- June 14, 2020
LumberLiquidator is an American retailer of hardwood and laminate flooringmaterials located in Toano, Virginia, USA. The company was started inthe year 1994 by a building contractor, Tom Sullivan who begun bybuying excess woods from other companies (Gallagher, 2015). TomSullivan carried on with his activity of buying excess wood fromcompanies and then resold them from the back of a trucking yard inMassachusetts. Conversely, after three years since its inception inthe year 1996, the company found their niche market in hardwoodflooring. The company opened a store in West Roxbury on 5thJanuary 1996. During the first day, the company sold more than 150square feet of floors.
InAugust 1996, the company went ahead and opened another store inHartford, Connecticut to increases its overall business productivity(Gallagher, 2015). Since its inception, the company has grown inleaps and bound to be one of the largest hardwood flooring retailersin the United States. Additionally, the company has grown to anextent where it operates more than 370 storeshiring more than 1,000 employees in 47 States of the United States ofAmerica as well as Canada. Furthermore, as an indication of expansionand growth, launched a call center, catalogs and anonline e-commerce platform where it can sell its products.
Thecompany has basically attained a reputation for providing a widechoice of high-quality hardwood flooring products, superior servicesand great value. recorded net sales revenue of$978,776 million during the FY2015, a decrease of 6.6% over theFY2014 which was $1,047,419 million. During the FY2015, the companynet loss was -$56,433 million as compared to significant profitexperienced in 2014 which was $63,371 ( Inc.Finacial reports. 2015, 2014 & 2013).
Issuesthat did incorrectly.
Itis alleged that s sourced and sold laminate flooringfrom China and claimed that the laminate flooring met the CaliforniaAir Resources Board (CARB) compliance requirements but the reality isthat it never complied with the requirements set the regulatory body(Gallagher, 2015). Therefore, to test whether sactually complied with the required standards, some 31 samples werepurchased from both California and Non-California Liquidator stores.Destructive testing method was undertaken to test for formaldehydeemissions. The method was used because CARB approved this testingmethod as best. However, s have always been veryrigid and steadfast in their belief that destructive method is notthe best method of testing formaldehyde emissions in its product.
LumberLiquidator sold laminate flooring materials to California, despitethe materials not meeting standards set by a CARB which is a Staterecognized regulatory body. The act was problematic and contravenedethical principles because it is claimed that formaldehyde that wasfound in the product is very harmful to human health. Formaldehydeis a colorless gas with a pungent smell, which can be used tomanufacture building materials, among other things. Research findingsshow that formaldehyde irritates people noses and eyes besidesincreasing cancer risks (Nagel, 2015). However, interestingly, it isindicated that the company did not dispute on the reports of thefindings, implying that the findings were correct and that thecompany knew of the unethical act they had committed. Besides theinvestigation being undertaken by 60 minutes, it was furtherundertaken by Centre for Disease Control and revention (CDCP) whichwas another federal agency that also concluded that the testedproducts contained formaldehyde.
Anotherthing that did incorrectly was involving itself insourcing habits which were considered indiscriminate and generallypoor. According to the Environmental Investigation Agency report(2013), the involvement of in the poor sourcinghabits led to the destruction of forests, consequently destroyingTiger habitats. The company was considered to have affected diverseanimals since most of them could not have any peaceful location inthe forest as their habitats because involvement in such practices isunethical and contravenes standards set by statutory bodies.
Ethicalstandards and philosophy a business can employ to avoid theseproblems
Ideally,when businesses are set up, they are often set up on the principle ofgoing concern, a policy that states that a company is establishedwith no possibility of it coming to an end in the near future (Wild,Shaw, & Chiappetta, 2010). In other words, a company is meant toexist in perpetuity. In order to meet objectives, set by a businesssetup which turns out to be a measure of success, it is importantthat a business complies with various standards set up by variousstatutory bodies. There are instances where products produced bycompanies fall short of the minimum threshold of standards set up byresponsible agencies. Examples could be a case where a companyventures into a construction project which has not met standards metby relevant statutory bodies in the country.
Fora company to avoid problems to do with non-compliance to relevantbodies, it is important that it strengthens its Internal ControlSystem (ICS) to ensure that all necessary requirements are met duringthe production process. As defined by Davies & Aston (2010),Internal Control System (ICS) refers to all the necessary proceduresthat a company puts in place to ensure that activities run smoothlyand that errors and fraud are eliminated reduced or even possiblyeliminated. Application of the internal control system will assistthe company to avoid diverse problems because the system often actsas the regulatory platform that ensures that the company operationsare in accordance with the required standards.
Anotheraspect that the company can employ to avoid such problems is to trainits employees on the importance of complying with statutoryrequirements. One of the things that could have contributed to LumberLiquidator’s case could be that a particular employee messed up. Asimple mistake by an employee could land the whole business inproblems (Inc., 2016). It is important the organizations train theiremployees on the importance of observing ethical standards in work.Compliance with Statutory regulations is in itself ethical becauseset standards are meant to protect consumers and users of productsfrom being harmed or rather being negatively affected.
Anotherstrategy that should apply is doing the right thingsince an ethical character is not the only thing that one believes into be correct or fair, but it is a replication of individual brandthat diverse people or customers view as an important aspect. Some ofthe people perceived as the company public figure includes JohnPressley and Tom Sulivan have at one point fallen from grace while inpublic and later learned the hard-way which was very unethical(Davies, & Aston, 2010). Diverse behavior such as tax evasionprobably can result in a prison term. The company should ensure thatits business operations are conducted in a precise approach incompliance with the set policies.
Issuesthat can attempt to do to redeem their image.
Corporateimage identity is one of the most important things that a companyshould focus on creating and maintaining their business operations(Leiva, Ferrero, & Calderón, 2016). A business that has a goodcorporate image often enjoys a significant competitive advantage overits rivals. This is because the corporate image in itself is amarketing tool and customers get attached to businesses that havegood and reputable corporate identities. When companies produce goodsthat are found to have negative effects on the users and by bad lackthe same good get in the hands of the consumers, the company’scorporate image gets tainted. Besides, the company is negativelyviewed in the business world, and consumers tend to avoid purchasingfrom the company. A case in hand relates to ,which, after getting involved in the unethical act, had its sharesdrop from $70 per share to $36 per share ( Inc.Finacial reports. 2015, 2014 & 2013).
Inorder for to redeem its tainted image, it shouldappeal to its customers, stakeholders and the general public to bearwith its act. It should clearly explain that the act was not donewith intent and that it did not have any malicious intentions (Leivaetal.2016). However, though it will take a considerable period of timebefore customers believe in the company and consequently restoringits reputable image. need to focus on itsproduction by providing high-quality products and services that willattract both potential and existing customers.
LumberLiquidator can attempt to redeem their image by providing qualityservices with appropriate facilities. This is done by utilizingsophisticated facilities that are enhanced with contemporarytechnology to increase services productions. Quality consumerservices can benefit the company in countless ways and by discerningthe significance of the consumers’ service often provide them witha positive experience (Gallagher, 2015). shouldfocus on the quality services, company structures because it isalways customer perceptions that can make or break the companyoperations. Focusing on the quality service provisions will assistthe company redeem and improve its tainted image because reputablecompany image often enhances the company production, thus increase inrevenues and total market control in the industry.
Davies,M., & Aston, J. (2010). Auditingfundamentals auditing fundamentals.Harlow, England: Financial Times/Prentice Hall.
Gallagher,C. (2015, March 16). Lumber liquidators. Retrieved November 23, 2016,from business ethics,http://www.chuckgallagher.com/lumber-liquidators-in-the-hot-seat-an-ethics-challenge/
Inc.,C. I. (2016, February 10). Feds: Harmful formaldehyde levels inlumber liquidators flooring. Retrieved November 23, 2016, fromhttp://www.cbsnews.com/news/feds-harmful-formaldehyde-levels-in-lumber-liquidators-flooring/
Leiva,R., Ferrero, I., & Calderón, R. (2016). Corporate reputation inthe business ethics field: Its relation with corporate identity,corporate image, and corporate social responsibility. CorporateReputation Review.
LumberLiquidator Inc. Finacial reports. (2015, 2014 & 2013). Retrievedfrom http://investors.lumberliquidators.com/annual-reports
Nagel,T. (2015, October 12). Own lumber liquidators laminate flooring? Itcould contain dangerously. Retrieved November 23, 2016, fromhttp://www.classaction.org/lumber-liquidators
Wild,J. J., Shaw, K. W., & Chiappetta, B. (2010). Fundamentalaccounting principles (20thEd.). New York: McGraw Hill Higher Education.