Product ethical management

University Degree Business and Administrative studies

Introduction:

In recent years, the pursuit of profit and winning competition has been seen as the most important aim in people’s career. It’s therefore not surprising that some people view ethical principles as secondary in importance to financial success. As a result, business scandals happen over and over again in the modern society. Such ‘ethical marketing’ in the midst of these scandals is criticized by a sceptical public because ‘ethics’ should be integrated into the process of management decision making. Ethic marketing includes practices that emphasize transparent, trustworthy, and responsible personal and/or organizational marketing policies and actions that exhibit integrity as well as fairness to consumers and other stakeholders. Murphy et al., (2005) argue that to be an ethical organisation, ethical theories and reasoning should be used as a foundation for managerial decision-making. Among the three ethical reasoning, consequences, duties and virtue, duties are seen as most prevalent as applied in the product management ethics area. However, Murphy (2005) and others (Grant 2007; Peattie 1992) with regard to green marketing believe an ethic should be more than rhetoric. Therefore the implementation is crucial in ethical marketing. As a result, the implement approaches will be suggested in part B. With this, value statement and ethical auditing in marketing will be deliberated.

Part A

In , a product is anything that can be offered to a that might satisfy a want or need. (From Wikipedia). There are several major ethic issues in product management area, e.g. some having legal implications, e.g. product safety and product counterfeiting; some concerns more about corporate social responsibility, e.g. socially and environmentally harmful products.

Murphy (2005) suggests that marketing ethics is the systematic study of how moral standards are applied to marketing decisions, behaviours, and institutions.

To evaluate whether a corporation is ethical or not, we’d better start from stakeholder perspective. The stakeholder approach looks at various groups to which the corporation has responsibilities. A stakeholder in an organisation is … any group or individual who can affect or is affected by the achievement of the organisation’s objectives. (Murphy, P.E. et al 2005). The primary stakeholders have a formal, official, or contractual relationship with the firm, e.g. customers, shareholders, employees, et al, primary stakeholders is also classified as traditional stakeholders by Crane, A and Matten, D ( 2004). In the product safety area, it relates more to consumers, which is the primary stakeholder. A typical example might be the toy manufactures, because they are providing products for the vulnerable group, children. As a result they should be more careful about their products. A record of 112 recalls of toys and other products geared for children issued in 2007. Extremely high lead content was the reason. Children are the most susceptible to lead poisoning, which can cause learning and behavioral disorders, as well as illnesses and even death. Congress generated considerable publicity this summer when it passed a law regulating the lead content of toys and other children’s products. (Toy safety still an issue, Nov 27, 2008) Besides the codified responsibility, including warranties, product liability law, and some federal agencies having responsibility for product safety, corporate should show more concern on consumer’s safety. However, Staelin (1979) criticised that only 20 percent consumer injury can be related to defective or poor product design which could be addressed by product safety regulation. (Reid, I.D and Preusser, D.F, 1983) From corporation’s view, it’s not only their responsibility but also that of the whole society. Staelin (1979) suggests that government should spend more on public education to avoid product injury.

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The primary ethics approach applied in product management is a duty-based theory called deontology. This theory stems from fundamental obligations which decide certain actions are correct in and of themselves. Intentions or motivations then determine whether a marketing decision is ethical or unethical. Immanuel Kant (cited in Murphy, P.E. et al 2005) suggests the formulation that there are universal moral standards. E.g. Copying patented products, inventions and brands without permission or legal contract is not tolerated by moral. Since, it costs millions for developing a brand or patented products; the theft from other organisations is unethical. Another formulation is concerned to encourage companies to treat all stakeholders as people. In another words, organizations should never treat stakeholders such as customers, employees, etc. as means, or manipulating their behaviour to attain company goals. The most controversial product may be cigarettes. Cigarettes are different from alcohol where the negative impact generally occurs with abuse or misuse. Both the smoker and the second hand smoker will be affected in health. Murphy (2005) points out that the U.S. Public Health Service estimates cigarette-related deaths in this country at about 350,000 per year. Direct medical costs resulting from smoking related illness are as high as $22 billion a year, excluding second hand smoke effect. Society has the duty to interdict when a company failed to meet its obligation. Therefore, the advertising ban has been adopted in many countries. Canada, Sweden, New Zealand, and, most recently, the European Union have comprehensive promotional restrictions, and the United Kingdom has now banned all cigarette advertising. (Murphy, 2005, pp.93) It’s manufacture’s duty not to harm others. Although, those manufactures meet the duty to inform, e.g. showing the warning labels on cigarette package. It’s still controversial that should cigarettes manufactures encourage consumers smoking or not harm them from humanity concern.

Although duty-based theory is widely applied in ethics marketing, it is still controversial. The universal rules are challenged by the following conditions. There are always contingencies that seem to complicate real-world situations. We can say directly that product counterfeiting and black marketing cannot be tolerated by the market and is wrong. However, the judgement on this ‘gray market’, which is also called parallel importing, is quite difficult. Gray marketing involves the selling of trademarked goods through channels of distribution that are not authorized by the trademark holders (Duhan and Sheffet, 1998, p. 76) The practice of parallel importing represents an uneasy balance between the protection of intellectual property rights such as trademark and patent rights and the liberalization of trade in goods and services promoted by organizations such at the World Trade Organization (e.g. Bronckers, 1988). Much of the debate in the academic literature centres on whether parallel importing is a legitimate response to discriminatory pricing strategies or a free rider problem (see, e.g. Malueg and Schwartz, 1994). Thus, from the brand owner’s view, parallel importer may damage their reputation, without providing after sale service, as while as share the benefit from advertising by original manufactures, etc. All above shows unfair to brand owners. However, parallel importers actually bring some benefit for consumers. Customers gain good quality merchandise with less money. It has been criticised that brand owners are charging an unreasonable price, which customers can’t afford. Thus, in this situation, the universal theory doesn’t work well. (Eagle, L, et al 2003)

Additionally, there may not be a mechanism for resolving conflicts among two absolute moral duties. Just as the cigarettes cased mentioned, managers clearly have a fiduciary responsibility to their shareholders and a duty not to harm others. Which trade-off should be taken? There is no absolute right answer at least nowadays.

Part B

After companies realize the reasons for ethics, how to incorporate the ethical dimension into their marketing decision making process is crucial. Formal corporate policies and audit are useful avenues to install ethical values into marketing organisation, especially in product management ethics.

Murphy (2005) suggests that corporate ethics statement is prevalent used because it is a public manifestation of organisational commitment to ethics. Thus, it is has a significant influence on implementing ethics. Among the four types of ethics statements: corporate credos, codes of ethics, value statements and Internet privacy policy, value statement contributes more to product management. Usually, companies set out their corporate values refer to quality, customer, and a range of employee issues. However, Murphy, P.E et al (2005) believe customer commitment/ focus should be the dominant moral value driving marketing organisations. Value-statements are intended to set out the guiding principles of the firm and they often stem from the company’s mission and give direction to it. Hanna Anderson, an American clothing company producing mainly on children’s wear sets the value statement ‘Soft quality for kids and families, inspired by our Swedish heritage’. The Swedish tradition of ‘choosing the best quality she could find – and using things for a long, long time!’ taught by founder’s grandmother Hanna Anderson has been kept until now. “What started as a passion for beautiful quality in children's clothing has grown up into an inspiration that guides the comfort and quality of everything we make.” () Hanna Anderson’s value statement is more than the quality of products; it shows its care and commitment to consumers. Although value statement is not explicit ethic statement, it reveals claims about the company’s fundamental principles such as integrity, commitment, etc. Thus these principles will guide the organisation do right decision.

Besides the general commitment, there is another practical tool for implementation ethics that is ‘audit’. An ethical audit for marketing gauges the ethical health of the marketing department and its activities. Murphy (2005) suggests that “all major marketing decisions should be evaluated through and orderly sequence of steps in an objective fashion every few years”. Philosophical, functional, compliance audits directly relate to product management ethics. The philosophical approach involves asking questions about the duties to stakeholders in a marketing decision and about whether the decision violates any written or unwritten obligations to these parties. If manufactures keep on asking whether they violate the obligations to users or not, then the quality of products can be guaranteed.

Functional auditing pertains to the functional decisions that marketing manager make in devising and implementing marketing strategies. A battery of questions concerned in marketing mix is raised. There are questions relate to the core product and the product offer. E.g. does the label contain adequate amounts of information for safe consumer use?

Compliance audit focuses on questions dealing with codes and other formal policies. A recent study conducted by Williamson et al (2006)

confirms that environmental regulation leads to better environmental procedures and practices. The main reason may be the penalties for non-compliance so that those who disregard the environment cannot obtain an

economic advantage. To meet the specific requirements of legislation, formal policies and procedures have to be established within organizations to improve environmental outcomes. (Gadenne, D.L, et al, 2009) For example, ‘Is there consistent enforcement of standards and punishments in the organisation?’ is posed in the ethical compliance audit organisational questions mentioned by Murphy, P.E et al (2005). Small and medium sized organisation may also be required to be ISO14000 compliant in order to be considered as suppliers to other organizations.

To make sure the ethical audit is practically useful; there are certain issues suggested by Mulphy, (2005) to concern. The easiest way to employ our ethical audit is to compile the ‘yes’ and ‘no’ answers and calculate the percentage. If the final percentage of yes falls below 70 percent, the company should review the ethics of its marketing. It is realized that no firm is perfect, there are undoubtedly area that companies need to improve. The purpose of ethics auditing is point out questions for companies to concern.

Additionally, the auditing questionnaire should be answered by more than one person. That is the answer should be generally collected in the company, in the purpose of accurate. Another concern is that the questionnaire should be conducted every year or two. A regular check can help reflect the truth. (Mulphy, 2005)

Conclusion:

Product ethical management is a crucial issue for the public to concern, because everyone is a consumer. There are varieties of products exist in market from satisfying our substantial needs such as foods, clothes to our spiritual needs e.g. books, computers, and even the invisible products e.g. patents, brands. No matter from the stakeholder’s view or the duty based frame, manufactures should be responsible for consumers. To help companies complement well on product ethical management, companies set value statement to guide their activities. In addition, they should check if their activities follow the auditing questionnaires regularly. The purpose of auditing is for companies to find out existing problems and solve them.

Reference:

cited 28/11/08

Reid, I.D and Preusser, D.F. Academy of Marketing Science Journal, ‘The impact of alternative consumer education strategies on safety knowledge and behaviour’ Greenvale: Fall 1983. Vol. 11, Iss. 4; p. 382

Goldberg, Marvin E ; Why New Tobacco “Harm-Reduction” Products Should Be Regulated. Fall2008, Vol. 27 Issue 2, p182-186, 5p

Toy safety still an issue, Nov 27, 2008 cited 28/11/08

Lynne Eagle, Philip J Kitchen, Lawrence Rose, Brendan Moyle, ‘Brand equity and brand vulnerability : the impact of gray marking/ parallel importing on brand equity and value’ European Journal of Marketing. Bradford: 2003. Vol. 37, Iss. 10; p. 1332

David L Gadenne, Jessica Kennedy, Catherine McKeiver. ‘’ Journal of Business Ethics. Dordrecht: Jan 2009. Vol. 84, Iss. 1; p. 45

Grant, J (2007) The green marketing manifesto West Sussex Wiley.

Peattie, K (1992) Green Marketing London: Pitman.

Murphy, P.E, Laczniak, G.R, Bowie, N.E, and Klein, T.A, Ethical Marketing, 2005, Pearson, Prentice Hall.