Case1 and Case 2
Thedevelopment of the auto rental trade is credited to two individuals.One, Joe Sanders who in 1916 started a car renting business for tencents a mile and Walter Jacobs who began a rental organization inChicago before handing over the firm to Hertz (Marino, Richey,&Swan, n.d.). The booming of this sector led to the rise of variousauto rental companies such as Dollar/Thrifty, Avis Budget Group,Hertz, Enterprise, National and Alamo Car Rental (Marino et al.,n.d). This industry did not grow without challenges. The restrictionsof World War II caused the market to stagnate, but it would pick upfollowing the rapid growth of airports until the 1990s. On-airportbusiness dominated the market compared to off-airport (Marino et al.,n.d).
There were also significant changes in the trade due to the oilcrisis and government regulation, which made this industry change themodels of vehicles they sold. Consequently, the USA companiescontinued to grow internationally building worldwide brands with aresounding 50.20% share in the global market (Marino et al., n.d).Many auto rental firms started to sell cars directly to consumers asthey partnered with various automakers who promised a discount ontheir purchase as they collected information about customersatisfaction and quality levels. As time passed, these enterpriseshad already incorporated technology in their operation systemspromoting efficiency and minimizing productions cost (Marino et al.,n.d).
Amidstall this, there was a man called Jack Taylor who was not ambitiouswhen he started his business, but an opportunity presented itselffrom a clients` idea that he should rent them their cars when theyare on lease (Marino et al., n.d). He was informed of an insuranceadjustors meeting where he secured his biggest client at that time.The organization focused its efforts on satisfying customers andemployees and off-airport rental operations. It grew and diversifiedits services to the on-airport segment as it expanded throughout theglobe (Marino et al., n.d).The Enterprise business segment by 2007was divided into international operations, off-airport market,aftermarket, rent a truck, on-airport market, and California Vanpoolservices. It encouraged its employees to be entrepreneurs as it gavetheir managers significant autonomy (Marino et al., n.d).
Theircompensation and rewards were dependent on the profits that were madein various branches. Though, the organization financial details werenot published as it was a private entity, it had an “A” rating onunsecured loans and interest rate of 6.2% (Marino et al., n.d). By2007, the corporation had achieved a saturation rate in the USA withalmost branches within 15 miles in populated areas (Marino et al.,n.d). At that time, it had received various acknowledgments andcustomer satisfaction awards such as the best employer, theHospitality award, the best career entry level and the largestcollege recruiter. Its major competitors have been Dollar/Thrifty,Avis Budget Group, Hertz, National and Alamo Car Rental (Marino etal., n.d).
Currentor Upcoming Challenges
Therapid growth of a company can make an entity shift its focus fromimproving customer satisfaction. As an organization grows, it becomesexpensive to carry out its operations and those tiny, but yetsignificant issues can be overlooked. This can be witnessed in thecase study when the Enterprise developed significantly it did notcarry out customer satisfaction survey for a quite a time. When thesurveys were carried out, it was found that the levels had dwindled(Marino et al., n.d). The same issue will recur if the business doesnot equip its personnel with proper customer service education. Also,there is a likelihood that the organization can lose customers amidstiff global competition.
Thefact that managers have great autonomy in running a business canaffect the corporation as a whole (Marino et al., n.d). Thoughindependence of the branches gives managers a sense of control, thesystem is viable if they are responsible when discharging theirduties. Also, such freedom makes it difficult to control acorporation in a particular direction as managers do not feelobligated to follow certain rules or a particular path. For instance,some managers were against Taylor’s decision to market the businessnational wide (Marino et al., n.d). Thus, there is a probability theydid not support Taylor’s efforts.
Moreover,when you become a global entity, there are various issues that arerelevant and irrelevant due to different cultures, geographicallocations, and technology (Andriopoulos & Dawson, 2009). It iseasier to market through televisions in Africa and the Middle East asthere are few national channels available for viewing, yet in the USAthere are numerous and choosing the right one that will meet thetarget market can be challenging (Andriopoulos & Dawson, 2009).Technology has also made it easy to acquire cheap cars hence manypeople have their own (Andriopoulos & Dawson, 2009). This reducessignificantly the customers who will use Enterprise services.
Furthermore,there is an increase in competition resulting from various companies(Andriopoulos & Dawson, 2009). Growth means more sophisticatednetwork system with very powerful servers and sufficient customerservice personnel, which might be expensive to implement(Andriopoulos & Dawson, 2009). Finally, the fact that employeesare remunerated based on the level of the profits raises a lot ofdemographic equity concerns (Marino et al., n.d). It can be easier tomake sales in some areas due to high populations compared to othersegments. Similarly, there have been issues of compensation someemployees have claimed that they work overtime (Marino et al., n.d).As a result, they feel that they should be paid some bonuses.
Anyentity that is eyeing to become a global business should know that itwill encounter a lot of operational difficulties (Andriopoulos &Dawson, 2009). Thus, it ought to streamline its functions. This canbe done by having a strong culture (Andriopoulos & Dawson, 2009).It brings a sense of identity, behavioral control mechanism and actsas a performance motivator. Therefore, it is essential for a businesslike Enterprise to have a strong organizational culture that issimilar throughout its branches (Andriopoulos & Dawson, 2009). Ifits culture is based on this principle “customer satisfaction firstand employees comfortability,” the business should direct itsresource in ingraining such values in its employees through variouscues such as organizational mission, vision, and the workenvironment.
Therefore,in relation to Enterprise, the entity needs to carry out customer andemployee satisfaction surveys with suggestions on what to improve.This will not only motivate employees and customers, but also createloyalty (Andriopoulos & Dawson, 2009). Employees can also betrained on how to handle customers efficiently, consequentlyincreasing customer satisfaction levels (Andriopoulos & Dawson,2009). Furthermore, gratification can be boosted by having anefficient system in place that is easy to use and understandcomplicated systems usually frustrate customers resulting in highdissatisfaction levels (Andriopoulos & Dawson, 2009). The excessautonomy of managers can also be controlled through havingwell-defined regulations, which stipulate the limitations of branchmanagers and their obligation towards the goals of an organization(Andriopoulos & Dawson, 2009).
Moreover, there is need to define various methods that can be adoptedespecially when marketing Enterprise. Currently, inbound method hasbecome the most efficient strategy in developed countries due togrowth in Internet use and social media platforms. On the other hand,some areas are not that developed, or the target has not adoptedinbound strategies (Andriopoulos & Dawson, 2009). So, it isadvisable before any marketing is done that the Enterprise carriesout analysis to determine the best approach to maximize returns. So,I recommend those areas that are developed and with a high youthpopulation to use inbound marketing while less advanced areas withthe elderly population to use outbound strategies.
Tocurb competition and the increase in the purchase of personal cars,there is a need for the organization to diversify its services toinclude packages that are totally new and innovative (Andriopoulos &Dawson, 2009). Furthermore, the organization can concentrate itsexpansion in those areas that accessing a car is a problem. To makean auto rental business successful, you need to install high-techsoftware, which can integrate all functions on a single page, such aspayment, customer care service, account sign up, FAQs, and otherfeatures with very little reload times. Finally, the issue ofremuneration can be solved through better pay and streamlinedcompensation system, which factors demographic statistics(Andriopoulos & Dawson, 2009). To avoid the disputes of employeesclaiming to work overtime, the organization can set fixed businesshours within which employees will carry out their daily duties.
Enterprisehas established itself strongly in the USA and had over 900 branchesinternationally (Marino et al., n.d). Furthermore, it has won thevarious awards and received recognitions from different institutes.Its main competitors are Dollar/Thrifty, Avis Budget Group, Hertz,National Car Rental and Alamo Car Rental (Marino et al., n.d). Itconcentrated on off-airport segment before diversifying intointernational operations, aftermarket, rent a truck, on-airportmarket and California vanpool services (Marino et al., n.d). Theorganization was founded on the principle of customer and employeesatisfaction (Marino et al., n.d). Despite all these successes, thebusiness needs to streamline its compensation system, marketing andinnovation strategy to be the world leading firm in the auto rentalindustry.
Sincethe 1990s, different businesses all over the world have been tryingto address the issue of unethical standards in their varioussuppliers (Thompson, n.d.). The companies have done this byestablishing elaborate codes of conduct that govern their providersof goods and monitoring them more often so that they can help toimprove working conditions, mostly in foreign countries. In 2007, India, Sri Lanka, Tunisia, Peru, Korea, China, Bangladesh, thePhilippines, Honduras, some countries in Latin America, Africa, andthe Middle East had a large number of unethical behaviors in theirorganizations (Thompson, n.d.). These Countries have been found touse child labor in their production, they pay sub-standard wages,workers work for long hours, and they also operate in unsafe workenvironments (Thompson, n.d.).
Inthe 1990s, Nike and Wal-Mart were criticized by activists. Theyclaimed that these firms acquired their goods from sweatshopmanufacturers. These made the companies come out and fight the menaceso as to protect their image (Thompson, n.d.). Despite the efforts bydifferent enterprises to monitor their foreign suppliers, it has beennoticed that they have outsmarted their customers in concealing theirunethical behaviors. The details of how manufacturers deceive so thatthey can escape being detected of their unscrupulous behaviors intheir facilities were published in BusinessWeekin 2006 (Thompson, n.d.). Deception by different manufacturers hasled to the development of various strategies by importers so thatthey curb the issue. Many corporations have now established asupplier code of conduct and have greatly indulged in compliancemonitoring efforts. They have also widely engaged in helping theirsuppliers to improve working conditions and meet other standards thatare expected. In 2006, World Motors Inc. formed an association calledFair Factories Clearinghouse to help different companies to detectand even eliminate sweatshop and any other poor work conditions(Thompson, n.d.). Another group that was formed for this purpose isthe Fair Labor Association.
Thecase study illustrates majorly on how Nike and Wal-Mart use theirsupplier code of conduct and other different programs to monitor themglobally. These strategies help them to find out if producers areworking according to the set standards of the company.
Currentand Upcoming Challenges
Addressingthe problem of poor ethics through monitoring has been thwarted byunscrupulous suppliers. They now have two sets of books one with abogus payroll that shows how workers are well paid and the other withgenuine records, which is kept secret (Thompson, n.d.). This makes itimpossible for the inspection team to know the truth. Thus, the badpractice of low pay will continue. Another challenge that hinderselimination of unethical behavior is the tactic of hiding theunderage workers during audits. The records of the workers arefalsified so that the ages are not exact (Thompson, n.d.). Moreover,the suppliers shift production to their sub-contractors to hide theirunethical standards. Therefore, they will remain without blame. Inother instances, managers and employees are trained on how to answerquestions that are most likely to be asked by the auditors, by doingso they end up giving false information and hence the poor ethicswill continue (Thompson, n.d.).
Furthermore,unethical practices have been highly related to pricing pressures. Amanager to one of the factories, which were suppliers of commoditiesto Nike in China, said that “anyimprovement you make costs more money. The price (Nike pays) neverincreases one penny, but compliance with labor codes raises costs,”(Thompson, n.d.). Many customers seek to buy their goods fromsuppliers with low costs for their products. The prices of differentproducts have dropped in the past few years. The downward pressure onprices resulted in the development of many unethical standards. Everymanufacturer works to make sure that they make profits as losses willforce them out of the market (Thompson, n.d.).
Thefinancial constraint has made it impossible for them to providebetter compensation for their workers, to make the workplaces saferand to implement effective methods of production. BusinessWeekin 2006 interviewed the Fair Labor Association CEO he mentioned thatsolving the problems of working overtime and underpayments in Chinais a very difficult issue to solve (Thompson, n.d.). Customers placeorders late, and they make changes after they have ordered, and thismakes employers overwork their employees so that they can meet theircustomer needs in time. Another challenge is the late delivery of rawmaterials to the factory (Thompson, n.d.). To cater for the losttime, they overwork the employees so that they can catch up with thetight schedule. In addition, the Company will subject their employeesto much workload without compensation so that they can save money.
Mostsuppliers in companies with issues of poor ethics lack propertraining they only have the basic information of running a company,and thus they end up depicting poor leadership skills in themanagement of their businesses (Treviño, & Nelson, 2011). Thepoor dress code in the factories is quite an issue. Workers lackprotective clothing that will help them be safe while working. Theyhave no masks to prevent them from poisonous fumes. Attire andfootwear have changed and have become more complicated as time passedby. Moreover, there are many guidelines that need to be followed by asingle manufacturer. Every code gives different information on aparticular issue so that it becomes complicated on what should bedone. Despite the efforts of audit and other monitoring plans, theremay be a possibility that the problem was not addressed, because lessinformation was gathered on its causes.
PossibleSolutions and Recommendations
Theproblem of unethical practices in most companies has become a globalissue. Since Nike and Wal-Mart appeared in the limelight due to poorethics, they have come up with strategies to curb the issue. In 1991,Nike drafted its code of conduct and distributed it to theirmanufacturers all over the world in 1992 it instructed factories topost their code in places where it could be seen by everyone and beinterpreted in the local language. The issues addressed in the codeof conduct were compensation, forced labor, documentation, andimplementation, benefits, environment, child labor, safety and health(Thompson, n.d.).
Moreover,Nike came up with three approaches to monitoring their manufacturers.It used basic monitoring or SHAPE inspection, which has been usedsince 1997. It helped to gauge the environment, safety, and health ofworkers. Another strategy they used is M-audits and finally theindependent external monitoring Nike joined the Fair LaborAssociation to help them monitor their manufacturers (Thompson,n.d.). This has helped Nike regulate unscrupulous behaviors in theircompanies. These strategies can be emulated by other enterprises, andthis will help to reduce or eliminate unethical behaviors across theglobe. Cutting off orders from suppliers who do not comply or arepersistent to poor performance could also be a good method to solvethe issues of unethical practices.
Onthe other hand, Wal-Mart formulated standards for all its suppliers.It then developed an ethical standards program to monitor howproviders were complying with their principles, which were evaluatedoccasionally and modified depending on the issues experienced. Thestandards addressed compensation, forced labor, discrimination,regulations on health and safety, environmental abuse, underagelabor, working hours and freedom of association. Every suppliersigned the document of the set standards before contracting withWal-Mart. In 2002, the Global Procurement Services Group (GPSG) wasformed, which also helped in solving the issue of ethics inWal-Mart’s suppliers. The training offered to the supplierpersonnel was very effective in reducing unethical practices(Thompson, n.d.). Wal-Mart methods of dealing with unscrupulousbehaviors and their efforts to cultivate a better businessenvironment for their manufacturers and workers show the possibilityof eliminating bad ethics.
Thecompanies should come up with a collective code of conduct and toestablish a common session of inspecting their suppliers, this willcut on the expenses spent on audits and other monitoring plans andtherefore increase productivity (Treviño, & Nelson, 2011).Firms should also join associations that address the issue ofunethical practices in organizations. The issue of prices should alsobe addressed manufacturers should have standard prices for theirproducts so that every supplier benefits without pressure (Treviño,& Nelson, 2011). This will help suppliers to have better paymentsand compensation for their workers. Training every worker should be anecessity (Treviño, & Nelson, 2011). Every employee should knowtheir rights and the time limits that they can work. This will reducepoor treatment of workers and improve health standards and workingconditions (Treviño, & Nelson, 2011).
Unethicalpractice in companies is a menace that its enormity is wanting. Sincethe 1990s, activists have criticized entities that have manufacturersin countries like China, India, Indonesia, Sri Lanka, Malaysia,Mexico, and Peru among other countries. Most manufacturers from thesecountries have been famously known for unethical behaviors in theirbusinesses (Thompson, n.d.).
Someof these behaviors include child labor, unhealthy work environment,poor pay for workers, forced labor, overtime and discrimination amongothers (Thompson, n.d.). Big corporations such as Nike and Wal-Marthave been associated with such behaviors, which in turn has affectedthe productivity of the companies since their image was dented(Thompson, n.d.). There have been numerous efforts to curb thesechallenges some have been successful while others have not producedtheir fruits yet. Many associations are now being formed with thehope that they will help reduce the challenges of unethical behavior.As we all dream of a country free of poor ethics, every employeeshould be sensitive to their workers’ rights, and they should offerthem training so that they are knowledgeable in what is expected ofthem (Thompson, n.d.).
Thompson.A.A(n.d.). Case 29 monitoring foreign suppliers: The challenge ofdetecting unehical practices.
Andriopoulos, C.,& Dawson, P. M. (2009). Managingchange, creativity and innovation.Thousand Oaks, CA: sage.
Marino.L, Richey. G.R, &Swan K. (n.d.). Case 24 Enterprise rent a car.
Treviño, L. K.,& Nelson, K. A. (2011). Managingbusiness ethics: Straight talk about how to do it right(5th ed.). New York, NY: John Wiley.