The implications of RFID on society. An ethical case study using William May's seven-step method for an ethical analysis

Table of Contents

1. Introduction

2. Case Study

3. Analysis
3.1 The facts
3.2 Ethical issues
3.3 Major principles
3.4 Alternative courses of action
3.5 Comparison of values and alternatives
3.6 Assessment of the consequences
3.7 Finalizing a decision

4. Conclusion

Bibliography and further recommended reading

Background information about RFID and the Mexican retail market

1. Introduction

This document contains a case study and an example evaluation of an ethical problem in the information technology environment.

In the second chapter of the paper the text of the case study is included. The Chief Information Officer (CIO) of a Mexican supermarket chain has to come to a decision about the implementation of Radio Frequency Identification Technology (RFID) in several stores and warehouses in Mexico. The introduction of RFID has major impacts on customers besides the possible selling of consumer data to a third party marketing research company.

The third chapter of the paper finally deals with an example case report in which William May’s seven-step method is used for an analysis and a possible solution to the decision problem.

To sum up the case report, a conclusion is given in the fourth chapter. Lastly all necessary and additional information can be found in the appendix. Especially the attached research publication from MIT and Accenture “Auto ID in the box: The value of Auto-ID Technology in Retail Stores” should be considered for more detailed background information about RFID technology and its impacts. The publication can also downloaded from Accenture’s website (www.accenture.com).

However as for most case studies, there is not a unique solution to the problem. Therefore learning outcomes of the case study are to not to develop the perfect solution the writers of the case had in mind but to see an ethical problem from different perspectives and to learn how to evaluate an ethical problem by applying a suitable concept for analyzing the situation.

2. Case Study

It is a lucrative offer, Alejandro Lopéz Martes, just received from Delincuencia Marketing Services (DMS). Ten million US Dollars in advance for selling customer sales data from all Mexican supermarkets during the next five years could solve some financial problems at Platano Supermercados S.A. de C.V. (S.A. stands for Sociedad Anónima and is the Mexican equivalent to a stock company whereas C.V. means that the company capital funds and stocks are variable) where Alejandro was working as the company’s CIO. When this deal would turn out to be successful, it would mean a huge step forward towards his aim to become managing director of Platano Supermercados. The current CEO, Benicio Juaréz de Garibaldi would probably work just 2 more years until his retirement, but Benicio was already looking for a successor in the company, Alejandro knew. And Alejandro was on his list due to his success, his reputation and his strong academic background which is seen in Mexico as prerequisite for climbing up the corporate hierarchy. Graduated 15 years ago with a degree in Business Administration from the prestigious Mexican University Tec de Monterrey, Alejandro started at Wal-Mart in the early nineties but soon accepted an offer from Platano Supermercados in Mexico City and worked his way up to the general management.

It wasn’t an easy time when he started at Platano Supermercados as the department manager for market research. Due to the high competition on the Mexican Retail Market and the competitive advantages of Wal-Mart, the most important player on the Mexican retail market, Platano Supermercados margin has continuously shrunk. Additionally the share price of Platano Supermercados has sunk during the last ten years whereas the share price from Wal-Mart was usually above average or on a record high.

But in spite of the harsh business conditions, Alejandro found colleagues he could trust and also spend spare time at the golf club.

One of his best friends and colleagues is Stuart, who emigrated from the United Kingdom to Mexico and is currently the Chief Financial Officer at Platano Supermercados. As Alejandro knew from his colleagues, he was widely accepted in the company for his business knowledge and his direct and passionate approach of solving problems. But for some people Alejandro seemed to be rude and offensive. Discussions therefore always occurred with the energetic head of the Human Resources Department, Cathrin Jontera de Vaqueros, due to her opinion that people should be better paid and treated with more respect at Platano Supermercados. Alejandro had argued with her countless evenings how to reduce costs without reducing the number of employees.

When he first read in a short article on the web site of Frontera Consulting, the consulting company which implemented the new enterprise resource planning software from SAP at Platano Supermercados last year, about the opportunities of RFID, he thought that it could be an opportunity to reduce costs and therefore increase profitability without firing employees.

Probably it would be a good idea to ask the consultants about a presentation and possible introduction strategies. Five minutes later he called one of the managing partners in the nearest office of Frontera Consulting and agreed on a presentation date next week. After the meeting with the consultants he was still sitting in his office late at night and thought about the most important sheets from the presentation.

The consultants also left him the research publication “Auto ID in the box: The value of Auto-ID Technology in Retail Stores” where the technology and the advantages of RFID were further described. He scanned through the publications and remembered the most important aspects. A faster and more efficient organization of receiving and stocking of incoming goods seems to be the major benefit for the retail industry. Physical counting could be completely avoided. Theft of goods would be almost impossible. And there were many benefits for the customers, too. He remembered when he went birthday shopping with his son who was in a tantrum because the fan shirt he wanted was sold out due to the fact that one clerk simply forgot to order new ones. That wouldn’t happen with RFID. Or the hours he had to wait in a row at Wal-Mart because there was just one check-out open. With RFID the check-out could be organized automatically and as fast as walking out of the building.

Alejandro glanced out of the window and watched the industrial zone where the head office of Platano Supermercados was located. Would the benefits be really as significant as it is stated in the research study the consultants gave him, he thought on the way to the coffee machine to get another cup of strong Mexican coffee? And implementing RFID would also mean to sell all customer data for the next five years to the marketing company DMS to finance the expensive implementation of the technology due to the insufficient cash situation. At a first glance DMS seems to be a reliable market research company based in the United States with international Fortune 500 clients and a simple but powerful business concept of completing market research projects for its clients and developing strategies for the retail market. Alejandro met Joe, the CEO of DMS, a few weeks ago on a congress with the topic of the benefits of introducing RFID in the retail sector in Mexico. When he told Joe about his interest in RFID and the tremendous costs of implementing it, Joe made him instantly an offer a few days later to buy all customer data for the next five years if RFID would be installed at Platano Supermercados. Joe seems to be serious and trustworthy but he didn’t want to tell what exactly he planned to do with the customer data because he was still in negotiations with companies interested in the data, he told Alejandro.

Alejandro thought about his wife and how she always argued against using his Lufthansa Miles & More Card because the benefits in her opinion don’t outweigh the disadvantages resulting from privacy issues. However his wife also supported technologies making peoples lives easier like cell phones and credit cards which usually reveal too much of peoples private lives to some companies. Alejandro also read on the web about massive customer outcries in Germany about the test of RFID tags. What would happen when customers would switch to competitors not installing RFID tags to stay on the safe side? But the competition from Wal-Mart was strong and margins were still shrinking. Something had to be done and perhaps would it be better to avoid firing employees and to install the technology to reduce costs and increase revenues. Wal-Mart was already forcing his suppliers to provide all supplied products with RFID tags, he heard on the golf course from one of his former colleagues still working at Wal-Mart. Has Platano Supermercados the same power of demanding ID tags from his suppliers on all the supplied products? RFID tags still seem to be very expensive.

Alejandro also thought about the opinions of his colleagues in the general management. Cathrin would definitely be against the introduction of RFID but Stuart would support him, no doubt. About the CEO he wasn’t quite sure. Although Alejandro knew that Benicio held Alejandro’s work in high regard, Benicio sometimes seemed to be old fashioned and risk avoiding. He probably had to further discuss his idea of introducing RFID on the golf course with him.

It seemed to be a tough decision, Alejandro thought in his car on the way home back to his family. Introducing RFID and thus selling customer data seems to have major impacts on customers and on the fate of the company, its employees and its suppliers. He definitely should think about a deeper ethical analysis of the situation before making a decision. Besides the risk of his own career the privacy of many people was at stake and if something should go wrong, the legal system in Mexico was well known to give right to civilians and not to companies. Loosing a trial in Mexico could mean paying millions of Pesos and seriously damaging the reputation of the company.

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