CAIE IGCSE Business Studies 6.4.1 ethical issues
Practise ethical-issue questions by defining ethical business, applying stakeholder effects and weighing cost against reputation.
- Syllabus
- 2027–2029
- Course
- Business 0264
Exam points
- Define an ethical business as one that bases decisions on moral judgement.
- Explain benefits such as higher demand, improved image or access to new markets.
- Justify whether ethical issues outweigh cost or profit concerns in the case.
6.4.1—Ethical issues question 1
[Maximum number: 6]
CFG is a social enterprise. It buys cocoa beans from local farmers and then uses the beans to make chocolate. Being ethical is important to the business. CFG has developed a new chocolate bar. The Marketing Manager plans to use skimming as its pricing method, and retailers as its distribution channel for the new product. He knows there are many legal controls over marketing that might affect a business.
Do you think being ethical will always lead to lower profit for a business? Justify your answer.
Award up to 2 marks for identification of relevant points. Award up to 2 marks for relevant development of points. Award up to 2 marks for justified decision as to whether being ethical will always lead to lower profit for a business.
Points might include:
- Limited/fewer sources of materials [k] leading to less output [an]
- Higher cost of materials [k] leading to higher variable costs/cost of goods [an] which lowers gross profit margin [an]
- Workers may have to be paid more/fair pay [k] increasing labour costs [an]
- May take time to source ethical supplies [k] which could delay production [an]
- Good image/reputation [k] so can charge high(er) prices/ lead to customer loyalty [an]
- High(er) demand / increase sales / enter new market / more customers [k] which could increase revenue [an]
- Help recruit/motivate/retain workers [k] leading to lower absenteeism/increased productivity [an]
- Investors more likely to invest [k]
- Can help create better supplier relations (by paying a fair price) [k]
- Less opposition from pressure groups [k]
This is a general question so there are no marks for application.
Increase cost can be awarded as [k] once where candidates do not refer to specific examples of costs.
Do not credit answers which relate to the costs of being unethical as this is NAQ.
Justification might include:
Being ethical could mean having to pay more to suppliers [k] increasing variable costs [an]. However, this could improve the business's reputation [k] allowing them to increase prices [an]. Being ethical will not always mean lower profit because a better reputation is likely to attract more customers [eval], and the extra revenue gained could cover the costs increasing profit overall [eval].
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