Social Responsibility and Ethics in Marketing at McDonalds - Assignment Example

Corporate Social Responsibility and Ethics in Marketing at McDonald’s Executive Summary Corporate Social Responsibility (CSR) is a concept that has been around for almost a century but has been actively practised mainly in the past five decades or so. During this time, the theoretical and conceptual frameworks for use of CSR policies in companies has evolved greatly with some scholars being opposed to it while others have pointed out its benefits to business in general. In the contemporary business environment almost every company is involved in some form of CSR. Ethical marketing practices are now viewed as one of the many forms of CSR because it represents consideration for the society and doing what is right for it. McDonald’s is the biggest food corporation in the world and this status has come with many years of development and global expansion. This status has come with a price to pay, as much as the company has in place a detailed CSR policy that it keeps improving with time, many environmental and consumer groups continue their campaigns against it for practices termed as unethical and destructive to the environment. The company has CSR programs targeting the environment, employees, and the community. It is evident that these programs are not exhaustive enough and remain underwhelming to many stakeholders. McDonald still has ethical issues in marketing to be dealt with in order to improve its image, these issues touch on the company’s products, its promotion practices, pricing policies, and distribution networks. This report concludes that the corporation has to work on its image by taking care of ethical issues in marketing and implementing more effective CSR programs. The report recommends that McDonald’s implements policies and programs that improve its protection of the natural environment, relationship marketing, green marketing, and cause-related marketing. List of Contents Executive Summary 1 1.0 Introduction 3 2.0 CSR and Marketing Ethics Concepts and Initiatives 4 3.0 CSR and Marketing Ethics in McDonald’s 7 3.1 McDonald’s CSR Programs 8 3.2 Ethics in Marketing at McDonald’s 10 4.0 Conclusions 12 5.0 Recommendations 13 References 15 1.0 Introduction Companies produce goods and services through utilization of resources to satisfy the needs of consumers. Most of the resources that are utilized are scarce and in many cases they are non-renewable. Many companies find themselves increasingly under obligation to be innovative, productive and effective in their activities so as to make efficient uses of these resources as well as human resources. Corporate social responsibility (CSR) requires that when companies profit from the environment and its resources, they should contribute positively to the welfare objectives of society. It is now considered ethical that business organizations should be sensitive to societal expectations with regard to social issues and the environment (Kotler, 2006). Consequently companies also have an obligation to their customers to engage in ethical marketing practices as part of their CSR (Crane and Matten, 2010). Ethical issues in marketing include issues touching on the products, product promotion, pricing, and distributions. The main concern is that while pursuing all these aspects of marketing many companies are involved in practices that are unethical to the extent that they are not socially responsible (Gundlach and Murphy, 2003). McDonalds Corporation has come under heavy criticism from different consumer and environmental groups in the past decade for practices that have been cited as being unethical and negating the corporation’s corporate social responsibility. While most of the issues that have come up include aspects of environmental degradation and labour concerns, the company also faces questions on its marketing ethics. This paper examines the issue of ethics in marketing as part of organizational CSR and focuses on the case of McDonald’s Corporation and how it is pursuing its CSR in marketing ethics. The paper then concludes with recommendations on how to improve the CSR initiatives of the organization as far as marketing is concerned for the sake of its image and responsibility to society. 2.0 CSR and Marketing Ethics Concepts and Initiatives The concept of CSR began almost a century ago in the 1920s although serious societal issues such as Word War II and the Great Depression ensured that it did not become a serious topic until the 1950s. According to Frank Abrams in 1951, business had an obligation to conduct their enterprise affairs of maintaining workable balance between various groups, striking harmony in the balance among stockholders, customers, employees and the public at large (Blowfield and Murray, 2006). The fist clear definition for CSR was provided by Bowen (1953) who indicated that CSR involved the obligations of business enterprises to pursue policies and make decisions that are desirable in terms of their objectives and values for society. Since then the concept of CSR has theoretically evolved over the years with different scholars proposing various views about it. As early as 1958, Theodore Levitt had an opposing perspective to the role of CSR in business indicating that the government’s job was not business and business’ job was not government. This implied that businesses were not supposed to perform roles in society which should be the duty of government to taxpayers (Lee, 2008). The agency theory also views CSR as a misuse of corporate resources that are better off being applied on internal projects aimed at increasing value for shareholders. It also views CSR as a benefit to executive as managers utilize it to advance their careers and pursue other personal goals (Lee, 2008). Freeman (1983) built on Chester Barnard’s inducement contribution framework on 1938 to come up with a positive perspective of support for CSR through the stakeholder theory. Freeman asserted that managers had an obligation to satisfy a variety of business constituents including customers, employees, suppliers, and local community players who could have an influence on the business outcomes of the firm. Basically, stakeholder theory insinuates that it is important for a company to engage in a certain level of CSR activities that are beneficial to non-financial stakeholders because failure in doing this may lose the company critical support from the groups (Freeman, 1983). Currently the concept of CSR has evolved considerably and has been enriched with greater theoretical perspectives as well as experiences from practice by many organizations in diverse industries. Although there is no single definition for CSR, it is currently perceived as a comprehensive set of policies, programs and practices that are central to business operations, business supply chains, and decisional processes across the company and it includes responsibility for the current and past actions and future consequences (Kotler and Lee, 2005). Currently, CSR is significantly wide in scope, the issues representing an organization’s CSR focus may vary from one business to another depending on the business characteristics including sector, size, and geographical location. Some of the issues defining CSR include governance, environmental conservation, human rights, business ethics, community investment, and workplace practices (Neubaum and Zahra, 2006). It has been argued that the new generation of corporations, optimization of profits will be key for success, rather than maximization of profit. This implies that there is a gradual shift in accountability of corporate leaders from shareholders towards social responsibility to customers and other stake holders within society. This means that the contemporary corporation has to balance between the needs of all stakeholders and the need to generate profits for the shareholders so as to satisfy both (Kotler and Lee, 2005). According to Kotler and Lee (2008), CSR is the “commitment to improve community well-being through discretionary business practices and contributions of corporate resources”. A number of benefits have been attributed to CSR including increased market share, enhanced company and brand image, attraction of investors, ease in attraction and retaining of quality employees, and lower operating costs (Barnett, 2007). Irrespective of these benefits, marketing managers in different companies view some social issues as having greater importance than others, thus the relevance of CSR issues are weighed on the basis of the company’s products, its distribution policies, its pricing structures and its view of social responsibility. Various approaches can be assumed in marketing management with regard to CSR, the first approach would be to focus entirely on profits and minimize CSR as much as possible, the second approach would be to explicitly incorporate CSR in the day-to-day marketing decisions of the company and therefore reduce the negative impacts of the decisions on society while enhancing positive impacts (Barnett, 2007). The third approach would be to engage in social projects that are not related to the company’s corporate mission and may be even detrimental to profits. Marketing managers are faced with the task to choose between the three approaches of CSR as well as to decide which social aspects matter to their companies. In marketing, awareness about acceptable behaviour and ethical standards is highly necessary. This awareness implies that marketing managers in business organizations are supposed to recognize the viewpoints of the company, the industry, and the society (Lee, 2008). While these three parties are very important in the CSR and ethical marketing, the groups always have largely different needs and wants. This raises the likelihood of conflicts arising. The conflicts can arise given two different scenarios, firstly when the needs of the three parties are different and secondly when a company leader’s conflict with those of the organization (Crane and Matten, 2010). For example, in the tobacco industry cigarettes have been profitable and good for tobacco companies and their shareholders, on the other hand tobacco smoking has been documented as being bad for health and therefore society does not want them although the company’s provide employment to thousands of people. This brings a conflict of interest between society and the tobacco industry as the latter benefits from cigarette marketing while the latter thinks it is harmful, this situation therefore presents difficult choices for marketing managers on the ethics of marketing tobacco products and their role in CSR (Crane and Matten, 2010). On the other hand, a company leader can seek personal benefits through practices such as false advertising so as to increase profits through sales even though society suffers as a result. This also presents an ethical dilemma for marketing managers. 3.0 CSR and Marketing Ethics in McDonald’s McDonald’s CSR policy includes a section on governance and ethics that details the corporation’s ethical standards in general and touches on aspects of marketing. One of the company’s value statements is that “it operates its business ethically” (McDonald’s Corporation, 2012). To support this assertion, McDonald’s has established strong policies and processes that make business ethics central to all activities. According to the company’s CSR report (McDonald’s Corporation, 2012), McDonald’s is a socially responsible organization that takes seriously issues of product safety, diversity, environment and workplace safety. The corporation runs a number of CSR programs covering the whole spectrum of its activities. 3.1 McDonald’s CSR Programs McDonald has been involved in a number of CSR programs throughout its operations globally. Most of what the company is doing is highlighted in its annual reports and global CSR reports. Some of the CSR programs run by the company include: Sustainable Supply Chain According to McDonald’s Corporation (2013), the company educates and communicates with its supply system about sustainability as part of its obligation to the society. This is carried out as part of the company’s supplier performance review and forms an important part of its global product board deliberations. The company has also developed a comprehensive global forestry policy applicable to all products it purchases. This policy covers issues of sustainable land management and forest protection. The same global forestry standards have also been extended to cover consumer packaging for all areas of the global market. McDonald’s also indicates that its eco-filter global packaging scorecard emphasizes important features such as reduction of package weight, use of recycled material and reduction of greenhouse gas emission in the production of the packaging material. Environmental Responsibility McDonald’s environmental responsibility policy involves increasing of best practice sharing within the organization’s system so as to enhance the most efficient and innovative initiatives towards environmental protection. The company established the Global Energy Leadership Board (GELB) in 2010; among other things the board has advanced energy efficient solutions for the company’s processes. The company has also continued to create new ways to increase energy efficiency in its restaurants through introduction of energy-efficient equipment. Although these steps have been taken by the company as part of its CSR initiatives, there are still feelings among environmental groups that the company has not accomplished enough to reduce environmental pollution or excessive use of resources (McDonald’s Corporation, 2013). Employee Experience There have been claims about McDonald’s lack of good policies for protection of the rights of employees and unethical labour practices. The company CSR policy focuses on enhancement of employee experience through education and other career development strategies. According to McDonald’s Corporation (2013), the company has increased the number of Hamburger University-certified restaurant managers. These are state-of-the art training centres for restaurant employees and staff around the world which are supposed to build the capacity of the employees to manage restaurants professionally and rise in their careers. The company has also continued to enhance its employee value proposition to drive employee engagement. Finally, the company has also continued to integrate its values into key people programs, from staff hiring to training and career development. Although this policy indicates good progress in employee development and career enhancement, it does not say anything about improvement of working conditions for employees at the lowest level of the company chain in restaurants. Community McDonald’s community CSR policy includes increasing of financial and volunteer support to the company charities through communications outreach. The Ronald McDonald House Charities has been the company’s charity for about four decades now and the company raises funds for it so as to make a difference to the lives of the children who benefit from it. The organization has also stepped up campaigns to increase the charity’s popularity and bring more people on board to help children. 3.2 Ethics in Marketing at McDonald’s Product Issues There have been many concerns over the ethical practices involved in the production of food products by Mc Donald’s. The first concern that has been raised by environmental groups is that the food production system for the poultry and beef products made by the company encourages environmental destruction. Even though the company continues to show efforts towards forest and water conservation, environmental groups including Greenpeace and point out that the company still encourages large scale production of soya beans and other crops from fields created by clearing forestland in the Amazon of Brazil (Bansal and Roth, 2000). Another concern about McDonald’s products has been that most of the company’s products have other added ingredients, particularly artificial flavours and preservatives that are not revealed on the product labels. There have been serious concerns across the world over the past few years about waste from food packaging. McDonald’s is also accused of using excessive packaging in its shops and restaurants although the company has been emphasizing on reducing the thickness of packages. Finally, McDonald’s is a strong global brand by consumer groups accuse the company alongside many others of carrying out global branding and ubiquity. The company has expanded its operations into many markets globally where it is using its big brand and large resources to outmuscle smaller food companies out of the market (Lee, 2008b). Promotion Issues According to many marketing critics and non-governmental bodies campaigning against food multinationals, McDonald’s is the biggest food company that utilizes unethical marketing in its practices. One of the practices that are widely applied by the company and many other food and grocery retailers are advertising to children (Lee, 2008ba). The adverts carried out by the company reach many children across the world and they have an influence on the children because they create an image suggesting that foods from McDonalds’s are better than what they get at home or elsewhere, in this case the advertisements appear misleading. On the other hand, though it’s CSR the company has nutrition and well-being program which involves diversification of food offerings for children and use of computer games to educate them about food choices. These programs have been accused of promoting McDonald’s products among children, an unethical practice. The company’s advertisement strategies of flooding supermarkets and stores with its adverts as well as using sponsors to advertise its brand has also been termed as unethical because of its strong influence on consumerism. McDonald is one of the most heavily advertised brands in the world and it has used sponsors in sports to advertise its brand e.g. the England Olympic games of 2008 (McDonald’s Corporation, 2013). Pricing Issues Pricing remains a serious concern among consumers globally as far as ethical marketing is concerned. McDonald’s is one of the food companies which are marketing cheap fast food and snacks in urban areas all over the world at cheaper prices this promoting eating habits that have been termed as unhealthy and contributing to weight problems and obesity. Most of McDonald’s products are rich in meat and chicken and their marketing as cheap healthy food that should be eaten regularly is seen as misleading for many consumers. Similarly the low prices offered for food in the company’s restaurants is blamed for keeping many average income consumers away from buying more healthy organic food (Lee, 2008bb). As the global food industry has expanded in recent years, there have been widespread concerns of industrialization of food production which concentrates power in the food business in the hands of a few profitable corporations like Mc Donald’s. This is considered extreme capitalism and unethical because McDonald’s and others get massive profits every year due to unfair pricing while restaurants selling alternative food struggle. It is suggested that even at lower prices the company can still make profits on most of its products (Lee, 2008bb). Distribution Issues McDonald’s has one of the hugest distribution channels for food globally. The company has penetrated many large urban areas and is now making inroads too smaller towns and villages through its food distribution channels. This distribution strategy is blamed for leading to the collapse and disappearance of smaller traditional restaurants in many towns as they are replaced with the huge industrial style food outlets by McDonald’s and its distributors. Because of the distribution system of the company and similar food companies, ‘fresh’ food products or ready-to-consume are moved long distances across the world to reach customers in markets where the same food could be produced at reasonable prices or alternatives could be provided. Transportation and shipping is blamed for increased pollution of the air by carbon dioxide. 4.0 Conclusions Ethics in marketing is one of the most important aspects of contemporary CSR. As illustrated in the literature, consumers are now very sensitive to ethical issues associated with marketing with the main issues being environmental impact of companies and their products, the truth in advertisements, practices of the company’s in society and so on. Although questions have been raised about the role of companies in community development through CSR, the practice has also been associated with good business outcomes. Ethical marketing practices are just the least expected of companies by their customers and McDonald’s is one of the companies that have been greatly highlighted for its unethical practices in production and marketing. The company has responded in recent years with strong CSR programs but it is evident that it still has a considerable distance to go to satisfy society that it is completely ethical in its practices. 5.0 Recommendations While McDonald’s has a CSR program in place, the company still has a lot of room to improve its program so that it can resonate better with society expectations while enabling the corporation to still make profits. Some of the recommendations for improvement of CSR and ethics in marketing at McDonald’s include; Natural environment: The Corporation should expand its initiatives in protection of the natural environment to cut across all its activities including marketing. Currently the company is not doing enough for the environment considering its huge resources. The company should come up with initiatives to reduce its total consumption of energy and water, and limit its production of pollutants (Business Green, 2008). This can be achieved by setting tougher standards for its suppliers and enforcing them. Relationship marketing and ethics: many people today believe that relationship marketing is a more effective practice for building positive relationships between consumers and companies. This would allow McDonald’s and its customers to work together under a set of rules that are not necessarily contractual and where the company’s practices can be more scrutinized by the public due to transparency. Green Marketing: Social marketing with the objective of protecting the environment and improving quality of life is the most positive trend many companies are taking now in the form of CSR (Business Green, 2008). McDonald’s should commit more resources and publicity to reduction of environmental pollution, control of land use, protection of endangered species and similar activities. The company should increase its production and marketing of ‘green’ products because current trends show that consumers are more willing to buy and pay more for such products. Cause-Related Marketing: cause related marketing is different from social marketing because its major purpose is to help a business. This kind of marketing can help the business improve its image or expand market share. In the case of McDonald’s cause-related marketing can be utilized in helping the company to improve its corporate image. The organization can associate its business with better causes, particularly where it has been blamed for unethical practices in the past. The company may work with organizations in protection of forests and healthy food protection and use such causes to improve its image. References Bansal, P., and Roth, K., 2000. Why companies go green: A model of ecological responsiveness, Academy of Management Journal, 43(4), pp.717–736. Barnett, M.L., 2007. Stakeholder influence capacity and the variability of financial returns to corporate social responsibility, Academy of Management Review, 32(3), pp.794–816. Blowfield, M. and Murray, A. 2008. Corporate Responsibility. Oxford: Oxford University Press Business Green, 2008. U.S. Execs: CSR initiatives do boost the bottom line. Business Green [Online] Available at: [accessed 9 April, 2014]. Crane, A. and Matten, D., 2010. Business Ethics. Oxford: Oxford University Press Freeman, R.E., and Reed, D.L., 1983. Stockholders and stakeholders: A new perspective on corporate governance, California Management Review, 25(3), pp.88–106. Gundlach, G. D. and Patrick Murphy, E., 2003. Ethical and Legal Foundations of Relational Marketing Exchanges, Journal of Marketing, 57 (10), 35-46. Kotler, P. and Lee, N., 2005. Corporate Social Responsibility: Doing the Most Good for Your Company and Your Cause. Hoboken, NJ: Wiley. Kotler, P., 2006. Principles of Marketing, 11th edition. New Delhi: Pearson Education, Asia. Lee, J., 2008b. An unhealthy relationship? Marketing, 4, pp. 15 Lee, M.P., 2008a. A review of the theories of corporate social responsibility: its evolutionary path and the road ahead. International Journal of Management Reviews, 10, pp. 53–73. McDonald’s Corporation, 2012. Worldwide Corporate Social Responsibility 2012 Report. McDonalds McDonald’s Corporation, 2013. 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