Business Ethics Individual Assignment

TABLE OF CONTENTS
1.0 Introduction.......................................................................................................... 2

2.0 What is business Ethics........................................................................................ 3

3.0 Relevancy of business ethics to the business world.............................................3

4.0 Supply Chain Defined.......................................................................................... 4

5.0 Coffee Industry: Value Chain.................................................................................4

5.1 Value Chain: Kenyan Coffee Industry.................................................................6

6.0 Identify stakeholders............................................................................................ 7

6.1 Stakeholders map.............................................................................................. 8

7.0 Conclusion............................................................................................................ 9

8.0 References............................................................................................................ 9

TABLE OF FIGURES
Figure 1: World Coffee Production and Consummation, 2013-2014...............................................2
Figure 2: The mainstream coffee chain.................................................................................. 5
Figure 3: Kenyan Value Chain............................................................................................. 6
Figure 4: Stakeholder Mapping............................................................................................ 9

1.0 INTRODUCTION
Coffee has become the second most traded commodity after oil and is the single most important
tropical commodity traded worldwide. Coffee growing is part of specific global commodity

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 Business Ethics Individual Assignment

chains, which are border-crossing value-added creating networks of producers, traders and
service providers, whose end result is the use of a finished commodity (Daphne J., 2012). The
vast majority of coffee production (more than 3 tons for every 4 tons grown) is exported, flowing
from developing countries (such as Brazil, Vietnam, and Columbia) principally to industrial
ones. The largest consumers in 2013-2014 are the European Union (consuming nearly a third of
the worlds total), the United States and Brazil (figure 1).

Figure 1: World Coffee Production and Consummation, 2013-2014

Source: Worldwatch Institute (2014)

A number of developing countries depend heavily on commodities like coffee for their export
earnings, hence, coffee experiences tremendous price volatility in which have destabilizing
impacts on their economies. Over the past decade, coffee producers have been facing
considerable difficulties due to low and unstable coffee prices, despite the International Coffee
Agreement (ICA) whereby a set of regulations between the principal coffee exporting and
importing countries that imposed export quotas in order to raise the price at which member
country exporters sell coffee to member country importers (Stanislas B., 2015). Such extreme
price volatility threatens the livelihoods of many small producers who derive limited economic
benefit compared with traders, roasters, distributors, retailers and investors (Michael R., 2014).

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 Business Ethics Individual Assignment

2.0 WHAT IS BUSINESS ETHICS

Ethics has become a significant issue in business, both on the frim level and wider phases. Ethics
is the basics for an impartial internal environment in an organization (Aytac G., and Turan O.,
2012). Being ethical is not the same as following the law, despite that the law often incorporates
ethical standards to which most citizens subscribe, however, laws, like feeling, can deviate from
what is ethical (Priyanka C., and Vijeta S., 2013).

The term business ethics represents a combination of two (2) familiar words, namely business
and ethics. The word business is usually used to mean any organization whose objective is to
provide goods and/or services for profit. The word ethics in the term business ethics refers to
the nature and grounds of morality where the term morality is taken to mean moral judgements,
standards and rules of conduct (Ferrell C., Fraedrich J., 1997). Ethics can also be defined as a
code of moral principles and values that governs the behaviors of a person or group with respect
to what is right or wrong (Zoe D., 2007). Based on these conceptualizations, business ethics
adopted here comprises of the moral principles and standards that guide behavior in the world of
business.

3.0 RELEVANCY OF BUSINESS ETHICS TO THE

BUSINESS WORLD
Dishonest procedures in business brings about substantial damage to partners/stakeholders of the
association. As an illustration, the loans given to borrows in American in 2008 contributed to
bringing down the economy of the U.S, not to mention, afflicted economies worldwide. (Shahid
E., 2008). The economies of particular nations experienced severe economic slowdown, a large
number of the workforce became unemployed as well as the billions of dollars lost by investors
(Shahid E., 2008).

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 Business Ethics Individual Assignment

It is imperative that business associations exercise widespread business ethical fundamentals to

ensure that best practices together with best governance in business associations. Adequate
execution of business ethics in association can guarantee amplification of legal benefits such as
lawful profits and viably secures the interests of all partners of the company including corporate
social obligation of the company as stated by academic researchers (Abdul J., Ferdous A.,
Muhammad R., 2010). This ultimately can guarantee a feasible and competitive environment
worldwide and such a feasible and competitive business practice is especially required in the
realm of business and in addition, in the capital market. The researchers genuinely recognize that
preparing and implementing a code of business morals is of crucial value in the business and
capital market environment both at present and in the future.

4.0 SUPPLY CHAIN DEFINED

As a consequence of liberalization along with the globalization of worldwide trade, the
production components sourcing and consumer products over the globe is accelerating the
relationship amongst makers and wholesalers on worldwide supply chains (Edward S., 2011). An
organized assembling process whereby crude materials are changed into completed products,
then converted to end clients can be viewed as the meaning of Supply Chain (Assey J., 2012).
With all things considered, there is an extensive variety of definitions for Supply Chain, John T.
Mentzer (2001) Characterized Supply Chain as an associated set of assets/resources and
procedures that begin with crude material sourcing and extends through the conveyance of
completed products to the end buyer. However, the definitions above concentrate on the center
determents of a powerful and effective Supply Chain. They recommend the requirement for a
provenance and a destination which merchandise stream and acknowledge the approach that
general Supply Chains begin with assets (crude materials), accompanied with various value
adding activities and complete with the exchange of completed products to consumers.

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 Business Ethics Individual Assignment

5.0 COFFEE INDUSTRY: VALUE CHAIN

The coffee chain can be broken down into various stages. After the coffee cherries are reaped,
they can enter one of two fundamental preparing courses; the wet or the dry procedure. This is
perpetually performed on or close to the farm. The subsequent coffee parchment then must be
processed. In this stage, there are more economies of scale, and processing has a tendency to
happen in the provincial locations where coffee is developed, however on a more incorporated
premise. Bothe coffee parchment and green coffee can be put away and the location is
accordingly in fact conceivable anyplace after this stage (Bart Slob, 2006). On the Contrary,
green coffee is less cumbersome and lighter than coffee parchment, so processing has a tendency
to be embraced in the developing nation. Then green beans are then cooked, and reach the
market as instant coffee (in developed countries), or in ground form (Emmylou T., 2008). Figure
2 exhibits the standard coffee chain.

Figure 2: The mainstream coffee chain

Source: (Bart Slob, 2006)

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 Business Ethics Individual Assignment

The supply chain for standard coffee can contain numerous linkages. As indicated by Anna M.,
(2004), it is mentioned that coffee beans may change hands up to 150 times from maker to buyer.
In a disentangled standard coffee supply chain, essential makers offer their natural coffee to
private intermediaries, who transport the coffee to a handling plan. In the wake of being handled,
the coffee is sold by a nearby transporter to a global trader. Roasting organizations more often
than not buy the coffee from worldwide dealers, and offer it to retailers, for instance, grocery
stores, eateries, and hotels. This is how coffee is then acquired by the customer (Anna M., 2004).

5.1 VALUE CHAIN: KENYAN COFFEE INDUSTRY

Figure 3 underneath represents the association of the individuals involved in the coffee industry
of Kenya.

Figure 3: Kenyan Value Chain

Source: (USAID, 2010)

Producers: Cultivation is constituted by 700,000 small agriculturists in 450 communities but

then again, they deliver around about 28,000 metric tons; small- scale as well as medium-scale

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 Business Ethics Individual Assignment

estates farmers are over 3,300 and possess five (5) to ten (10) acres of land, together with large-
scale farmers who hold 100 estates and possess farms of 10 acres of land or more (United States
Agency for International Development, 2010).

Wet Millers: Presently, there are more than 4,000 wet processing facilities. Smallholders produce
farmed cherries to a cooperative community processing facility, in which the cherries are pulped,
cleaned and dried. Every cooperative community bears a minimum of one (1) wet facility; a few
might possess as much as ten (10) wet facilities. It happens to be compulsory for smallholder to
market coffee via cooperative communities. (United States Agency for International
Development, 2010).

Dry Millers: Coffee is required to be accumulated and stored in an authorized public storehouse
before it can be displayed at the auction sale. The administrator or also known as the public
warehouseman is entrusted to distribute negotiable storehouse invoices or even warrants. After
the transaction conducted in the auction, physical possession is transferred against payment by
means of agreement of the warrant in the buyers benefit by the marketing agent. As of late, just
about every commercial mill distributes its own particular warrants. This warrant program is
dependent on unconditional trust. The consumer purchases the coffee before its actual
availability and quality can be freely confirmed or verified. Small-scale consumers could quite
possibly have to lodge warrants with their banking institutions as collaterals against overdrafts
(United States Agency for International Development, 2010).

Marketing Agents: In the course of the marketing sequence, possession of the coffee continues
to be with the cultivator. With possession, for the most part, staying with the producer just before
the auction, the cooperative community, marketing agents, mills and auctioneers, effectively
offer services to the cultivator/producer and a paid from the returns of the sales conducted in the
auction. (United States Agency for International Development, 2010).

Export Marketing: The auction process has long been the conventional procedure for promotion
coffee in Kenya. There are more than 90 certified coffee exporters who tender for coffee at the
auction in Nairobi. The promoting agents put together coffee samples that are to be included
within the auction (United States Agency for International Development, 2010). These
promoting/marketing agents control the purchase programme and then determine the volumes as
well as qualitied to deliver at every auction. The clean coffee is then obtained at the sale by

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 Business Ethics Individual Assignment

merchants and traders and afterwards exported, either as straight parcels/lots or combined into
larger volumes of standardized quality. An insignificant proportion of coffee is roasted
domestically.

6.0 IDENTIFY STAKEHOLDERS

Partners or Stakeholders can be characterized as those people who have the ability to influence
the future of an association, inferring that the individuals who do not have such power dont
qualify as stakeholders (John B., 2004). From the definition provided above, it is then
conceivable to distinguish partners/stakeholders inside the coffee industry. Stakeholders within
Kenyas coffee industry incorporate; producers, coffee purchasers, processors, exporters,
merchants/dealers, roasters, retailers and shoppers.

Growers: at the cultivator level, there exists three (3) types of cultivators; i) smallholders
symbolizing 72 % of coffee generations, block holders symbolizing 4% of coffee generation, and
iii) plantation symbolizing 24 % of coffee generation (Coffee Industry Corporation, 2016).

Coffee Buyers: the coffee purchasers give a fundamental connection amongst producers and the
processors and additionally the exporters. The purchasers go about as the broker between the
processors/production lines and the village farmers who offer their coffee specifically to them.
These purchasers then sell the parchment of coffee to the processors/individual facilities.

Exporters and Importers/traders: As of now, there are 14 enlisted green bean (GB) exporters
and 5 roast exporters in Kenyas coffee industry (Coffee Industry Corporation, 2016). Merchants
or importers assumer a critical part in obtain coffee from coffee cultivating nations to consuming
countries.

Roasters: roasters are classified as organizations that change GB coffee into roast and
ground/instant coffee. They offer the customer an alluring coffee which dependably keeps up the
very same standards of quality and value. Whats more, they execute forceful advertising and
promotion.

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 Business Ethics Individual Assignment

Retailers: retailers are considered business elements (coffee bistros, eateries, stores and so forth)
who offer coffee to the end buyer. They secure fabricated coffee, both roast, ground and instant,
and additionally in arranged beverages, desserts and offer to the final consumer.

Consumers: consumers are considered as the most imperative stakeholder. Consumers are the
individuals who select how much coffee they will buy, at what costs and sort or quality. All
exertion put into coffee cultivation, transportation, financing and protection is hone for fulfilling
the shopper.

6.1 STAKEHOLDERS MAP

A stakeholder map uncovers what brings change in choices and prevailing wisdom after some
time, and how they may be formed in future. The procedure of graphically mapping these
progressions incites and empowers member encounters and thoughts on further instruments,
methodologies and strategies that can impact others (Derek H., Lynda B., and Arthur S., 2008).
Figure 4 exhibits Stakeholders mapping.

Figure 4: Stakeholder Mapping

Source: (Derek H., Lynda B., and Arthur S., 2008)

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 Business Ethics Individual Assignment

In Kenya, Government, parliament, business, common society and other partner cooperate to
advocate for strategies that will make coffee exchange fare. Overlooking the standards as well as
certification, the Fairtrade programme give immediate and roundabout support to makers and
their associations to extend social and ecological maintainability.

7.0 CONCLUSION
It is imperative to comprehend the economic establishments that the primes of delivering
products that are devoured in everyday life. This report has led a study in regards to the
worldwide coffee industry and business ethics, utilizing the Kenyan coffee industry as contextual
investigation to distinguish the industrys value chain and stakeholders. One might say that the
coffee industry is isolated into three (3) essential segments; the cultivators, the roasters and the
retailers. The global interest and demand for coffee has been expanding on the course of recent
years and is anticipated to increment in the upcoming years, which will make it troublesome for
the providers or suppliers to meet.

8.0 REFERENCES
Abdul Jalil , Ferdous Azam and Muhammad Khalilur Rahman (2010) 'Implementation
Mechanism of Ethics in Business Organizations ', International Business Research , 3(4),
pp. 1-11.

Anna Milford (2004) Coffee, Co-operatives and Competition: The Impact of Fair Trade,
Available at: https://www.cmi.no/publications/file/1802-coffee-co-operatives-and-
competition.pdf (Accessed: 10 November 2016).

Assey Mbang Janvier James (2012) 'A New Introduction to Supply Chains and Supply
Chain Management: Definitions and Theories Perspective', International Business
Research, 5(1), pp. 195-200.

Aytas Gakmen and Turan (2012) 'Issues of Business Ethics in Domestic and International
Businesses: A Critical Study ', International Journal of Business Administration, 3(5), pp.
82-86.

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Bart Slob (2006) A fair share for smallholders: A value chain analysis of the coffee
sector, Available at: http://www.fao.org/3/a-at226e.pdf (Accessed: 9 November 2016).

Coffee Industry Corporation (2016) Stakeholders, Available at:

http://www.cic.org.pg/index.php/coffeeinpng01/coffee-industry-stakeholders (Accessed:
10 November 2016).

Daphne Zografos Johnson (2012) 'International Intellectual Property Scholars Series:

Using Intellectual Property Rights to Create Value in the Coffee Industry', Intellectual
Property Law Review , 16(2), pp. 283.

Derek H. T. Walker, Lynda Bourne and Arthur Shelley (2008) 'Influence, stakeholder
mapping and visualization', Construction Management and Economics, 26(6), pp. 645-
685.

Edward Sweeney (2011) 'Towards a Unified Definition of Supply Chain Management',

International Journal of Applied Logistics, 2(3), pp. 30-48.

Emmylou Tuvhag (2008) A Value Chain Analysis of Fairtrade Coffee - With Special
Focus on Income and Vertical Integration, Available at:
http://webcache.googleusercontent.com/search?q=cache:KAe-
tyrhtdAJ:lup.lub.lu.se/student-
papers/record/1335444/file/1646769.pdf+&cd=1&hl=en&ct=clnk (Accessed: 8
November 2016).

Ferrell, O.C. & Fraedrich, J (1997) Business Ethics, 5th edn., Boston : Houghton Mifflin.
John Bryson (2004) 'What to Do When Stakeholders Matter', Public Management
Review, 6(1), pp. 21-53.

John T. Mentzer (2001) 'DEFINING SUPPLY CHAIN MANAGEMENT', JOURNAL OF

BUSINESS LOGISTICS, 22(1), pp. 1-6.

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MICHAEL RENNER (2014) Coffee Production Near Record Levels, Sustainable Share
Rising, Available at: http://www.worldwatch.org/coffee-production-near-record-levels-
sustainable-share-rising-1 (Accessed: 8 November 2016).

Priyanka Chaudhary and .Vijeta Soni (2013) 'A Utilitarian Perspective on Business
Ethics', Journal Of Humanities And Social Science, 14(5), pp. 75-80.

Shahid Ebrahim (2008) 'THE FINANCIAL CRISIS: COMMENTS FROM ISLAMIC

PERSPECTIVES', Journal of Economics and Management, 16(2), pp. 111-138.

Stanislas Bigirimana (2015) 'The Contribution of the International Coffee Agreement

(ICA) to the Development of Export Markets for Small Scale Coffee Farmers in
Manicaland, Zimbabwe', World Journal of Business and Management, 1(1), pp. 57-64.

United States Agency for International Development (2010) KENYA COFFEE

INDUSTRY VALUE CHAIN ANALYSIS, Available at:
https://d3n8a8pro7vhmx.cloudfront.net/eatradehub/pages/840/attachments/original/14328
04646/Kenya_Coffee_Industry_Value_Chain_Analysis_2010.pdf?1432804646
(Accessed: 10 November 2016).

Zoe S. Dimitriades (2007) 'Business Ethics and Corporate Social Responsibility in the e-
Economy: A Commentary', Electronic Journal of Business Ethics and Organization
Studies, 12(2), pp. 1-10.

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