Dev's COMM 101 Blog

Inflation is defined as a steady increase in price levels of all goods and services in an economy, over a given time period. In an effort to combat inflation, packaged fast food producing giants have given birth to a new phenomenon called “Shrinkflation” that involves“manufacturers reducing the package size of household goods while keeping the price the same” (Digital, O. 2017)

Fig. 1

Companies claim that prices of raw materials have risen. In November 2016, Toblerone reduced the size of their products by 10%, with the price remaining same. In their defence they said that “We are experiencing higher costs for numerous ingredients” and so “to ensure Toblerone remains on-shelf, is affordable and retains the triangular shape, we have had to reduce the weight of just two of our bars in the UK, from the wider range of available Toblerone products” (Digital, O. 2017). Similar responses were seen by other companies such as Mars Inc.

The rising cost of raw materials is a fairly valid reason for reducing packaged sizes. However, the argument posed by companies about keeping products affordable for consumers, instead of raising prices, seems more of a marketing stunt than an effort to ensure consumer satisfaction. I say this because it seems as if these corporations conveniently adjusted their costs and didn’t lose a single penny. It is the consumers who lose out by receiving lesser quantity. By marginally reducing package sizes, they created an illusion to trick consumers at first. When an average consumer walks into a store and picks up a pack of chocolates, it’s hard for them to notice the difference in size, and so they end up buying it. On the other hand, if prices were hiked up by 10%, the consumer would immediately realize that they are now paying more for the same packet and possibly make them think twice before buying it. In addition, in the case of chocolate producers, it is hard to believe that “their raw material costs went up” even though cocoa and sugar prices have dropped since 2015, as seen in Fig. 2, and Fig. 3.

Fig. 2

Fig. 3

Strangely enough, Mcvities’ 300g chocolate biscuit packet had its size reduced by 6% but its price was reduced by 10% (“Lawrie, E., 2017″). This technically implies that consumers are now paying lesser for the same quantity. This example got me thinking that perhaps “shrinkflation” isn’t all that bad for consumers. In fact, smaller serving sizes of high-calorie foods like chocolates and biscuits would perhaps help reduce obesity and promote healthier lifestyles among consumers.

(“Toblerone, 2017”)

Works Cited:

           Digital, O. (n.d.). Shrinkflation and the changing cost of chocolate. Retrieved September 26, 2017, from https://visual.ons.gov.uk/shrinkflation-and-the-changing-cost-of-chocolate/

                   Lawrie, E. (2017, July 24). Five products hit by shrinkflation. Retrieved September 26, 2017, from http://www.bbc.com/news/entertainment-arts-40709180

                Toblerone. (2017, September 23). Retrieved September 26, 2017, from https://en.wikipedia.org/wiki/Toblerone

To begin with, Business ethics is defined as  a system of laws and guidelines by which business professionals and corporations operate in a fair, legal and moral fashion (“Business Ethics, 2017”).

Although the sole motive of most businesses is profit, I believe that running a business is about more than just making money.

In my opinion an ideal business institution is one that operates with an efficient, cost effective model in order to make profits but at the same time ensuring that it provides benefits to all stakeholders involved and does not provide significant gains to one at the cost of another.

Even though governments all across the globe have taken several efforts to enforce laws that safeguard the interests of society against unethical business practices, several corporations have crossed the line time and again. A recent incident that took me by surprise was a global emissions scandal by the Volkswagen group.

After the clean air act was passed by the FPA, engineers at Volkswagen were pressured to modify existing vehicle prototypes to comply with the new regulations. This meant high costs in R&D and reduction in the milage of their vehicles which was their main selling point. (Russel Hotten, 2017). In addition they were losing business to their competitors in North America such as Toyota and Honda that use hybrid technology. Hence, they decided to install a device that would automatically reduce the engine power when a vehicle is being tested in a laboratory in order to falsely pass emission tests (Russel Hotten, 2017).

So in a nutshell, the Volkswagen group violated the trust of their customers and national government bodies across Europe and North America, not to mention the adverse effects the harmful emissions from their vehicles have had on the environment. All of this, just to put in a few more millions in their bank account.

And was it even worth it in the end? Within months of this scam, the company was charged with an $18 Bn dollar fine and had to set aside another $6.7 Bn to repair and replace the faulty vehicles. In addition, they have faced several lawsuits from individual vehicle owners. (Russel Hotten, 2017).

I’d classify this as a classic case of “pennywise pound foolish”. In addition to their financial loss, this scandal has slandered Volkswagen’s brand name and legacy which will surely have a long lasting negative impact on future sales. In fact, just a month after being exposed, the company recorded their first quarterly loss in 15 years, worth $2.5 Bn (Russel Hotten, 2017).

Works cited:

Business Ethics. (2016, June 09). Retrieved September 14, 2017, from http://www.investopedia.com/terms/b/business-ethics.asp

Hotten, R. (2015, December 10). Volkswagen: The scandal explained. Retrieved September 12, 2017, from http://www.bbc.com/news/business-34324772