Question

Discuss Ethics as an integral part of strategic management and how it impacts an organization's competitive advantage

Answer 1

Ethics cannot be conceived as an external factor which can or cannot be integrated in to strategic management. Every business that exists is run by human beings. Every business run by humans need to be managed properly in order to fulfill its objectives and for managing business we need to manage people. Therefore to manage people you require ethics. As you can infer, ethics is the core of every business and an essential, integral component.

Strategic management is required to achieve the desired goals by any organization. These goals and objectives can only be achieved if the organisations management which consists of individuals work together and with the same goal and purpose in mind. For achieving such streamlined thinking within the management and the employees an ethical code of conduct is a must. Having ethics as an integral part helps in better and efficient decision making as well. This arises from the fact that any number of individuals when struck with the same problem having a moral delimma of right and wrong, the possibility of maximum individuals opting for the right decision increases when ethics are embedded in the working culture of the organisation.

Ethics evolve in a magement through first the decision that are taken by the management, then the ideology that drives the organisation and finally at an individual level depending upon the moral character of his/her.

Ethics generate competitive advantage for a firm in a vaariety of ways. Good ethics in an organisation boosts the morale and productivity of its employees. It generates trust between employees and shareholders. Shareholders trust in an organisation can be very valuable as it directly relates to financial impacts. Beyond this, trust and loyalty between customers and the firm is very crucial and important for any firm in the long term. Any form of unethical behaviour can tarnish the reputation of any organisation. To recover from such a state takes a huge toll on the firms finances as well on the long term growth. We have seen such failures in the case of Enron and Satyam Computers Ltd. An organisation with good ethical practices differentiates itself from others and stands out.

Thus it is imperative to understand that the sole purpose of businesses is not only to earn profit and serve shareholders but to have a sustainable business practice which helps in the development of the organisation, its employees, customers and above all, the society at large.