Functional areas in Business EthicsEthics

1. Ethics in Functional Areas
Module III

2. • The word ethics is derived from the Greek word “Ethikos”
which means custom or character.
“Our concern for good behaviour. We feel an obligation to
consider not only our own personal well being but also that
of others”.
Albert Schweitzer

3.  Marketing consist of the performance of
business activities that direct the flow of
goods and services from producer to
consumer.
 A number of distinct function is coming
under this broad characterization which
include:
1) Product Development
2) Distribution
3) Pricing
4) Promotion
5) Sales

4. • “Marketing is a societal process by
which individuals and groups obtain
what they need and want through
creating, offering and freely
exchanging products and services of
value with others”
Philip Kotler

5. • Marketing ethics addresses principles and standards that
define acceptable conduct in the market place. Marketing
usually occurs in the context of an organization, and
unethical activities usually develop from the pressure to
meet performance objectives. Some obvious ethical issues
in marketing involves clear cut attempts to deceive or take
advantage of a situation

6. Why we need Ethics in
Marketing?
We can give many reasons but will notify
some:
• When an organization behaves ethically,
customers develop more positive attitudes about
the firm, its products, and its services.
• To create Values or trust with key stakeholders
• To build good image about the organization in
the minds of customer, employees, shareholders
and the society.

7. • The law and regulations are generally designed to
protect the consumer from unethical practices by
businesses
• These law and regulations recognizes that consumers
have certain basic rights in the market place
• Each marketer must rely on his/her own value system to
determine what is and is not ethical

8. • AMA has established a codes of ethics to provide
guidelines for ethical conduct. It says, in part, that,
“Marketers shall uphold and advance the integrity,
honour and dignity of the marketing profession, by
being honest in serving consumers, clients,
employees, suppliers, distributors, and the public.”

9. • Honesty: to be truthful and forthright in our dealings
with customers and stakeholders.
• Responsibility: to accept the consequences of our
marketing decisions and strategies.
• Fairness: to try to balance justly the needs of the
buyer with the interests of the seller.
• Respect: to acknowledge the basic human dignity of
all stakeholders.

10. Openness: to create transparency in our
marketing operations.
Citizenship: to fulfill the economic,
legal and societal responsibilities that
serve stakeholders in a strategic manner.

11. Marketing ethics includes…
Marketing
effectiveness
Market
research
Market
segmentatio
n
Marketing
strategy
Marketing
management
Market
dominance

12. I. CRITICISM OF THE FORMER :
Promotion of morally ‘bad’ values such as the
excessive consumption of private rather than public
goods and services comes under this.
II. CRITICISM OF SPECIFIC PRACTICES :
These are frequently based on assumptions drawn
from system level critiques. The criticism are:

13. • Advertisement : that gives false information,
penetrating to wrong values.
• Personal selling : the ethics of the relationship of
sales people to customer
• Packaging and labelling practices :
irregularities of package size and shape
ecological issues
Pricing practices
Provision of intelligible labelling information

14. Ethical Criticisms of Marketing
• High prices
• Deceptive practices
• High-pressure selling
• Shoddy, harmful, or unsafe products
• Planned obsolescence
• Poor service to disadvantaged consumers

15. High Prices
• Caused by:
▫ High costs of
distribution
▫ High advertising
and promotion
costs
▫ Excessive
markups
(greed & profit pressures)
Why do branded products cost more than
generics (i.e. store brand)?
The cost of advertising?

16. Deceptive Practices
• Deceptive Pricing
▫ Falsely advertising “factory”, “wholesale”, “clearance” or other
seemingly large reductions from a high original retail (list) price.
• Deceptive Promotion
▫ Overstating a product’s features or performance, running
fraudulent contests.
▫ “Bait-and-Switch” advertising
• Deceptive Packaging
▫ Exaggerating package contents through slick design, misleading
quantity or quality imagery and misleading labeling

17. High-Pressure Selling
• Salespeople are trained to deliver smooth,
canned talks to entice purchase.
▫ High-pressure selling persuades people to buy
goods they neither need nor want.
▫ Driven by compensation structures (i.e. high
bonus potentials).
▫ High-pressure selling ultimately destroys
customer relationships and goodwill.

18. • Includes
▫ Poorly made products
▫ Products that do not perform well
▫ Products that deliver little benefit
▫ Harmful products (cause bodily harm, illness, even
death)
• How it happens
▫ Undue focus on profit, increased production
complexity, poorly trained labor, and poor quality
control
▫ New products without safety track records
▫ Outsourcing of production often leads to quality issues
Shoddy or Unsafe Products

19. McDonald’s and Obesity
A 2002 lawsuit sued McDonald’s on behalf of obese children, claiming
McD’s marketed food that is high in “fat, salt, sugar, and cholesterol

20. Planned Obsolescence
• Refers to:
▫ Products needing replacement before they should be,
because they are obsolete. (computers and software)
▫ Producers who change consumer concepts of
acceptable styles. (clothing and fashion)
▫ Intentionally holding back attractive or advanced
functional features, and introducing them later to
make the old model obsolete. (electronics)
How do consumers attempt to combat Planned Obsolescence?

21. • Examples
▫ The poor are forced to shop in smaller stores
where they pay more for inferior goods.
▫ The poor receive worse service (or no service) at
stores.
▫ “Redlining” by national chain stores in
disadvantaged neighborhoods.
▫ Poor are targeted for “rapid refunds” and other
“quick-money” swaps.
Poor Treatment of Disadvantaged Consumers

22.  Involvement in the community
 Honesty, truthfulness and fairness in marketing
 Use of animals in product testing
 Agricultural practices e.g. intensive faming
 The degree of safety built into product design
 Donation to good causes
 The extent to which a business accepts its alleged
responsibilities for mishaps, spillages and
 leaks
 The selling of addictive products e.g. tobacco
 Involvement in the arms trade
 Trading with repressive regimes
Ethical issues and society - examples

23. Ethical issues arising from internal and industry
practices - examples
 Treatment of customers - e.g. honouring the
spirit as well as the letter of the law in respect to
warranties and after sales service
 The number and proportion of women and
ethnic minority people in senior positions
 The organisation’s loyalty to employees when it is
in difficult economic conditions
 Employment of disabled people
 Working conditions and treatment of workers
 Bribes to secure contracts
 Child labour in the developing world
 Business practices of supply firms

24. Cultural Pollution
Does constant exposure to advertisements
assault our senses?

25. Consumerism
Consumerism is an organized
movement of citizens and
government agencies to improve
the rights and power of buyers in
relation to sellers

26. • Buyers have the right to:
1. not buy a product offered for sale.
2. expect the product to be safe.
3. expect the product to perform as claimed.
4. be well informed about important aspects of the
product.
5. be protected against questionable products and
marketing practices.
6. influence products and marketing practices in ways
that will improve their “quality of life.”
Buyers’ Rights

27. • Sustaining the environment while producing
profits for the company.
• The “Triple Bottom Line”
• Levels of environmental sustainability:
▫ Pollution prevention
▫ Product stewardship
▫ New environmental-friendly technologies
▫ Sustainability vision
Environmental Sustainability

28. Environmental Sustainability
The Dell recycling
program helps
customers recycle or
donate old computer
equipment.

29.  Most advertisements are socially responsible
Some advertisements willfully misinform the public
Deceptive Advertising: Advertising that give false info
Corrective Advertising: company publicly correct a false
impression created by past advertising

30. Ethical standards to be followed in
advertisements
• Cannot be directed towards any religious or
political end
• Any goods or services that are advertised should
not have any defect of any form in consumer
protection act 1986
• Products should not be portrayed in a way that
misleads the public to infer that it has a super
natural quality
• Picture and the audible matter should not be
excessively ‘loud’

31. • Advertisements should not endanger the safety
of children or produce any sort of perversion
• Any type of offensive, indecent, suggestive,
vulgar, repulsive themes must be avoided

32. Nike shoes

36. • Children are an important marketing target for certain
products
• Because their lack of knowledge about products, the
media and selling strategies usually mislead them
• Children are likely to be more vulnerable to
psychological appeals and strong images.

37. :
• Deceptive Pricing: Where a salesperson tries to
influence lure customers into a store. Thereafter, a
salesperson tries to influence to buy a higher-priced
item
• Unfair Pricing: When competitors are driven out by
low prices the company raises price back to their
former level

38. • Price Discrimination: It can be unethical if similar
buyers are charged different prices for the same based
on their ability to pay.
• Price fixing: It is an agreement among firms in an
industry to set up prices at certain levels.

39. Background
• Sweatshops and child
labor overseas, with
horrible working
conditions.
• Accusation: targeting
low-income families by
making shoes an
expensive status symbol
for poor urban street
kids.
Nike responds by…
• Implementing a companywide
ethical code of conduct
• Commissioning an independent
study of Nike factories abroad
• Creating a huge social
responsibility department
• Donating more than $37 million
to sports programs and 3 percent
of earnings to charity.
NIKE – Socially Responsible?

40. • Social gambling
• Facebook’s deal with online gaming firm
888 has raised eyebrows, with many questioning
whether a social networking site is a suitable
environment for gambling. The social network
will offer Las Vegas-style slot machines and
other games for bets up to £500 using a credit or
debit card.
•

41. Nestle
• Nestlé boycott
• The Nestlé boycott is a boycott launched on July 7,
1977, in the United States against the Swiss-based Nestlé
corporation. It spread quickly throughout the United
States, and expanded into Europe in the early 1980s.
• In Canada, the controversy lasted from 1978 to 1984. It
was prompted by concern about the Nestle's promotion
of breast milk substitutes (infant formula), particularly
in less economically developed countries (LEDCs), which
campaigners claim contributes to the unnecessary
suffering and even deaths of babies, largely among the
poor.

43. Concept of Social Responsibility
 Profit Responsibility-company’s duty is to maximize profits
• Green Marketing
 Stakeholder Responsibility-company’s duty is to protect
the interests of the people who
gain from it
 Societal Responsibility - company’s duty is to preserve
environment while reaping profit
Careful of Profiteering- shrink supply to raise price & profit

44. Three concepts of social responsibility