An understanding of ethics is important to the overall strategy process in that it provides the connection between proper behavior and the corporate functioning. The ethics of an organization serves more than just a window dressing and actually helps guide and focus the mission by removing unwanted behaviors. The importance of this connection cannot be overstated as the evolution of business since the Sarbanes/Oxley Act of 2002 has been moving towards the installment of ethical codes to remove corporate corruption. I think it is however, important to understand that ethical guidelines are a top down responsibility for management to enforce and to provide a strong example for the organization.
Companies without some form of ethical oversight seem to devolve into corruption (Ermann & Lundman, 2002). One can see from cases such as Enron and WorldCom that valuing solely the bottom line can lead to disaster. The problem of having an ethical organization is that it is a top down problem. Whether a small business owner or a corporate CEO, the ethics standards are started at the top. This means being the example and also making leaders culpable for unethical behavior. While this idea seems simple in theory it is often difficult to implement. This is because unethical behavior by its nature is an abuse of a system or authority. This means that corruption is a top down problem in that leaders are the ones responsible for outlining and enforcing ethical standards. When seen from this approach ethics become an important facet of the company for all stakeholders in order to keep the company focused properly on its mission.
Ermann, M. David & Lundman, Richard J. (eds.) (2002). Corporate and Governmental
I always thought that the Netflix problem was due to lack of marketing data. Netflix going into October 2011 announced that it would be dividing its streaming video service from the DVD rental service. Customers would receive two bills (both with substantial increases to cost) one from Netflix and from its streaming video organization Quickster. The decision to divide these services came after three months of $800,000 in losses from the DVD rental business (Wingfield and Stelter, 2011). The decision to do this was quickly reversed as customers began retaliating by closing accounts. In fact the figure was so large that Netflix is expected to make a revised report for the number of subscription later the month.
As a result of lack of assessing the market for DVD rental and streaming video, Netflix was forced to kill its plans to divide the DVD and streaming businesses. As well, the company has taken heavy losses from loss of subscriptions and from the cost involved in preparing for startup of Quickster. In November with the retraction of its plan and losses of subscriptions, company stock fell 25% (New York Times Stock Report, 2011). It seemed to me that the Netflix rushed to raise prices after taking losses without any form of marketing analysis. Had the company performed even an informal analysis of the market they might have realized that there were already competitors offering substantially lower cost for movies and television. This may have helped them alter their plan to be more realistic.
The New York Times Stock Report November 18, 2011 Retrieved from
Wingfield, N. Stelter, B. (2011) How Netflix Lost 800,000 Members, and Good Will The New York Times Retrieved from