and Competition

Competitors, the Playing Field,

Business Ethics
Case: Slotting: Facilitation, Costs, or Bribery?

Presented by
Ahsan Iftikhar | Maha Asif | Muawwiz Zia | Umar Khan
 This article examines the ethics of slotting fees.
The practice of manufacturers' payments of fees to retailers for the
display and sale of their products has become a common practice.
In the grocery retail business, the fees paid by manufacturers are
called slotting fees, or a payment made for a slot on the shelf.
The same practice is used now in the retail book industry. Large
book chains command high fees from publishers for the prominent
Summary display of books.
Entrepreneur's products are often precluded from stores and
markets because slotting fees are prohibitive.
The fees are non-uniform and often paid in cash, creating an
atmosphere that could not be explained financially and ethically on
the part of retail executives.
There is no law presented by government regarding slotting fee.
 Shelf space in grocery stores is awarded on the basis of the
manufacturers willingness to pay slotting fees.
Food manufacturers produce more than 10,000 new products each
year. However, store shelf space remains fixed.
Because profit margins at grocery stores hover at very narrow levels
of only 1 to 2 percent of sales.
Facts Within some retail grocery chains, slotting fees represent the net
profits for the organization.
There is a huge impact of this activities on a market share of the
products.
These fees for a position in some businesses are referred to as key
money or negative allowances.
Facts
 Retailers claim slotting was started by manufacturers with the fees
paid to retailers as an inducement to secure shelf space.
Another theory of origin offered by retailers is that manufacturers
use slotting fees to curtail market entrants.

Opinions Some manufacturers have opinion that slotting was started by retail
grocers as a means of covering the bookkeeping and warehousing
costs of the introduction of a new product.
Slotting is the calculated tool used by large manufacturers and
retailers to destroy all competitive markets and destroy the free
market enterprise system.
 Taking things that don't belong to you.
Buying influence or engaging in conflict of interest.
Ethical
Dilemmas It is impossible to understand how the fee structure works, how
much the fees should be, and whether the fees are actually related to
the costs incurred by retailers in getting a new product to the shelf.
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 No Slotting Fees
There should not be any
slotting fee.
Either slotting should be
Solutions and allotted on come first, get
Recommendations first biases or slotting should
be allotted according to the
demand of the product.
Government should label
slotting fee as illegal in law.
Let people (end consumer)
decide.
Slotting Fees
But, if slotting fee is
necessary for small retail
business survival then it
should be according to some
rules and laws.
There should be fixed slotting
fee for specific product
category and level of shelf.
Slotting should be allotted on
non-monetary biases.
There should the specific
space for new products.
 1. Are slotting fees a means of allocating risk?
Answer:
Yes, because
Answers of
Because profit margins at grocery stores hover at very narrow levels
questions of only 1 to 2 percent of sales.
 2. What possible employee temptations exist?
Answer:

Answers of These could be the options for possible temptation of retailers' and
employee:
questions All possible employee temptations were related to single approach,
and that is capitalism.
 3. Would a schedule of fees help?
Answer:
No, because
Answers of
The Small business still wont be able to compete in the market.
questions There is usually fixed number of shelfs in a store.
The most of the market share will be posses by the one who posses
the shelfs.
 4. Are slotting fees ethical?
Answer:
Answers of No, because
questions The activity of slotting fees done under the table.
 5. Are the perceptions of the industry participants a reflection of their questions
about the ethics of slotting?
Answer:
Yes, because
Answers of The meaning of slotting fees is extortion!
questions This industry practice has severely limited the ability of smaller
manufacturers to compete on a level playing field with larger manufacturers.
A possible solution to this problem is consumer awareness
The ordinary consumer has no idea that slotting fees have substantially
increased their grocery bills.
 6. Are the accounting issues the result of the secretive nature of the
payments?
Answer:
Yes, because
There no specific head in data entry for this kind of fee.
Answers of
This kind of fee could out balance the financial statements as
questions mention in the case.
This is the source of revenue regardless of sales for retail business
(business that is totally dependent on sales).
 Small Manufacturers
Employees/ intermediaries
End users
Stakeholders Big Manufacturers
Retailer/Whole sale owners
Society
Thank You
Any Questions?