Chapter 14
Consumer Stakeholders: Product and Service Issues
LEARNING OUTCOMES
After studying this chapter, you should be able to:
1. Describe and discuss the two major product/service issues-quality and safety.
3. Explain the role and functions of the Food and Drug Administration (FDA).
TEACHING SUGGESTIONS
INTRODUCTION – In this chapter, the authors discuss two central issues in the business/
consumer relationship—product quality and safety. Within the topic of safety, product liability
and calls for tort reform are explored. Two government agencies that play important roles in
product safety and quality are described, and finally, businesses’ responses to the consumer
stakeholder issues introduced in Chapters 13 and 14 are reviewed.
KEY TALKING POINTS – For many people, the most important elements of business ethics
and corporate social responsibility are the products and services provided. Products hold a
central position because these are (1) the items on which consumers spend their money and (2)
The classic product safety case is probably the Ford Pinto. Produced in the early 1970s, this
subcompact car had a design defect that caused the gasoline tank to rupture and catch on fire
when hit from the rear end, even at relatively low speeds. Ford engineers knew of the problem
before going into production and had even identified a cheap way to fix the problem ($11 per
vehicle). However, Ford executives decided to forego the cure and sell the cars to an
unsuspecting public. Dennis Gioia, who worked for Ford at the time this was occurring, has
written an excellent review of the circumstances and attempts to understand how such a blatantly
unethical decision could have been made (Gioia, D. A. 1992. Pinto Fires and Personal Ethics: A
Script Analysis of Missed Opportunities. Journal of Business Ethics. 11(5/6), 379-389).
Gioia doesn’t mention the connection, and why 60 Minutes chose not to discuss the similarities
between the Mustang and the Pinto is not clear, but it does seem suspicious.
The other major issue related to products and services is the idea of quality. Much like U. S.
Supreme Court Justice Potter Stewart said about pornography in 1964, “I shall not today attempt
further to define the kinds of material I understand to be embraced . . . [b]ut I know it when I see
it,” quality defies precise definition. Total Quality Management (TQM) and Six Sigma are often
criticized because they do not define quality, but the critics are silent on the question of how to
define the term. Robert Pirsig describes his frustrations with this exercise in his famous book
Zen and the Art of Motorcycle Maintenance. His conclusion is much like Justice Stewart’s—that
we all know quality when we see it, but it is impossible to define. Using these concepts as
PEDAGOGICAL DEVICES – In this chapter, instructors may utilize a combination of:
Cases:
1-Wal-Mart- The Main Street Merchant of Doom
2-The Body Shop (A) – Pursuing Social and Environmental Change
23-McDonald’s Coffee Spill
24-The Betaseron Decision (A)
30-Targeting Consumers – (& Using Their Secrets)
Ethics in Practice Cases:
The Pirated Popcorn
Was “Pink Slime” a Victim of Social Media Frenzy?
Spotlight on Sustainability:
Sustainable Products Meet Long-Term Market Needs
LECTURE OUTLINE
I. TWO CENTRAL ISSUES: QUALITY AND SAFETY
A. The Issue of Quality
1. Service Quality
2. Dimensions of Quality
3. Ethical Underpinnings
B. The Issue of Safety
1. Food Safety
II. CONSUMER PRODUCT SAFETY COMMISSION
III. FOOD AND DRUG ADMINISTRATION
IV. BUSINESS’S RESPONSE TO CONSUMER STAKEHOLDERS
V. CUSTOMER SERVICE PROGRAMS
VI. TOTAL QUALITY MANAGEMENT PROGRAMS
SUGGESTED ANSWERS TO DISCUSSION QUESTIONS
Students should recognize that their answers to these discussion questions should be well
reasoned and supported with evidence. Although some answers will be more correct than others,
students should be aware that simplistic answers to complex questions, problems, or issues such
as these will never be “good” answers.
1. Question: Identify the major dimensions of quality. Give an example of a product or
service in which each of these characteristics is important.
Answer: As the text notes, quality means different things to different people.
Consequently, students may differ on what they consider the major dimensions of quality.
The eight dimensions of quality mentioned in the textbook (and examples of products or
2. Question: What ethical theories can help us to better understand the issue of quality?
Discuss.
Answer: Three ethical theories shape our understanding of quality: (1) the contractual
theory, (2) the due-care theory, and (3) the social costs view. The contractual theory
focuses on the terms of the sale between the company and the customer, emphasizing the
terms of the sale, information provided to the customer, and avoiding some anti-friendly
customer behaviors. The due-care theory provides that the customer is the more vulnerable
party; consequently, the firm has a greater ethical responsibility to the customer. The
contractual and due-care theories do little to inform us about quality because they take the
3. Question: Identify the principal reasons why we have a product liability crisis. Have any
reasons been omitted? Discuss.
Answer: The main reason we have a product liability crisis in the United States is our
emphasis on litigation as the way to solve problems. If we have a problem we sue
someone, rather than try to find a reasonable resolution. Why we are so litigious is beyond
the scope of this question, but the fact that we are does impact the state of product liability.
Another reason is the growing size of financial awards given to plaintiffs. Again, we
should go deeper into why this is occurring. Could it be that businesses bring this on
4. Question: Differentiate the doctrine of strict liability from the doctrines of absolute
liability and market share liability. What implications do these views have for the business
community and for future products and services that might be offered?
Answer: The doctrine of strict liability holds that anyone in the value chain is liable for
harm caused to users if the product as sold was defective and unreasonably dangerous.
The use of the strict liability doctrine in U.S. courts is a primary reason for the litigious
state of the nation. While some parties argue that strict liability increases product safety,
others note that the costs of these lawsuits ultimately are passed on to the consumer.
Absolute liability goes beyond this to say that a firm is liable for damages even if it had no
way of knowing that the product might cause a problem later. Under this principle, it does
no good for a company to claim that it did its best at the time, given the prevailing state of
businesses’ decisions to conduct business in a particular jurisdiction.
5. Question: Given the current business and consumer climate, what do you anticipate the
future to be for the CPSC and the FDA? What role does politics play in your answer?
Answer: Although business is, by far, the most powerful social institution in the United
States, the consumer movement seems to be holding its own. In part this is due to the fact
that business is so competitive that firms cede some power to consumers in the hopes of
capturing more business. With that climate as the backdrop, it is likely that the FDA and
CPSC will continue much as they are now—going concerns with moderate successes and
6. Question: What is your assessment of business’s response to product and service quality
and safety? Have they done enough? What is missing from their approaches?
Answer: It seems that businesses have strived to improve the quality and safety of products
and services over the last decade. Corporate focus on these issues is driven by businesses’
need to (1) retain a loyal consumer base despite increased competition, and (2) avoid costly
litigation. Consequently, business, as a whole, seems devoted to meeting customer
GROUP ACTIVITIES
Group Activity 1 – Product Recalls
Divide students into groups of four to five students. Assign each group to research a recent
product recall. Students should determine why the product was recalled and whether the
company could have taken steps in the production process to avoid the recall. Students should
Group Activity 2 – Quality and Safety Movie Night
Invite groups of students to watch the movie “Supersize Me.” This movie focuses on the fast
food industry’s contribution to the growing obesity problem in the United States. Specifically,
the subject consumes only McDonald’s food for breakfast, lunch and supper for 30 days and
monitors the impact to his health. Initially, students may not view this movie to be about product
quality and safety, but the instructor should encourage students to explore the ethical dilemmas
INDIVIDUAL ASSIGNMENT
Distribute the following instructions to each student:
Research how Toyota handled complaints that it received from 2008-2010 regarding runaway
acceleration problems. Specifically, note how the company dealt with the vehicle problem, those
directly impacted by acceleration issues, and its own shareholders and employees. Compare
Toyota’s response to Johnson & Johnson’s response to the Tylenol crisis. Based on this