Baines2e ch20

The New Generation Marketing Text!
Learning Outcomes
Define sustainability marketing and its implications for marketing
practice.
Define the term ethics and apply the discipline to marketing.

Explain the common ethical norms applied in marketing.
Describe the role of ethics in marketing decision-making.
Analyse situations to determine the kind of ethical approaches that
might be adopted.
Recognize how to apply an understanding of ethics to a companys

marketing programme.
Marketing: Asian Edition
Oxford University Press 2013. All rights reserved
Case Insight DLF Ltd

DLF Ltd, the largest real estate developer in
India, attributes its success to stakeholders
satisfaction, resulting from CSR initiatives,

manifested more precisely through customerled ethical policy and community-led CSR
efforts.
Do you think DLF will be able to continue to

differentiate themselves from other emerging
market leaders in the realty sector, using
corporate social responsibility initiatives?
Sustainable Marketing
Sustainable marketing is an attempt to broaden the concept of
marketing, beyond simple economic development. It introduces
the
concepts of the three Es of sustainability as outlined below:
1.
2.
3.
ecologicalmarketing should not negatively impact upon the

environment;
equitablemarketing should not allow or promote
inequitable social practices; and
economicmarketing should encourage long-term economic
development as opposed to short-term economic
development (as we have seen in the late 2000s with the
global credit crunch arising as a result of poor financial
regulation in world financial services markets).
Some Unsustainable Marketing

Practice
1984: Union Carbide and Bhopal - In 1989, Union Carbide and Union Carbide India
Limited (UCIL) eventually settled all claims arising from the incident with the Indian
government for US$470 million, although victims are still seeking compensation from
the Indian government (Sen and Egelhoff, 1991; Kumar, 2004).
1989: The Exxon Valdez affair Exxons Valdez oil tanker accidentally dumped 10.8m
gallons (approx. 42 litres) of crude oil in the waters around the Alaskan coastline.
Exxon is still appealing against a $4.5billion punitive fine placed on it in a federal
court trial in 1994 (Bayne, 2005).
1997: Nikes alleged tolerance of the use of sweatshops by its suppliers in Asia, often
with the use of child labour in hazardous conditions, for the production of its sporting
goods prompted media uproar and forced it to sign a high profile Code of Conduct on
global employment practices in 1997 (Usborne, 1997).
Some Unsustainable
Marketing Practice
2001: Enron improper financial accounting, including inflated turnover
claims filed to the Securities and Exchange Commission, and fraudulent
practices, resulted in convictions for insider trading and securities fraud
against senior employees, and led to the collapse of a Fortune 500 company
and its auditor, Arthur Andersen (Swartz and Watkins, 2003).
2008: Sanlu (and other Chinese milk manufacturers) a major scandal

occurred when Chinas largest milk producer, and many others in the industry,
were found to have added melamine to milk to increase its protein content
causing sickness in 300,000 infants and 6 deaths.
Corporate Social
Responsibility
The rationale for developing CSR initiatives irrespective of their
financial contribution is based on the following ideas (Buchholz,
1991: 19):
*
*
*
*
*
Corporations have responsibilities that go beyond the production

of goods and services at a profit.
These responsibilities involve helping to solve important social
problems, especially those that they have helped to create.
Corporations have a broader constituency than shareholders alone.
Corporations have impacts that go beyond simple marketplace
transactions.
Corporations serve a wider range of human values than can be
captured by a sole focus on economic values.
Drivers for Ethical Marketing
An increasing belief that corporate social responsibility leads to

increased business performance.
Government legislation, e.g. the American Sarbanes-Oxley Act 2002,

which set up an oversight board for the US accounting profession,
strengthened auditor independence rules, increased accountability
of officers and directors of companies, enhanced the timeliness and
quality of finance reports of public companies, and placed
restrictions on the selling of shares in certain situations.
The increase in global trade and the rise of the multinational

company with cross-country trade, particularly in developing
countries.
The rise of 24-7 global media companies with the potential to

damage corporate reputations around the world.
Increasing recognition and belief that climate change is affected by

industrial activity and modern lifestyle choices.
Definition of Ethics
The science of morals, the department of study concerned

with the principles of human duty.
The moral principles or system of a particular leader or

school of thought.
The whole field of moral science, including the science of
law whether civil, political, or international.*
* Oxford English Dictionary
Types of Ethics
Normative ethics concerned with the rational enquiry into

standards of right and wrong (i.e. norms), good or bad, in respect
of character and conduct and which ought to be accepted by a
class of individuals.
Social or religious ethics concerned with what is right and wrong,

good and bad, in respect of character and conduct. Makes an
implicit claim to general allegiance to something (e.g. God).
Positive morality Knowledge that is generally adhered to by a

social group of individuals, concerning what is right and wrong,
good and bad, in respect of character and conduct.
Descriptive ethics the study of the system of beliefs and practices

of a social group from outside that group.
Metaethics a form of philosophical enquiry which treats ethical

concepts and beliefs systems as objects of philosophical enquiry in
themselves.
Ethical Norms in Marketing

Decision-Making
The Chartered Institute of Marketing, the worlds largest member-based

marketing organization, requires its members to (CIM, 2005):
demonstrate integrity, bringing credit to the profession of marketing;

be fair and equitable towards other marketing professionals;
be honest in dealing with customers, clients, employers, and employees;
avoid the dissemination of false or misleading information;

demonstrate current knowledge of the latest developments and show
competence in their application;
avoid conflicts of interest and commitment to maintaining impartiality;
treat sensitive information with complete confidence;
negotiate business in a professional and ethical manner;
demonstrate knowledge and observation of the requirements of other
(professions) codes of practice;
demonstrate due diligence in using third-party endorsement, which must have
prior approval; and
comply with the governing laws of the relevant country concerned.
Marketing Ethics Defined
The analysis and application of moral

principles to marketing decision making
and the outcomes of these decisions.
Normative Approaches in
Ethical Decision-Making
Moral Virtues Applied to

Companies
Determining Whether An Action

is Ethical
Early attempts to devise frameworks of how to act ethically involved asking
ourselves reflective questions as follows (Laczniak and Murphy, 1993):
Does the contemplated action violate the law (legal test)?

Is this action contrary to widely accepted moral obligations (duties test)?
Does the proposed action violate any other special obligations that stem from the type
of marketing organization in focus (special obligations test)?
Is the intent of the contemplated action harmful (motives test)?

Is it likely that any major damage to people or organizations will result from the
contemplated action (consequences test)?
Is there a satisfactory alternative action that produces equal or greater benefits to the
parties affected than the proposed action (utilitarian test)?
Does the contemplated action infringe on property rights, privacy rights, or the
inalienable rights of the consumer (rights test)?
Does the proposed action leave another person or group less well off? Is this person or
group already a member of a relatively underprivileged class (justice test)?
Contingency Model of Ethical

Decision-Making
Source: Reprinted from Journal of Marketing, published by American Marketing Association. Ferrell
and Gresham (1985)
Distribution Management and

Ethics
*
Collusionin the late 1990s, Italian Antitrust authorities (IAA) found its two largest
dairy producers Consorzo del Grana Padano (CGP) and Consorzo del Parmigiano Reggiano
(CPR) guilty of operating strict production quotas designed to effectively co-manage
each others market share (Braga and Nardella, 2003).
Abuse of monopoly statusin March 2004, the European Union levied a half-billioneuro fine against Microsoft, the American software giant, for abusing its near
monopoly status. The EU anti-competition authority called for Microsoft to offer a
version of Windows that did not contain its digital media player within three months,
and to release a complete and accurate interface code to other software companies
to ensure interoperability between competitor companies (Deutsche-Welle, 2004).
Exploitation of supply chain partnersa well-known example in Western markets is

that taking place between supermarkets and their suppliers, particularly those
supplying multinational supermarket groups. European countries have brought in
legislation to stop supermarkets from wielding excessive power. For instance, in France
the Chtel Act replaced the Loi Galland, which forbade supermarkets to charge socalled listing fees. The new act strengthens legislation to stop supermarkets selling at
below-cost prices and is aimed at increasing competition in the sector. All discounts and
services provided by the distributor to the supplier now require stipulation upfront in an
annual agreement (see Boutin and Guerrero, 2008).
Ethics: The Use of Shock

Appeals
*(When) is it ethical, even in
political advertising, to use
advertising approaches like
this? (see opposite).
*What, if any, are the long
term implications of using

negative advertising in
political campaigning?
Ethics: Marketing to Children

Children are more exposed to marketing
than before and parents increasingly feel
that they are losing control of the
marketing directed at their children.
Parents are particularly concerned about

the marketing channels such as the
internet and mobile phones, which can
target their children directly.
Inappropriate
marketing to children
damages the brand, making it less likely
that you will get past the parent as
gatekeeper.
More appropriate marketing methods are

those that are informative and help
parents to feel more in control.
Ethics: Defective Products and

Recall I
Pertinent examples of defective products causing death, injury, and
inconvenience
include the following examples:
1. Thalidomide, a tranquillizer administered to pregnant women, sold in the UK,

under the brand name Distaval, by Distillers (Biochemicals) Limited. The drug
caused limb deformity and death in around 10,000 babies throughout the
world. The drug was withdrawn in 1961 but Diageo plc retains the moral
responsibility to fund the Thalidomide Trust (until 2022), which makes
compensation payments to Thalidomide victims in the UK.
2. Coca-Cola, the American global beverage manufacturer, was forced to recall
2.5m bottles of Coca-Cola, Coca-Cola Light, Fanta, and Sprite in Belgium when
bottles of the product were found to be contaminated with defective carbon
dioxide and/or pesticide, resulting in the hospitalization of 100 children
(Campbell,1999).
3. Dell was forced to recall 4.1m laptops of its notebook computers because its
laptop batteries, manufactured by Sony, posed a fi re risk. After other
computer manufacturers such as Apple were also forced to recall the batteries,
Sonys profi ts dived 94% in 2006 as they struggled to cope with the recall and
the delayed launch of their PS3 console (Simmons,2006)
4. Toyota had recalled 8,700 units of its premium sedan Corolla Altis and Camry
in India to rectify faulty power window switches as part of a global exercise.
Ethics: Defective Products and

Recall II
Determining when to recall products is a difficult ethical problem.
Where a risk of injury is likely, a product should be recalled. This
might
occur when:
1.
2.
3.
4.
a serious consumer illness or injury is caused by the

contamination of products;
there are similar complaints of illness or injury that apply to a
specific product;
a design or manufacturing failure could result in potential harm
to consumers; or
there is defective product labelling that could result in potential
harm to consumers; or where a product has been tampered with.
Price Discrimination
Ayutthaya Historical
City
operates
a
discriminatory pricing
policy for Thai and
non-Thai
nationals.
Locals pay 10 Baht,
foreigners pay 30
Baht
Source: Ning Baines
International Marketing Ethics

Cultural Relativism versus Universalism - some cultures seem less
likely than others to perceive ethical dilemmas. Under one
perspective, ethicists suggest that universal codes of practice in
ethics should exist because there are some things which are simply
wrong no matter what the colour or creed of the people concerned
(e.g. murder, bribery, extortion). The opposite argument suggests
that different groups legitimately consider ethical situations from
different viewpoints and that there is nothing wrong with this (e.g.
gifts, corporate entertainment).
Micro-cultural differences do seem to have a big impact on

perceived ethical problems, according to a study of the
Javenese, Batak, and Indonesian-Chinese managers in
Indonesia (Sarwono and Armstrong, 2001). Each subculture
responded differently to situations with ethical content.
Universalism/Relativism in
Marketing Ethics
A study of marketing ethics in Korea, Kim and Chun
(2003) found that Koreans perceived the seriousness of

ethical problems in order of importance as follows:
1. bribery
2. unfair price increases
3. exaggerated advertising
4. sexual discrimination
CSR Initiatives
CSR initiatives incorporate the following features:
1. Corporations have responsibilities that go beyond the production

2.
3.
4.
5.
of goods and services at a profit.

These responsibilities involve helping to solve important social
problems, especially those that they have helped to create.
Corporations have a broader constituency than stockholders
[shareholders] alone.
Corporations have impacts that go beyond simple market-place
transactions.
Corporations serve a wider range of human values than can be
captured by a sole focus on economic values (Buchholz,
1991:19).
Summary
Defined sustainable marketing and its implications for marketing
practice.
Defined the term ethics and applied the discipline to marketing.

Explained the common ethical norms applied in marketing.
Described the role of ethics in marketing decision-making.
Analysed situations to determine the kind of ethical approaches that

might be adopted.
Recognized how to apply an understanding of ethics to a companys

marketing programmes.

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The New Generation Marketing Text!

Define the term ethics and apply the discipline to marketing.

Recognize how to apply an understanding of ethics to a companys

Oxford University Press 2013. All rights reserved

The New Generation Marketing Text!

Case Insight DLF Ltd

satisfaction, resulting from CSR initiatives,

Do you think DLF will be able to continue to

Marketing: Asian Edition

Oxford University Press 2013. All rights reserved

The New Generation Marketing Text!

ecologicalmarketing should not negatively impact upon the

Marketing: Asian Edition

Oxford University Press 2013. All rights reserved

The New Generation Marketing Text!

Some Unsustainable Marketing

Oxford University Press 2013. All rights reserved

The New Generation Marketing Text!

2008: Sanlu (and other Chinese milk manufacturers) a major scandal

Marketing: Asian Edition

Oxford University Press 2013. All rights reserved

The New Generation Marketing Text!

Corporations have responsibilities that go beyond the production

Marketing: Asian Edition

Oxford University Press 2013. All rights reserved

The New Generation Marketing Text!

Drivers for Ethical Marketing

An increasing belief that corporate social responsibility leads to

Government legislation, e.g. the American Sarbanes-Oxley Act 2002,

The increase in global trade and the rise of the multinational

The rise of 24-7 global media companies with the potential to

Increasing recognition and belief that climate change is affected by

Marketing: Asian Edition

Oxford University Press 2013. All rights reserved

The New Generation Marketing Text!

The science of morals, the department of study concerned

The moral principles or system of a particular leader or

The whole field of moral science, including the science of

law whether civil, political, or international.*

* Oxford English Dictionary

Marketing: Asian Edition

Oxford University Press 2013. All rights reserved

The New Generation Marketing Text!

Normative ethics concerned with the rational enquiry into

Social or religious ethics concerned with what is right and wrong,

Positive morality Knowledge that is generally adhered to by a

Descriptive ethics the study of the system of beliefs and practices

Metaethics a form of philosophical enquiry which treats ethical

Marketing: Asian Edition

Oxford University Press 2013. All rights reserved

The New Generation Marketing Text!

Ethical Norms in Marketing

The Chartered Institute of Marketing, the worlds largest member-based

demonstrate integrity, bringing credit to the profession of marketing;

avoid the dissemination of false or misleading information;

Marketing: Asian Edition

Oxford University Press 2013. All rights reserved

The New Generation Marketing Text!

Marketing Ethics Defined

The analysis and application of moral

Marketing: Asian Edition

Oxford University Press 2013. All rights reserved