Etch-a-Sketch Ethics
CASE 1: ETCH-A-SKETCH ETHICS.
QUESTION 1:
Was it ethical of the Ohio Art Company to move production to China? What were the economic and social costs and benefits of this decision? What would have happened if production had not been moved?
The decision to close and move a plant raises important issues about the social responsibilities of a corporation. To make an ethical judgment, one must look at the impact the decision has on various stakeholders. On a macroeconomic level, both the US and China benefited. The US gained lower prices and subsequently an increase in disposable income; poor Chinese villagers gained higher paying jobs and were able to move from the countryside to the city. Social costs to domestic OAC workers were high. The city of Bryan, Ohio, population 8000, lost a key employment base; as a result, a community was destroyed. The former OAC workers were left jobless and had no income stream. They were unable to pay their mortgages, which resulted in many home foreclosures and auctions. Many were forced to leave the town and look for work in other parts of the country. The city lost a steady tax stream. From a business perspective, OAC didn’t break any prevailing laws. OAC’s decision to offshore stemmed from an inability to lower production costs and reverse two years of losses and “sluggish sales” (p160).
In the short term, OAC may have been able to preserve jobs, but eventually the losses would have amounted to a larger restructuring costing more job losses. The issue behind the cuts was the fact that retailers wanted to keep the product under $10, this pressure in unison with high worker wages and operations costs forced the company into a hard decision. Raising the cost of the product would reduce demand from consumers and retailers, this hits the bottom line and we have a case of shrinking margins. The long term viability of the corporation comes to center stage. If it cannot survive (i.e. profit), job losses will inevitably
QUESTION 1:
Was it ethical of the Ohio Art Company to move production to China? What were the economic and social costs and benefits of this decision? What would have happened if production had not been moved?
The decision to close and move a plant raises important issues about the social responsibilities of a corporation. To make an ethical judgment, one must look at the impact the decision has on various stakeholders. On a macroeconomic level, both the US and China benefited. The US gained lower prices and subsequently an increase in disposable income; poor Chinese villagers gained higher paying jobs and were able to move from the countryside to the city. Social costs to domestic OAC workers were high. The city of Bryan, Ohio, population 8000, lost a key employment base; as a result, a community was destroyed. The former OAC workers were left jobless and had no income stream. They were unable to pay their mortgages, which resulted in many home foreclosures and auctions. Many were forced to leave the town and look for work in other parts of the country. The city lost a steady tax stream. From a business perspective, OAC didn’t break any prevailing laws. OAC’s decision to offshore stemmed from an inability to lower production costs and reverse two years of losses and “sluggish sales” (p160).
In the short term, OAC may have been able to preserve jobs, but eventually the losses would have amounted to a larger restructuring costing more job losses. The issue behind the cuts was the fact that retailers wanted to keep the product under $10, this pressure in unison with high worker wages and operations costs forced the company into a hard decision. Raising the cost of the product would reduce demand from consumers and retailers, this hits the bottom line and we have a case of shrinking margins. The long term viability of the corporation comes to center stage. If it cannot survive (i.e. profit), job losses will inevitably