Inventory Models We know that EOQ and JIT are both important methods in Inventory Theory. Please read this example on EOQ vs. JIT and comments on the pros and cons of either approach. Then
Each week, you will be asked to respond to the prompt or prompts in the discussion forum. Your initial post should be a minimum of 300 words in length, and, you should respond to two additional posts from your peers.
Inventory Models
We know that EOQ and JIT are both important methods in Inventory Theory. Please read this example on EOQ vs. JIT and comments on the pros and cons of either approach. Then give one example in real world application for either approach.
If you use any source outside of your own thoughts, you should reference that source. Include solid grammar, punctuation, sentence structure, and spelling.
Chapter 10: Globalization of Ethical Decision Making – Reading
Chapter Review
10-7aSummary
In this chapter we tried to sensitize you to the important topic of ethical decision making in an international context. We began by looking at values and culture. A country’s values are influenced by ethnic groups, social organizations, and other cultural aspects. Hofstede identified four cultural dimensions that can have a profound impact on the business environment: individualism/collectivism, power distance, uncertainty avoidance, and masculinity/femininity. The self-reference criterion is the unconscious reference to one’s own cultural values, experiences, and knowledge and is a common stumbling block for organizations. Another approach organizations tend to take is that of cultural relativism, or the idea that morality varies from one culture to another and business practices are defined as right or wrong differently.
Risk compartmentalization is an important ethical issue and occurs when various profit centers within corporations become unaware of the overall consequences of their actions on the firm as a whole. The last financial meltdown was in part the result of risk compartmentalization. Understanding rational economics and systems is an important foundation for understanding business ethics. Rational economics assumes people make decisions rationally based upon utility, value, profit maximization, and relevant information. Capitalism bases its models on these assumptions. Behavioral economics, by contrast, argues that humans may not act in a rational way as a result of genetics, learned behavior, emotions, framing, and heuristics, or rules of thumb. Social democracy, a form of socialism, allows private ownership of property and features a large government equipped to offer services such as education and health care to its citizens. Sweden, Denmark, and Finland are social democracies.
Multinational corporations are public companies that operate on a global scale without significant ties to any one nation or region. MNCs contributed to the growth of global economies but are by no means immune to criticism. The International Monetary Fund makes short-term loans to member countries that have deficits and provides foreign currencies for its members. The UN Global Compact is a set of 10 principles that promote human rights, sustainability, and the eradication of corruption, while the World Trade Organization administers its own trade agreements, facilitates trade negotiations, settles trade disputes, and monitors the trade policies of member nations.
There are several critical ethics issues of which global businesses should be aware. Global risks create ethical issues for global companies to manage. Bribery is a major ethical issue, prompting legislation such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act. Antitrust activities are illegal in most industrialized countries and are pursued even more ardently in the European Union than in the United States. Internet security is an ethical issue, and hacking and privacy violations are on the rise. The United Nations codified human rights as a function of inherent human dignity and includes equal and inalienable rights such as the foundation of freedom, justice, and peace in the world. Health care and labor issues are important ethical issues but tend to vary by country. Wage issues such as a living wage and executive compensation are controversial topics that affect a variety of global stakeholders. Consumerism is the belief that the interests of consumers should dictate the economic structure of a society, rather than the interests of producers; it refers to the theory that an increasing consumption of goods is economically desirable, and equates personal happiness with the purchase and consumption of material possessions.
Chapter Review
10-7cResolving Ethical Business Challenges![]()
After graduating from college and working a few years at a small technology firm, Preet scored a high-level job in the logistics department at Amex Corporation. Amex sells high-quality electronic products that are extremely popular among technical savvy young adults. Part of Preet’s job involves working with a team to oversee Amex’s contractors in China. Amex contracts with factories across Asia to build components for the company’s electronics. Preet’s team was to ensure the shipments were as orderly as possible. Preet’s team had innovative people, and they performed so well the company began giving them more responsibility, including solving major challenges that arose within the factories.
One day Preet was to visit the factory in the Shandong province of China. Shipments were falling behind schedule, and there seemed to be more accidents occurring there. Preet was to observe the factory and meet with management to determine where the problems occurred. Preet looked forward to her first trip to China and to actually visit a factory to learn more about the manufacturing process.
When Preet arrived at the airport, the managers of the factory greeted her and showed her around. When she got to the factory, all of the employees were hard at work. One group of workers cleaned the components using special chemicals. Preet noticed they did not wear protective face masks, even though she knew the chemicals could be harmful if inhaled. When Preet asked about this, she was told that face masks were recommended but not required because the chances of getting sick from the chemicals were low.
As Preet spent time at the factory, she noticed more things wrong. She discovered employees, on average, worked at least 12 hours per day, sometimes with no breaks. She knew company policy mandated an eight-hour work day. Sometimes employees would put in as much as 18-hour shifts. Preet spoke with one of the employees who told her on condition of anonymity that they were denied sick leave. Any perceived idleness on the employees’ part resulted in reduced pay. He also informed her there had been several suicides at the plant from overworked employees. When Preet asked the supervisor why the factory did not hire more workers, he replied they did not have the money.
When Preet returned to the United States, she wrote a list of recommendations for improving the factory. Later that month, her team met with the company’s top managers in the logistics department. They expressed concern about Preet’s findings but offered no recommendations for how to fix them. Afterward, Preet complained to members of her team.
“Of course they aren’t going to do anything,” said Jim, who had been working in the logistics department for 12 years. “Why should they? As long as the company gets their shipments, they aren’t going to disrupt the process by requiring major changes.”
Dawn, who had only been working for six months, chimed in. “But Jim, they have to do something. From what Preet said, the workers have terrible working conditions.”
Jim sighed. “Dawn, you haven’t been in this business long enough to see how things work. The factory in Shandong really isn’t that bad compared to many other factories in China. It’s not unusual for factory workers to work longer hours. Besides, you might think the employees there don’t make much for the amount that they work, but it’s a lot better than what people get in other factories. For better pay people are willing to work in less than ideal conditions.”
Preet spoke up. “Just because that’s normal in the culture doesn’t necessarily make it right. Many of these problems could be avoided if the factory ensured their workers wore appropriate safety gear and hired more employees.”
“The factory probably can’t hire more workers,” Jim said. “Where are they going to get the money?”
“Well, maybe Amex should begin paying them more,” Dawn replied. “That would translate into higher wages and the ability to hire more staff.”
“You’ve got to be kidding!” Jim said. “The whole reason why Amex is there in the first place is because labor costs are so cheap. Besides, being able to keep costs low is the only way to price our products reasonably. Consumers want low-priced products.”
“But consumers also care about how workers are treated, don’t they?” Preet asked.
“They might show some concern,” Jim replied. “But if it’s between higher-priced products or better working conditions, I guarantee consumers will choose the latter.”
Questions | Exercises
1. Discuss some of the choices of the firm and the advantages and disadvantages of each.
2. Describe how Jim takes a cultural relativism approach to the problem.
3. Since Amex does not own the Chinese factory, are they still accountable for the working conditions of its suppliers? Why or why not?
Case 10: Google: The Drive to Balance Privacy with Profit
10-1Introduction
Google’s ease of use and superior search results have propelled the search engine to its number one status, ousting the early dominance of competitors such as WebCrawler and Infoseek. Even later offerings by other large tech companies using comparable algorithms, such as Bing by Microsoft, have failed to make significant inroads, with Google retaining an impressive 64 percent global market share. As Google gained popularity, it began expanding into a number of different ventures, including multiple advertising platforms, a digital book publishing space, and social networking. It has spent billions to acquire hundreds of companies in a variety of industries, from robotics to smart home devices to intangibles such as voice recognition technologies. Approximately 2.3 million searches every minute are performed through Google’s search engine.
As is common with most large companies, Google has experienced its share of ethical issues. Its mantra “Don’t Be Evil” was called into question after it allowed the Chinese government to censor aspects of some of its sites in order to enter the market. Google has also been investigated and sued by multiple governments based on concerns that its widespread reach and market power violate antitrust laws.
The hot ethical topic for many Internet users, however, is the company’s approach to Internet privacy and collection of user information. To improve the effectiveness of its services, including customized search results, targeted ads, and more precise integration of its various offerings, Google tracks and leverages user information without explicit permission (although Google’s privacy statement informs users about the recordkeeping, and Google does allow users to opt out of some forms of tracking). Such tracking is common practice for Internet companies, but Google’s deep access to so many different types of user information has led people to question whether Google violates user privacy. In light of the increasing amount of cyberattacks and the government’s determination to crack down on these illegal attacks, consumers also worry their private information, tracked and stored by Google’s algorithms, might be compromised.
10-2Company Culture
Google adopted a decentralized approach to empower its employees. Its corporate headquarters in Mountain View, California, is known as the Googleplex and consists of a campus containing such amenities as on-site gymnasiums and swimming pools, an outdoor volleyball court, and even high-tech “nap pods” for optimized downtime. When Sergey Brin and Larry Page founded the company, they recognized employees had to put in long hours to make the company not only successful but flexible enough to adapt to the changing environment. Thus, Google employees are provided with benefits to make the complex their second home. The company strives to make its corporate culture fun and innovative.
At the same time, Google works to ensure it has top talent at the company. While it reinvents the office experience, it also takes different tactics in recruiting to ensure it hires the most creative, talented individuals. For instance, Google recruiters take a bottom-up approach when reading résumés. Recognizing that top items such as education and work experience do not always guarantee the applicant is innovative, some Google recruiters start at the bottom of the résumé where applicants put more creative information. This type of mentality—being more concerned with hiring creative people than those who excelled in school—meshed well with Google’s famous informal policy of allowing employees to spend up to 20 percent of the workweek pursuing their own unique projects. Not only did this policy make employees feel empowered, it led to some of Google’s standout products including Gmail and key improvements to AdSense. However, in 2013 this “20% time” policy was largely discontinued after Google determined it was splitting its focus among too many projects. It decided to commit itself to putting “more wood behind fewer arrows.” Nevertheless, Google’s innovative company culture is one of the major reasons why it has become successful in so many different market niches.
10-3Products
Although Google started out as a search engine, it has since branched out into a variety of fields, including consumer electronics and productivity tools. While it would be too long to list all of Google’s products, some of the more popular offerings are described below.
10-3aSearch Engine
According to Larry Page, a good search engine “understands exactly what you mean and gives you back exactly what you want.” This philosophy was the founding principle behind the creation of Google and is a top reason why the Google search engine surpassed competitors.
Google could not have gained such prominence without an in-depth search index of the Web’s content. The company creates this index using programs called “Googlebots”—automated web crawlers that visit webpages, add their content to the index, and then follow the links on those pages to other parts of the Internet. This process is constantly ongoing, with every indexed page periodically revisited to ensure the index contains the most updated material. Google’s index is one of the most extensive in the world, at well over 100 million gigabytes worth of information.
A good search engine’s index must not only be comprehensive but also easily accessible. Therefore, Google uses technology such as PageRank to organize search results according to their perceived relevancy. When a user types a search term into Google’s search box, Google’s index matches the term with what is deemed the most relevant materials and creates a list of these materials for the user. Each search result is followed by a few sentences describing the webpage (called a “snippet”). To maintain a competitive edge, Google responds quickly to its users’ queries, with a response time on Google’s side of approximately one-fourth of a second so users get information as quickly as possible.
10-3bAdvertising
Google’s main source of revenue is advertising. The company earns approximately $70 billion in advertising revenue. Google’s signature advertising platform is Google AdWords, first introduced in 2000. Google AdWords differs from traditional advertising in that advertisers do not pay Google anything upfront, but only pay when customers take action—either by viewing the ad (pay-per-impression), clicking on the ad (pay-per-click), or performing a certain predefined action such as making an online purchase (pay-per-conversion). This model is attractive to advertisers because they only pay when their ad is effective, as determined by the metric of their choice. The twist, however, is that Google does not set ad prices but rather puts its limited advertising space up for auction; companies submit “bids” for how much they will pay per customer action, and higher bids generally get more ad time (other factors are also considered, such as how popular an ad has been so far). Google makes no money from even a very high bid if customers do not engage with the ad. Advertisers are therefore incentivized to bid high, which benefits Google’s bottom line. Google promotes the model as a win-win; it makes a profit, and companies get more bang for their advertising buck.
Google leverages its various product offerings to provide a variety of attractive advertising options. Companies can choose to have their ads displayed as “sponsored links” alongside search results for certain keywords, or as banners on any of the more than two million websites that display Google ads in return for a cut of the profits (known as the Google Display Network). YouTube is another option, offering video ads before or during videos as well as traditional banner space on the site. Mobile is also becoming a critical advertising space, through both searches on mobile devices and apps that allow advertising. Improving the effectiveness of its AdWords service is a key driver of Google’s collection of user information—the more it knows about its users, the more targeting options it can provide to advertisers and the more precisely it can serve targeted ads to desired consumer segments.
10-3cWeb Browser
Google Chrome is the most popular web browser in the world with 59 percent market share. When Google Chrome was released, it was praised for its unparalleled speed, support, and security. The Chrome browser is known for loading within seconds and maintaining a simplistic design to make it easier for users to navigate. Chrome is also updated more frequently than most of the other browsers, allowing Google to quickly push out new features and security improvements. The Chrome Web Store contains a wide selection of apps and extensions, providing additional flexibility and functionality for users.
10-3dEmail Account
Google’s email account service, called Gmail, has over one billion active users and is the world’s largest email service provider. Gmail was initially revolutionary for the huge amount of space it offered—1 gigabyte per user when rivals were only offering 100 megabytes or less—and the integration of Google search, which gave users a robust way to search within their stored emails. Since then, Gmail has continued to offer popular features such as filters and labels for users to organize their mail, a variety of add-ons for special functionality from the former Google Labs, and deep integration with other Google products such as Google+, Hangouts, YouTube, Maps, Docs, and Calendar.
10-3eYouTube
In 2006 Google acquired video sharing site YouTube for $1.65 billion. YouTube allows users to upload and share original videos and has become the second most visited of all websites (Google.com is the most visited site in the world). Everyone from global corporations to consumers uses YouTube to share videos ranging from video blogs to parodies, to corporate messages to news events. By selling video advertising slots before and during videos, as well as placing banner ads in free space on the site, Google has made millions in advertising revenue. Additionally, YouTube content creators can share in advertising profits from their videos through YouTube’s Partner Program, allowing popular “YouTubers” to make careers out of their channels.
Although YouTube opened up new opportunities in marketing and entertainment, it has had its share of controversy. YouTube has been sued by organizations such as Viacom for copyright infringement after finding copyrighted content on YouTube’s site. YouTube’s Community Guidelines specifically direct: “Only upload videos that you made or that you’re authorized to use.” However, not all users heed the warning. To detect and eliminate copyrighted material, YouTube enables users to “flag” videos for copyright infringement. If, upon review, the flag is found to be valid, the offending video is removed. YouTube also provides a more automated system called Content ID for certain situations, which automatically compares newly uploaded videos to a database of copyrighted material and notifies the copyright holder if a match is found. Google believes providing tools to enable self-interested copyright owners to protect their property is the best way to police YouTube, arguing it is simply not feasible for the company to screen the more than 400 hours of video uploaded to the site every minute.
10-3fAndroid
In 2005 Google acquired the startup firm Android Inc., which worked on mobile phone software technology. In 2008 the Android operating system was released by the Open Handset Alliance, a team of organizations led by Google whose mission is to promote development of open standards for mobile devices. The Android operating system is an open source platform, meaning the source code is available for outside users to view and use. However, Google has copyrighted the Android name and logo, as well as some proprietary features of Google’s version of the software. Companies that wish to claim they make “Android” devices must enter into a licensing agreement with Google. The Android operating system is most often used in mobile devices and tablets but can also be found on other devices, including full computers, game consoles, and digital cameras.
Android has become the most popular mobile operating system in the world, making up over 87 percent of the market. Apple’s iOS, while undeniably a strong competitor with a loyal customer base, trails far behind with 12 percent of the smartphone market. One reason for Android’s larger market share is that, unlike Apple and its iPhone and iPad, Google is not the only company that makes Android phones and tablets; Samsung, HTC, Motorola, T-Mobile, Sony, and many other manufacturers develop Android devices. However, there are disadvantages to this approach as well. For example, Amazon built its mobile offerings, the Fire Phone and Kindle Fire tablets, off the Android open source code, and now competes directly with Google in the mobile sphere. Google is also a direct player in the mobile device market with its Nexus line of phones and tablets, placing it in the uncomfortable position of competing with its business partners. Still, Android has been a great success for Google, vastly increasing the company’s reach into electronics. One top Google executive called the initial Android Inc. acquisition the company’s “best deal ever.”
10-3gGoogle+
In 2011 Google launched its social network Google+, positioning it as an alternative to Facebook. By 2013 Google claimed the social network had 300 million members that were active at least monthly. However, there were signs that these numbers were somewhat misleading because most “active” users spent very little time on the site, far less than average user time on Facebook. An independent analysis in 2015 concluded Google+ had only 111 million active profiles, and only 6.7 million with more than 50 total posts. Many industry experts have called Google+ a “ghost town.”
Even if Google+ has not ended up posing a significant threat to Facebook, it has been successful in helping Google unify its products and better understand its users. Before Google+, all of Google’s online products—Gmail, YouTube, Google Docs, Google Drive, etc.—required their own separate logins, meaning Google could not tell if the same user was using multiple services. Google used Google+ to create a single login system.
Furthermore, some features of Google+ have become very popular. Google Hangouts unifies Google’s online messaging, text messaging, audio and video call, conferencing, and other communications offerings into one service. Google Photos, an online photo management, backup, sharing, and basic editing service, is considered by fans to be the best service of its kind. Both of these started out as a part of Google+ but have since become their own standalone services. Google has since redesigned Google+ to focus more on its Communities and Collections features.
10-3hExpanding the Product Mix
Google offers a number of other popular products to businesses and consumers. Google Translate and Google Maps offer automated translation and mapping/directional services. Google Analytics tracks and freely reports website traffic statistics, giving businesses a market research tool to understand how customers are interacting with their websites. Google Drive allows users to store files in the cloud and share them with others. The service offers 15 gigabytes of free storage per user, and more can be purchased if desired. The company is also investing in artificial intelligence processing and has developed a new chip called the Tensor Processing Unit. Early studies of the chip claim that it runs 30–80 times more efficiently than competitors’, leading to a possible breakthrough in the more sophisticated systems needed to run artificial intelligence applications.
10-4Google’s Initiatives
Like all major corporations, Google is expected to act with integrity and give back to the communities where it does business. Google has therefore invested in a number of initiatives that support economic development, environmental awareness, and charitable endeavors.
10-4aGV
In 2009 Google formed Google Ventures, later shortened to GV, as a separate entity to provide funding for startup firms. The venture capital fund began with $100 million in seed money and now manages more than $2 billion in assets of its own. It invests this money in startup companies at the forefront of technological innovation. The money goes not only to firms that market Internet-based technologies or consumer electronics but also to green technology firms, biotechnology and life-sciences companies, and more. One of its best-known investments is popular ride-sharing company Uber. GV’s goal is to invest in entrepreneurs that can change the world through technology by having “a healthy disregard for the impossible,” mirroring what the Google X department is trying to do within Google itself.
10-4bGoogle Green
Google has recognized the business opportunities that come from adopting greener operations and technologies. Greener technology not only saves Google money in the long run with decreased energy costs, it also enables the company to create greener products for consumers. According to Google, running its servers for one month uses less energy than leaving a light on for three hours, and providing a user with one month of all of Google’s online services uses less energy than driving a car 1 mile. Google also claims its data centers are 50 percent more energy efficient than the industry average and that 35 percent of its power comes from renewable energy sources. Google has purchased carbon offsets to reduce its effective emissions to zero since 2007. For employees, Google offers a shuttle system run on biodiesel, an on-campus car sharing program, company bicycles to commute between buildings and departments, and the largest electric vehicle charging station in the country. Other green successes for Google include a large solar installation on its campus and LEED-certified buildings.
10-4cGoogle.org
Google.org is the charitable arm of the organization. According to its website, the organization provides assistance to “nonprofits using technology and innovation to tackle complex global challenges.” Google.org contributes grant money, develops tools for nonprofits, and provides disaster relief. Google for Nonprofits provides resources such as discounts on Google products and free AdWords advertising to nonprofit organizations. Google.org has also partnered with nonprofits to offer them use of Google’s considerable resources. For example, it provided tools to the National Center for Missing and Exploited Children to help the nonprofit in its fight against global child exploitation.
10-4dGoogle and Employee Charitable Initiatives
In addition to its work through Google.org, Google contributes hundreds of millions of dollars directly to various charities and socially responsible organizations.
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