Final answer:
A company that strictly complies with existing laws will avoid legal penalties and regulatory issues, but this does not guarantee ethical behavior, market success, or financial stability. The correct answer is C) Avoid legal penalties and regulatory issues.
Step-by-step explanation:
If a company strictly complies with existing laws, the firm will C) Avoid legal penalties and regulatory issues. Compliance with the law does not necessarily ensure that a business will engage in ethical business practices or guarantee success in the market. Laws typically set the minimum standards for behavior, and ethical practices can go beyond what is legally required.
Additionally, adherence to the law does not guarantee a firm's financial stability as market conditions can change due to various external factors. Moreover, even while maintaining strict compliance, companies may still face challenges like changing market preferences, competition, or economic downturns which can affect their success and stability.
Businesses create a code of ethics to align with societal values and outline permissible and impermissible actions. These codes address concrete matters such as bribery, discrimination, and whistleblowing, and also set out guidelines for accomplishing environmental and social goals to build trust and goodwill.
The rationale behind these ethical policies is that firms seek repeat customers who will recommend the business to others. This reputation for ethical conduct can be a significant competitive advantage, potentially allowing businesses to charge higher prices for goods and services as customers associate higher standards with higher quality.
The concept of restrictive practices is continually evolving. This creates a landscape where businesses need to be vigilant and adaptable to both comply with laws and exceed them ethically.