MGX3100 WEEK 10 ETHICAL ISSUES IN MARKETING
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  • (That rank, of course, waspart of the history of misrepresentation atEnron. It was never profitable-even its energytrading in California brought in only .5%on sales.) 5What if it was stakeholder value?Thepermission to use that accounting had comefrom the federal government itself. But themajor problem facing the others responsiblefor monitoring American business, thebanks, the investment analysts, the accountants-Enron's outside auditors. Arthur AndersenInc., especially-was that they had avery lucrative consulting relationship withEnron, and they were given to understandthat they would lose it if they asserted andmaintained accounting standards for Enron'sdeals.it wasn't exactly a whistle that Enron VicePresident Sherron S. Watkins blew. Hers wasnot (initially) a principled stance. She wantedthe career and the money as much as anyone,but confronted with reality, she decided totell Ken Lay about it instead of pretending itwasn't there.Watkins wrote a long anonymousletter to Lay suggesting that Skillingknew what he was running away from. The letterspoke of the danger that "we will implodein a wave of accounting scandals,“Accounting GRESSIONS WILL BE FOUND OUT, THE PAPER IS A BIT CRITICAL ABOUT WILKINS ROLE.ROLE OF LEHMAN BROTHERSInternal legal investigation as led by enrons own legal firmFalse information to the board of directors, telling them that the company was in good shape,When Lay addressedinvestment fund managers later that day, tryingto get them to hold their stock, or evenbuy more, he responded to their concerns,and the questions triggered by the article, byattacking the press and promising, over andover, that the loss was a one-time thing, thatthere were no more write-offs hiding in thebooks.When questions were asked Lay was aggressive!Sec LAUNCHED an inquiry wanting more explanationlook into the books, and they found all thosehidden debts and all those cover-ups and allthose overstatements of profits, and there wasno longer any chance of keeping them hidden.When McLucas issued his report, thecompany was essentially finished.CEOs took all the money and the employees lost,Accounting firm Arthur Andersen has to takesome of the responsibility for that hurt. Andersenhad signed off on all of the deals thatEnron had made, sometimes under pressure,but it had signed off.Responsibility to tell the truth to the public: accounting as a profession, the credibility and image, responsibility of the auditing firms! Making money through consultation, accounting was made a glamorous profession.GREED CANT BE SATISFIED!SACKING OF BASS WHO WAS UNHAPPY WITH ENRONS ACCOUNTINGAND HEDGING PRCTICEISThe accounting firm should have audited Enron/s dubious deals, they did not there was internal conflict within the firm as well.Signing off Enrons documents without any questions!THE ROLE OF EXTERNAL REGULATION: SEC: Arthur Andersen were scared of them.In the first weeks of October, instructionscame down in Houston and inChicago, to "follow the firm's document-retentionpolicy" of destroying "extraneous" orunneeded documents. Duncan's office got towork and started destroying: destroying documentsDestrying all the documents concerned with Enron till the SED ORDERED them to preserve all documents.Cause for criminal investigation, obstruction of justiceIt's worth pointing out that hecheated everyone: he cheated governmentand investors alike by lying about the company'sreal assets, and cheated the company, siphoningoff millions into his own pocket. I6Enron will surely be sued, what's left of it, andgood lawyers may figure out ways to get at theindividual executives. I7Self regulation: profession honesty
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MGX3100 WEEK 10 ETHICAL ISSUES IN MARKETING Presentation Transcript

  • 1. Business and Economics Management Ethics and Corporate Governance: MGX3100
  • 2. Week10  Overall Essay Feedback  Group Presentations: Ethical Issues in Marketing  Case: British American Tobacco’s expansion into emerging economies.  What are the central ethical issues in each of these cases?  Are there any lessons that BAT might learn from Nestle’s experience?
  • 3. BAT: A snapshot • Moving into emerging markets: 1. Populations in emerging markets are expected to grow  leading to increased smoking among young adult populations - the tobacco industry’s main consumer target. 2. Also, as income continues to rise in developing countries, consumers may switch to higher-priced premium brands of cigarettes, leading to greater profits.  Nicandro Durante, BAT’s Chief Operating Officer, recently highlighted BAT’s strength against its competitors in emerging markets. He described BAT as having the “best exposure to developing markets” of all publicly traded TTCs which gives the company an advantage because emerging markets are “likely to be more resilient than developed markets
  • 4. Marketing and Advertising  https://www.youtube.com/watch?v=N7w2bbBRBRA  Exploiting weak regulations in emerging economies: Many of the marketing techniques created and perfected by the tobacco industry in developed markets are now being used in emerging markets where tobacco control regulations are weak. – For example, the fraudulent marketing campaign of “low-tar” tobacco products is now being recycled from the U.S. and other developed markets to developing countries throughout the world. – Companies target kids by putting cartoon characters on cigarette packs, and stores still sell cigarettes to children.  Target audience is young adults, women and poor: – http://www.prwatch.org/spin/2010/11/9629/cigarette-makers-aggressively-recruit- smokers-foreign-countries – https://www.drugfree.org/join-together/marketing-and-media/children-in- developing-nations-targeted-by-tobacco-company-marketing  Some strategies and tactics include cigarettes smuggling, recruiting of new and young smokers, denying the health consequences of smoking, manipulating governments to delay tobacco control legislations and the sponsoring of health professionals and academic institutions to act in their favour.
  • 5. Explosion of smoking of babies http://global.tobaccofreekids.org/en/global_updates/detail/abcs_20_20_philip_morris_internationals_link_to_ indonesias_mini_explosion_o http://abcnews.go.com/Health/age-children-smoking-indonesia/story?id=14464140 https://www.youtube.com/watch?v=55mOuU_lfM0 https://www.youtube.com/watch?v=ldbRXAOiwWs
  • 6. What happened at Nestle: Infant Formula  Marketing first world consumer products in third world countries.  Water quality, Lack of education: couldn’t read the instructions, Over dilution, Aggressive marketing, Bottle-feeding instead of breast-feeding  Public issue life cycle and 4 phases  Phase 1: increased awareness and sensitivity to the facts of the issue.  Phase 2: Issue becomes politicized  Phase 3: Development of formal or governmental action  Phase 4: institutionalization: implementation of the policy.
  • 7. Can we apply this to BAT  Tobacco causes harm: we know that, not so much with the instant formula.  In terms of the public life cycle where do you think Tobacco Advertising is right now?  How can BAT avoid backlash?  Products that are appropriate and suitable in one social environment may not be suitable in a different environment.  Even good products may be harmful if the market doesn’t know how to use them safely.  Companies have to take after sales responsibility as well: who is using it how are they using it?  Unsafe products need to be demarketed/ removed from the market.  Marketing strategies should be appropriate to the condition of the customer.  Don’t exploit a condition of consumer vulnerability.  Marketing strategies should permit flexibility and adaptation to new circumstances
  • 8. BAT and PM are advertising Tobacco products in emerging economies: – Is there anything ethically objectionable about the practice of informing the public about the availability of a particular product? – Is there anything ethically objectionable about the practice of trying to persuade the public to buy that product?  According to Galbraith and Hayek,  Nothing wrong, this is the purpose of Marketing, to give information to customers about products.  Beauchamp Bowie and Arnold argue that,  advertising should not prevent informed choice about the product or service  advertisements should be persuasive and are ethically/morally inappropriate when they are manipulative  Paternalism Argument – Interference with Liberty  Therefore WEAK PATERNALISM: weak paternalism involves the protection of individuals from harming themselves in situations where their decisions are impaired  Impaired decision making, harm to others, harm to personal well being  Stakeholder and Shareholder CSR perspectives Lets consider the ethical issues again
  • 9. Thank you!