MGT610 Assignment No.1 Spring 2013

On Fri, May 3, 2013 at 12:27 AM, Moiz Romeo <moiz.romeo7@gmail.com> wrote:

Background
Liquefied Petroleum Gas (LPG) has been a deregulated sector in Pakistan for almost a decade.
The primary objective of this price deregulation by the government was to bring more
investment in the oil and gas sector of Pakistan. Local production in the country is less than the
demand of this product. According to a rough past estimate, local production of LPG in the
country is 1600 metric ton and its demand is around 3000 metric ton per day. Different LPG
companies that were licensed by Oil & Gas Regulatory Authority (OGRA) had to manage the
product demand of the market mostly through de‐marketing activity and import of LPG (in few
cases through illegal channels from Iran). This massive gap in the supply and demand of the
product also created black marketing and import of product without paying taxes on the import
and without the prior permission of OGRA. Price trend in the market over the years is that this
product's price increases in winter due to extra demand and decreases in summer due to
decrease in the demand. LPG initially was thought to be a pro‐poor fuel but it was not the actual
case in the market because its prices remained out of the reach for a poor person during winter
seasons.
Real time scenario
In a routine price cartel situation just before the winter season, managers of the different LPG
licensed companies were sitting together in a meeting for deciding a mutually agreed price with
extra and unchecked profit during the upcoming winter season. Most of the managers were
keen to have a constant increase in the price during winter with their mutual consensus but one
of the managers, Mr. Ali suggested that this constant increase in the fuel price will increase the
suffering of common and poor people. All the other stake holders heavily criticized Mr. Ali as he
was suggesting a cut on the profit for the interest of society. Some of the senior managers in
that meeting told Mr. Ali that he had no right to think for these ethical considerations in
business as he is representing his company as an employee and that there is no such law to
regulate the price of the product. Mr. Ali's point of view was that he was also representing the
same interest of his company for increasing the profit but he said that he is also seriously
concerned about the low purchasing power of this fuel of the common person and that he will
remain firm on this argument. This initiated a new dimension of brainstorming for social
responsibility and ethical consideration in that business meeting. Now on one side there was
short term strategy to earn high profit and on the other side, there was a long term strategy of
business growth with ethical consideration.
Requirement
Considering the above mentioned scenario, answer the following questions based on the
knowledge that you have acquired from this course so far.

1: In your point of view, what may be the possible reason of prisoner's dilemma in this
situation? How will the ethical consideration help this business sector as a long term growth
strategy? (10 Marks)
2: How can Mr. Ali create the spirit of moral reasoning in this interest group? Discuss with logical
points. (10 Marks)
Due date:2 May 2013

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¸.•°*"˜˜"*°•.`•.¸.• MOIZ ROMEO •.¸.•´¸.•°*"˜˜"*°•.

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