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Ethical Dilemmas & Marketing
Ethical dilemmas in international marketing
Background of Marketing Ethics
Ethical Issues in Marketing
Modern Debate in Stakeholder Theory
Ethics in Marketing
Ethical dilemmas in international marketing
Humanity has long struggled with the question of what constitutes ethical behavior. The answer to this question has not always been simple or easy especially in the midst of conflicting interests. Businesses desire and need to sell products to consumers but serious issues arise regarding the methods and effects of such marketing activities. This research paper is aimed at exploring the ethical dilemmas in international marketing by using previous studies as well as a detail discussion of different theories related to business and marketing ethics.
Background of Marketing Ethics
Business ethics awareness has increased greatly since the 1990s. A 1994 study of Fortune 500 industrials and 500 service corporations examined how these 1,000 U.S. companies incorporated ethics into their corporate policies, structure, activities, and personnel. It was found that 98% of the firms claimed to address issues of ethics and conduct in some kind of formal document. Of the 98%, 67% did so through regular policy manuals, and 78% did so through separate codes of ethics (Weaver, Trevino, & Cochran, 1999a, p. 285). Moreover, recent corporate scandals in America such as Enron, Worldcom, and Martha Stewart have increased public concern for ethical business activities (Byrne, 2002). Ethics awareness is increasing not only in America but in other countries as well. Asian countries after the 1997 financial crisis, and European countries fraught with financial scandals and bribery, asl have an interest in cleaning up the ethics of their business practices (Carrol & Meeks, 1999; Kwon, 2000; Spence, 2000).
In today's global markets, businesses are not limited to an own local region. In search of low labor costs, low cost of raw materials, and large untapped markets, businesses are looking to move into foreign countries, particularly less industrialized countries where these three conditions exist.
Increasingly, scholars and experts watch corporate business ethical performance, measuring variables such as corruption, bribery, integrity, and community volunteerism. In published journal articles and media broadcasts, business scandals and other poor business practices are gaining greater prominence, and corruption watch is gaining international scope. However, Transparency International (TI) currently considers itself to be the only global nongovernmental and nonprofit organization devoted to curbing corruption globally. Oncer per year, TI publishes Corruption Perceptions Index (CPI), which assigns a CPI number to each country and ranks all the countries based on this score. The score ranges from 0 (high corrupt) to 10(high clean), and indicates the country's degree of corruption as perceived by business and risk analysts.
Ethical Issues in Marketing
Marketers and manufacturers have typically faced two issues relating to products marketed and directly sold to customers - potentially harmful products and age appropriateness. Products that were potentially harmful may contributed to either negative behaviors or to poor health. Products may also be marketed towards consumers that are not appropriate for their age group. Some of the negative behaviors that were linked to direct marketing include sexuality, violence, and materialism.
The field of consumer psychology has been represented academically by the Society for Consumer Psychology which is Division 23 of the APA. According to the society's website, "Consumer psychology employs theoretical psychological approaches to understanding consumers" ("Society for Consumer Psychology Culture and Values," n.d.). Their publication, Journal of Consumer Research, has often published articles which discussed the application of psychology for the purpose of understanding children and adolescent consumer behavior (Kramer, 2006). Considerable attention in this publication has been given for brand recognition and often how to curb brand conscientiousness in children. Another journal dedicated to consumer psychology is the Journal of Consumer Research which "publishes scholarly research that describes and explains consumer behavior. Empirical, theoretical, and methodological articles spanning fields such as psychology, marketing, human communications, sociology, economics, and anthropology are featured" ("Journal of Consumer Research Description," 2009). Published by the University of Chicago Press, this journal features articles that apply psychological techniques to marketing issues and practices.
Businesses have significant financial interests in identifying ethical issues involving marketing. When industries fail to recognize and respond to perceived threats to consumers from business, regulation often follows. Consider the current worldwide childhood obesity crisis. Mueller (2007) stated that "Governments and health advocates worldwide are cracking down on the marketing tactics they blame for the explosion in childhood obesity" (p. 562). Velasquez (2006) concurred stating that customers will turn against a company if they perceive a "gross injustice" in its business practices (p. 40). Poor ethics represents a liability to the firm that may lead to increased government regulation, decreased customer loyalty, and an overall decline in public perception. This dynamic between unethical business practices and reciprocation increases in magnitude when consumers are involved.
Modern Debate in Stakeholder Theory
Based on all definitions of a stakeholder, customers are regarded as vital entities and must be considered in a business's strategic decisions. Stakeholder theory has its origins as a disruptive theory challenging the established view that the company's supreme role is to maximize shareholder wealth as articulated most famously by Milton Friedman (1962). Friedman contended that the primary function of managers was to maximize shareholder wealth. Shareholder theory became epitomized by Friedman's famous quote:
"There is one and only one social responsibility of business -- to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud." (1962, p. 133).
This view remained entrenched in finance and economic classrooms and textbooks. However the competing stakeholder theory has been altered by supporters and attacked by critics. In 2003 Phillips, et al. (2003) offered "What Stakeholder Theory is Not" in response to the philosophical expansion of stakeholder theory. They defined stakeholder theory as "a theory of organizational management and ethics" (p. 480) and thus linked stakeholder theory to business ethics as primarily concerned with moral issues. Stakeholder theory was not designed to provide businesses with specific guidelines on how exactly to manage stakeholder interests since it would be impossible to form one model for all businesses given the variety of organization. Stakeholder theory was not intended to argue for the equal distribution of the firm's wealth (p. 486). Phillips, et al. (2003) argue that stakeholder theory is consistent with the goal of value maximization but this was different than maximizing shareholder wealth and that "an organization that is managed for stakeholders will distribute the fruits of organizational success (and failure) among all legitimate stakeholders" (p. 486).
This debate between shareholder and stakeholder theories was summarized effectively by H.Smith (2003) who stated that "the fundamental distinction is that the stakeholder theory demands that interests of all stakeholders be considered even if it reduces the company profitability" (p. 86). Smith effectively argues that both theories are often misrepresented by claiming shareholder theory encourages profits at all costs and stakeholder theory ignores the need for profit. Presented with competing theories, business leaders are forced to decide whose interests to further. While it may often be argued that both theories converge, this is not always the case. Enron served as a rallying cry for stakeholder theory and yet it was also clear that the corruption that destroyed the organization certainly did not maximize shareholder wealth when Enron's stock became worthless. However, Smith demonstrated that given a situation where a firm must decide to outsource labor or not, stakeholder and shareholder perspectives would generate different results. But the central point of contention has always been exactly how to distribute the wealth. Should wealth primarily be distributed to the owners of the firm under a shareholder perspective or distributed to other stakeholders? This serves also as the philosophical battleground pitting Rawlsian concepts of fairness and distributive justice against the rights of owners to maximize their own investments within the boundaries of law and ethics.
The expanse of the stakeholder web to include a myriad of groups and organizations coincided with the philosophical expansion by many to a Rawlsian view of distributive justice. O.C. And Linda Ferrell (2008) directly applied Rawl's (1971) "Difference Principle" which argues that inequality is permissible only if it is to everyone's advantage (Thiroux & Krasemann, 2009). Ferrell and Ferrell posited that
"The difference principle is connected to this discussion of stakeholder orientation in that it provides an ethical rationale for the problem of why organizations are obligated to consider claims of secondary stakeholders such as competitors, special interests groups, and vulnerable consumers such as children and the elderly." (p. 29)
Thus, the original admonition to recognize various stakeholder interests was transformed into an obligation. The argument is further made that "a stakeholder orientation utilizing DJ [distributive justice] principles can have an impact, one organization at a time, in the marketing system and in society" (p. 31). The desired impact in this case was to correct flaws in the market system which…[continue]
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