Lahore School of Economics

Export Marketing Bases of International Marketing

BBA IV with Major in Marketing Minors in Media Studies Section: H

Ethical/Moral issues

Increasing demands by governments, consumers, special interest groups and the public for companies to behave in a socially responsible manner.

International marketers often must deal with:

(a) different sets of ethics; (b) different views of what constitutes socially acceptable behaviour; and (c) different legal requirements.

Defining Ethics

Ethics is what most people in a society view as being moral, good or right. What is ethical in one society may be considered unethical in another.
Examples are given of different attitudes toward; (a) the paying of interest on loans, (b) women in the workforce and (c) bribes. The above, and particularly the issue of making facilitating payments or bribes, may result in conflicts between a persons ethical code, the laws of the home country and/or the laws of the host country. In 1977, the US government passed a Foreign Corrupt Practices Act that placed its businesses at a serious disadvantage in many countries. This put American companies at a serious disadvantage in the many counties where bribery was common, or even considered normal. US companies lost out on billions of dollars in sales in the following years to foreign competitors who continued to offer bribes as part of a sale.

Defining Ethics

No other industrialized nation passed similar legislation until 1998 when the OECD and five other nations proposed a convention making bribery of public officials a criminal offense. However, it was up to individual nations to pass any legislation against bribery. Some industrialized nations still allow their companies to deduct bribes as a taxable expense. In others, there are laws prohibiting bribes, but bribes are still sometimes used.

The US government is now prosecuting international companies that do business in the US for bribes paid in third countries.
Environmental issues are of increasing concern, particularly in the more economically developed countries such as global warning, pollution, wasting of natural resources, and destruction of forests, destruction of animal and plant species, etc.

* The Organisation for Economic Co-operation and Development (OECD)

Possible bases for ethical decision making

No universally agreed upon standard or model, but approaches include:

(a) Principle of utilitarianism: correctness determined by results. (b) Principle of rights: overall benefits to society do not justify overriding rights of some people. (c) Principle of justice: fair treatment. (d) These, and other approaches, may lead to different decisions.

Applying Ethics in International Marketing

Need for concern with issues of: products or services, promotion and customers. Some specific dos and donts are given with regard to products, market penetration, advertising Promotion, prices and the treatment of customers, employees and suppliers.

International marketer needs knowledge of ethics, values and customs (and laws) of host markets as well as home market.

Applying ethics in international marketing

Ethical issues currently receiving increased attention:

Promotion and sales of goods to children Misleading advertisements and pressure tactics

Procurement of goods involving child labour, unfair treatment of workers, damage to the environment
Other issues, such as concerns over high executive pay in some countries Best practice for a company is usually to follow the highest ethical standards of host country and home country (but conflicts still may arise)

Social responsibility and the business environment

Reasons for:
Businesses must respond to changes in society and its demands/expectations. 2. Profit maximization in the long run requires a socially and physically healthy environment. 3. It was necessary to do so in order to avoid increasing government regulation. 4. It would provide a better corporate image, with benefits in the ability to attract better employees, increased sales, improved access to capital, and improved stock performance.
1.

Social responsibility and the business environment

Reasons against:
1.

It would reduce the companys ability to meet its primary objective of maximizing profits to stockholders It would place individual business leaders in the position of personally making non business-related decisions about spending corporate money. And the whole concept is fuzzy.

2.

3.

Social responsibility and the business environment

Views of the proper goals for business vary among countries (e.g. Britain and the US focus more on returns to stockholders, Europe focuses more on responsibilities to society as a whole). Even in US, more is expected from businesses than profit maximization. Overall tendency in most countries is to expect and/or demand a higher level of social responsibility

The stakeholder concept

Stakeholders are those individuals or organizations with some interest in the activities of a business. Owners rights have been widely recognized in market economies. Other stakeholders with legal and moral rights include employees, customers, suppliers and governmental bodies. Secondary stakeholders include competitors and special interest groups. Effects on the environment are receiving much greater attention. Institutional investors are becoming more active and influential, especially in the US.

Changing views of social responsibility

Strong tendency for society to demand that companies act with concern for overall social and environmental needs. Many large western European, US and Canadian companies have developed codes of ethical conduct and/or social responsibility US companies lead the way in corporate giving; in Europe, where the government plays a more central role, companies give less; in Japan, there is no tradition of corporate giving and businesses focus more on protecting the company and its employees.

Effects on the political/legal environment

Issues related to social responsibility may result in changes in the political-legal environment.

Occurs when some group:

(a) identifies a problem/issue and need for change; (b) develops support and

(c) obtains legislative or administrative support

Effects on the political/legal environment

Environmental issues have been pushed to the forefront by global warming and degradation of the environment

Outsourcing of jobs, now affecting more workers and a broader range of jobs, is one of these

Executive compensation, especially in the US and UK, has become a matter of greater concern

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