Answer to Question #249303 in Finance for Kajal

Question

A sales representative for a struggling computer supply firm has a chance to close a 

multimillion dollar deal for an office system to be installed over a two year period. The 

machines for the first delivery are in the company’s warehouse, but the remainder would 

have to be ordered from the manufacturer. Because the manufacturer is having difficulty 

meeting the heavy demand for the popular model, the sales representative is not sure that 

subsequent deliveries can be made on time. Any delay in converting to the new system 

would be costly to the customer; however the blame could be placed on the manufacturer. 

Should the sales representative close the deal without advising the customer of the 

delivery problem? Discuss the pros and cons of the decision the sales representative 

chooses to take.

Answer 1

Solution:

No, the sales representative should not close the deal without advising the customer of the delivery problem.

It is ethical to properly inform the customer and not leave any information out – the truth is preferable to a false claim. However, this could cause the sales representative to lose the deal, causing the company to suffer as well.

However, if the sales representative fails to inform the customer, the transaction would most likely take place. Given that the manufacturer is having difficulty meeting the high demand, the chances of a delay are relatively high. After closing the deal, the customer would expect everything to be delivered on time, oblivious to the manufacturer's problems.

 

If there was any delay, the client would be irritated, and the risk of legal action against the firms would increase. It will also damage customer loyalty and relations, including damaging the brand image of the company.

Being ethical and informing the customer, in my opinion, is important in more ways than one. It not only fosters goodwill toward the company and its representatives but also aids in the development of a long-term relationship with the customer. That is, it creates customer loyalty. It also improves the corporate image of the company. The sales representative must understand how to balance short-term profits with long-term gains from ethical behavior.

The two main drawbacks of being ethical are that it limits the company's ability to maximize its profits and its time consuming to implement the practices of business ethics for the company.