The current situation associated with Timmco’s need for competitive advantage is complex and should be analyzed from various perspectives. The pressure from rivals and the difficult conditions in the market introduce the need to choose a new strategy that would guarantee the following development of the company and its ability to struggle with other companies. For this reason, one of the possible ways to achieve the goal is the decrease in the price of final products and making the company’s offerings more attractive to clients. At the moment, it can be achieved only by changing the supplier and a new contract with a company that can guarantee lower prices for its high-pressure valves. However, regardless of some benefits associated with this strategic decision, there are multiple negative factors and adverse effects that might emerge if the given decision is accepted, and Sanco is chosen as a would-be partner for cooperation.
Timmco has obligations towards Blagg industries to purchase 1,000 valves a year at $2,500 per valve during the following two years. The supplier is a small, privately-owned firm located in Boone, North Carolina. It boasts the quality of its products and hopes for further cooperation with Timmco as it is a primary customer. If the contract breaches, Blagg industries will have to go out of business because of the absence of the opportunity to sell its products. This factor is one of the basic aspects that should be taken into consideration when selecting a future strategy and making the final decision. The given statement can be justified by the arguments presented below.
Breach of Contract
First of all, if Timmco refuses to cooperate with Blagg Industries, the breach of contract will be observed. It occurs when one party in an agreement fails to deliver according to the fundamental terms of this very agreement (Mallor et al., 2015). The failure to provide a promised asset, or pay, is viewed as a serious violation that can trigger the development of conflict and filing a lawsuit to compensate losses. It means if Timmco refuses to buy valves from Blagg Industries, several remedies for breach of contract will emerge. First of all, the award of damages should be considered as it might cost a lot for Timmco. In this case, the concept of special damages can be applied, which presupposes the need to cover any loss incurred by the refusal to cooperate (Mallor et al., 2015). For Blagg Industries, which faces the risk of failure because of the absence of the primary partner, the breach might mean the collapse and going out of the business. That is why Timmco will have to cover significant costs and suffer from additional spending not included in the budget.
Timmco’s decision to start working with another partner can also be viewed as negligent torts. The given tern presupposes the failure of an individual or an organization to act reasonably towards an entity or a person considering the existence of a particular obligation (Mallor et al., 2015). The negligent action can lead to serious financial damages and precondition the development of a critical situation resulting in a failure. For Blagg Industries, the inability to continue its cooperation with Timmco is disastrous as it is the central partner guaranteeing that all its employees will be provided with salaries, and the local firm will survive. Additionally, the breach of the contract will result in the disappearance of workplaces vital for the community and the deterioration of the quality of people’s lives. For this reason, the given situation acquires a new meaning as Timmco will not only disregard its legal obligations, but its actions will cause substantial harm to Americans and the state’s economy, which is viewed unethical and inappropriate regarding the focus of the firm on local markets customers.
Another important factor that should be considered by Timmco is product liability. Blagg Industries’ valves are known for the high quality and the ability to function under high pressure, which makes the final product of Timmco reliable and safe. Sanco valves cost lower and can help to reduce the price for items; however, they are of much lower quality if to compare with Blagg Industries’ ones and can burst, causing damage to workers. For this reason, if the given situation occurs, Timmco becomes responsible for all damages in terms of product liability framework (Mallor et al., 2015). It can deteriorate the brand’s image and precondition multiple lawsuits to compensate damage for individuals affected by the low-quality product. Moreover, all sellers who are in the distribution chain also held responsibility for the provision of products with defects, which means that Sanco will also have to face multiple problems associated with the low quality of their valves (Mallor et al., 2015). In such a way, it might become a serious problem for Timmco in the future and precondition the decrease in sales and income.
Foreign Corrupt Practices Act
The possible partnership with Sanco should also be analyzed regarding the Foreign Corrupt Practices Act. In accordance with the current legislation of Slawrovia, and because of the large government bureaucracy, the approval to export needed valves to the USA might take more than a year, which is inappropriate for Timmco. However, Sanco offers an alternative solution offering a $20,000 gift to the Slawrovia Minister of Commerce to get the approval in a week. It is an apparent case of corruption as using its authority, the Minister can breach the existing laws. The FCPA act applies to those with formal ties to the USA and those who act outside the country but are related to objects on the U.S territory (Mallor et al., 2015). In such a way, the agreement to pay $20,000 to the Minister will be viewed as an act of corruption, and there is a risk of applying severe penalties and punishments to because of the impossibility of such actions and their unethical nature.
The hypothetic cooperation with Sanco also means that Timmco will have to engage in deceptive advertising practices. The company plans to launch an advertising campaign emphasizing the outstanding quality of its products, or its commitment to the idea of American made quality (Mallor et al., 2015). The presupposed tagline is “Made in the USA by Americans, for Americans.” However, it is the case of false advertising as the company provides misleading and inaccurate information to promote its products to consumers. As against the previous partner, Blagg Industries, Sanco is not the U.S. company as it is located in Slawrovia, and its items do not meet the current requirements for the quality of goods provided to clients. In such a way, cooperation with a new partner and the use of deceptive advertising practices can cause substantial harm to the image of the company and precondition a critical reduction of its sales along with the possible lawsuits because of the use of irrelevant and inaccurate information to popularize the products produced by Timmco.
Finally, the strategy presupposing the change of partner presupposes multiple ethical issues that should also be taken into account. First of all, cooperation with Sanco can be viewed unethical because it uses child labor and pays extremely low salaries to its workers ($5 per day). At the same time, they have to work in extremely complex and dangerous conditions. Moreover, Sanco uses unfair schemes presupposing corruption as it offers to pay the state’s authorities to make a deal. In such a way, the possible partnership with the firm because of the lower price means supporting the given patterns and helping the company to evolve and continue using inappropriate methods.
Additionally, the change of the partner is unethical because it will precondition the failure of the national manufacturer, Blagg Industries. The small local company critically depends on Timmco as it is the primary partner guaranteeing stable income. The breach of the contract will deprive American workers of the source of income and the ability to support their families. For the brand which emphasizes its American nature, the given strategy is unacceptable.
Finally, the situation can be analyzed from the positions of utilitarianism. It states that the moral nature of any action can be determined depending on its outcomes and impact on people. If the majority of individuals benefit form a certain decision, it can be viewed as a morally right one (Mallor et al., 2015). Thus, Timmco’s decision to engage in partnership with Sanco will damage different groups of people. First of all, workers of Blagg Industries will suffer because of their inability to earn money. Second, customers in the USA might be damaged because of the low quality of valves and the possibility of an explosion under high pressure. Finally, children and people in Slawrovia will also experience hardships as their position will not improve. In such a way, it is possible to conclude that the decision to work with Sanco is unethical regarding the utilitarianism theory.
Recommendations and Conclusion
In such a way, all factors mentioned above evidence that cooperation with Sanco is a bad choice for Timmco. The hypothetic partnership between these companies will cause substantial harm to the American frim and precondition its failure. Instead, other strategies should be employed to guarantee a competitive advantage and the ability to compete with the closest rivals. The brand might focus on the improvement of customer service, new offerings, or diversification of products. Moreover, Blagg Industries can be sponsored to use innovative technologies and reduce the price of its valves.
Altogether, multiple legal and ethical issues might emerge if the cooperation with Sanco is approved. Timmco will have to compensate for special damages because of the breach of contract with Blagg Industries and its failure. Moreover, the FCPA will be applied to the potential deal because of the need to pay authorities in Slawrovia to make a deal. Finally, deceptive advertising will corrupt the image of the company and precondition the decrease in the clients’ interest. For this reason, this option cannot be viewed as an appropriate one for the company at the moment.
Mallor, J., Barnes, J., Langvardt, A., Prenkert, J., & McCrory, M. (2015). Business law: The ethical, global, and e-commerce environment (16th ed.). McGraw-Hill Education.