- The importance of ethics in business can be understood by the fact that ethical businesses tend to make much more profits than the others. The reason for this is that customers of businesses which follow ethics are loyal and satisfied with the services and product offerings of such businesses.
- Consider an example. Suppose, there is an organization named XYZ, which manufactures cosmetics, and XYZ greatly believes in the importance of ethics in business.
- When XYZ advertises its cosmetics in the market, being an ethical organization, it will be very truthful and honest in its communication with the probable customers.
- It will tell correctly about the kind of ingredients it has used while manufacturing the cosmetics. It will not lie or exaggerate about the benefits or uses of its products either.
- So, the customers who buy its cosmetics, know precisely what they are buying and how useful that product is going to be for them. This way, the product will meet their expectations and thus, satisfy the customers.
- When customers are satisfied, they will become loyal to the company and come back again for re-purchasing. This will surely increase the profits of the organization.
- Thus, the importance of business ethics is that it creates loyalty in customers and maximizes the profits.
Efficient Utilization of Business Resources
- In an organization, people working at the junior levels often emulate the ones working at the top. The same applies with ethics too.
- If the management or seniors of an organization follow ethical business practices, i.e, they do not bribe to get their way or they do not cheat the customers, investors, suppliers, etc., the employees will follow suit.
- The employees too will refrain from using the office property or resources for personal benefits. This will result in better and efficient utilization of the business resources.
Creates Goodwill in the Market
- An organization, which is well-known for its ethical practices, creates a goodwill for itself in the market.
- Investors or venture capitalists are more willing to put their money in the businesses which they can trust. Shareholders too, remain satisfied with the practices of an ethical businesses.
- Thus, ethics creates goodwill and builds long-term relationships. Also, an ethical business puts greater value on its employees, and thus, employees remain loyal to such an organization too.
The chief goal of any organization is to maximize its profits. The importance of business ethics can be understood from the fact that it helps the businesses in achieving its goal of profit-making by creating goodwill for the business in the market, increasing its loyalty among the customers, by aiding in employee retention and by maximum utilization of its resources.