Tate Electronics manufactures computers and all required components. Its purchasing agent informed the company owner, Mervin Tate, that another the company had offered to supply keyboards for Tate computers at prices below the variable costs at which Tate can make them. Incredulous, Tate hired an industrial consultant to explain how the supplier could offer the keyboards at less than Tate's variable costs.
The consultant suspects the supplier is using many undocumented laborers to work in its plant. These people are poverty stricken and will take work at substandard wages.
Tate's purchasing agent and the plant manager recommend to Mervin Tate that the company should outsource the keyboards because "no one can blame us for the supplier's hiring practices and if those practices come to light, no one will be able to show that we knew of those practices."
a. What are the ethical issues involved in this case?
b. What are the advantages and disadvantages of buying from this supplier?
c. What do you think Tate should do and why?