Saturday, 8 October 2016

Business Ethics and the Effects of Unethical Business Practices - A Case Study of Yelp

Ethical business practices influences the public image of a company. A company which observes the highest standard of business ethics creates a good public image for itself, and this in turn impresses its loyal customers thus creating a degree of brand loyalty. Nonetheless, there are instances of unethical business practices which hurt the public image of a company besides damaging its reputation (Ferrell & Fraedrich, 2016). An instance of such an event occurred in February 2016 when business owners in Florida accused Yelp of using unethical business practices to extort money from them (Vasquez, 2016).
Photo Credit: Baylor.edu
Yelp is an online firm that specializes in crowd-sourced business reviews and ratings. The main revenue stream for the company is advertisement. Thus, the firm allows local businesses to advertise themselves through its online platform (Yelp, n.d). However, business owners in Florida were complaining that Yelp downgrades their ratings and reviews by omitting positive reviews, unless these businesses chose to advertise themselves through Yelp (Vasquez, 2016). Thus, Yelp was accused of arm-twisting small businesses to pay advertisement fees to the firm so that the small businesses could get positive reviews.
Ethical Parameter
            Ethics parameters assess the profit-maximizing behavior of a firm in relation to its non-economic concerns (Ferrell & Fraedrich, 2016). Yelp has projected itself as a provider of objective crowd-sourced business reviews and ratings for small businesses. Small businesses do not need to pay anything so as to receive an objective business review and rating. Thus, they expect Yelp to provide objective reviews and ratings without being charged. However, the complaints against Yelp are that the company buries positive reviews of small businesses which do not purchase paid advertisement packages from the firm. Yelp has counteracted by stating that it does not have the capabilities to modify the ratings since they are crowd-sourced via an automated program, and thus the ratings and reviews obtained by the small businesses are objective (Vasquez, 2016). The ethical parameter in this case is the principle of Do no Harm (primum non nocere); as Yelp is accused of harming the business health of the small businesses which are reviewed and rated disfavorably. An ethics-focused decision-making model would be used to analyze the situation.
Ethics-Focused Decision-Making Model
            There are seven steps in this model and each of the step would be related to the case under review.
1. Determination of the facts.
            The available facts collected from different media sources, and also from the official website of Yelp, indicate that the Yelp's crowd-sourced business reviews and ratings system has been probed and assessed to determine its level of objectivity. Yelp's official website declare that the system is automated and is thus not liable to manipulation and that this fact eliminates subjectivity in the reviews and ratings system (Yelp, n.d). Nonetheless, small businesses affirm that their positive reviews are buried by the system till they purchase advertisement packages from Yelp (Vasquez, 2016). Thus, it can be determined that the system has been accused of being subjective.
2. Identification of the Ethical Issue Involved.
            Small businesses use the crowd-sourced business reviews and ratings system to improve their public profile and image. This ultimately improves the business sales thus increasing their profit margin besides improving the health of the business. Hence, a disfavorable rating would hurt their public image and market viability. In other words, disfavorable ratings and reviews do harm them. Therfore, if the system is subjective and liable to manipulation, then Yelp would be accused of contravening the ethical principle of Do no Harm (primum non nocere), as manipulation of the system ultimately harms businesses.
3. Identification of the Stakeholders
            The main stakeholders are small businesses which uses the crowd-sourced business reviews and rating system, and Yelp which offers this system.
4. Alternative Courses of Action
            An alternative course of action is for the crowd-sourced business reviews and rating system to be hosted separately from the paid advertisement program, thus ensuring that it is delinked from the advertisement program.
            Another alternative course of action is for the system to introduce a set of standard metrics which would determine the placement and ranking of reviews and ratings on the website.
5. Assessment of the Alternatives
            The two alternative course of actions would ingrain objectivity in the system. However, the first alternative course of action would be costly for Yelp since it would require the company to purchase additional servers and also recalibrate its present system. The second alternative would be cheap since it would only involve Yelp publishing its metric system thus ensuring transparency in the operations of the system.
6. Guidance
            Research studies have shown that improving the transparency of business operations do improve the public image of a company as well as solve ethical dilemmas (Ferrell & Fraedrich, 2016). Thus, such research should guide Yelp in resolving the present ethical issue.
7. Decision, Action and Monitoring.
            Yelp should make a decision to improve the metrics used in the system and also publish them so as to ensure transparency. Once this action is done, the company should closely monitor how the refined standard of metrics has impacted its relationship with small businesses.
References
Ferrell, O. C., & Fraedrich, J. (2016). Business ethics: Ethical decision making & cases. Nelson
            Education.
Vasquez, C. (2016, February 19). Business owners accuse Yelp of 'extortion'. BH Media Group.
            yelp-of-extortion
Yelp. (n.d). Yelp.com [Official Website].

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