Marketing Ethics and

Social Responsibility in

Strategic Planning1st Group• Ary Suryo W

• Masruroh

The Auto Industry Tries to Go Green

Car manufacturers have gone to great lengths to promote hybrid cars.

These cars are generally much more expensive to develop and produce. Do corporations have a social responsibility to develop environmentally friendly cars? Why or why not?

The Role of Ethics and Social Responsibility in Marketing Strategy Grown in importance recently

Due to firms having problems in this area

Have become necessities due to: Stakeholder demands Changes in Federal law

Improve marketing performance and profits

Are important to development of marketing strategy

The Dimensions of Social Responsibility Social Responsibility

A broad concept that relates to an organization’s obligation to maximize its positive impacts on society while minimizing its negative impacts

Marketing citizenshipThe adoption of a strategic focus for

fulfilling the economic, legal, ethical, and philanthropic social responsibilities expected by stakeholders

StakeholdersConstituents who have a “stake” or claim in

some aspect of the company’s products, operations, markets, industry, and outcomes

The Nature of Social Responsibility

The Nature of Social Responsibility (cont’d) The Dimensions of Social Responsibility

Marketing ethics

Principles and standards that define acceptable marketing conduct as determined by various stakeholders

Cause-related marketing

The practice of linking products to a particular cause on an ongoing or short-term basis

Strategic philanthropy

The synergistic use of organizational core competencies and resources to address key stakeholders’ interests and achieve both organizational and social benefits

Best Corporate Citizens1 General Mills 11 AT&T

2 Cummins Inc. 12 Fannie Mae

3 Intel 13 Bank of America

4 Procter & Gamble 14 Motorola

5 IBM 15 Herman Miller

6 Hewlett-Packard 16 Expedia

7 Avon Products 17 Autodesk

8 Green Mountain Coffee Roasters

18 Cisco Systems

9 John Nuveen 19 Wild Oats Markets

10 St. Paul 20 Deluxe

Source: Peter Asmus, with Sandra Waddock and Samuel Graves, “100 Best Corporate Citizens of 2003,” Business Ethics, www.business-ethics.com/100best.htm (accessed Oct. 24, 2003).

Marketing Strategy in Action

R.J. Reynolds has been accused by critics of using its “Joe Camel” cartoon character, to target children for cigarette consumption.

How has society acted to protect children from advertising such as this? What obligations do companies have to protect children?

The Pyramid of Corporate Social Responsibility

Exhibit 3.1

Social Responsibility

Includes:

Economic responsibility of making a profit Legal responsibility of obeying laws and

regulations Ethical responsibility to uphold principals and

standards Philanthropic responsibility to increase the

firm’s positive impact on society

Marketing Ethics and Strategy

Requires that organizations and individuals accept responsibility

Can lead to violations of public trust Involves complex and detailed

decisions in gray areas Deals with experiences and

decisions made at work Comes into play anytime individuals

feel manipulated or cheated

The European Eco-label

Social Responsibility Issues Green Marketing

The specific development, pricing, promotion, and distribution of products that do not harm the natural environment

Green Marketing Goals Eliminate the concept of waste Reinvent the concept of a product Make prices reflect actual and

environmental costs Make environmentalism profitable

Social Responsibility Issues (cont’d) Consumerism The efforts of independent individuals, groups,

and organizations to protect the rights of consumers

Lobbying government officials and agencies Letter-writing campaigns and boycotts Public service announcements Coverage by the news media and the

Internet Consumer “Bill of Rights”

Right to safety Right to be informed Right to choose Right to be heard

Social Responsibility Issues (cont’d)

Community Relations Expectations of firms as “good corporate

citizens”Philanthropic contributions to civic projects and

institutionsEducational, health, cultural, and recreational

Employee volunteer participationEmployment opportunities and economic

development

The Nature of Ethics

Ethical Standards

Company

Industry

Government

Customers

Interest Groups

Society

InfluenceFactors

The Nature of Ethics (cont’d)

EthicalIssues

LegalIssues

EthicalIssues

LegalIssues

GrayAreas

The Nature of Ethics (cont’d)

Ethical Issues in Marketing An identifiable problem, situation,

or opportunity requiring a choice among several actions that must be evaluated as right or wrong, ethical or unethical

The Challenges of BeingEthical and Socially Responsible

Business decisions involve complex decisions in which correctness may not be clear cut e.g. Internet privacy, protecting

trademarks and brand names

Ethical conflict may emerge from an inconsistency between personal values and the values held by members of the work group

Ethical issues can develop into legal problems

Types of MisconductObserved in Organizations

Exhibit 3.4

Deceptive Practices in Marketing Deceptive Communications and Promotion

Fraud or any false communication Exaggerated claims or statements Ambiguous statements Product labeling issues Selling abuses

Regulating Deceptive Marketing Practices Typically regulated by:

The firms themselvesIndustry and trade associations

Organizational Determinants of Marketing Ethics & Social Responsibility Ethical Decision Making

Determined by an individual’s background and business colleagues

Affected by personal values, opportunity for unethical behavior, and exposure to others

Intricately tied to the firm’s culture and ethical climatea

Can only be improved by planning and structure

Likely to occur when modeled by a strong leader

Ethical Climate

Part of a corporate culture that relates to an organization’s expectations about appropriate conduct The character component of an

organization Sets the tone for ethical decisions Determines whether or not an

individual perceives an issue to be an ethical issue

Codes of Conduct (1 of 2)

Codes of Conduct (Codes of Ethics) Formal statement that describes

what an organization expects of its employees

Not an effective means of controlling ethical behavior unless integrated into daily decision making

Not effective unless the code has support of top management

Codes of Conduct (2 of 2) Codes must reflect management’s desire for

compliance with values, rules, and policies Codes should have six core values:

1. Trustworthiness

2. Respect

3. Responsibility

4. Fairness

5. Caring

6. Citizenship Codes will not resolve every issue encountered in

daily operations Codes can help managers deal with ethical dilemmas

Key Considerations in Developing and Implementing a Code of Ethical Conduct

Exhibit 3.5

Market Orientation

Market Orientation The development of an organizational

culture that effectively and efficiently promotes the necessary behaviors for the creation of superior value for buyers and, thus, continuous superior performance of the firm.

Strongly tied to ethics and social responsibility

Means fostering a sense of cooperation and information exchange

Stakeholder Orientation

Stakeholder Orientation The degree to which a firm understands

and addresses stakeholder demands Strongly tied to ethics and social

responsibility Comprised of three activities:

1. Generation of stakeholder groups data and assessment of firm effects on these groups

2. Distribution of this information throughout the firm

3. Responsiveness as a whole to this intelligence

Connecting Ethics & Social Responsibilityto Marketing Performance Strong ethics causes employees to be:

Motivated to serve customers Committed to the firm Committed to high quality standards Satisfied with their job

Can lead to trust among firm’s stakeholders

Is so important that it can have major negative impacts on firms that don’t uphold ethical standards

The Connection BetweenEthics and Strategic Planning

Typically done through ethical compliance programs or integrity initiatives

Vested in the marketing plan Based on an understanding of:

1) Risks associated with misconduct 2) Ethical and social consequences of

strategy 3) Values of organizational members and

stakeholders

Manifested through actions … not just words