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Social responsibility n ethics in marketing

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Ekta Zatakia
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Social responsibility n ethics in marketing - November 30th, 2007

INTRODUCTION

What does the term Marketing mean? Many people think of marketing as selling and advertising. And no wonder –every day we are bombarded with television commercials, newspaper ads, direct-mail offer, sales call and internet pitches. However selling and advertising are only the tip of the marketing iceberg. Although they are important, they are only two of many marketing functions and are often not the important ones.Today marketing must be understood not in old sense of making a sale - “telling and selling” – but in the new sense satisfying customers needs. The concept of markets finally brings us full circle to the concept of marketing.
Marketing, like life is all about relationships. For today’s marketing firms, there has been a shift from mere marketing to building, maintaining and enhancing long term relationships with customers, dealers, suppliers, government agencies, and others. Marketing people are shifting the focus from mere profit maximizing to maximizing mutually beneficial relationships. Marketers have to be in constant touch with their customers. They need to understand the changing and growing needs of the customers. It is no longer enough to satisfy customers, but equally important to delight those by meeting their expectations and at times surprise them with unexpected products, sales promotion schemes, and other marketing activities. Marketing means managing markets to bring about profitable exchange relationships by creating value and satisfying needs and wants. Hence, the words of Philip Kotler says that, “A social process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others.”












SOCIAL RESPONSIBILITY ON MARKETING

The societal marketing concept calls upon marketers to build social responsibilites among society into their marketing practices. It stresses the need for a organisation to balance three factors while taking marketing decision: Consumer satisfaction + Company’s profit + Society’s well-being. In other words, firms should not just make consumer satisfying goods but also‘environmenalfriendly’and ‘consumer health oriented products’.Because of marketing, consumers can enjoy new and better varieties of goods and services which increases their standard of living. It generates employment, improves quality and reduces costs by way of research and development and stiff competition in the market. It creates utility,and also enhances economic growth by ensuring optimum utilisation of resources and effective production and distribution.
An organization can create a positive impact on the society if it produces products that are useful to society and do not harm it.Organizations seriously started considering their responsibility towards society, around forty years ago.They have realized that organizational social commitment comprises of four types of responsibilities. They are economic, legal, ethical and philanthropic responsibilities. Although these four categories of responsibilities have existed for decades, ethical and social dimensions have gained increased significance in recent years. Firms are established largely to offer goods and services to people and their aim is to maximize profits. In their profit maximizing efforts, their responsibilities towards society are almost forgotten. As consumers now realize the need to protect environment and society, companies are also forced to realize their responsibilities towards society and environment.












IMPACT ON INDIVIDUAL CUSTOMER

Consumer are becoming increasingly aware of the social commitments of organizations and some prefer to buy produts of those firm that are socially responsible. Organizations are gradually realizing that following unethical pratices for short-term gains, would spoil a company’s image in the long run and the costs incurred in becoming socially responsible would improve organizational sustainability in the long run. Firm must give maximum importance to the customers they are serving. Consumers needs and their purchasing power should be kept in mind while developing products and services. Produts should satisfy the quality reqirements of target customers. Companies must also ensure that they deal with customers in a fair and respectful manner at all points of contacts. Several companies have been critized for misleading customers through advertisements, pricing and packaging. Some companies recalled their produts when they found that their products were either not performing at the desired effiency level or were unsafe for consumer use or were harming the environment.


IMPACT ON SOCIETY

Every business establishment contributes to society in same form or the other. Similarly, society also helps business organizations by creating an environment for them to grow in. Since businesses depend on society for their survival, they need to pursue their activities in a manner that does not harm the environment and society, and infact proves benificial to them. Many organizations have begun to realise their responsibility towards society. For example, Companys need to be environment conscious, and sensitive towards issues like global warming and ozone layer depletion. Till recently, CFC (Chloro Floro Carbon) that damages the ozone layer was used in most countries to manufacture compressors for refrigerators. However, of late, many companies have developed alternate ways of manufacturing and have banned the use of CFC in any product and processes. They should also adopt fair pratices of employment like, giving equal opportunities to both men and women of the community, and provide a safe and healthy work environment for employees along with adequate compensation packages.




ETHICS IN MARKETING AND ITS IMPACT
The word ‘ETHICS’, is known as ‘ethikos’ in Greek and ‘ethicus’ in Latin.It is derived from ethos, which means character or manners. Ethics therefore is said to be the science of morals, moral principles and rules of conduct.
The characteristics that define acceptable conduct in marketing are called Marketing Ethics. Certain fundamental ethical issues have been codified into statutary regulations, to be followed by marketers. However, it is not enough to follow these legal regulations if marketers want to build a long term relationship with their customers. To nurture their relationship with customers, marketers need to confirm to ethical standards, which society expects them to follow. The expectations of customers and the general public should be observed carefully. Therefore, it is very important for organizations to follow ethical standards. As awareness among customers is on the rise, many customers prefer not to buy products or services of Companies that have resorted to unethical practices either in the past or at present. Thus, if Companies do not ensure that their policies and practices are ethical they are bound to lose potential customers. These customers may also engage in a negative campaign against the Company.
Practicing ethics in marketing means deliberately applying standards of fairness, or moral rights and wrongs, to marketing decision making, behavior, and practice in the organization. In other words, Ethics in Marketing is a sub-set of business ethics and examines the moral issues relating to marketing decisions made by organizations. In a market economy, a business may be expected to act in what it believes to be its own best interest. The purpose of marketing is to create a competitive advantage. An organization achieves an advantage when it does a better job than its competitors at satisfying the product and service requirements of its target markets. Those organizations that develop a competitive advantage are able to satisfy the needs of both customers and the organization. According to Kotler, in recent years, people have started questioning the value of marketing concept, when the world is faced with environmental degradation, resource shortages, hunger and poverty and neglected social services. Ethics are a collection of principles of right conduct that shape the decisions that people or organizations make.
In a market economy, a business may be expected to act in what it believes to be its own best interest. The purpose of marketing is to create a competitive advantage. An organization achieves an advantage when it does a better job than its competitors at satisfying the product and service requirements of its target markets. Those organizations that develop a competitive advantage are able to satisfy the needs of both customers and the organization.
Marketers must develop ethical standards that are followed by the entire organization and ensure that these standards are never compromised. A firm which strictly adheres to these standards without compromising on them for short-term benefits would definitely find itself in a profitable position in the long run. Though it might be legal to use children in advertisements, it may be unethical to use them. Similarly, a pharmaceutical Company can provide technical details about its products in advertisements, but can hide critical information about their side effects. In such a case, the Company might not be breaking any rule, but it will be morally incorrect to deprive customers of the information which may affect their health adversely. A salesperson of a financial services company can sell a product to a customer, which does not suit his needs.
Concerned about the ethical values adopted by organizations is on rise, the increasing impact of media and the increase in its reach are making information available to the public, fast. For example, media, on number of occasions, has focused attention on alleged exploitative employment practices of suppliers used by some of the biggest brand names in sportswear. There is a myth that if a Company acts ethically, its profit objective will be adversely affected. It actually adds to profitability in the long run. For example, good safety standards and employment policies can improve productivity.
Because not all managers have fine moral sensitivity, Companies need to develop corporate marketing ethics policies-broad guidelines that every one in the organization must follow. These policies should cover distributor relations, advertising standards, customer’s service, pricing, product development and general ethical standards. Companies and managers should apply high standards of ethics and morality when making corporate decisions. Companies are also developing programs to teach managers about important ethics issues and help them find the proper responses. They hold ethics workshops and seminars and setup ethics committees.



CORPORATE CODE OF ETHICS
A Code of Ethics helps an organization to follow rightful ethical practices avoiding the unethical business processes. However, the increasingly complex and competitive business environment across the countries is complicating the process of developing ethical standards. Therefore, it is important for the marketers to analyze and understand the complex ethical standards governing society and organizational environment. Cultural factors also deeply influence in developing the code of ethics. A framework is generally used to analyze the effectiveness of the corporate code of ethics. The frame work is segmented into four divisions depending on the competition in the market and the industry in which the firm is operating.
In the first segment, industrial atmosphere does not support strong ethics and also do not concentrate in building a corporate code of ethics. Their main aim is profit maximization. In such organisations, management should slowly direct the company’s attention in building and maintaining ethical standards by encouraging the employees and communicating with them the dangers of being unethical in long run.
The second segment is highly competitive market environment and individual professional ethics dominating a firms environment. In such cases professional code of ethics must be adapted to cultural factors thereby helping the firm in developing strong corporate code of ethics.
The third segment is where industrial environment is stable and corporate code of ethics is standardized. However these organizations must adapt themselves to the changing market scenarios.
The last segment is where there is a stress factor working on the corporate code of ethics, because of the environment is highly volatile. An organization constantly focuses on adjusting its ethical standards with the changes in the environment on the basis of changes in the cultural, individual and professional ethics. Such organizations must maintain an ethical corporate code and should constantly communicate to the employees regarding the ethical standards they should follow.

CASE STUDIES RELATING TO SOCIAL RESPONSIBILITY AND ETHICS

· CASE STUDY 1: Organizations following the best business practices are being encouraged through awards like Business Ethics which include 100 best corporate citizens who adheres marketing ethics and its responsibility towards society. One of the leading organization among the list of 100 best corporate citizens is Hawlett – Packard (HP). HP’s started its tradition of serving the community from the year 1939, when its founders Hewlett and Packard donated $ 5 to charity in their first year of business. Since then HP has been involved in social welfare activities to improve economic conditions in many countries across the world. Being a good citizen was among HP’s key corporate objectives formulated in 1957. HP was recognized as philanthropic leader among global corporations. In 1996, HP and its employees worked in many ways to enrich communities, improve the quality of life, and promote economic development around the world. In 1998, HP gave $ 64.8 million in cash and equipments to not only for profit agencies but also to educational institutions worldwide. HP’s focus on the environment started by paying special attention to its own products and operations. As part of its culture, HP evaluated environmental effects at the earliest stages of its product development process in order to conserve resources, as well as, prevent or minimize any adverse environmental impact.
This case study reflects the positive impact of social responsibility. HP’s have gained people’s faith and goodwill of the organization by getting involved in social welfare activities, thus reflecting the concept of responsibilities towards society.






· CASE STUDY 2: In 1995 the Royal Dutch/Shell faced intensed public protests over its decision to dump one of its obsolete oil storage platforms into the North Sea. Greenpeace activists gathered in large numbers on April 29th 1995, the day the Company has planned to sink the platform in the sea. They protested against the move, contending that it would pollute the environment. The international media extensively covered the protest. Shell immediately took the matter to court, seeking legal protection. The court passed its judgement in favour of Shell. Subsequently, Shell forcibly removed the activists from its precincts. For weeks afterwards, Shell took radical steps to prevent Greenpeace activists from causing any further damage to its plans. The Company even blasted boats occupied by Greenpeace activists with water cannons to stop them from entering its premises. Although Shell won legally, it failed ethically in the eyes of people around the world, as they started boycotting Shell gas stations. Due to these developments, the Company announced that it was abandoning its plans to sink the platform in the North Sea.
After this protest, Shell has understood the societal responsibilities and ethical values and then introduced a new committee called “Social Responsibility Committee”. He reviewed the policies with respect to the statement of “general business guidelines” and the group’s policy and commitment concerning health, safety and environment.
From the case study, we have come to know that by going against the will of society and polluting the environment, facing back to the social responsibility, Shell had to face difficult situations loosing faith of the people and also the reputation or goodwill which he has gained for years ago.






· CASE STUDY 3: Ben Cohen and Jerry Greenfield founded Ben & Jerry’s Home made in 1978 as a company that cared deeply about its social and environmental responsibilities. It bought only hormone-free milk and cream and used only organic (natural) fruits and nuts to make its ice cream, which it sold in environmentally friendly containers. It went to great lengths to buy from minority and disadvantaged suppliers. From its early Rainforest Crunch to its most recent One Sweet Whirled flavors and awareness campaigns, Ben & Jerry’s have championed a host of social and environmental causes over the years. From the start, Ben & Jerry’s donated a whopping 7.5 percent of pretax profits to support projects that exhibited “creative problem solving and hopefulness…relating to children and families, disadvantaged groups, and the environment.” By the mid-1990s, Ben & Jerry’s had become the nation’s number two super premium ice cream brand.
This shows that Ben & Jerry had gained profit resulting into goodwill through following social responsibility towards people by providing natural ice creams thus not affecting their health.











CONCLUSION
After a detailed study on this topic we have come to know that there is a great impact of social responsibility and ethics on marketing. This impact not only reflects its negative side but also its positive side on marketing a product.
Marketing done in ethical manners following the societal responsibilities side to side shows a positive flow of business which enables a marketer to not only maximize his profit but also increase the credit worthiness of his organization, gaining goodwill. And on other hand, marketing done in unethical manners, not following the laws and regulations results in losses, poor reputation, which takes a long time for a marketer to retain its goodwill because business standards and practices vary from country to country. The issue of social responsibility and ethics poses challenges for marketers. The growing consensus among today’s marketers is that it is important to make commitment to a common set of shared standards worldwide.
Also from the case studies we have come to know that to be a successful marketer in the market one must follow business ethics and consider responsibility towards society. This is profitable not only to the marketer but also to the society as a whole. So it means a marketing system should sense, serve, and satisfy consumer needs and improve their standard of living by taking meaningful decisions keeping in mind the rules and regulations.








BIBLIOGRAPHY
* Marketing Management: Ethical and Social Dimensions
*Marketing and Finance - Michael Vaz
*Principles of Marketing - Philip Kotler and Arms Strong
* www.google.com
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Re: Social responsibility n ethics in marketing - February 13th, 2009

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Business Education
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Re: Social responsibility n ethics in marketing - July 2nd, 2015

The best example of Social responsibility n ethics in marketing is the corporate social responsibility(CSR). Here are some advantage of CSR which is indirectly connected with the topic mention above.

1) Company goodwill

2) Enhance Brand image
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