Chapter 22: Ethics and Organizational Architecture
WILMORITE MALL DEVELOPMENT
Discussion Question Answers:
1. There are several points on which everyone should agree.
Wilmorite (its managers and owners) and the mall’s potential customers are expected to be better
off if the mall is built.
2. By contributing to an effort that some (for example, members of the Audubon Society) would
argue addresses an important social problem, this individual raises costs imposed on a potential
Note that the old strip mall across the road from the new mall lost all the major regional and
Finally, the plans for the enclosed mall were revised to include a number of ponds dotting the
THE TYLENOL TRAGEDY AND J&J’S CREDO
Discussion Question Answers:
1. The credo guides managers by communicating the corporate culture and helping to foster
shared values. It says that J&J’s first and primary concern is to protect the customer and the
2. No. The stock price could have fallen even more had managers at theMcNeil division not
reacted or reacted differently. The stock price drop is a function of two interrelated events — the
3. Tylenol is a well recognized brand name, allowing J&J to charge prices in excess of costs.
The new packaging will have two affects. First, the cost curve is higher and second, the demand
curve is higher than it would have been after the tampering, but still below what the demand
curve was before the tampering. The new packaging, while useful, is unlikely to offset the
4. Maximizing firm value depends on the value of the various J&J brands. Investing in
intangible brand names requires a long-run focus on first the R&D to create the product, and
second on the advertising and marketing to create brand awareness. To recover these costs,
5. Given the tampering incident only affected capsules and not all Tylenol products and the
repackaging design was relatively quick to implement gave McNeil managers more flexibility.
Existing employees could be assigned to delayed maintenance projects, shifted to producing
other products, use vacation time, and so forth. These redeployment decisions are much easier
6. a. There should be both direct and indirect effects on J&J. The direct effect is to reduce
J&Js assets by $2.2 billion. The indirect effect comes through the tarnish on J&Js reputation, the
reduction in the demand for their products because of the reduction in perceived quality, and the
b. When J&J was setting up Janssen Pharmaceuticals, J&J had two basic decisions to make:
1) Should Janssen be set up as a business unit within J&J or as a separate corporation whose
stock is owned by J&J? 2) Should the connection between Janssen and J&J be highlighted or
suppressed? A pharmaceutical firm’s ability to generate revenue depends on customers’
