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Marketing Ethics and Social Responsibility in st 1 Group • Ary Suryo W • Masruroh Strategic Planning 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 Nature of Social Responsibility 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 citizenship The adoption of a strategic focus for fulfilling the economic, legal, ethical, and philanthropic social responsibilities expected by stakeholders Stakeholders who have a “stake” or claim in some aspect of the company’s products, operations, markets, industry, and outcomes Constituents 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 Citizens 1 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 Public service announcements Coverage campaigns and boycotts 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 institutions Educational, Employee health, cultural, and recreational volunteer participation Employment opportunities and economic development The Nature of Ethics Company Industry Government Customers Interest Groups Society Influence Factors Ethical Standards The Nature of Ethics (cont’d) Legal Issues Legal Issues Ethical Issues Gray Areas Ethical Issues 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 Being Ethical 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 Misconduct Observed 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 The regulated by: firms themselves Industry 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. 2. 3. 4. 5. 6. Trustworthiness Respect Responsibility Fairness Caring 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: 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 1. Connecting Ethics & Social Responsibility to 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 Between Ethics 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