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Assigned Readings:

Chapter 13. Consumer Stakeholders: Information Issues

Chapter 14. Consumer Stakeholders: Product and Service Issues

Initial Postings:

Read and reflect on the assigned readings for the week. Then post what you thought was the most important concept(s), method(s), term(s), and/or any other thing that you felt was worthy of your understanding in each assigned textbook chapter.Your initial post should be based upon the assigned reading for the week, so the textbook should be a source listed in your reference section and cited within the body of the text. Other sources are not required but feel free to use them if they aid in your discussion.

Also, provide a graduate-level response to each of the following questions:

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 comparison, evaluate Toyota’s response. What did the company do right? What should it have done differently? How could a company that had been held out as an exemplar of product quality produce over 8 million vehicles with safety issues?

[Your post must be substantive and demonstrate insight gained from the course material. Postings must be in the student’s own words – do not provide quotes!]

[Your initial post should be at least

450+ words

and in APA format (including Times New Roman with font size 12 and double spaced). Post the actual body of your paper in the discussion thread then attach a Word version of the paper for APA review]

Business & Society
Ethics, Sustainability & Stakeholder
10th Edition
© 2018 Cengage
Chapter 14
Product and
Service Issues
© 2018 Cengage
Learning Outcomes
1. Describe and discuss the two major product issues:
quality and safety.
2. Explain the role and functions of the Consumer Product
Safety Commission (CPSC).
3. Explain the role and functions of the Food and Drug
Administration (FDA).
4. Outline business’s responses to consumer stakeholders,
including customer service programs, and quality
initiatives such as Total Quality Management (TQM), Six
Sigma, Lean Six Sigma, Kaizen, and ISO 9000.
© 2018 Cengage
Chapter Outline
• Two Central Issues: Quality and Safety
• Consumer Product Safety Commission
• Food and Drug Administration
• Business’s Response to Consumer Stakeholders
• Customer Service Programs
• Total Quality Management Programs
• Six Sigma Strategy and Other Process
• Summary
• Key Terms
© 2018 Cengage
Consumer Stakeholders:
Product and Service Issues
Sam Walton, founder of Walmart –
• “There is only one boss. The customer. And he
can fire everybody in the company…simply by
spending his money somewhere else.”
Takata, Japanese auto supplier, becoming
more well known. Many of today’s autos
have Takata air bags.
• In early 2016, bursting air bags linked to 10
deaths (9 in the U.S.) and dozens of injuries
• 29 million air bags recalled. Later another 40
million rupture-prone air bags were recalled.
Recall being called the biggest in U.S. History.
© 2018 Cengage
Two Central Issues The Issue of Quality •
Product quality means different things to different
Service quality usually means that the service was
performed as expected and on time.
Interest in quality is driven by an increase in
family income and demand for good value.
The Issue of Safety •
Nearly all consumer products or services entail
some small degree of risk.
Today it is important that even financial services
do not cause damage or financial harm.
© 2018 Cengage
Critical Dimensions of Product Quality
© 2018 Cengage
Ethical Underpinnings of Quality
© 2018 Cengage
The Issue of Safety
• Who is liable for a defective product?
Historical Perspective • Caveat emptor – “Let the buyer beware.”
This doctrine assumed that the buyer had as
much knowledge of the product as the seller,
but this was not correct.
Modern Day • Caveat venditor – “Let the seller beware.”
• But how safe should a product be?
© 2018 Cengage
Top Ten List of Safety Principles
1. Build safety into product design.
2. Do product safety testing for all foreseeable
3. Keep informed about and implement latest
developments in product safety.
4. Educate consumers about product safety.
5. Track and address products’ safety performance.
6. Fully investigate product safety incidents.
7. Report product safety defects promptly.
8. If a defect occurs, promptly offer a
comprehensive recall plan.
9. Work with the Consumer Product Safety
Commission to make sure your recall is effective.
10. Learn from mistakes—yours and others’.
© 2018 Cengage
Product Liability (1 of 3)
Reasons for the concern • The sheer number of cases where products
resulted in illness, harm, or death.
• The amount of the financial award.
Doctrine of strict liability •
Anyone in the value chain of a product is liable
for harm caused to the user if the product is
unreasonably dangerous because of a
defective condition.
• The U.S. is a litigious society.
© 2018 Cengage
Product Liability (2 of 3)
Extensions of the strict liability rule –
Courts in several states and some countries
have established a standard more demanding
than strict liability:
Absolute liability – A manufacturer could be
held strictly liable for failure to warn of a product
hazard, even if the hazard was scientifically
unknowable at the time of manufacture and sale.
Market share liability – Manufacturers who
made the product share in the liability for injury
according to their market shares. This doctrine
was applied in delayed manifestation cases, but
limited to those.
© 2018 Cengage
Product Liability (3 of 3)
Product Tampering and Product Extortion–
The Tylenol tampering cases of the 1980s are best
known. As a result, firms began to use tamperevident packaging.
Other cases include: Jell-O pudding, bottle water,
oranges, candy, baby food, and Girl Scout cookies.
Product Liability Reform –
• These issues have raised calls tor product liability
reform, also known as tort reform. Tort law
requires that the one causing injury pay the injured
party. Businesses seek tort reform; consumer
groups oppose it.
© 2018 Cengage
Product Safety Commission An independent regulatory agency created by the
Consumer Product Safety Act of 1972, which works
to reduce the risk of injuries and deaths from
products by:
1. Developing voluntary standards with industry
2. Issuing and enforcing mandatory standards
3. Banning consumer products if no feasible standard
would adequately protect the public
Obtaining the recall of products or arranging for
their repair
Conducting research on potential product hazards
Informing and educating consumers through
media, state and local governments, private
organizations, and by responding to consumer
© 2018 Cengage
CSPC Strategic Plan, 2011-2016
Protecting the public against unreasonable risks of injury
from consumer products.
The CPSC is the recognized global leader in consumer
Product safety
Goal 1
Leadership in Safety
Goal 2
Commitment to Prevention
Goal 3
Rigorous Hazard Identification
Goal 4
Decisive Response
Goal 5
Raising Awareness
© 2018 Cengage
Food and Drug Administration (1 of 2)
Food and Drug Administration • Grew out of experiments with food safety
by Harvey W. Wiley in the late 1800s.
• The FDA resides within the Health and
Human Services Department.
© 2018 Cengage
Food and Drug Administration (2 of 2)
The FDA regulates •
Human prescription and non-prescription drugs
Vaccines, blood products, and other biologics
Medical devices
Electronic products
Veterinary products
Tobacco products
© 2018 Cengage
Business’s Response to Consumer
© 2018 Cengage
Customer Service Programs
Customer service or self service?
Retailers of all types have been pushing the
idea of self-service. We check out our own
groceries, pump our own gas, print our
boarding passes, and fix our cable tv,
following a computer voice.
Customers are frustrated with after-sale
problems not quickly and easily remedied.
Experts know that the key to customer
retention is customer service.
Building life-long devotion among customers
takes serious commitment and hard work.
© 2018 Cengage
Principles of Customer Service
1. Keeping your word is where it begins.
2. Always be honest and tell it like it is.
3. Always think proactively, looking around the
4. Deal with problems as best you can yourself, never
passing the buck.
5. Do not argue with a customer because it is a
lose/lose situation.
6. Accept your mistakes, learn from them, and do
not repeat them.
7. Consistency is the name of the game for lasting
© 2018 Cengage
Creating a
Customer-Oriented Company
© 2018 Cengage
Total Quality Management – (1 of 2)
Has many characteristics, but essentially
means –
• All business functions are blended into an
integrated philosophy built around quality,
teamwork, productivity, and customer
understanding and satisfaction.
• TQM focuses on product quality and safety,
focuses on the customer, and uses
continuous improvement.
• The customer is the final judge of quality.
© 2018 Cengage
Total Quality Management – (2 of 2)
TQM emphasizes eight key elements 1. Ethics
2. Integrity
3. Trust
4. Training
5. Teamwork
6. Leadership
7. Recognition
8. Communication
© 2018 Cengage
Six Sigma Strategy and Other
Six Sigma • A development within TQM that has
become a way of life for many
• Sigma is a statistical measure of variation
from the mean; higher values of sigma
mean fewer defects.
• Six Sigma level of operation is 3.4 defects
per million.
Most companies have 6,000 defects per
© 2018 Cengage
Consumer-Stakeholder Satisfaction
© 2018 Cengage
Key Terms
absolute liability
caveat emptor
caveat vendor
Caveat venditor
Consumer Product Safety
Commission (CPSC)
Consumer Product Safety
Improvement Act of 2008
consumer stakeholder
satisfaction model
contractual theory
delayed manifestation cases
doctrine of strict liability
due care theory
Food and Drugs Act of 1906
© 2018 Cengage
• Food and Drug
Administration (FDA)
• Food Safety Modernization
• ISO 9000
• Kaizen
• Lean Six Sigma
• Market share liability
• Product extortion
• Product liability risk
management program
• Product (products) liability
• Six Sigma
• social costs view
• tort reform
• Total Quality Management

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