Chapter Eighteen: Ethics and Socially Responsible Marketing TOOLS FOR INSTRUCTORS • Learning Objectives • Annotated Chapter Outline with Instructor’s Notes/Teaching Tips • Answers to End of Chapter Learning Aids Concept Review Marketing Application Questions Net Savvy • Chapter Case Study • Video Activities Learning Objectives 1. Explain why marketers should be concerned about ethics 2. Describe the characteristics of a socially responsible firm 3. Explain how a firm could make ethically responsible decisions 4. Discuss how ethics and social responsibility can be integrated into a firm’s marketing strategy 5. Discuss how consumers foster ethical and socially responsible business practices Annotated Chapter Outline PowerPoint Slides Instructor’s Notes Chapter 18 will focus on Ethics and Socially Responsible Marketing. These questions are the learning objectives guiding the chapter and will be explored in more detail in the following slides. Opening Vignette: Joe Fresh and Bangladesh The collapse of Rana Plaza in Bangladesh marked the worst disaster in the textile industry’s history. More than 1100 people were killed and another 2500 injured. The tragedy could have been averted had better safety measures been in place for the factory structure and its workers. Loblaw, whose Joe Fresh brand was manufactured in the factory, immediately took action, apologizing to victims’ families and putting a plan in place to prevent future incidents. Ask students if they agree that clothing manufacturers should be responsible for the structural integrity of the factories in which their clothing is produced. While Loblaw took immediate action and went above and beyond what was considered necessary, companies such as Walmart would not even admit their clothing was manufactured at the Rana Plaza factory, in spite of photos showing photos of its George brand clothing in the rubble. Does that change student opinion of Loblaw or Walmart? The Scope of Marketing Ethics Understand Business Ethics • Business ethics overall refers to a branch of ethical study that examines ethical rules and principles in a commercial context, various moral or ethical problems that might arise in a business setting, and any special duties or obligations that apply to persons engaged in commerce. • Marketing ethics examines ethical problems specific to the domain of marketing. • Marketers must recognize the ethical implications of all their actions. Group activity: Ask students to brainstorm the ethical issues unique to marketing. They should start with the marketing mix and proceed through each of the 4Ps. Each group should write one issue for each element on the board, and then discuss what they have produced as a class. LO1: Ethical Issues Associated with Marketing Decisions The public nature of marketing often leads to the charge that marketers are unethical or at least less ethical than people in other professions. Marketing is a very visible part of business. Often practices that are the result of other business functions will be attributed to marketing. Marketers need to stress the good things that they do and the value that they add to society. Also, by policing practitioners and sanctioning those who violate the various codes of ethics, etc. marketers can demonstrate that they are serious about ethical standards. Ask students: What actions can marketers take to improve their image? Do you consider the way marketers are characterized by people taking the survey to be fair? To create an ethical climate in the workplace: • Everyone within the firm must share the same understanding of values and how they translate into the business activities of the firm, as well as a consistent language to discuss them. • All levels of the firm must be committed to establishing and maintaining an ethical climate. A strong ethical climate requires a commitment from the top down within the firm. Everyone within the firm must agree to a system of controls that rewards appropriate behaviour and punishes inappropriate behaviour. Ask students about the ethical climate on their campus. Pick a topic such as honour code violations or pledging procedures of sororities and fraternities. Then ask them to evaluate the topic based on values, rules, and controls. A firm’s incentive system can encourage exactly the type of behaviour the firm states that it wants to avoid. Incentives such as a bonus can be a double-edged sword, generating sales but also encouraging overly and aggressive and potentially unethical sales tactics. • Many professions, including marketing, have their own code of ethics. This marketing code of ethics was developed by the Canadian Marketing Association. Each sub-area within marketing, such as marketing research, advertising, pricing, and so forth, has its own code of ethics that deals with the specific issues that arise when conducting business in those areas. Group activity: Have the students develop a Code of Ethics for their college or university. Ask students: What ethical behaviours should you include? Why are those chosen behaviours important? The Influence of Personal Ethics • Why do people act unethically? Each person is the product of his or her culture, upbringing, genes, and other influences. • Two key questions apply to understanding unethical behaviour: What makes people take actions that create harm? Are all people who engage in such behaviour immoral or unethical? In many cases, ethics is in the eye of the beholder. Ask students: Why might a salesperson lie to a young couple about the safety of a car seat for their infant? This will bring out issues such as self-interest for the welfare of the salesperson and his/her family. Remind students there are no definitive answers to these questions. Ethics is a difficult topic, and many people struggle to find answers to questions such as these. LO2: Corporate Social Responsibility • Corporate social responsibility refers to the voluntary actions taken by a company to address the ethical, social, and environmental impacts of its business operations and the concerns of its stake-holders. It means doing things that benefit society, such as sponsoring a charity event. Such actions are typically beyond the scope of corporate ethical behaviour or the ethical behaviour of employees. • A firm can behave in a socially responsible manner, but perform unethical practices, and vice versa. Ask students: Can a firm be socially responsible and not ethical, or ethical and not socially responsible? A firm can give money to charity (socially responsible), but be unethical (engage in deceptive advertising). Ask students: Can you think of a firm that may be either ethical or socially responsible, but not both? Group activity: Students should create a list of firms reputed to be socially responsible. In what ways do these firms demonstrate their commitment? Do the students consider these factors when purchasing goods? A number of examples follow which can be selectively used based on the amount of time available for the lecture. Ethics vs. Social Responsibility It is important to distinguish between ethical business practices and corporate social responsibility programs. The slide helps to explain this concept further. Case in Point series: Tim Hortons Tim Hortons is a great example of Corporate Social Responsibility in Practice: Click on link in slide title to go to Tim Hortons’ website and show students the Community and Goodwill programs such as the Tim Horton Children Foundation and/or Tim Horton Camp Experience. Answer: A; see page 571 LO3: Consumerism, Ethics, and Socially Responsible Practices Consumerism—a social movement aimed at protecting consumers from business practices that infringe upon their rights. More than 75% of Canadian companies have established SR policies and support SR projects. When companies embrace CSR they must consider their employees, customers, marketplace, and society. Employees: must be assured of a safe working environment, free of threats to their physical safety, health, or well-being. Customers: Companies must pay attention to the marketing environment, take shifts and trends into account and react to them quickly. Marketplace: When one firm in the industry leads the way toward CSR, its partners and competitors often have no choice but to follow. Society: 95 percent of CEOs believe that society increasingly expects companies to take on public responsibilities. Consumer activism can result in boycotts of companies who do not act in an ethical or socially responsible manner or if they believe that a marketing practice is unethical or unfair to group of individuals. For example many students demanded that their Universities boycott Nike products for their sports teams in protest of Nike’s labour practices. Companies are criticized for engaging in unethical or illegal marketing practices, e.g. those that promote products and services to vulnerable groups such as people who are addicted to alcohol, tobacco, and gambling. Ask Students: are the criticisms of marketing justified? Entrepreneurial Marketing 18.1: Ten Tree Apparel Saskatchewan brothers Kalen and Derrick Elmsley and their friend, David Luba, wanted to offer consumers the ability to buy clothing and give back to society. They started Ten Tree Apparel which makes t-shirts, tank tops, hats, and hoodies. For every item it sells, the company plants 10 trees. Although their clothing sells for up to $6 more at retailers than comparable clothing, there has been no push back on price from consumers. Ask students to watch CBC’s Dragons’ Den video. Ask them if they have seen Ten Tree Apparel in stores. Were they aware that 10 trees were planted for every item purchased? Would that knowledge change their buying behaviour? LO4: A Framework for Ethical Decision Making This chart can be used on its own to introduce the framework. Additional slides follow which can be used to provide more detail as desired. Step 1: Identify issues In a marketing research firm, ethical issues might include: - data collection methods—not informing respondents that they are being observed - hiding the true purpose of a study from respondents—telling them they are an independent research company, but actually doing research for a particular politician - using results to mislead or even harm the public—results of a pharmaceutical study. Step 2: Gather information and identify stakeholders • Gather key facts related to the ethical issue, including all relevant legal information. • Identify and discuss the issue with those persons and groups that have a stake in its resolution. Ask students: What are the ramifications of publishing misleading research findings for a new pharmaceutical product? Answer: there could be real harm to users. Then ask: Why might this happen? Answer: The pharmaceutical industry wants the product to come to market to meet sales goals. They might be paying the researchers to do the project. • A stakeholder analysis matrix defines each stakeholder’s responsibility to the others. The stakeholders are interrelated because an ethical violation may impact others. Falsifying results for a new pharmaceutical study will, for instance, impact the researchers, the pharmaceutical company, the legal system, the physicians, and most importantly the patients Step 3: Brainstorm alternatives The relevant stakeholders come together to brainstorm alternative solutions. The alternative solutions depend on the type of ethical issue and how the stakeholders are affected. Step 4: Choose a course of action • Weigh the various alternatives and choose a course of action that generates the best ethical solution. • Rank the alternatives in order of preference. • With an ethical framework, decision makers can include all relevant ethical issues, evaluate alternatives, and choose the course of action that will help them avoid serious ethical lapses. Alternatives are then evaluated and a course of action is chosen. The chosen course represents the best solution for the stakeholders using ethical best practices. Case in Point series: Ben and Jerry’s Ben & Jerry’s has taken its commitment to the environment into consideration in its sourcing decisions. The company examines every aspect of its products and seeks opportunities to improve the environment. Answer: B; see page 581 LO5: Integrating Ethics into Marketing Strategy The pertinent ethical questions vary at each stage of the strategic marketing planning process. Remind students that as marketers, they must ask questions specific to each stage and examine those questions carefully before moving on to the next phase. Planning Phase • Include an ethical statement in the firm’s mission or vision statements. • Ethical mission statements can guide SWOT analyses. By incorporating ethics into the firm’s mission statement, the firm sets a standard for its subsequent ethical decision making. The mission statement signals the firm’s strategic priorities. Implementation Phase • Ensure the values stated by the firm are consistent with the values of the target market. • Various choices lead to potential ethical issues, including 1. Target market 2. Resource allocation 3. Sourcing decisions Group activity: For each question related to the implementation phase, have students use the textual examples as a basis for a discussion in which they identify other products or examples for which a firm faces potential ethical issues. Many students will use examples such as tobacco, alcohol or other controversial product companies. Point out that other products also encounter the same issues, even if the products themselves seem less controversial. Control Phase • An implemented system must address any potential ethical issues. • As new technologies emerge, so might new ethical issues. Any plan requires constant evaluation and revision, and this truism applies particularly to the evaluation of ethical issues. Answer A; see page 585 Ethical Dilemma 18.1: Check-ins and Facebook photos can be dangerous As students: how often do they post statuses that indicate where they are, or check-in via Facebook? Are they concerned about revealing their locations & having their homes robbed? How should retailers treat this sensitive type of information? ** These scenarios are designed to stimulate discussion and offer no single correct answer. Scenario 1: Retailers Lack Ethical Guidelines Peavy’s Bridal is exerting pressure on Renata to make quote or be fired. Another salesperson tells her to sell the most expensive dress in the store and as many accessories as possible to prospective brides, saying Renata needs to tell them that doing so will make them feel more beautiful on their wedding day. Ask students: If Marilyn is correct about the brides’ goal of everyone gasping when they first see her, is she doing the right thing? Scenario 2: Giving credit where credit isn’t due A catalogue retailer that appeals to families wants to pursue a new market. A market research firm suggests targeting low-income single parents, who make up an attractively large new market but have severe resource constraints. The marketing plan would offer a generous credit policy with direct payment requirements. The accounts would carry extremely high interest rates. Is the catalogue retailer offering a valuable service or encouraging unmanageable debt levels? Lower-income consumers often are denied credit, and when they get credit then pay it off, they build their credit. Rent-to-own and cheque cashing firms use this argument to justify their exorbitant fees and interest rates. Opponents argue that encouraging non–credit-worthy consumers to take credit cards harms them by making them responsible for debts they likely cannot pay off. Scenario 3: The jeweller’s tarnished image A family-owned and operated costume jewellery manufacturer traditionally has sold only to wholesalers. Recently a saleswoman approached the firm about selling its product through a network of distributors via home parties. The saleswoman generated revenue, and the firm started making plans for expansion. Then, a party attendee informs the manufacturer that she was misled into purchasing products at a home party. Is the manufacturer responsible for the actions of its distributor? When the owners learn about the deception, should they immediately stop using the distributors? Why or why not? Scenario 4: No wonder it’s so good A new soft drink, advertised as the perfect way to relax, contains no caffeine and has become very popular with woman. The marketing director learns that the firm is not disclosing that the cola contains alcohol, though below the legal limit required for reporting. However, the director worries that any alcohol may pose a danger for certain consumers. Even if the lack of disclosure is legal, is it ethical? Many people believe that legal actions de facto must be ethical, but are they really? If the chance of harm is very low, should the firm disclose the presence of the alcohol to avoid any potential issues? Scenario 5: Bright Baby’s bright idea A manufacturer of infant toys has issued a recall order for one of its products. The CEO is looking for options other than destroying all inventory of this project. Perhaps the product could be repackaged and sent to another country in which the recall is not in effect. The CEO decides to accept this recommendation. No deaths or serious injuries related to the product have been reported; is the CEO’s decision therefore ethical? Avoiding a large loss often creates the potential for ethically questionable actions. Would the scenario change if some infants had died from this product? Concept Review Generally, the concept questions are designed to achieve a single purpose – to encourage students to test their knowledge and understanding of the theoretical content of the chapter. These questions encourage recall and reflection, which will better prepare students to answer the marketing applications questions based on their understanding of the theory. 1. Explain the meaning of ethics and corporate social responsibility (CSR) in marketing. What are the main differences between ethics and social responsibility? Answer: Ethics examines ethical rules and principles within a commercial context, the various moral or ethical problems that might arise in a business setting, and any special duties or obligations that apply to persons engaged in commerce. Marketing ethics, in contrast, examines those ethical problems that are specific to the domain of marketing. Because the marketing profession often is singled out among business disciplines as the root cause of a host of ethical concerns (for example, unethical advertising or the promotion of shoddy products), anyone involved in marketing activities must recognise the ethical implications of their actions. These can include societal issues, such as the sale of products or services that may damage the environment; global issues, such as the use of sweatshops; and individual consumer issues, such as deceptive advertising and the marketing of dangerous products. Corporate social responsibility describes the voluntary actions taken by a company to address the ethical, social, and environmental impacts of its business operations and the concerns of its stakeholders. The two concepts are separate but related. Being ethical means a firm sets and enforces high ethical standards for its managers, executives, and employees in doing their jobs AND the firms and its employees are supports and participates voluntary and community activities for the good of society and the firm’s stakeholders. 2. List four factors that determine whether an individual or firm will act ethically. List the different ways firms could demonstrate their commitment to corporate social responsibility. Answer: Generally, the ethical behaviour of individuals or firm are determined by (1) societal culture and norms, (2) business culture and practices, (3) corporate culture and expectations, (4) an employee’s personal philosophy and ethical standards. When society, the business community or the firm establishes high ethical standards, then it is quietly likely that employees will improve their ethical behaviour for fear of being publicly embarrassed or punished in some ways. Rewarding ethical behaviour tends to encourage ethical behaviour and practices. A firm can demonstrate its commitment to CSR in several ways such as (1) develop and implement CSR policies, (2) implement CSR programs within the company, (3) reward and recognise employees that engage in socially responsible activities, (4) publicly promoting its activities in dedicated messages, or by including a symbol of its commitment on all its packaging or advertisements, and (5) reporting results of CSR as part of its bottom line. 3. Describe how firms can integrate ethics and corporate social responsibility into their marketing strategy. Answer: A firm can integrate ethics and corporate social responsibility into their strategy by considering it at every stage of the planning process. Some specific tactics include mentioning a commitment to CSR in the firm’s vision or mission, considering ethical ways to target and communicate with its target market, sourcing from reputable suppliers with fair employment and production methods, having a quick response system in place for recalls, rewarding and recognising good ethical and social behaviour and punishing those that fail to uphold or promote CSR policies and programs. Integrating CSR and ethics into all decision making is crucial. 4. Explain how the use of sustainability scorecard could add value to a company in the eyes of its consumers. Answer: • When companies adopt measures like a sustainability scorecard, customers receive the message that the company wants to be transparent about its practices. Consumers know that they can trust the firms to provide healthy, ethically acceptable products and services. Many customers also feel better about buying from a company that engages in responsible practices, which provides them with the additional value of feeling good about buying from that company. 5. Is it possible for companies that have a code of ethics to behave unethically? Why and how might this happen? Answer: Absolutely. The existence of a code of ethics is not a guarantee that ethical behaviour is taking place. Ethics are difficult to define and even harder to police. A company with a code of ethics may behave unethically because an employee acts unethically, because information influencing a decision is incomplete, because competing priorities sway decision makers, or more likely, because it is impossible to account for every single ethical dilemma with a set of guidelines. The best case scenario is to keep the guidelines clear but general and encourage all employees to make ethical choices to the best of their ability. 6. What is consumerism? Name two organizations that you think are at the forefront of consumerism in Canada. How has consumerism helped foster ethical behaviour and good CSR in Canadian companies? Answer: Consumerism is a social movement aimed at protecting consumers from business practices that infringes upon their rights. There are many organisations are the forefront of consumerism, including AdBusters, Consumer Reports, and LemonAid. The movement is responsible for increased commitment to CSR initiatives in Canada through research and publications, promotion and lobbying governments. 7. Is it ever possible to eliminate or reduce the social and ethical criticisms of marketing? What actions might help in this regard? Answer: It is possible to reduce, but not likely eliminate, the social and ethical criticisms of marketing. Renewed commitments to CSR activities and ethical standards will help, as well as voluntary membership on ethical committees like the Advertising Standards Council. Active consideration of consumer perceptions in decision making is very important. Forcing firms to avoid questionable practices and decisions that are easily misinterpreted by the public and industry watch dogs. 8. Problems can arise when businesses from one culture (the United Sates) operate in another culture (China) that has vastly different ethical standards. Google can be seen as trying to impose its ethical standards on China and meddling in China’s domestic politics. Do you agree with this perception? Should North American firms abide by the standards of foreign countries even though they may conflict with U.S. or Canadian standards? Answer: There are no straight forward answers to this question. Depending on our ethical standards and political views, we may tend to side with China and regard the issue as a commercial dispute. Therefore, Google should simply abide by China’s laws. There is also an equally convincing argument for Google to regard this as highly unethical and take action as it did. Generally, to the extent possible, foreign companies should abide by the laws in the countries they operate it but they should not sacrifice their moral or ethical standards, especially if their standards are higher than those of the host country. 9. Many commentators suggest that socially responsible marketing is not only a fad but can actually enhance the revenues and profitability of a firm. Explain how socially responsible marketing may contribute to improved revenues and profitability. Can you name one or two firms in Canada that explicitly make the claim that their CSR efforts have resulted in increased revenues and profitability? Answer: Consumers react favourable to CSR efforts. Many will choose to support an organisation known for community commitment over one who is simply in business. Not only do consumers feel good about supporting philanthropic causes, they may also be more trusting of a firm engaging in CSR practices. As well, socially responsible practices can contribute to sustaining the environment and saving costs – which impact the bottom line. Canadian companies benefiting from this trend include Tim Hortons, Saturn Canada, The Cooperators, and The Body Shop. 10. Many marketers have developed programs to help consumers dispose of their products after use in safe and environmentally responsible ways, either through recycling or by taking the used product to a retailer or depot. Yet, tons of recyclable materials end up in landfills all across Canada. What factors do you think might explain the behaviours of consumers who do not dispose of their products in an environmentally-friendly manner? Answer: There are many reasons why consumers may choose not to participate in environmentally responsible programs. Perhaps the programs require extra effort, like a phone call or a trip to a drop off location. Some may forget and casually throw items in the regular garbage. But more likely, consumers simply do not know that such programs exist. It is critical not only to create the recycling programs but also to communicate them to the consumers of their products. Education and awareness programs by companies, government and non-profit organisations that promote these programs can help change attitudes and behaviour over the long-run. It is almost a truism that over the last decade the ethical and CSR standards of most Canadian businesses and even consumers have increased considerably. Marketing Applications 1. Why are marketers likely to be faced with more ethical dilemmas than members of other functional areas of the firm, like finance, accounting, or real estate? Instructor’s Notes: This exercise challenges students to consider the substantive differences among various business functions. If, for example, a student considers the functions from the perspective of quantitative versus qualitative decision making, he or she might recognize that finance and accounting are largely number driven and that real estate quantitatively estimates property values and financing arrangements. In contrast, marketing tends to include a significant qualitative component, and subjective decisions often increase the associated ethical issues. Example answers: Marketers generally face more ethical dilemmas, because they promote the company’s product or service to an external customer base. Decisions about pricing, distribution, the marketing strategy’s influence on both the target market and other customer segments, and whether to inform the public of product defects often fall to marketers. Marketers often face more ethical dilemmas because their work involves direct interactions with consumers and the use of persuasive techniques to influence purchasing decisions. They must balance promoting products effectively with avoiding deceptive practices. This contrasts with other functional areas like finance or accounting, which focus more on compliance and reporting, and real estate, which deals primarily with property transactions. The nature of marketing's influence on consumer behavior and its potential for manipulation increases the likelihood of ethical conflicts. 2. Develop an argument for why a pharmaceutical firm should build and maintain an ethical climate. Instructor’s Notes: Students must to consider the potential ethical issues that a pharmaceutical company faces and therefore how unethical behaviour on the part of the company might affect it negatively. Example answers: First, an ethical environment would help the company attract top talent to work at the firm, because medical professionals suffer few concerns about being involved with the company. Second, this environment could ease the drug approval process by reassuring potential clinical study participants that they will be treated well and not giving government health agencies (e.g., Health Canada or FDA) a reason to question the clinical research beyond its merits. Third, it would foster positive attitudes in the target market that might cause consumers to trust the firm and its products and investors to invest more in the firm without fear of potential legal issues. A pharmaceutical firm should build and maintain an ethical climate to ensure consumer trust, regulatory compliance, and long-term success. Ethical practices foster transparency and integrity, which are crucial in an industry where safety and efficacy are paramount. Upholding high ethical standards helps prevent costly legal issues, enhances the firm's reputation, and supports positive relationships with stakeholders, ultimately contributing to sustainable growth and market leadership. 3. An insurance company gives generously to charities and sponsors cancer awareness programs. It also makes it difficult for elderly consumers to make claims on policies that they have owned for years. Evaluate this company from an ethical and social responsibility perspective. Instructor’s Notes: This exercise illustrates the difference between ethics and social responsibility, noting that no guarantee ensures socially responsible companies necessarily act ethically. Example answers: Corporate social responsibility describes the voluntary actions taken by a company to address the ethical, social, and environmental impacts of its business operations and the concerns of its stakeholders. Therefore, it is socially responsible for the company to donate generously to charities and sponsor cancer awareness programs. However, it is unethical for the company to increase the difficulty elderly customers have when making claims on policies they have held for years. Overall, the company might be criticized for showing a socially responsible face to the public while pursuing unethical business practices in private. From an ethical and social responsibility perspective, the insurance company presents a mixed profile: 1. Positive Aspects: • Charitable Contributions: Generous donations to charities and cancer awareness programs demonstrate a commitment to social responsibility and community support. • Sponsorships: Sponsoring programs that raise awareness for important causes shows a proactive approach to addressing social issues. 2. Negative Aspects: • Claim Denial Practices: Making it difficult for elderly consumers to claim benefits undermines the ethical principles of fairness and honesty. This practice exploits vulnerable individuals, potentially causing financial and emotional harm. • Inconsistency: The contrast between charitable actions and restrictive claim practices suggests a lack of coherence in the company's ethical framework. Overall, while the company engages in socially responsible activities, its problematic claim practices diminish its overall ethical standing and raise concerns about its commitment to treating all customers fairly. 4. A clothing company gives generously to charities and sponsors donation drives to help lower-income teen girls get reasonably priced prom dresses. It also locates its manufacturing plants in countries with few labour laws, such that it does not know if children are working in its factories, and works to prevent union activity among its employees. Evaluate this company from an ethical and social responsibility perspective Instructor’s Notes: This exercise allows students to analyze an ethical decision from the different perspectives of a variety of stakeholders and apply the stakeholder analysis matrix tool. Example answers: Stakeholder Stakeholders’ Concerns Result or Impact on the Stakeholder Potential Strategies for Obtaining Support or Diminishing Impact The public Purchasing a product that might violate their sense of fairness, decency, or ethical behaviour. Loss of trust in the company’s product, so they purchase from another company. • Enforce “no child labour” and fair wage practices. • Notify public of such practices. Brazilian workers Must work long hours in very poor conditions for very little pay; children possibly forced to do the work. Potentially poor health or injury, even if the wage earned is high relative to that offered by other local employers. • Stipulate wage and labour condition guarantees in contract with Brazilian firm. • Stipulate penalties for lack of compliance with these directives. Canadian company Being seen as unethical and socially irresponsible for using sweatshops in manufacturing. Loss of business and potential investment, as well as possible legal action by outside parties. • Put ethics clauses in all labour contracts. • Monitor the business practices of outsourcing vendors. The Brazilian company A foreign company dictates business practices and ethical behaviour it must use. Loss of competitive advantage if labour costs increase; potentially negative repercussions and image in its own country. • Absorb some of wage costs. • Offer appropriate concessions and potential support. From an ethical and social responsibility perspective, the clothing company shows a mixed approach: 1. Positive Aspects: • Charitable Contributions: Generous donations and sponsorships for prom dresses support lower-income teens, demonstrating social responsibility and community involvement. 2. Negative Aspects: • Labor Practices: Locating manufacturing in countries with few labor laws raises concerns about potential exploitation, including child labor. • Union Suppression: Preventing union activity undermines workers' rights and fair treatment, impacting employee welfare and ethical labor practices. Overall, the company's charitable efforts are commendable, but its questionable labor practices and suppression of worker rights significantly detract from its ethical and social responsibility profile. 5. Based on the evaluation you developed for question 4, provide responses to the ethical decision-making metric from Exhibit 18.5. Provide a rationale for your score for each question. Instructor’s Notes: This exercise prompts students to take their evaluation of the ethical situation to another level. In particular, their use of the evaluation questionnaire forces them to analyze their own thinking and ability to empathize with the various stakeholders involved. Example answers: • “Have I/we thought broadly about any ethical issues associated with the decision that must be made?” = 5, very confident. The ethical issues of outsourcing apparel manufacturing to a third-world country are fairly well publicized. • “Have I/we involved as many possible people who have a right to offer input into or have actual involvement in making this decision and action plan?” = 1, not confident. The only evaluation is the student’s own and lacks actual involvement or input from the parties. • “Does this decision respect the rights and dignity of the stakeholders?” = 4, somewhat confident. The student should have focused on solutions that consider the dignity of the parties involved, with the possible exception of the reaction of the Brazilian company to outside interference in its business practices. • “Does this decision produce the most good and the least harm to the relevant stakeholders?” = 5, very confident. Despite potential reservations regarding the Brazilian company, the decision generally helps the workers, the general public, and both companies, with little to no downside. • “Does this decision uphold relevant conventional moral rules?” = 5, very confident. The decision upholds conventional moral rules about helping those who are less fortunate and those who cannot help themselves. • “Can I/we live with this decision alternative?” = 5, very confident. Students should have no qualms about living with this decision from either an ethical or a socially responsible standpoint. 6. A company that makes granola and other “healthy” snacks has the following mission statement: “Our goal is to profitably sell good-tasting, healthy products and to better society.” Although its products are organic, they also are relatively high in calories. The company gives a small portion of its profits to the United Way. Evaluate the mission statement. Instructor’s Notes: Student should consider this hypothetical brand and explore to whom its products are targeted and how such targeting actually appeals to the consumer audience in question. Example answers: As far as the quoted mission statement, the company is following the letter, if not the spirit. There is nothing ethically wrong with any of the company’s actions; high caloric content does not necessarily mean something is unhealthy, and the portion of the profits going to the United Way helps society, regardless of the size of the contribution. However, the company could do more to better society than just donating a small contribution to the United Way. The mission statement of the company is somewhat contradictory: 1. Positive Aspects: • Healthy Products: Emphasizes the goal of selling products that are marketed as healthy and good-tasting. • Social Contribution: Commits to bettering society by donating a portion of profits to the United Way. 2. Negative Aspects: • Health Claim vs. Product Content: The claim of promoting "healthy" products is undermined by the high calorie content of the snacks, which may not align with the health benefits implied. • Limited Social Impact: While donating to the United Way is positive, the small portion of profits donated may not significantly contribute to societal betterment. Overall, the mission statement lacks alignment between the company’s health claims and the actual product attributes, and the social contribution may not fully reflect its goal to "better society." 7. The granola company described in the last question is thinking about starting an advertising campaign directed at children that would air on Saturday morning television. Explain why you think it should or should not do so. Instructor’s Notes: This exercise challenges students to extend their thinking to determine if ethical standards remain the same even when circumstances change. In this particular case, the issue is whether such a product should be marketed directly to children, who are not the most informed consumers when it comes to what products are nutritionally best for them. Example answers: The company should not market such a product directly to children, because of the high calorie content and the incidence of childhood obesity in Canada. In an ideal world, parents make purchase decisions based on whether products are nutritionally appropriate for their children. However, that ideal assumes the parent is present for every purchase and that the parent uses nutrition as a criterion for selection, even though in the real world, such is not always the case. The granola company should not start an advertising campaign directed at children for the following reasons: 1. Health Mismatch: Despite being organic, the granola's high calorie content may not align with the healthy image targeted at children, potentially misleading them about its nutritional value. 2. Ethical Concerns: Advertising high-calorie snacks to children raises ethical issues, as it could promote unhealthy eating habits and exploit children’s vulnerability to marketing. 3. Regulatory Scrutiny: There are strict regulations around advertising unhealthy food to children, and such a campaign might attract negative attention or legal challenges. Overall, the potential risks and ethical implications make this advertising strategy problematic. 8. A health inspector found some rodent droppings in one batch of granola made by this same company. What should the company do? Instructor’s Notes: Again, this question extends the circumstances for the granola company to help students to consider whether certain behaviours may be more or less ethical. Example answers: The company should recall that particular batch of its product. Although the recall might prompt some negative publicity, it will be better for the company’s public image in the long run if it owns up to the problem and takes ethical responsibility for it quickly. The company should immediately: 1. Recall the Affected Batch: Withdraw the contaminated granola from shelves to ensure consumer safety. 2. Investigate and Address the Issue: Identify the source of contamination and implement corrective measures to prevent future occurrences. 3. Communicate Transparently: Inform customers and stakeholders about the issue, the steps taken to resolve it, and any actions being taken to improve quality control. These actions help ensure consumer safety and maintain the company's credibility. 9. A women’s clothing retailer has been found guilty of misleading pricing practices. In spite of significant fines, its pricing practices remain unchanged. Explain how consumerism could force the company to act more ethically in the future. Instructor’s Notes: This question encourages students to think about what differences their actions can make in ensuring companies uphold high ethical standards. It also reinforces the importance of strong consumerism on the ethical practices of businesses. Example answers: Students will propose several measures or actions they can take, which will include things such as (1) lobbying for tougher penalties, (2) “shame the companies” by making their actions more widely known, (3) boycott, (4) or keep a vigilant eye on companies and report them to the Competition Bureau. Consumerism could force the company to act more ethically by: 1. Public Pressure: Increased awareness and criticism from consumers can damage the company's reputation and brand image, compelling it to change its practices to restore public trust. 2. Consumer Boycotts: A shift in consumer behavior, such as boycotts or reduced purchases, can impact sales and financial performance, incentivizing the company to adopt ethical pricing practices. 3. Advocacy and Activism: Consumer advocacy groups and social media campaigns can exert additional pressure, driving the company to adopt fairer practices to avoid further scrutiny and potential backlash. These consumer-driven actions can create financial and reputational incentives for the company to improve its pricing practices. 10. Consumers who were unhappy about the Canadian seal hunt expressed their displeasure by promoting an international boycott of Canadian seafood. While this action might prompt the sealing industry to change, it could also result in job losses in the fishing industry. Are consumers taking the most ethical approach? Instructor’s Notes: Again, this question extends the circumstances under which students as consumers are being challenged to consider the ethical implications of a boycott in a broader context, which is often overlooked. Example answers: There are no clear answers to this question and it would be hardly surprising if students are divided in their opinions. Those who are pro-animal rights would likely argue in support of the boycott. Those who are more neutral or open to consider the broader implications of the boycott may likely not support it but argue for other ways to manage the issue. The real challenge here is for students to decide whether a boycott at all cost is ethical and whether a boycott is effective in achieving the goal of those who oppose the seal hunt. Consumers' approach of promoting a boycott to address the seal hunt issue is ethically complex: 1. Ethical Justification: The boycott can be justified as it seeks to protest and potentially end practices deemed inhumane, aligning with animal rights and ethical concerns. 2. Potential Harm: However, it could unintentionally cause job losses and economic harm to workers in the fishing industry, affecting individuals who may have no direct involvement in the seal hunt. Overall, while the boycott addresses a significant ethical issue, balancing the impact on both animal welfare and human livelihoods is crucial for a fully ethical approach. Net Savvy 1. Perhaps no sub discipline of marketing receives more scrutiny regarding ethical compliance than direct marketing, a form of non-store retailing in which customers are exposed to and purchase merchandise or services through an impersonal medium such as telephone, mail, or the Internet. Ethical issues in direct marketing cover a broad spectrum because this means of selling is conducted through all forms of communication. The Canadian Marketing Association (CMA) takes ethics very seriously and has several programs to ensure that its member organizations comply with its Code of Ethics. Go to the Web site for the Canadian Marketing Association (http://www.the-cma.org/) and type the word “ethics” in the search box. Discuss the results of your search. How many different ways did you find that the CMA was involved in assisting consumers and the industry to create a more ethical marketplace? Instructor’s Notes: Although the actual student notes will vary, it should be clear from everyone’s search results that the CMA publishes its ethical standards and provides links to other government departments (federal and provincial, e.g., the Competition Bureau) as well as other websites (e.g., Phone busters, Public Interest Advocacy Centre, Consumer Association of Canada) that reports on whether member companies follow those standards. By publicizing such standards and reports of violations, the CMA hopes to address the general public’s ethical concerns about direct marketing by providing a transparent portrait of how the industry self-regulates. Example answers: The CMA uses two main methods to help create a more ethical marketplace: (1) It publishes its ethical standards and code of conduct for all to see, and (2) it links to key websites (governments and other special interest groups) that releases reports on those companies that fail to follow the ethical practices it outlines, so people can readily see which firms are not in compliance. Upon searching for "ethics" on the Canadian Marketing Association (CMA) website, you will find several ways the CMA is involved in creating a more ethical marketplace: 1. Code of Ethics: The CMA provides a comprehensive Code of Ethics that sets standards for ethical conduct in marketing practices. 2. Ethics Programs: The CMA runs various programs to promote ethical behavior among its members and ensure compliance with ethical standards. 3. Consumer Protection: The CMA offers resources and guidelines to protect consumers from unethical marketing practices. 4. Training and Resources: The CMA provides training and educational materials to help marketers understand and adhere to ethical practices. These efforts help foster an ethical marketing environment and support both consumer protection and industry integrity. 2. An increasing number of firms are stating their strong commitment to corporate social responsibility initiatives. The Corporate Social Responsibility Newswire Service keeps track of these various initiatives and posts stories on its Web site about what various corporations are doing. Go to http://www.csrwire.com/ and choose one story. Write a description of the corporation and the initiative. Instructor’s Notes: The CSR Newswire contains many stories, so each student should be able to pick one and provide a brief description. The site is a good source of such news and goes a long way toward showing that many such efforts exist. Example answers: “GROW: Design for Sustainability” is a day-long conference on the business incentives for choosing sustainable design principles and practices. The conference is hosted by the American Institute of Graphic Arts (AIGA). Visit [CSRwire](http://www.csrwire.com/), select a story, and summarize it as follows: 1. Corporation: Name and brief description of the company. 2. Initiative: Overview of the CSR initiative, including goals, activities, and expected impact. For example, a tech company might launch a program to support STEM education, aiming to enhance local educational opportunities through grants and partnerships. Chapter Case Study: Whose Side are You On? 1. Using the framework for ethical decision making presented in the chapter (Exhibit 18.4), analyze Lauren’s dilemma. Should she go to the company’s ethics officer and report what she knows about the use of insider information? Example answers: Identify issues. There are two main issues: Is Brian’s behavior inappropriate or unethical, given the context of the industry and the standards of the company, and should Lauren report Brian’s behavior, given that such behavior might be common practice, the contract might not be rewarded to Lauren’s firm if she turns Brian in, and social and financial incentives exist for Lauren not to speak up? Gather information and identify stakeholders. The relevant stakeholders are Brian, George, the architectural firm to which they belong, the potential client, the governmental agencies involved, and—further down the chain—the American taxpayers who ultimately pay the bill for the military hospital. Brainstorm and evaluate alternatives. Rather than turning Brian in and losing the contract—not to mention hurting the company’s reputation and causing bad blood with her coworkers—Lauren could approach Brian with the issue and suggest rewriting the proposal without “insider” information. Lauren also could report the incident to management and let them make the ethical decision. Lauren could tell the potential client of the impropriety, which would cause his firm to lose the business. Lauren could also report the incident to the company’s ethics officer. Choose a course of action. Lauren should approach Brian privately and ask him to remove any “insider” information from the proposal. To analyze Lauren’s dilemma using the ethical decision-making framework from Exhibit 18.4, follow these steps: 1. Identify the ethical issue: Lauren knows about the use of insider information, which is illegal and unethical. 2. Gather relevant information: Understand the details of the insider information, the potential harm to stakeholders, company policies, and legal implications. 3. Evaluate alternative actions: • Report the issue to the ethics officer. • Remain silent and do nothing. 4. Consider the consequences of each action: • Reporting: Upholds integrity, prevents legal issues for the company, and promotes ethical culture. However, it may cause personal and professional backlash for Lauren. • Silence: Avoids immediate conflict and personal risk but perpetuates unethical behavior and legal risks for the company. 5. Make a decision and test it: • Reporting the issue aligns with legal and ethical standards and promotes a culture of transparency and accountability. 6. Act and reflect on the outcome: • Lauren should report the issue to the ethics officer and reflect on the importance of ethical conduct in the workplace. Based on this framework, Lauren should go to the company’s ethics officer and report what she knows about the use of insider information. 2. Do you feel that Lauren, as the most junior member of the team, has less of an ethical duty than more senior members of the team do? Why or why not? Example answers: Lauren has neither more nor less ethical duty to report the actions of the team than senior members do; ethically, they are all share equal standing. No, Lauren does not have less of an ethical duty than more senior members of the team. Ethical duty is not determined by seniority but by the obligation to uphold integrity and legal standards. Regardless of her position, Lauren has a responsibility to report unethical behavior to prevent harm and maintain the company's ethical culture. 3. If you were the ethics officer for this firm, would you address the belief among employees that it is acceptable to discuss a pending proposal with members of the decision team? If so, how? If you would not discuss this ¬belief, why not? Example answers: The ethics officer should address this issue through continued ethics training and discussion within the company, using role-playing and generic situations to highlight appropriate and inappropriate conduct. The officers also must stress to those inside the company the legal liability and loss of public trust - and subsequently, the business - that could result from unethical practices such as what Lauren witnessed. Yes, as the ethics officer, I would address the belief that it is acceptable to discuss a pending proposal with members of the decision team. This can be done by: 1. Clarifying Policies: Clearly communicate the company's policies on confidentiality and insider information through training sessions and written guidelines. 2. Education: Conduct workshops and seminars to educate employees about the ethical and legal implications of discussing pending proposals. 3. Creating Awareness: Use real-life examples and case studies to illustrate the consequences of such actions. 4. Encouraging Open Dialogue: Foster an environment where employees feel comfortable asking questions and discussing ethical concerns. 5. Reinforcing Accountability: Remind employees of their ethical responsibilities and the importance of maintaining the integrity of the decision-making process. Addressing this belief is crucial to maintaining ethical standards and preventing potential misconduct. Video Activities Video: Ten Tree Apparel (CBC’s Dragons’ Den) Learning Objective: LO3 Description: This video provides a real world pitch by two brothers, Kalen and Derrick Elmsley, and their friend David Luba on CBC’s Dragons’ Den. The trio wanted to allow consumers to buy clothing in an ethical manner that gave back to society. They formed Ten Tree Apparel making t-shirts, tank tops, hats and hoodies. For every item sold, 10 trees are planted. Two Dragons invested in the company which has since secured distribution at 300 retailers across Canada. Key Words: ethical climate, Corporate Social Responsibility (CSR), environmental concern, shareholders, stakeholders, consumers Activity: Ask students in small groups to discuss how much they usually pay for a t-shirt. Then ask if they think about the way the t-shirt was produced, e.g. was it manufactured in a third world factory like the one in Rana Plaza, Bangladesh? Do they notice a difference in prices when they shop for t-shirts at Walmart versus stores where Ten Tree Apparel is sold (Boathouse, North by Northwest, Sporting Life)? Are they willing to pay a bit more for a t-shirt knowing that 10 trees are planted for every item of clothing they buy or is a cheap price the bottom line? Solution Manual for Marketing Dhruv Grewal, Michael Levy, Shirley Lichti, Ajax Persaud 9781259030659, 9781259104312
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