in the relationship. This will keep recurring as long as Camera intends to raise capital this way. 5) I am choosing the first option, which SETS gets to keep Camera as a client and they feel good about it. SETS prides itself n holding the price line for their customers when prices for steel are high. Giving a little bit of a discount seems to be no different when the customer has run into tough times financially.
Milton Friedman says “A corporation’s only social responsibility is to make as much money as possible while conforming to the basic rules of the society. ” The first basic rule is keeping the law. SETS is doing this by not giving money to a bribe, which is illegal. It would not be illegal even if they donated the money openly, since it appears on the surface to be a legitimate business practice. The second rule is conforming to ethical custom. This would be an issue in this case, since “wining and dining” is not an ethical business practice.
SETS is not doing this. Rather, they are merely giving helping out a customer in need, something they have been wont to do in the past. The third rule is to act without deception or fraud. By having this fundraiser Camera is deceiving everyone into believing that this annual sales meeting is a legitimate way to further the business and develop their salespeople. The underlying purpose is to create a bidding war amongst suppliers in order to save few bucks. SETS is acknowledging this and lowering their contract price to help out a customer in need.
In using core values we can establish its 4 values in this solution. There is trustworthiness, since SETS is showing its loyalty to Camera, a long time customer by re-negotiating their new contract to include a $5,000 discount, thereby helping Camera save money and avoid having to declare this saved money as income. There is responsibility, since Frank will not be accusing Linda Lewis and Camera of extorting SETS for money. Rather he will be acknowledging his company’s lice on advertising and Samara’s need for money and helping both companies work around this dilemma.
There is caring, since Frank is helping out Camera. Even though it will cost SETS $5,000 in contract sales, it will save them in the long run by being able to keep Camera as a client. Also, Frank is taking Samara’s feelings into account by recommending a better financial arrangement than the one currently on the table. Finally, there is good citizenship. This arrangement does not break any laws whatsoever. Frank is merely trying to help out a customer and under tax law giving a discount is fine. Words: 1,696
