Tobacco Companies and Product Safety - Case Study Example

? Tobacco Companies and Product Safety Introduction In the last couple of decades, investigation papers related to marketing ethics and business ethics can be found in large numbers. The extensive research stream clearly points out to the fact that managerial ethics in the marketing process of a firm is a vital issue. Business ethics is concerned with the application of moral frameworks in the way an organization carries out their business activities. According to Carroll and Buchholtz (2009), the ethical viewpoints can shape the way a business functions in the market and it encompasses issues such as human resource management and also sales and marketing policies. The unethical activities by a firm appear in different forms and nature (Curwen and Whalley, 2005). In this report, analysis of one such case will be carried out. Hence, a brief overview of the case chosen for this study is detailed below. The case entails about the significance of product safety and the role played by companies in managing these safety standards. The case highlights a real life incident of 2004 where the US district court ruled eminent tobacco manufacturing and marketing companies such as Liggett, Philip Morris and Reynolds to pay a hefty fine of $ 280 billion if the US Department of Justice (DOJ) proves that these companies are continually deceiving the customers despite knowing the risks of smoking and its addictive nature. The case also highlighted about the fact that tobacco manufacturing companies have formed a committee so as to carry out research and developmental works on the adverse effects of Tobacco. However, the committee deceived people by denying the fact that smoking causes cancer or any other type of health effects. Ironically, research carried out by other researchers clearly showcased that smoking did causes cancer. Furthermore, the case also made it evident that Tobacco companies advertised that nicotine is not an addictive material and even campaigned to target teenagers. One of the key findings from the case was that tobacco is a product that kills around 400,000 American people in a calendar year. Regarding this matter, DOJ claimed that it is the duty of the firms to design a safe product and at the same time test its quality before launching in the market. Even these companies have also intentionally not warned the customers about the ill effects of nicotine consumption. Hence, the case makes it evident that it is a sheer violation of the ethical norms and morality of business for such kind of finds is a subject of question. This report seeks to investigate the ethical and moral issues associated with the selling of goods in the market and along with that moral and ethical issues will also be highlighted. The duty of a company towards its customer is another vital area which will be covered during the course of the study. In addition, theories and literature pertaining to this area will be highlighted in the study in order to strengthen and justify the claims made in the study. The study will begin with a brief summary of the duties that a company has towards its consumers. Duties to Consumer Ethics have been defined as one branch of philosophy that deals with the systematization and recommendations related to the conception of right or wrong. It helps in addressing to the issues that are arising in moral diversity. Now the question arises that what is morality. Morality can be described as a systematic procedure that helps to differentiate between what is right and what is wrong. Moral theories provide exact framework for analysing, discussing and finally evaluating all the moral disputes in very reasoned manner. As mentioned earlier, it is the emergence of globalization which has lead to increase of the need of business ethics. Generally an organization has three main goals: One being incur of high profits, the second being responsible environmentally and the third one being responsible socially. In order to attain such goals, it is significant that the organizations perform certain responsibilities in order to protect the preferences of the customers. It can only be possible by making participation in the CSR activities. According to several researchers, organizations perform their operations for earning good amount of profit whereas other researchers have argued that the organizations also perform their ethical role in highly responsible manner for remaining in compliance with the standards of the business ethics. It is due to this reason that the business enterprises actively participate in the philanthropic activities. The organization which is operating within a particular market possesses a number of responsibilities for maintaining the business ethics along with carrying out the business transactions. The customers form an important part of the stakeholders of the organizations. It is one of the most vital responsibilities of the organizations to help the customers in their decision making associated with purchase of products by giving them detailed information about the product quality or other associated factors. In a similar manner, another significant responsibility of the corporations is offering good quality products to the customers and pricing them in a justified manner. In order to carry out the business activities in a successful manner, it is important that every organization thoroughly obey the standards set by Government. The significance of business ethics has been noticed from an early stage of trade. Ethical decision making is described in various researches and theories as one significant process consisting of different stages where each stage is affected by the environmental, situational and environmental behaviour. It uses a four stage model where the organization would be identifying the moral issues in the beginning, considering moral judgement, presenting the issues in an appropriate manner and performing the actions accordingly. However, there have been a number of non compliances conducted by different types of organizations from very long time. Business ethics represents such a form that helps in analysing all the moral principles embedded in the business environment. In today’s world maintenance of business ethics is highly significant in all the aspects of the business. It mainly represents the moral judgements of the individuals associated with the business and states what is right and what is wrong. The business ethics includes representation of those factors that are either correct or wrong from the perspective of the business operations. In order to continue business operations and achieve success in the market, it is significant that the customers are satisfied efficiently. It would help in retaining these customers and creating a long term relationship with them. The success of any business is directly proportional to the satisfaction level of the customers. It is because of this reason that it becomes important for the organizations to fulfil the demands or preferences of all the customers appropriately (Carroll and Buchholtz, 2009). There are different types of responsibilities performed by organizations for satisfying the customers. They are mentioned below: Conveyance of accurate information to all the customers: The organizations should aim at providing exact information related to the product or service offerings to the customers so that it helps them in making their purchasing decision in an appropriate manner (Ferrell, Fraedrich and Ferrell, 2011). The organizations must strictly determine that they do not provide any sort of misleading information to these customers for persuading them to opt for their products or services. It becomes the responsibility of all the organizations to represent the actual figures for helping the customers in their buying decisions. The pricing strategy must be justified: The corporations must offer such prices which matches with the quality of the products (Laszlo, 2003). The customers must not get deceived due to imposition of high prices for low quality products (Boatright, 2000). This in turn reduces customer loyalty in the long term perspective. On the other hand, if the pricing strategy is made in a fair manner, it leads to increase of customer loyalty thereby increasing the profitability both in short term as well as long term perspective. Offering customer services at every point of time: Sometimes the customers face problems in handling the products after purchasing them. At such point of time, it is the duty of the organizations to offer efficient customer services and help them in solving their problems (Frederick, 2006; Gyves, 2008). There are large numbers of evidences which claim that many organizations make themselves free from all the liabilities once they sell their products to the customers. It is the duty to serve their complaints in a fair manner by providing them satisfactory after-sales service. Conducting various training sessions to train the customers: There are many products that needs to be handled with care. While selling such products, it is the duty of the organizations to conduct training programs which would help the customers in using the products in an appropriate manner (Muller and Whiteman, 2009). Critical Discussion of Theories According to several scholars around the world, ethical marketing is the act of honestly representing the business in front of the audiences and maintaining high level of transparency. Echoing the same, some of the most renowned academicians of the world have stated that marketing ethics takes into account the standards and principles defining acceptable conduct in the market place. This statement is supported by one of the renowned ethics consultant, David Gebler. He had states that most of the behaviour that is tagged as unethical is not carried out for the purpose of personal gain; rather it is done to meet the performance goals. However, failure to understand the basic fact acts as the major barrier towards educating the marketers about the ways to avoid unethical practices. Samy, Odmelin and Bampton (2010) believe that it is the organization’s culture that decides the ability of the company to remain ethical or otherwise. They believe that organizational culture is a major driver of the ethical conduct of an organization. Several outbreaks pertaining to violation of ethical principles by the companies has been evident since the last few years. However, these unethical actions appeared in different forms. For example, a company providing fake information or misleading customers is indulging in a type of unethical activity. On the other hand, a company charging more prices for a product in comparison with the quality is also an unethical activity. However, the intensity of the activity acts as the decisive factor. Therefore, it can be stated that a company often carries out unethical activities for the purpose of gaining short term profit, but after a certain point of time, it has to face the consequences (Friedman, 2004). As a result of this unethical activities, companies although has been able to gain short term profits, but their reputation in the market has been hampered simultaneously. It has also been observed that companies which are alleged of performing unethical activities had to deal with legal law suits (Barnett, 2007). In addition, another important theory pertaining to the business ethics is that companies should maintain transparency in their business operation (Carroll and Shabana, 2010). It is often dubbed as the extent to which policies, corporate decisions and activities are made accessible and easily visible to the stakeholders. Hence, it is evident that following the business principles and maintaining transparency is crucial else the reputation of the firm might diminish at every sphere of business. Valor (2008) emphasized on the fact that it is imperative that commercial organizations must gain the confidence of the consumers and maintain a positive image by involving themselves in philanthropic and socially responsible activities (Carroll and Buchholtz, 2009). A number of scholars around the world has stressed on the fact that the sole purpose of a company to exist in the market is to generate revenue for its operation and earn handsome profit. Contradicting this statement, another set of academicians firmly believes that profit is not the sole intention for a firm. Rather, a company must ensure societal development and ethical compliance. A company operating in the market place does not only have the duty to carry out business transaction; rather it has several other responsibilities to fulfil. One of the key responsibilities of the companies towards the consumers is to ensure that they offer products which are of high quality and is justified according to the price charged (Waddock, 2002). Apart from the quality of the products and services, it must also conform to the standards set by government for the business. The notion of business ethics has emerged since the beginning of trade. However, deception has always been a part of this concept. Business ethics is defined as a form of applied ethics that scrutinizes the moral and ethical principles arising in a business environment. It is applicable to every area of business environment and is also relevant to the conduct of individual employees in an organization. As a result of that, business ethics have both normative and descriptive dimensions. The term ethics is concerned with the moral judgement of an individual about what is right and what is not. In the similar way, business ethics is a term that deals with the right and wrong factors for a business (Pivato, Misani and Tencati, 2008). Although, it is an obligation for the firms to ensure that they follow and comply with the ethical guidelines and standards of business, yet simultaneously, complying with these standards provides the company with several benefits. One of the most common benefits that are enjoyed by the companies is the respect among the customers and community. Nowadays, consumers have become more aware of the ethical and environmental issues. Hence, to satisfy the customer base, it is an obvious task for the companies to comply with the requirements of the environment and the society. The present era has witnessed renewed interest in the issues of business ethics as well as corporate social responsibility. A number of examples can be cited which enlightens the issue of unethical marketing, but the parameters of being unethical are a subject of doubt among the mass (Robinson and Dechant, 1997). For example, selling of cigarette is such an issue which is yet to be tagged. Consumers have never rejected it in spite of its bad effects and have hardly protested against the selling of this item. On the contrary, if the same is viewed from another perspective, it will be found that selling of tobacco or especially, cigarette is unethical, as it leads to various diseases and are even fatal. Thus, selling of such products is unethical. If the theories mentioned above is interlinked with the case, high resemblance can be found. In the context of the aforementioned example, an instance can be cited which, to a certain extent, will lessen the controversy surround the parameter of being unethical in the market, in case the US department of Justice (DOJ) succeeded to prove that this company had been purposefully deceiving the public by selling harmful products. . In the year 2004, the US district judge ordered the renowned tobacco product manufacturing and marketing company, Reynolds, Philip Morris and Liggett, to pay a hefty sum of $280 billion, which was almost their entire profit earned during the last 50 years of their operation. The DOJ had even claimed that companies involved in the sales of tobacco-related products had held a conference in the 1950s, where they had formed a research and development team to identify the ill effects of consuming tobacco. Despite several proofs of the ill impacts of tobacco consumption, the newly formed committee deliberately denied any ill impacts of tobacco consumption, they rather stressed on the fact that there is no solid evidence to prove that tobacco causes cancer or any other health perils. This is a clear example of unethical marketing, where the company intentionally deceiving consumers. Moreover, the intention of targeting children to consume cigarettes is a serious offense and can be dubbed as unethical. Conclusion and Findings Business ethics is often dubbed as the moral principles which guide the behaviour of a business in a market place. Acting in an ethical way is about distinguishing between the right and wrong before deciding on the right choice. This study was meant to analyse the issue of consumer protectionism and the significance of ethical behaviour from the companies. The study made it evident that being ethical in the market provides the company with lot of advantages. One of the key findings of the study is the most beneficial fact where, the company enjoys good reputation in the market and the government also supports it in the process of its growth and development. On the contrary, unethical activities may lead the company towards failure and negative image. Hence, it can be concluded that a company must adopt strategies and policies to ensure that it complies with the ethical standards and norms and maintains transparency in the business. On the basis of the findings following are the recommendations by which companies can remain ethical and pursue fair business practise. 1. The organizations should encourage a culture of honesty and sincerity within the workplace so as to ensure processes are transparent. 2. In the context of Tobacco companies, they should create awareness about the health issues associated with this and at the same time should also provide statutory warnings. 3. 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