Diploma In Management Studies 2nd Year

MANAGEMENT ETHICS

MANAGEMENT ETHICS AND THE PRODUCT ASPECT OF MARKETING

The consumer rights movement is placing marketing in a new ethical perspective. These rights demand greater attention and concern on the marketing side towards product, price, place and promotion

Compiled by Marouska Chetcuti 303781 M

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1.1 What is Business Ethics?

Ethics basically involve learning what is right or wrong and then doing the right thing. Some people say the right thing is based on the moral principle. Others believe that the right thing depends on the situation. At the end of the day, doing the right thing depends solely on the individual. In reality, identifying and doing what is right is not as easy as it may seem. In this day and age, the demand for more ethical business processes and actions is constantly increasing. The concept of business ethics examines ethical principles or moral and ethical problems that can arise in a business environment. It includes ethical issues concerning relations between different companies, as well as moral issues between the company and the shareholders. The ethical code mainly covers Personal behaviour for example when dealing with customers Corporate behaviour for example when negotiating deals Behaviour towards society for example when recruiting new Behaviour on the environment for example when deciding on and suppliers

employees the process of production A business has to ensure that the firms main goals are in line with the ethical and moral principles. Corporate Social Responsibility is a concept which mainly implies the ethical rights and duties existing between the company and the society. Business ethics is considered a management discipline, especially since the start of the social responsibility movement during the 1960s. At the time, social awareness movements raised

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expectations of businesses to use their financial and social influence to address social problems such as poverty, crime, environmental protection, equal rights, public health and improving education. People stated that because businesses were making a profit from using the country's resources, these businesses had the duty to work in order to improve society. By time, organisations have realised that the aim of managing an organisation is not just making profit. There is much more to it since the organisation is not just the building, but it consists of a group of people who are striving together to achieve a common goal. They also have to deal with the environment around them. That is why, nowadays, many organisations have replaced the term stock holder with stake holder, in order to include the employees, companies, suppliers and the wider community by which the organisation is surrounded. Ethics in the workplace can be divided according to the specific functional areas of the organisation. The following are some of the categories Ethics of Accounting Ethics of Human Resources Management Ethics of Sales and Marketing Ethics of Production Ethics of Intellectual Property, Knowledge and Skills Ethics in Health and Safety

1.2 Marketing
Marketing is an ongoing process with regards to planning and dealing with the marketing mix. Marketing involves selling, advertising and

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distribution. It also includes identifying what the customer really needs and forecasting future demands through the use of market research. In a few words, marketing is creating a product that reflects what the customer wants and which will attract customers to buy it. Thus marketing will guarantee success to the organisation.

When marketing a product, firms need to create a successful mix of The right product Sold at the right price In the right place Using the right promotion

Product A product or service which is offered to the customers which should have the right features. Product includes packaging and branding of the product or service offered. The organisation should offer an attractive and innovative product that is eye catching and appealing to the customers. In this way the organisation can reach a wider range of customers and increases the chance to enlarge its market share. Price The product should be sold at an acceptable price to the customer. It is useless setting a price which the target customers cannot afford, or which does not equal the value of the product or service offered. On the other hand, it is not just to under price the product, thus leading to the malfunctioning of the organisation. The price of the product or service offered should be set in a just and equitable way that reflects the value the customer will get from the product or service.

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Place The product or service offered should be in the right place and at the right time. Place represents the location where the product or service can be purchased. The organisation has to ensure that the product or service offered is available when the customers request it. It is useless spending money in promoting a product which is not available for the customer. Place is often referred to as distribution channel. Promotion The target market needs to be aware that the product or service exists and is available for them to buy when they want. Promotion is very important since it affects the demand for the product or service and thus costs can be distributed over a larger output. All these elements are essential because in conjunction with each other they determine how successful the product or service offered will be.

1.3 Marketing Ethics

Nowadays we are living in a free market, in which consumers and producers drive one another in order to satisfy each others needs. Producers have to provide the consumers with what they want in order for the consumers to buy and generate profit for the producers. However, such market also leads to inequalities of income, wealth and market power Suppliers can exploit consumers Buyers can exploit supply firms Worldwide inequality of income can result in unethical practices

such as child labour

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Conscientious marketers face many moral dilemmas. The best thing to do is often unclear. Because not all managers have fine moral sensitivity, companies need to develop corporate marketing ethics policies, which are broad guidelines that everyone in the organisation must follow. Marketing ethics is the area that deals with the moral principles behind the regulation and operation of marketing. In order to identify and analyze the moral principles found behind marketing, we have to look into the four elements of the marketing mix since each element involves distinguished principles. In the following part I will only be examining one of the elements of the marketing mix which is product development, since the subject is quite vast and analyzing all elements would require much more detail.

1.4 Product Development

There are many important aspects of ethics with regards to product development. Each one of them is of equal importance in the code of ethics. One of them is the degree of safety built into product design. When manufacturing a product, the organisation has to ensure that certain safety regulations are adhered to. For example when producing a permanent marker, the organisation has to ensure that the inhalation of the chemicals is not harmful to the people using the marker. Producers of toys have to ascertain that the material used in the toy or the accessories accompanying the toy are not harmful for the children using such toys. Product testing is very useful at this stage. When testing a product, the producers have to be very accurate so as to ensure that the

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product is truly safe and non harmful. Some organisations spend less money in a lower standard testing procedure in order to save money, and therefore the product is not accurately tested. This should not be the case. Organisations should test the product as accurately as possible until being 100% sure that the product is right and safe for the consumer. These factors are very important and should not be left out when planning for the production of a product. We are producing a product which will be used by other people. The producers have to ensure that the product is totally safe for consumption or usage. It is not ethical to sell a product which can harm the consumers. Taking the example is selling cigarettes and alcohol, even though consumers demand the product it is still unethical to produce such products since they harm the health of who consumes them. It is more unethical giving a false description of the product, or failing to signalize any harmful chemicals or material that the product contains or any possible side effects. Information on the product and side effects should be stated at all times. Whenever you buy medicine for example, you have the instructions leaflet which explains the product in detail, its ingredients and its possible side effects. Omitting to provide information on the product and on any possible side effects is very unethical. Taking the pharmaceuticals example, it may even be fatal to certain customers who are allergic to certain ingredients or who are taking certain medication which cannot be taken with the particular product. Not stating that the product can cause a heart attack may be fatal to someone who suffers from heart problems for example. Deception on the size and content of the product is very frequent as well. Many times companies write that the product weighs so much

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when in actual fact it weighs less than stated. Same applies to the content. Sometimes companies say that the product includes certain features or ingredients but it does not. Consumers are deceived all the time and buy the product with the conviction that they are making the best deal. However they end up disappointed with the product that they bought. Working conditions and treatment of workers is one of the major issues in ethics. When employing people, the organisation cannot impose bad working conditions and treat the employees in a bad way. Examples include unsafe environment, poor lighting, bad pay, no right for break, unpaid overtime and so on. Unfortunately there are many unjust situations which people have to endure because certain organisations have no idea of what management ethics is, or maybe they know but they choose to do what is wrong in order for them to benefit more from the operation. Child labour in the developing world is another sad reality. Organisations want to make profit at the least possible cost. Unfortunately most organisations aim only at maximizing profits, irrespective of what is necessary in order to achieve their goal. This has lead to the use of child labour in order to produce items at the least possible cost. There are many well known organisations that produce their products in third world countries in order to decrease production costs. Unfortunately in such countries they can also exploit children who are forced to work. In poor countries, families rely on their children in order to get some income for survival. Heartless organisations take advantage of this situation and employ these children secretly in order to produce their products at a very low cost. Instead of trying to help these poor children to improve their life, these organisations think only of themselves. The society we live in nowadays is so

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heartless and selfish. No one does anything to help others and is even willing to break the law in order to gain benefits for oneself. Another unethical process in product is the copying of packaging style in order to mislead consumers. Some producers try to deceive consumers by making them think that their product is of a particular renowned brand. They use the same packaging style that the well known brand uses. In this way consumers think that they are buying an established product of good quality, since they associate it with a particular brand. For example in the perfume industry, well known brands have very innovative and original packaging styles and bottled perfumes. We can find many imitations as well unfortunately. Some imitations are clearly recognizable. However, some imitations cannot be distinguished because they are exactly the same as the original product. When a consumer buys the imitation, he will believe that he is buying the original perfume since the packaging and bottle is exactly the same as the original perfume. He will later find out at his own expense that the quality is much more inferior and therefore he will realize that he has been swindled. Another aspect regarding packaging is wasteful and unnecessary packaging of the product. As already mentioned, the ethics code includes respecting the environment around the organisation. Wastage of resources is not very ethical since it involves using unnecessary resources. This can damage the environment because natural resources are wasted instead of used properly. One can also mention the use of harmful chemicals or material. If for example extra plastic is used for the packaging of a product, this harms the environment since plastic is not degradable and takes too long to decompose.

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Building a product in obsolescence is another point in which certain companies are at fault. If a company produces an mp3 player which has 1GB storage space when knowing that nowadays technology advanced to 4GB storage space is not very correct. Some people are not technologically informed and therefore may not know that the 1GB mp3 player is now outdated. Other times producers may label the mp3 player as latest technology and includes 4GB storage when the truth is that the memory is much less than that. Another example is the toiletries industry. The research and development department of LOreal changed the shampoo slightly. The shampoo is not new and improved. However, labeling the shampoo as new and improved would increase sales. This is not ethical since the producer is misleading the consumer. He is making the consumer believe that the shampoo has the latest ingredients, and therefore it is more avant-garde than other brands. In reality, the shampoo is the same as it used to be. Certain companies do everything to increase revenue and profit.

1.5 Conclusion
Honesty, truthfulness and fairness are essential in marketing. We cannot expect success if we do not treat the customer in a loyal and true way. After all, as many books say, the customer is king, and we have to satisfy the customer in the best possible way. However we have to do so by giving him a right and true product, not a product which will satisfy his needs temporarily or harm him in any way. Satisfying the customer involves a complete package that we have to be ready to offer, even if this means that the company might decrease its profits slightly or lose in some way or other.

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Customers should be treated with respect. The producers should honour warranties at all times and offer a good after sales service. It is actually requested by law, but in ethics it is the duty of the producer as well. Since many companies are not in line with the ethical code, there have been many developments in the consumer rights aspect. Consumer rights are there to safeguard the rights of the consumer when organisations do not follow the code of ethics. Producers should incorporate such codes of ethics within the organisation and they should implement them in the best possible way. It is a very hard procedure especially when organisations are used to behave in a totally different way. However, it is a necessary step that will boost the organisation and the society around it in a positive way.

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