Overview Of Company And Pharmaceutical Market Commerce Essay

Overview Of Company And Pharmaceutical Market Commerce Essay GSK is one of the leading pharmaceutical players in the world whose operations span 117 countries globally and it markets to 140 countries around the world. (Source: www.gsk.com) It is primarily organised along product and regional divisions, including Prescription Medicines, Vaccines and Consumer Healthcare. In recent times it has undergone a major streamlining of its operations in order to better respond to the environments in which it operates. Clearly, its environment is characterized by a great deal of change and uncertainty and hence it is extremely important that the structure in place is one which allows for information flow and knowledge exchange between subsidiaries and operations throughout the world in order to achieve its objectives and also to anticipate change and turn it to its advantage as a Marketing opportunity, rather than be surprised by it when it occurs and perceive it as a threat. (Baker, 1992) It is primarily structured on a regional basis covering Europe, No rth America, Central and South America, Caribbean, Asia and Australasia, Southeast Asia, Africa and the Middle East. The nature of the industry and the varying legal and regulatory environments which govern the industry makes this necessary as the environments are highly variable with different stakeholders and interest groups participating at different levels with varying degrees of authority and influence, though convergence is increasingly evident. Although primarily involved in pharmaceuticals and healthcare, the company also produces a variety of consumer products with some leading brands such as Lucozade, Aquafresh and Ribena. This implies that the company is rather varied in terms of its product portfolio and thus, the structure needs to be adapted according to the markets it serves which are clearly varied on a global basis. In recent times, the pharmaceutical sector became increasingly consolidated on a global level as a number of notable mergers took place throughout the latter part of the 20th Century as companies sought to gain competitive advantage by combining skills and assets and to achieve scale economies in research, development and production. One of the main characteristics of the industry is that it is intensely competitive and the overriding goal of the majority of players is to provide innovative and speedy responses to market. The industry has also come under the spotlight for certain unethical practices, reflective of the nature of the industry as a whole and particularly the fact that its success is very much dependent on the purchasing power of nations. Hence, there has also been much criticism voiced, especially in developing and poorer countries where access to medication and treatment is clearly not as available as in the developed West. As a result, recent years have seen many of t he larger players becoming much more involved in issues of Corporate Social Responsibility, integrating the concept into the overall strategic framework of the company. (Katsoulakos Katsoulacos, 2007) The pharmaceuticals sector has been affected by the enormous speed of change in its operating environment, one of the principal being that of the development of the Internet and other communications technologies. In the past 20 years or so, the industry has undergone major upheaval and consolidation has been prevalent. In order to survive, business models and organisational structures have had to be adapted to cope with the wider external forces or contingencies and the complexities which exist within the industry. The high number of mergers and acquisitions which have take place has also clearly impacted on the subsequent structures in place, especially relevant in the case of cross border deals where cultures vary at both organisational and national level. This has been a major factor in the development of the structure within GSK as the company has had to deal with 2 major mergers within a relatively short space of time and has massive implications for the management of the variou s cultures, both at organisational and at national level, which it subsequently had to deal with. Hence, the creation of a uniform GSK culture across its many divisions became of paramount importance for the leadership of the company. This is obviously a major area of concern, especially in post-merger management as the correct structures and cultures need to be put in place if synergies are to be realised and was a problem area initially for the Greek subsidiary. If we look back to the 1960s as the time when the Pharmaceuticals Industry began to evolve, the business models adopted by companies then were primarily based on innovation and the creation of new and effective drugs. Many were organised along functional lines, which arguably, were appropriate at the time. Much in line with the Contingency theorists, particularly Burns and Stalker (1961), environmental factors have had an astounding impact on the way organisations in the sector are structured and subsequently managed. The 1960s were characterised by rapid growth in economic terms in most developed countries, and this new prosperity clearly brought advantages to many market sectors, the pharmaceutical industry being one such benefactor. At the same time, the regulatory environment was considered to be much less rigid than that we know today and consequently it was easier for drugs companies to bring products to market and secure patents to ensure sole distribution. Differentiation bec ame a key strategy which thus affected the structures in place (Lawrence Lorsch, 1967) which tended to focus on the distinct competencies and specialisations within the firm. Up until the 1980s, research and development was still an integral part of the value chain and the product offering, but costs were continually rising and the returns were gradually being eroded. Some might say that consolidation was inevitable, but this alone was not enough. Companies had to rationalize their manufacturing procedures and many opted to locate operations in just several markets around the world, to gain both financial savings and create hubs of specialists who would contribute to the continued drive for innovation in the market. The structures in place were no longer fitting to the environmental factors at play nor did they facilitate the execution nor realization of objectives, which had also altered radically. In the case of GSK, it was able, due to its sheer size and consequently, resources, to take advantage of technology so as to create competitive advantage in its market, much in line with the resource dependency view as advocated by Pfeffer and Salancik (1978) as opposed to the view of Hannan and Freeman (1977) who tended to see the environment as being constraining to organizations, rather than looking at how companies can benefit or exploit what others may view as contingent factors. One of the most significant developments affecting all players in the industry was the development of the Internet. This ultimately offered up choice to the end user, increased distribution efforts as well as facilitating negotiations and alliances between suppliers in the market, but ultimately, it made consumers more informed and automatically made them part of the purchasing process. This ultimately called for new structures to be put in place which could satisfy all stakeholders in the chain while still retaining and concentrating on core competencies of research and development, though the pressure to innovate has become much more intense. All of the top 15 pharmaceutical companies have undergone senior executive-level changes within the last two years, bringing in an influx of new C-suite talent that includes many individuals from industries that have successfully tackled the challenges now confronting Pharma,à ¢Ã¢â€š ¬Ã‚ ¦These leadership changes should help innovative companies to transform their finance function, organizational design, and business models in ways that enable them to continue to prosper in a challenging time. (Carolyn Buck Lane, Global Pharmaceutical Leader, Ernst Young, available at http://www.pharmaceuticalonline.com/article.mvc/Pharmaceutical-Industry-Needs-To-Speed-Up-0001?VNETCOOKIE=NO) Organizational Structure For most companies, organization design is neither a science nor an art; its an oxymoron. Organizational structures rarely result from systematic, methodical planning. Rather, they evolve over time, in fits and starts, shaped more by politics than by policies. (Goold Campbell, 2002) Globally, the company is organised along regional and product lines and also involves a structure which encompasses the different functions of the company. As research and development is so high on the priority of the organisation, and the industry in general, this part of the company appears to operate almost independently, though with links to the other areas of the business. As the company has evolved over time, and obviously as a result of its merger with Smithkline in the 1990s, the power structures within the company have also changed somewhat and is much more widespread and less centralised. It is evident that the company has attempted to capture the essence of Druckers information-based organisation (1988) recognising that information must be distributed throughout in order to capitalise on the existing expertise within the company and to promote further learning and development of individuals within, promoting cross-collaboration and knowledge exchange which shall in turn produce creativity and innovation, much in line with Quinns theory of the learning Organization (1980) . This is viewed as a key to achieving competitive advantage and obviously, the quest for finding new and innovative solutions for the market at all levels. It also recognises how distinct and separate functions must work together so that there is cross-collaboration, communicati on and knowledge exchange as propagated by the likes of Drucker (1988) and Handys notion of federalism (1992), The states of federation stick together because they need one another as much as they need the center. (Pg. 65) One of the major problems for GSK in terms of structure is that it not only operates across different and unique functional lines, but also across various national environments. Contingency factors are therefore also varied across legal, political, economic and social spectrums, requiring different approaches to different environments. Bartlett and Ghoshal (1990) looked to the matrix structure as a response to this problem which essentially required a degree of centralised control but also national responsiveness to the different contingency factors at play. In theory, the matrix structure should have been able to deal with the complexities, but as argued by Bartlett and Ghoshal (1990), the failure of such a structure was due to the fact it had not been created in the minds of management and they had continued to operate at local or national level. This was evident within the Greek operations as well as evident in other operations worldwide, who essentially felt isolated and independ ent of HQ at the end of the 1990s, and much was done to overcome this problem through improved communication networks and attempts at promoting an organisational-wide philosophy and mission which ultimately translated into a more uniform culture, while still retaining a degree of local responsiveness. The requirement for the effectiveness of the matrix structure is that it required a specific mindset and a major shift in organisational culture and values. Trans-nationality was a new management mentality; one that essentially attempted to recognise and deal with complexity rather than attempt to remove it. Within such an organisation, the anatomical structure of the organisation itself matters less, and the psychological element, the people element has become the most important factor of doing business globally, hence the quest to shape organisational culture and mindset. In line with the overall evolution of strategic management, the people element and the organisational culture ele ment, became more important in subsequently shaping both strategy and structure within organisations and has been the path pursued by GSK. Within the GSK, combining control and responsiveness has been problematic as employees are geographically dispersed, such as with the Greek subsidiary, operating within different socio-economic environments, whereby it is impossible and inadvisable to assume that they will share common values and be motivated by the same things. Consistency was highlighted by Bartlett and Ghoshal who saw that many corporate objectives were not being achieved as individual country subsidiaries were too concerned with the attainment of national targets, rather than overall global company objectives. Subsequently, advances in technology have facilitated and improved communication and reporting lines overcoming some of the obstacles and hurdles, yet psychological barriers remain the most difficult to deal with and shall undoubtedly be a major hurdle. The analysis has shown that GSK chose this as a suitable structure as it allowed, concentration on specific projects or special efforts and essentially it a llowed for a combination of the previously presented functional and product structure (Held et al, 2009, Pg.58) while still retaining responsiveness to specific situations or markets as required. Although some principal functions are still essentially centralised from the company HQ in the UK Finance, HR, Legal, Communications, Ethics and Compliance and IT, they work closely and in unison with the companys various divisions and regions across the globe, including Greece. It is deemed necessary to have these areas to be centralised to a certain degree in order to exert a degree of control and allow for consistency. However, there is also a great deal of emphasis on autonomy of the various units while still allowing for a unified vision and the pursuit of common objectives. As Huczynski and Buchanan described, By having a power structure, the group avoids continued power struggles which can disrupt its functioning (1991). This is much in line with Handys view of the Federalist Organisation, and the subsequent structure which has been created is simultaneously a reaction to the environments as well as being predetermined by individual opinions and the objectives of the company, as the Strategic Choice perspective of organisations advocated and reinforces Chandlers notion that structure follows strategy. One of the difficulties for GSK is the expanse of its operations globally which makes control and co-ordination difficult, but necessary. As Bartlett and Goshal argued in the 1990s, top-level managers à ¢Ã¢â€š ¬Ã‚ ¦ are losing control of their companies. The problem is not that they have misjudged the demands created by an increasingly complex environmentà ¢Ã¢â€š ¬Ã‚ ¦nor even that they have failed to develop strategies appropriate to the new challenges. The problem is that their companies are organisationally incapable of carrying out the sophisticated strategies they have developed. GSK have attempted to create a structure which is in part evolutionary, a reaction to its environment and markets, thus following a contingency view of the organisation, and has also been predetermined by management, as highlighted by Thompson and McHugh (2002) . As later commentators observed, the contingency theorists did not take into account the fact that organisations as entities could actually alter the contingency factors deliberately or unintentionally through their actions. Introducing new products or new ways of doing business, can actually alter and in many instances shape their environment, as argued by Moss Kanter (2002). GSK wanted to push accountability to all levels of the organisation, seeing this as necessary to capitalise on the internal assets available to them as well as recognising the diversity of its divisions, its markets and its employees. There is a great sense of urgency surrounding the notion of a common and unified vision and the creation of a structure which allows a positive and unified culture throughout the company, while still allowing for a degree of autonomy throughout the different divisions and functions regionally. For so long structures had been very mechanistic with clear reporting lines and lines of authority in place. Such organisations are now generally referred to as bureaucracies. It is now recognised that power must also be coordinated and integrated in some way and GSK recognised that by pulling together the overall power of the organisation is increased at a global level. They have attempted to apportion the same degree of power to different divisions, recognising that they all have a valuable and strategic role to play in the organisations overall success. Again, in line with Handy and Druckers predictions, employees are now viewed as assets, and although technology has taken on an extremely dominant role in all organisations, in essence, it is viewed as a facilitator to fully take advantage of the skills and assets a company may have in its possession, that is its people. Hence GSK fosters a learning approach, investing substantially in its people at both a functional and personal l evel and recognises that without them, it shall not achieve its objectives. Organisational Goals and Mission Strategic Fit Prahalad and Hamels (1989) view of strategic intent being the necessary ingredient of success is highly relevant to GSK. The authors saw that the Empowerment of the Strategic Intent was key to the effectiveness of strategy process and that it was, a matter that involves everybodyà ¢Ã¢â€š ¬Ã‚ ¦..to challenge the traditional downward communication style to an upward communication stream of new ideas coming from all the organization. (Source:http://www.valuebasedmanagement.net/methods_hamel_prahalad_strategic_intent.html, accessed 11/11/09) The fostering of an open communication system while still maintaining central control and direction should facilitate the exchange of ideas across the company, thus enhancing knowledge as well as market insight from specific customer markets, and thus promoting and inciting creativity and innovation which is one of the most important goals of the company. At the same time, it develops not only a sense of common purpose across the organisation but makes employees feel part of the overall strategic plan, thereby increasing motivation and productivity levels which have knock on effects across the board as employees feel empowered (Kotter, 1995). GSK has realised that much more important than the anatomical structure in place, there is a sense of common purpose across the company and its divisions which are characterised by diversity in functional, people and cultural terms. The important element of the new structure is that it revolves around the markets it serves rather than around functional areas, though these are still of great importance, especially the RD function. There are much fewer reporting lines to allow for the free flow of information and communication throughout the company. Flexibility and 360 degree feedback are built into the system and an open network of communication is encouraged to aid in the innovation process. As Barr (2005) concedes, According to Tidd, Bessant and Pavitt, (2005), innovative organisations are those that are flexible, adoptive, learning, characterised by organic culture, with capabilities of networking and team-working. (pg.1) Although the overall objectives have remained largely the same over the years, there has clearly been a shift in emphasis, particularly a renewed importance placed on innovation, in light of increasing competitive intensity as well as the expiration of many patents globally. In addition, there has also been a greater importance attached to the notion of people as assets and the recognition of the diversity of its workforce, its operations and the differing needs of its markets. This is particularly relevant given the emphasis on new and emerging economies of China and India who shall become increasingly important strategically in the very near future, as well as the concerns surrounding access to medication and healthcare in developing countries. In this respect, the environment and the external drivers which impact upon it, have an overriding influence on the strategy and structure adopted by the company. It could, however, also be argued that the companies themselves have also had an amazing impact on the environmental landscape due to the sheer size of some of the big players as well as the innovations they have brought to market which have ultimately shaped the industry, particularly with respect to consolidation. This is likely to continue, so structures and strategies shall be part evolutionary in line with external developments, but also determined by individual organisations through their activities. In summary, the main objectives of the company are as follows: Grow a diversified global business Deliver more products of value and Simplify the operating model. The mission is: We have a challenging and inspiring mission to improve the quality of human life by enabling people to do more, feel better and live longer. By focusing our business around our strategic priorities, were confident that we can fulfil this promise. Source: GSK Annual report, 2008 Conclusion and Recommendations The dictum Structure follows strategy refers specifically to the historical shift in the strategy and structure of large firms, first documented in the development of American industry (Chandler 1962). This shift involved the transition in strategy from single to multiple product lines and the concomitant structural innovation, the introduction of divisional structure, which made it possible to overcome the inefficiencies of functional structure (in particular, decision overload at the top of the organizational hierarchy). (Source: www.le.ac.uk/ulsm/doc/suhomlinova_organizational.pdf, accessed, 02/07/09) GSK have worked extremely hard at creating an organisation which is responsive to its environments and also one which allows it to shape the environments in which it operates. While many view the opinions of Burns and Stalker as being outmoded for business in the 21st Century, the analysis has shown that many of their assumptions still hold true today according to both firm and industry context and are particularly relevant to the pharmaceuticals industry and GSK in particular. The overriding thrust of the analysis undertaken in light of looking at the company from the perspective of the contingencies affecting it, is that an overwhelming emphasis of the structure which it has created is one that is fluid enough to facilitate innovation and the exchange of knowledge, and also one which recognises the diversity of its workforce, its markets and its operations, thus it essentially takes the best elements from the contingency school and the resource dependency theory which ultimately tr anslates into the strategic choice perspective . In this respect, it is attempting to achieve an organic structure which is flexible enough to respond to the uncertainty and unpredictability of the sector while simultaneously actually taking action which ultimately shapes the environment in which it operates. It appears that diversity is now a challenge of all business today, particularly those involved in global operations, and it appears that GSK has attempted to use this diversity as a key to its competitive advantage rather than seeing it as a problem which has to be overcome. Simultaneously, although it recognises that a certain degree of flexibility is required in its structure, it is also extremely important for the organisation to exert control and power, particularly given the intensity of competition and the fact that much of its business is of a particularly sensitive nature, both socially and politically. Power is dispersed throughout the organisation so that individuals , units and functions, can be exploited to their full potential. As Moss Kanter (1989) highlighted, to add value, managers think and work across boundariesà ¢Ã¢â€š ¬Ã‚ ¦every manager must think cross-functionally because every department has to play a strategic role. Hierarchies appear no longer to be a source of power in terms of both expertise, knowledge and success in the marketplace. GSK appears to be in an excellent position to capitalise on the opportunities available to it in the markets it serves globally. Its continued investment in learning and its support of staff, should allow it to recruit and retain the best skills available to it in its market. Clearly, more work and undoubtedly, changes to structure may be needed as the market changes further, particularly with regard to emerging economies, but its recognition that it is both a product of its environment as well as a shaper of its environment, should allow it to make the best possible strategic decisions going forward. Organisational structures are no longer used as a means to exert control and no longer operate in the same mode as political systems. This would be too rigid and would be at odds with the increasingly dynamic nature of the global business environment we know today. There shall be a continued emphasis on alliances and networks, internally and externally and the structure in place should be one which facilitates the pursuit of objectives but not be too rigid as to make changes, when required, impossible to achieve. As objectives change over time, the structure which accompanies it, may need to be altered as a result. As Kim and Mauborgne (2009) concede, There are three factors that determine the right approach: the structural conditions in which an organization operates, its resources and capabilities, and its strategic mind-setà ¢Ã¢â€š ¬Ã‚ ¦Even in a not-so-attractive industry, the structuralist approach can work well if a company has the resources and capabilities to beat out the competition. In either case, the focus of strategy is to leverage the organizations core strengths to achieve acceptable risk-adjusted returns in an existing market. In summary, our analysis of the industry has highlighted the importance and relevance of external events on a companys business model and strategic offering to the market. The nature of the industry across the value chain has changed substantially, with new entrants to the market and new and more demanding consumers of the end product. Differentiation strategies are much more difficult to create and certainly, even more difficult to maintain, hence many have formed partnerships or mergers in a bid to improve their competitive position. Price is extremely important, as we have seen from the success of the generic companies, but this alone will not suffice in such a competitive environment where stakeholders demands and expectations are constantly increasing, and the quest for innovation will continue to be important. As Daft and Marcic (2007) contend, The right structure is designed to fit the contingency factors of strategy, environment, and production technology. (Pg. 273) The chall enge is to define a business model which permits research and development to continue and succeed, while ensuring that returns are adequate and the market accepts a fair price. Over time, business models have also changed to become more focused on key competencies and strategic capabilities of the firm, much in line with the post-entrepreneurial model advocated by Kanter (2002), with many non core functions being outsourced in a quest to obtain a sustainable competitive advantage, others have opted for strategic partnership, seeing collaboration with apparent competitors as a viable option to outstripping the competition and obtaining market leadership. The contingency School of Thought, many argue, was a response to these new demands being placed on companies. Additionally, many also argued that it was in essence an extension of the Systems School, which focused more on the internal subsystems and interdependent functions within organizations. The challenge now, was to find a new a nd improved organization that fitted with its environment, which arguably calls for elements of each school of thought according to both external factors and internal capabilities (resource view). The important point is that there is no uniform answer to this problem as different industries and different companies need different responses. What may work well in one company will not necessarily translate across industry or organizational boundaries. What has become more important is that if strategy changes, for whatever reason, (internal or external), organizations must revisit structure to ensure that there is a fit between the two.

The Dark Side of Customer Analytics

HBR CASE STUDY AND COMMENTARYHow can these companies leverage the customer data responsibly? The Dark Side of Customer Analytics Four commentators offer expert advice. by Thomas H. Davenport and Jeanne G. Harris Reprint R0705A An insurance company finds some intriguing patterns in the loyalty card data it bought from a grocery chain—the correlation between condom sales and HIV-related claims, for instance. How can both companies leverage the data responsibly? HBR CASE STUDY The Dark Side of Customer Analytics COPYRIGHT  © 2007 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED. by Thomas H. Davenport and Jeanne G. Harris Laura Brickman was glad she was almost done grocery shopping. The lines at the local ShopSense supermarket were especially long for a Tuesday evening. Her cart was nearly over? owing in preparation for several days away from her family, and she still had packing to do at home. Just a few more items to go: â€Å"A dozen eggs, a half gallon of orange juice, and—a box of Dip & Dunk cereal? † Her sixyear-old daughter, Maryellen, had obviously used the step stool to get at the list on the counter and had scrawled her high-fructose emand at the bottom of the paper in brightorange marker. Laura made a mental note to speak with Miss Maryellen about what sugary cereals do to kids’ teeth (and to their parents’ wallets). Taking care not to crack any of the eggs, she squeezed the remaining items into the cart. She wheeled past the ShopSense Summer Fun displays. â€Å"Do we need more sunscreen? † L aura wondered for a moment, before deciding to go without. She got to the checkout area and waited. As regional manager for West Coast operations of IFA, one of the largest sellers of life and health insurance in the United States, Laura ormally might not have paid much attention to Shop-Sense’s checkout procedures—except maybe to monitor how accurately her purchases were being rung up. But now that her company’s fate was intertwined with that of the Dallas-based national grocery chain, she had less motivation to peruse the magazine racks and more incentive to evaluate the scanning and tallying going on ahead of her. Some 14 months earlier, IFA and ShopSense had joined forces in an intriguing venture. Laura for years had been interested in the idea of looking beyond the traditional sources of customer data that insurers ypically used to set their premiums and develop their products. She’d read every article, book, and Web site she HBR’s cases, whic h are ? ctional, present common managerial dilemmas and offer concrete solutions from experts. harvard business review †¢ may 2007 page 1 H BR C A SE S T UDY †¢Ã¢â‚¬ ¢ †¢T he Dark Side of Customer Analytics Thomas H. Davenport ([email  protected] babson. edu) is the President’s Distinguished Professor of Information Technology and Management at Babson College, in Wellesley, Massachusetts, and the director of research for Babson Executive Education. Jeanne G. Harris (jeanne. g. [email  protected] com) is an executive research fellow and a director of research at the Accenture Institute for High-Performance Business. She is based in Chicago. Davenport and Harris are the coauthors of Competing on Analytics (Harvard Business School Press, 2007). page 2 could ? nd on customer analytics, seeking to learn more about how organizations in other industries were wringing every last drop of value from their products and processes. Casinos, credit card companies, even s taid old insurance ? rms were joining airlines, hotels, and other service-oriented businesses in gathering nd analyzing speci? c details about their customers. And, according to recent studies, more and more of those organizations were sharing their data with business partners. Laura had read a pro? le of ShopSense in a business publication and learned that it was one of only a handful of retailers to conduct its analytics in-house. As a result, the grocery chain possessed sophisticated data-analysis methods and a particularly deep trove of information about its customers. In the article, analytics chief Steve Worthington described how the organization employed a pattern-based approach to issuing coupons. The marketing department understood, for instance, that after three months of purchasing nothing but WayLess bars and shakes, a shopper wasn’t susceptible to discounts on a rival brand of diet aids. Instead, she’d probably respond to an offer of a free doughnut or pastry with the purchase of a coffee. The company had even been experimenting in a few markets with what it called Good-Sense messages—bits of useful health information printed on the backs of receipts, based partly on customers’ current and previous buying patterns. Nutritional analyses of some customers’ most recent purchases were eing printed on receipts in a few of the test markets as well. Shortly after reading that article, Laura had invited Steve to her of? ce in San Francisco. The two met several times, and, after some fevered discussions with her bosses in Ohio, Laura made the ShopSense executive an offer. The insurer wanted to buy a small sample of the grocer’s customer lo yalty card data to determine its quality and reliability; IFA wanted to and out if the ShopSense information would be meaningful when stacked up against its own claims information. With top management’s blessing, Steve and his team had agreed to provide IFA with ten ears’ worth of loyalty card data for customers in southern Michigan, where ShopSense had a high share of wallet—that is, the supermarkets weren’t located within ? ve miles of a â€Å"club† store or other major rival. Several months after receiving the tapes, analysts at IFA ended up ?nding some fairly strong correlations between purchases of unhealthy products (highsodium, high-cholesterol foods) and medical claims. In response, Laura and her actuarial and sales teams conceived an offering called Smart Choice, a low-premium insurance plan aimed at IFA customers who didn’t indulge. Laura was ? ing the next day to IFA’s headquarters in Cincinnati to meet with members of the senior team. She would be seeking their approval to buy more of the ShopSense data; she wanted to continue mining the information and re? ning IFA’s pricing and marketing efforts. Laura understood it might be a tough sell. After all, her industry wasn’t exactly known for embracing radical change—even with proof in hand that change could work. The make-or-break issue, she thought, would be the reliability and richness of the data. â€Å"Your CEO needs to hear only one thing,† Steve had told her several days earlier, while they were comparing notes. Exclusive rights to our data will give you information that your competitors won’t be able to match. No one else has the historical data we have or as many customers nationwide. † He was right, of course. Laura also knew that if IFA decided not to buy the grocer’s data, some other insurer would. â€Å"Paper or plastic? † a young boy was asking. Laura had ? nally made it to front of the line. â€Å"Oh, paper, please,† she replied. The cashier scanned in the groceries and waited while Laura swiped her card and signed the touch screen. Once the register printer had stopped chattering, the cashier curled the long strip of aper into a thick wad and handed it to Laura. â€Å"Have a nice night,† she said mechanically. Before wheeling her cart out of the store into the slightly cool evening, Laura brie? y checked the total on the receipt and the information on the back: coupons for sunblock and a reminder about the importance of UVA and UVB protection. Tell It to Your Analyst â€Å"No data set is perfect, but based on what we’ve seen already, the ShopSense info could be a pretty rich source of insight for us,† Archie Stetter told the handful of executives seated around a table in one of IFA’s recently renovated conference rooms. Laura nodded in agreement, silently cheering on the insurance harvard business review †¢ may 2007 T he Dark Side of Customer Analytics †¢Ã¢â‚¬ ¢ †¢H BR C A SE S T UDY company’s uberanalyst. Archie had been invaluable in guiding the pilot project. Laura had ? own in two days ahead of the meeting and had sat down with the chatty statistics expert and some members of his team, going over results and gauging their support for continuing the relationship with ShopSense. â€Å"Trans fats and heart disease—no surprise there, I guess,† Archie said, using a laser pointer to direct the managers’ attention to a PowerPoint slide projected on the wall. How about this, though: Households that purchase both bananas and cashews at least quarterly seem to show only a negligible risk of developing Parkinson’s and MS. † Archie had at ? rst been skeptical about the quality of the grocery chain’s data, but ShopSense’s well of informati on was deeper than he’d imagined. Frankly, he’d been having a blast slicing and dicing. Enjoying his moment in the spotlight, Archie went on a bit longer than he’d intended, talking about typical patterns in the purchase of certain over-the-counter medications, potential leading indicators for diabetes, and other statistical curiosities. Laura noted that as Archie’s presentation wore on, CEO Jason Walter was jotting down notes. O. Z. Cooper, IFA’s general counsel, began to clear his throat over the speakerphone. Laura was about to rein in her stats guy when Rusty Ware, IFA’s chief actuary, addressed the group. â€Å"You know, this deal isn’t really as much of a stretch as you might think. † He pointed out that the company had for years been buying from information brokers lists of customers who purchased speci? c drugs and products. And IFA was among the best in the industry at evaluating external sources of data (credit histories, demographic studies, analyses f socioeconomic status, and so on) to predict depression, back pain, and other expensive chronic conditions. Prospective IFA customers were required to disclose existing medical conditions and information about their personal habits—drinking, smoking, and other high-risk activities—the actuary reminded the group . The CEO, meanwhile, felt that Rusty was overlooking an important point. â€Å"But if we’re ?nding patterns where our rivals aren’t even looking, if we’re coming up with proprietary health indicators—well, that would be a huge hurdle for everyone else to get over,† Jason noted. arvard business review †¢ may 2007 Laura was keeping an eye on the clock; there were several themes she still wanted to hammer on. Before she could follow up on Jason’s comments, though, Geneva Hendrickson, IFA’s senior vice president for ethics and corporate responsibility, posed a blue-sky question to the group: â€Å"Take the fruit-and-nut stat Archie cited. Wouldn’t we have to share that kind of information? As a bene? t to society? † Several managers at the table began talking over one another in an attempt to respond. â€Å"Correlations, no matter how interesting, aren’t conclusive evidence of causality,† someone said. Ev en if a correlation doesn’t hold up in the medical community, that doesn’t mean it’s not useful to us,† someone else suggested. Laura saw her opening; she wanted to get back to Jason’s point about competitive advantage. â€Å"Look at Progressive Insurance,† she began. It was able to steal a march on its rivals simply by recognizing that not all motorcycle owners are created equal. Some ride hard (young bikers), and some hardly ride (older, middle-class, midlife crisis riders). â€Å"By putting these guys into different risk pools, Progressive has gotten the rates right,† she said. â€Å"It wins all the business with the safe set by offering low remiums, and it doesn’t lose its shirt on the more dangerous set. † Then O. Z. Cooper broke in over the speakerphone. Maybe the company should formally position Smart Choice and other products and marketing programs developed using the Shop-Sense data as opt in, he wondered. A lot of people signed up when Progressive gave discounts to customers who agreed to put devices in their cars that would monitor their driving habits. â€Å"Of course, those customers realized later they might pay a higher premium when the company found out they routinely exceeded the speed limit—but that’s not a legal problem,† O. Z. noted. None of the states that IFA did business in had laws prohibiting the sort of data exchange ShopSense and the insurer were proposing. It would be a different story, however, if the company wanted to do more business overseas. At that point, Archie begged to show the group one more slide: sales of prophylactics versus HIV-related claims. The executives continued taking notes. Laura glanced again at the clock. No one seemed to care that they were going a little over. â€Å"Exclusive rights to our data will give you information that your competitors won’t be able to match. No one else has the historical data we have. † page 3 H BR C A SE S T UDY †¢Ã¢â‚¬ ¢ †¢T he Dark Side of Customer Analytics Data Decorum â€Å"Customers find out, they stop using their cards, and we stop getting the information that drives this whole train. † page 4 Rain was in the forecast that afternoon for Dallas, so Steve Worthington decided to drive rather than ride his bike the nine and a half miles from his home to ShopSense’s corporate of? ces in the Hightower Complex. Of course, the gridlock made him a few minutes late for the early morning meeting with ShopSense’s executive team. Lucky for him, others had been held up by the traf? c as well. The group gradually came together in a lightly cluttered room off the main hallway on the 18th ? oor. One corner of the space was being used to store prototypes of regional instore displays featuring several members of the Houston Astros’ pitching staff. â€Å"I don’t know whether to grab a cup of coffee or a bat,† Steve joked to the other s, gesturing at the life-size cardboard cutouts and settling into his seat. Steve was hoping to persuade CEO Donna Greer and other members of the senior team to approve the terms of the data sale to IFA. He was pretty con? dent he had majority support; he had already spoken individually with many of the top executives. In those one-onone conversations, only Alan Atkins, the grocery chain’s chief operations of? cer, had raised any signi? cant issues, and Steve had dealt patiently with each of them. Or so he thought. At the start of the meeting, Alan admitted he still had some concerns about selling data to IFA at all. Mainly, he was worried that all the hard work the organization had done building up its loyalty program, honing its analytical chops, and maintaining deep customer relationships could be undone in one fell swoop. â€Å"Customers ? nd out, they stop using their cards, and we stop getting the information that rives this whole train,† he said. Steve reminded Alan that IFA had no interest in revealing its relationship with the grocer to customers. There was always the chance an employee would let something slip, but even if that happened, Steve doubted anyone would be shocked. â€Å"I haven’t heard of anybody canceling based on any of our other card-driven marketing p rograms,† he said. â€Å"That’s because what we’re doing isn’t visible to our customers—or at least it wasn’t until your recent comments in the press,† Alan grumbled. There had been some tension within the group about Steve’s contribution to everal widely disseminated articles about ShopSense’s embrace of customer analytics. â€Å"Point taken,† Steve replied, although he knew that Alan was aware of how much positive attention those articles had garnered for the company. Many of its card-driven marketing programs had since been deemed cuttingedge by others in and outside the industry. Steve had hoped to move on to the ? nancial bene? ts of the arrangement, but Denise Baldwin, ShopSense’s head of human resources, still seemed concerned about how IFA would use the data. Speci? cally, she wondered, would it identify individual consumers as employees of particular companies? She reminded the group that some big insurers had gotten into serious trouble because of their pro? ling practices. IFA had been looking at this relationship only in the context of individual insurance customers, Steve explained, not of group plans. â€Å"Besides, it’s not like we’d be directly drawing the risk pools,† he said. Then Steve began distributing copies of the spreadsheets outlining the ? ve-year returns ShopSense could realize from the deal. â€Å"‘Directly’ being the operative word here,† Denise noted wryly, as she took her copy and passed the rest around. Parsing the Information It was 6:50 pm, and Jason Walters had canceled his session with his personal trainer— again—to stay late at the of? ce. Sammy will understand, the CEO told himself as he sank deeper into the love seat in his of? ce, a yellow legal pad on his lap and a pen and cup of espresso balanced on the arm of the couch. It was several days after the review of the ShopSense pilot, and Jason was still weighing the risks and bene? ts of taking this business relationship to the next stage. He hated to admit how giddy he was— almost as gleeful as Archie Stetter had been— about the number of meaningful correlations the analysts had turned up. Imagine what that guy could do with an even larger data set,† O. Z. Cooper had commented to Jason after the meeting. Exclusive access to ShopSense’s data would give IFA a leg up on competitors, Jason knew. It could also provide the insurer with proprietary insights into the food-related drivers of disease. The deal was cer tainly legal. And even in the court of public opinion, people understood that insurers had to perform risk analyses. It wasn’t the same as when that harvard business review †¢ may 2007 T he Dark Side of Customer Analytics †¢Ã¢â‚¬ ¢ †¢H BR C A SE S T UDY online bookseller got into trouble for charging ustomers differently based on their shopping histories. But Jason also saw dark clouds on the horizon: What if IFA took the pilot to the next level and found out something that maybe it was better off not knowing? As he watched the minute hand sweep on his wall clock, Jason wondered what risks he might be taking without even realizing it. †¢Ã¢â‚¬ ¢Ã¢â‚¬ ¢ Donna Greer gently swirled the wine in her glass and clinked the stemware against her husband’s. The two were attending a wine tasting hosted by a friend. The focus was on varieties from Chile and other Latin American countries, and Donna and Peter had yet to ? nd a sample they didn’t like. But despite the lively patter of the event and the plentiful food. Donna couldn’t keep her mind off the IFA deal. â€Å"The big question is, Should we be charging more? † she mused to her husband. ShopSense was already selling its scanner data to syndicators, and, as her CFO had reminded her, the company currently made more money from selling information than from selling meat. Going forward, all ShopSense would have to do was send IFA some tapes each month and collect a million dollars annually harvard business review †¢ may 2007 of pure pro? t. Still, the deal wasn’t without risks: By selling the information to IFA, it ight end up diluting or destroying valuable and hard-won customer relationships. Donna could see the headline now: â€Å"Big Brother in Aisle Four. † All the more reason to make it worth our while, she thought to herself. Peter urged Donna to drop the issue for a bit, as he scribbled his comments about the wine they’d just samp led on a rating sheet. â€Å"But I’ll go on record as being against the whole thing,† he said. â€Å"Some poor soul puts potato chips in the cart instead of celery, and look what happens. † â€Å"But what about the poor soul who buys the celery and still has to pay a fortune for medical overage,† Donna argued, â€Å"because the premiums are set based on the people who can’t eat just one? † â€Å"Isn’t that the whole point of insurance? † Peter teased. The CEO shot her husband a playfully peeved look—and reminded herself to send an e-mail to Steve when they got home. What if IFA took the pilot to the next level and found out something that maybe it was better off not knowing? How can these companies leverage the customer data responsibly? †¢ Four commentators offer expert advice. See Case Commentary page 5 T he Dark Side of Customer Analytics †¢ H BR C A SE S T UDY C ase Commentary by George L. Jones How can these companies leverage the customer data responsibly? The message coming from both IFA and ShopSense is that any marketing opportunity is valid—as long as they can get away with it. page 6 Sure, a customer database has value, and a company can maximize that value in any number of ways—growing the database, mining it, monetizing it. Marketers can be tempted, despite pledges about privacy, to use collected information in ways that seem attractive but may ultimately damage relationships with customers. The arrangement proposed in this case study seems shortsighted to me. Neither company seems to particularly care about its customers. Instead, the message coming from the senior teams at both IFA and ShopSense is that any marketing opportunity is valid—as long as they can get away with it legally and customers don’t ? gure out what they’re doing. In my company, this pilot would never have gotten off the ground. The culture at Borders is such that the managers involved would have just assumed we wouldn’t do something like that. Like most successful retail companies, our organization is customer focused; we’re always trying to see a store or an offer or a transaction through the customer’s eyes. It was the same way at both Saks and Target when I was with those companies. At Borders, we’ve built up a signi? cant database through our Borders Rewards program, which in the past year and a half has grown to 17 million members. The data we’re getting are hugely important as a basis for serving customers more effectively (based on their purchase patterns) and as a source of competitive advantage. For instance, we know that if somebody buys a travel guide to France, that person might also be interested in reading Peter Mayle’s A Year in Provence. But we assure our customers up front that their information will be handled with the utmost respect. We carefully control the content and frequency of even our own ommunications with Rewards members. We don’t want any offers we present to have negative connotations—for instance, we avoid bombarding people with e-mails about a product they may have absolutely no interest in. I honestly don’t think these companies have hit upon a responsible formula for mining and sharing cust omer data. If ShopSense retained control of its data to some degree—that is, if the grocer and IFA marketed the Smart Choice program jointly, and if any offers came from ShopSense (the partner the customer has built up trust with) rather than the insurance company (a stranger, so to speak)—the relationship could work. Instead of ceding complete control to IFA, ShopSense could be somewhat selective and send offers to all, some, or none of its loyalty card members, depending on how relevant the grocer believed the insurance offer would be to a particular set of customers. A big hole in these data, though, is that people buy food for others besides themselves. I rarely eat at home, but I still buy tons of groceries—some healthy, some not so healthy— for my kids and their friends. If you looked at a breakdown of purchases for my household, you’d say â€Å"Wow, they’re consuming a lot. † But the truth is, I hardly ever eat a bite. That may e an extreme example, but it suggests that IFA’s correlations may be ? awed. Both CEOs are subjecting their organizations to a possible public relations backlash, and not just from the ShopSense customers whose data have been dealt away to IFA. Every ShopSense customer who hears about the deal, loyalty card member or not, is going to lose trust in the company. IFA’s customers might also think twice about their relationship with the insurer. And what about the employees in each company who may be uncomfortable with what the companies are trying to pull off? The corporate cultures suffer. What the companies are proposing here is ery dangerous—especially in the world of retail, where loyalty is so hard to win. Customers’ information needs to be protected. George L. Jones is the president and chief executive officer of Borders Group, a global retailer of books, music, and movies based in Ann Arbor, Michigan. harvard business review †¢ may 2007 T he Dark Side of Customer Analytics †¢ H BR C A SE S T UDY C ase Commentary by Katherine N. Lemon How can these companies leverage the customer data responsibly? Customer analytics are effective precisely because firms do not violate customer trust. harvard business review †¢ may 2007 As the case study illustrates, companies will o on be able to create fairly exhaustive, highly accurate pro? les of customers without having had any direct interaction with them. They’ll be able to get to know you intimately without your knowledge. From the consumer’s perspective, this trend raises several big concerns. In this ? ctional account, for instance, a shopper’s grocery purchases may directly in? uence the availability or price of her life or health insurance products—and not necessarily in a good way. Although the customer, at least tacitly, consented to the collection, use, and transfer of her purchase data, the real issue here is the nintended and uncontemplated use of the information (from the customer’s point of view). Most customers would probably be quite surprised to learn that their personal information could be used by companies in a wholly unrelated industry and in other ways that aren’t readily foreseeable. If consumers lose trust in ? rms that collect, analyze, and utilize their information, they will opt out of loyalty and other data-driven marketing programs, and we may see more regulations and limitations on data collection. Customer analytics are effective precisely because ? rms do not violate customer trust. People believe that retail and other organizations will use their data wisely to enhance their experiences, not to harm them. Angry customers will certainly speak with their wallets if that trust is violated. Decisions that might be made on the basis of the shared data represent another hazard for consumers—and for organizations. Take the insurance company’s use of the grocer’s loyalty card data. This is limited information at best and inaccurate at worst. The ShopSense data re? ect food bought but not necessarily consumed, and individuals buy food at many stores, not just one. IFA might end up drawing rroneous conclusions—and exacting unfair rate increases. The insurer’s general counsel should investigate this deal. Another concern for consumers is what I call â€Å"battered customer syndrome. † Market analytics allow companies to identify their best and worst customers and, consequently, to pay special attention to those deemed to be the mo st valuable. Looked at another way, analytics enable ? rms to understand how poorly they can treat individual or groups of customers before those people stop doing business with them. Unless you are in the top echelon of customers— those with the highest lifetime value, say—you ay pay higher prices, get fewer special offers, or receive less service than other consumers. Despite the fact that alienating 75% to 90% of customers may not be the best idea in the long run, many retailers have adopted this â€Å"top tier† approach to managing customer relationships. And many customers seem to be willing to live with it—perhaps with the unrealistic hope that they may reach the upper echelon and reap the ensuing bene? ts. Little research has been done on the negative consequences of using marketing approaches that discriminate against customer segments. Inevitably, however, customers will ecome savvier about analytics. They may become less tolerant and take their business (and information) elsewhere. If access to and use of customer data are to remain viable, organizations must come up with ways to address customers’ concerns about privacy. What, then, should IFA and ShopSense do? First and foremost, they need to let customers opt in to their data-sharing arrangement. This would address the â€Å"unintended use of data† problem; customers would understand exactly what was being done with their information. Even better, both ? rms would be engaging in trust-building—versus trust-eroding—activities with customers. The esult: improvement in the bottom line and in the customer experience. Katherine N. Lemon (kay. [email  protected] edu) is an associate professor of marketing at Boston College’s Carroll School of Management. Her expertise is in the areas of customer equity, customer management, and customer-based marketing strategy. page 7 T he Dark Side of Customer Analytics †¢ H BR C A SE S T UDY C ase Commentary by David Norton How can these companies leverage the customer data responsibly? Would customers feel comfortable with the data-sharing arrangement if they knew about it? page 8 Transparency is a critical component of any loyalty card program. The value proposition must be clear; customers must know what they’ll get for allowing their purchase behavior to be monitored. So the question for the CEOs of ShopSense and IFA is, Would customers feel comfortable with the data-sharing arrangement if they knew about it? ShopSense’s loyalty card data are at the center of this venture, but the grocer’s goal here is not to increase customer loyalty. The value of its relationship with IFA is solely ? nancial. The company should explore whether there are some customer data it should exclude from the transfer—information that could be perceived as exceedingly sensitive, such as pharmacy and lcohol purchases. It should also consider doing market research and risk modeling to evaluate customers’ potential reaction to the data sharing and the possible downstream effect of the deal. The risk of consumer backlash is lower for IFA than for ShopSense, given the information the insurance company already purchase s. IFA could even put a positive spin on the creation of new insurance products based on the ShopSense data. For instance, so-called healthy purchases might earn customers a discount on their standard insurance policies. The challenge for the insurer, however, is that there is no proven correlation between the urchase of certain foods and fewer health problems. IFA should continue experimenting with the data to determine their richness and predictive value. Some companies have more leeway than others to sell or trade customer lists. At Harrah’s, we have less than most because our customers may not want others to know about their gaming and leisure activities. We don’t sell information, and we don’t buy a lot of external data. Occasionally, we’ll buy demographic data to ? ne-tune our marketing messages (to some customers, an offer of tickets to a live performance might be more interesting than a dining discount, for example). But we think the internal transactional data are much more important. We do rely on analytics and models to help us understand existing customers and to encourage them to stick with us. About ten years ago, we created our Total Rewards program. Guests at our hotels and casinos register for a loyalty card by sharing the information on their driver’s license, such as their name, address, and date of birth. Each time they visit one of our 39 properties and use their card, they earn credits that can be used for food and merchandise. They also earn Tier Credits that give them higher status in the program and ake them eligible for differentiated service. With every visit, we get a read on our customers’ preferences—the types of games they play, the hotels and amenities they favor, and so on. Those details are stored in a central database. The company sets rules for what can be done with the information. For instance, managers at any one of our properties can execute th eir own marketing lists and programs, but they can target only customers who have visited their properties. If they want to dip into the overall customer base, they have to go through the central relationship-marketing group. Some of the information captured in ur online joint promotions is accessible to both Harrah’s and its business partners, but the promotions are clearly positioned as opt in. We tell customers the value proposition up front: Let us track your play at our properties, and we can help you enjoy the experience better with richer rewards and improved service. They understand exactly what we’re capturing, the rewards they’ll get, and what the company will do with the information. It’s a win-win for the company and for the customer. Companies engaging in customer analytics and related marketing initiatives need to keep â€Å"win-win† in mind when collecting and andling customer data. It’s not just about what the information can do for you; it’s about what you can do for the customer with the information. David Norton ([email  protected] com) is the senior vice president of relationship marketing at Harrah’s Entertainment, based in Las Vegas. harvard business review †¢ may 2007 T he Dark Side of Customer Analytics †¢ H BR C A SE S T UDY C ase Commentary by Michael B. McCallister How can these companies leverage the customer data responsibly? When the tougher, grayarea decisions need to be made, each person has to have the company’s core principles and values in ind. harvard business review †¢ may 2007 Companies that can capitalize on the information they get from their customers hold an advantage over rivals. But as the ? rms in the case study are realizing, there are also plenty of risks involved with using these data. Instead of pulling back the reins, organizations should be nudging customer analytics forward, keeping in mind one critical point: Any collection, anal ysis, and sharing of data must be conducted in a protected, permission-based environment. Humana provides health bene? t plans and related health services to more than 11 million embers nationwide. We use proprietary datamining and analytical capabilities to help guide consumers through the health maze. Like IFA, we ask our customers to share their personal and medical histories with us (the risky behaviors as well as the good habits) so we can acquaint them with programs and preventive services geared to their health status. Customer data come to us in many different ways. For instance, we offer complimentary health assessments in which plan members can take an interactive online survey designed to measure how well they’re taking care of themselves. We then suggest ways they can reduce their health risks or treat their existing conditions more effectively. We closely monitor our claims information and use it to reach out to people. In our Personal Nurse program, for example, we’ll have a registered nurse follow up with a member who has ? led, say, a diabetes-related claim. Through phone conversations and e-mails, the RN can help the plan member institute changes to improve his or her quality of life. All our programs require members to opt in if the data are going to be used in any way that would single a person out. Regardless of your industry, you have to start with that. One of the biggest problems in U. S. health care today is obesity. So would it be useful for our company to look at grocery-purchasing patterns, as the insurance company in the case study does? It might be. I could see the upside of using a grocer’s loyalty card data to develop a wellness-based incentive program for insurance customers. (We would try to ? nd a way to build positives into it, however, so customers would look at the interchange and say â€Å"That’s in my best interest; thank you. †) But Humana certainly wouldn’t enter into any kind of datatransfer arrangement without ensuring that our customers’ personal information and the ntegrity of our relationship with them would be properly protected. In health care, especially, this has to be the chief concern—above and beyond any patterns that might be revealed and the sort of competitive edge they might provide. We use a range of industry standard security measures, including encryptio n and ? rewalls, to protect our members’ privacy and medical information. Ethical behavior starts with the CEO, but it clearly can’t be managed by just one person. It’s important that everyone be reminded often about the principles and values that guide the organization. When business opportunities come along, they’ll be screened according to those standards—and the decisions will land right side up every time. I can’t tell people how to run their meetings or who should be at the table when the tougher, grayarea decisions need to be made, but whoever is there has to have those core principles and values in mind. The CEOs in the case study need to take the â€Å"front page† test: If the headline on the front page of the newspaper were reporting abuse of customer data (yours included), how would you react? If you wouldn’t want your personal data used in a certain way, chances are your customers wouldn’t, either. Michael B. McCallister ([email  protected] com) is the president and CEO of Humana, a health benefits company based in Louisville, Kentucky. Reprint R0705A Case only R0705X Commentary only R0705Z To order, call 800-988-0886 or 617-783-7500 or go to www. hbrreprints. org page 9 To Order For Harvard Business Review reprints and subscriptions, call 800-988-0886 or 617-783-7500. Go to www. hbrreprints. org For customized and quantity orders of Harvard Business Review article reprints, call 617-783-7626, or e-mail [email  protected] harvard. edu www. hbrreprints. org U. S. and Canada 800-988-0886 617-783-7500 617-783-7555 fax

Business Ethics vs. Capitalism Essay - 2407 Words

The concept of business ethics has tried to change the way businesses operate over the years. Business ethics is a form of ethics that governs the actions of businesses to circumvent the affects business has on every day society. But some question its effectiveness in the application of capitalism. Several case studies have shown that this is the case; many companies place the pursuit of money in front of the pursuit of virtue. Although, the majority of companies are not in the spotlight of acting unethically, can we conclude that they follow the ethical norms? It is natural for normal human beings to act ethical but businesses are on a completely different playing field. But could business ethics be clearly possible in capitalism?†¦show more content†¦Businesses will compete with each other giving consumers the advantage and therefore help the economy profit. Friedman believes that capitalism the economy will take care of itself and any outside forces would disrupt its proc ess. In capitalism the worker is a commodity in so as to produce the products needed for the market. Each individual does what they are best at producing and if everyone does this then each person’s needs are taken care of. When each person is working they are paid money for their labor. With this money they can buy goods, which can fulfill their own desires, and so the trading of money for goods can take place in a capitalist market driving the economy forward (Smith 158). Capitalism depends on a free economy but does business ethics shake the very structure of a free economy? Some critics agree that business ethics infringe on the right of a free capitalist economy but others say that businesses are not following their social responsibility and so there should be a place for business ethics in a capitalist economy. But what kinds of ethics would be applicable to a free market economy such as capitalism? In business ethics there are several different types of ethical behavio r that exist. 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The Alchemist Reflection - 794 Words

The Alchemist In my point of view,the main message of this amazing story is to always follow your dreams no matter what obstacle comes between you and your dream. â€Å"The alchemist† has lots of things to learn from not just that it has a variety of myths and morals but it also gives you another perspective of life.As a matter of fact, â€Å"The alchemist† provides to you a journey of a young age man whos dream is to go to Egypt and find the treasure near the pyramids. Santiago a young shepherd boy which had a dream that had been following him for many days already came into a abandoned church with his herd of sheeps to rest,the boy with only a jacket and a book used them as a pillow and blanket to spend the night in the church, as he sleeps†¦show more content†¦Santiago providing lots of help to the merchant managed it to get more money and with that Santiago helps the man get a better way to get more customers to his crystal shop;in addition, with all his money gather heS how MoreRelatedReflection Of The Alchemist1010 Words   |  5 PagesThe alchemist is a unique piece of literature that stays true to it’s message it attempts to teach you. It begins when a young shepherd, Santiago, has a dream about a treasure he is to find at the Egyptian pyramids not once but twice. With curiosity he goes about and finds a gypsy to ask for what the dreams can possibly mean to him. The gypsy says she cannot decipher what his dream could mean ,but she advises him to go to Egypt himself to learn if there is anything out for him. For that message sheRead MoreCritical Reading Reflection on the Alchemist Essay1309 Words   |  6 PagesThe Alchemist is a story about a shepherd from Spain named Santiago whose parents have him attending a seminary to become priest and while he was there was taught to read. Santiago could be considered an educated person and achieve a much higher status than Shepard. Instead, he chose to become a Shepard since they travelled arou nd the country side while grazing their flocks of sheep. Santiago’s father did not object to the traveling sheep herder idea and gave him his blessing and inheritance earlyRead MoreSummary Of The Abandoned Spanish Building Spain 1625 Words   |  7 Pagessignificance of the caravan is the new knowledge he gains about alchemy and learning about The Alchemist. *Al-Fayoum Oasis, Sahara Desert: The significance of the Oasis is that Santiago meets the Alchemist and the love of his life. Fatima gives him something to come back to after achieving his â€Å"Personal Legend† and the Alchemist leads him towards the pyramids. *Enemy Camp, Sahara Desert: When Santiago and the Alchemist were taken by warlords, Santiago had to turn himself into the wind to avoid being killedRead MoreA Brief Note On The City Of California1630 Words   |  7 Pagesthe reflection of the tv. There was a dark strange figure moving behind us. I turned to see a man trying to look inside the house past the foggy curtains. As soon as I noticed this, I alerted my brother and we ran to my sister’s room to warn her as well. We woke her, told her what was happening, and without hesitation she called 911. While she was on the phone we heard a window break which came from my parents’ room, and as soon as we knew what happened †¦ (Tier) Paulo Coelho’s The Alchemist intelligentlyRead MoreWho Is The Villain? - Frankenstein Or The Monster?1206 Words   |  5 Pagesauthor, Marry Shelley is one of the authors who is not straightforward about who is the villain in her novel. In Frankenstein, both the Monster and Victor Frankenstein could be considered the villains in the book. Doctor Victor Frankenstein is an alchemist who is obsessed with creating life from the dead. He creates the green creature, also given the name Frankenstein, who is portrayed as the Monster in Mary Shelley’s Frankenstein. Dr. Frankenstein’s complete disregard for mortal beings, obsessionRead MoreThe s Bargain That Made Us Rethink Pseudoscience2233 Words   |  9 Pagesan unfavorable assessment on alchemy which caused the practice to be banned in many countries. Many â€Å"chymists† quickly isolated themselves from alchemy but did not consider the alchemical process as fallacious (Economist 85). Why did many famo us alchemists do this? Referring back to Dr. Principe, many thought that alchemy served as a way of life rather than a process of obtaining gold. Moreover, many 16th century writers such as Shakespeare developed stories in which the characters embody these alchemicalRead MoreThe Hero : The Alchemist, And Dorothy From The Wizard Of Oz1995 Words   |  8 Pageslives, and basically just do good deeds. Heroes follow their journey, which, when written, is actually very clichà ©. A hero follows a set of events in their journey that are rarely changed. In this essay, two hero’s are examined, Santiago from The Alchemist, and Dorothy from The Wizard of Oz. These two stories seem very different, but in the end, are actually very similar. When examined closely, one may find that their journeys are very similar, following the events of a hero’s journey. This seeminglyRead MoreDo You Know That The Alchemists In The Ancient Ages Melted1297 Words   |  6 PagesDo you know that th e alchemists in the ancient ages melted many substances in crucibles with the hope of turning those into gold? Likewise, a challenging experience – â€Å"Crucible of Leadership† – can turn someone to a successful leader if he can manage it properly. The stressful and challenging experiences to serve under an extremely demanding Commanding Officer (CO), Lieutenant Colonel (LTC) Saif, is the most significant event in my life that transformed me to a committed, self-aware, and adaptiveRead MoreFrankenstein : A Whole Mess Of Things1097 Words   |  5 PagesArguably one of the most complex characters in Frankenstein, Victor Frankenstein is a whole mess of things. Victor’s true reason for his downfall is his thirst for knowledge, simple. He was obsessed with reading the works of ancient and outdated alchemists. Specifically, the works of Agrippa, Magnus, and Paracelsus. This, coupled with Victor experiencing a thunderstorm at 15, sparks an interest in Natural Sciences. Even though he was told that alchemy was rubbish, he still continues to study it whenRead MoreUnderstanding The Dynamics Of Emotion, Compassion, Cognition,1119 Words   |  5 Pagestrembling contributing to the subjective experience of fear. Contrarily, the Cannon-Bard theory suggests that stimulus leads to simultaneous arousal and emotion. Schachter and Singer’s two-factor theory attributes emotion as a result of cognitive reflection resulting from a stimulus. On the other hand, the cognitive-mediational theory attributes emotion to the personal perceptions of sensation. Cognition and emotion theories may differ in the arrangement of cause-and-effect relationships among experience