Ethics of Marketing - Standards and Principles Tied with Suitable Conduct in the Market - Essay Example

Marketing ethics Introduction Ethics is a vital factor in the field of corporate governance, which has a considerable impact on performance of an organization. The factor can be related in two distinct ways through ethical assumptions and values that maintain a particular regime of corporate governance. The second theory is evident in methods used by organizations to manage their ethical performances. Ethics of governance is the term used to describe the first association; whereas, the latter association can be referred to as governance of ethics (Rossouw, 2009). An effective governance framework aligns organizational strategies with environmental and social concerns, enabling organizations to realize profit. However, in contemporary competitive market, the task of aligning is excessively challenging (Appelbaum, et al., 2009). In this particular study, the researcher will primarily focus on ethics of marketing, which addresses certain standards and principles associated with suitable conduct in the market (Ferrell, n.d.). According to the author, marketing is an activity usually conducted by an organization to promote a particular product or service and unethical practices arise out of pressure to achieve performance objectives. Misleading sales approach, overbilling customers, price fixing and fraud antitrust are all categorized as unethical marketing practices. Although such practices may fetch short-term benefits for the company; in the long run, these have devastating impacts. Such impacts may deteriorate financial performance of a company or tarnish its reputation to such an extent that downfall of the company becomes inevitable. This is precisely the reason why conducting ethical marketing is so important. Organizations that efficiently manage ethics are able to methodically absorb, respond and adapt to most breakdowns in decisions or conduct. In the contemporary consumer oriented society, human rights play a crucial role. Given the aforesaid fact, greater number of companies has been exposed to several positive as well as negative ethical issues of which count of the latter is increasing day by day. This has been largely possible due to rising power of media and the way this system is structured. Consequently, the system has a considerable impact on organizations that are involved in such means. In light of the aforementioned facts, this study will take a look at GlaxoSmithKline, which is a UK based pharmaceutical company and assess few of the ethical marketing challenges faced by the company, thereby seeking evidences as to why these have become an issue for the company. The study will involve a critical analysis of the poor as well as good marketing ethical practices conducted by GlaxoSmithKline, thereby highlighting various repercussions encountered by the company. Following that, an ethical marketing audit report will be prepared that will enable the researcher to provide necessary recommendations regarding ways for GSK to improve its credentials, as far as ethical marketing practices are concerned. Company Overview GlaxoSmithKline is a British publicly listed pharmaceutical company and one of the world’s most renowned multinational corporations. The company was founded in 1935 and is headquartered in Brentford, United Kingdom. The company along with its subsidiaries is mainly engaged in developing, producing and marketing pharmaceutical products, over-the-counter medicines and health-related consumer products worldwide. GlaxoSmithKline provides pharmaceutical products, which specialize in solving issues related to the central nervous system, respiratory system, urogenital, cardiovascular system, oncology and emesis, anti-virals, antibacterials, rare diseases, metabolic, dermatology, immuno-inflammation and HIV. Besides manufacturing medicines that treat conditions such as, asthma, depression, skin conditions, infections, heart and circulatory disease and cancer, the company also develops adult and pediatric vaccines in order to avert infectious diseases such as, diphtheria, whooping cough measles, rubella, polio, hepatitis A and B, tetanus, mumps, typhoid, influenza and bacterial meningitis. Alongside that, the company manufactures consumer health products for skin health, oral care, nutrition and overall wellness. GlaxoSmithKline is also known for developing nutritional products for hydration and energy (Yahoo finance, 2013a). According to Fortune 500 list of global companies by market capitalization published by the Financial Times (2013), GSK is the 46th largest company (market capitalization - $114.691 billion as of March 2013). According to Yahoo finance (2013b), GSK’s current market capitalization is $123.64 billion. Poor ethical practices With the advent of globalization, companies have faced difficulties in expanding their business operations in the international field. Despite the fact, companies have always been formulating strategies in order to gain entry into foreign markets as well as competitive advantage. GSK is no exception to this as the company has also been similarly strategizing in order to establish a solid foundation for business growth by extending into international markets. The company has implemented different strategies in order to market its products in the country of expansion. Implementation of such strategies, alongside fetching benefits, has also raised certain concerns for the company over the recent past. This forms the context of this research, which will be discussed in detail in sections to follow. Recently, GSK has been accused of conducting unethical marketing practices so as to gain competitive advantage in the market. The unethical marketing issue under concern, in case of GSK, is involvement in the act of bribery, corruption and fraud, false marketing and advertisement. GSK had allegedly breached regulatory standards set by the federal regulatory boards while marketing and selling products that did not meet criteria specified under the regulations (Institute of Business Ethics, 2012). The company was accused of fraudulently manipulating study designs in order to obtain positive outcomes. In addition, they had allegedly obscured test results, which were unflattering and had the potential to damage reputation of the company. GSK also failed to inform the general public about negative results and continued to manufacture drugs that could have had severe consequences on a patient’s health. The company was also accused of concealing information associated with potential side effects of certain drugs manufactured by them. GSK had also encouraged the usage of ‘off-label’ drugs, which resulted in misuse of medicines. Apart from that, other ethical lapses noticed in organizational strategies implemented by the company includes use of promotional means such as, advisory boards, medical education programs, speaker events and grants, in order to advertise their drugs. The company was accused of using grants so as to illegally promote their drugs. GSK had also allegedly violated federal fraud and abused laws such as, the federal false claims act; following which, the company was accused of wholesale pricing. The company also faced number of lawsuits as a result of inadequate quality control, when they were accused of selling more than 20 drugs manufactured at Cidra with possible safety issues. GSK has recently been fined $3bn (£1.9bn), after the company admitted to have bribed doctors in order to prescribe inappropriate medicines with underlying motive of boosting sales. The company encouraged doctors by means of bribe to prescribe incompatible antidepressants for children. GSK was also accused of influencing sales representatives in the United States to miss-sell certain drugs to doctors. In order to influence doctors into issuing extra prescriptions specifying drugs manufactured by GSK, the company lavished kickbacks and hospitability for those who agreed to do so. The officials, including even doctors, were offered trips to resorts in Jamaica, Bermuda and California. The company was also accused of corporate misconduct over antidepressants, Wellbutrin and paxil, as well as asthma drug, Advair. Psychiatrists and their associates were flown to five star hotels with an all expenses paid trip. They were invited as speakers and were paid close to $2,500 in order to give presentation in favour of drugs manufactured by the company. According to court documents, GSK paid for the articles that were written in favour of the company’s drugs and were published in medical journals. In addition, Paxil, a drug approved for adults, was also promoted as being appropriate for children as well as teenagers, despite the fact that repetitive trails showed negative results. Lavish events were held in places like, California, Puerto Rico and Hawaii, so as to promote drugs to doctors for unapproved usage. The officials who attended the event were given $750 along with other paid facilities. Air fares for doctors and their spouses were borne by the company itself. These were the unethical marketing practices conducted by GSK, which came to the knowledge of public; following this, the company had to face severe repercussions (Neville, 2012; Neate, 2013; Waters, 2012; Daily mail, 2012; Thomas and Schmidt, 2012). Financial performance of the company deteriorated drastically and on top of that, its reputation was hampered considerably. The level of trust shown by customers towards the company, depleted substantially. Although the company may recover from financial losses that they incurred, it will still be very difficult for them to recover from the intangible losses. Theories to support literature According to Catoiu, Geangu and Gardan (2013), marketing in the sphere of medical services has evolved over the due course of time and has reached a complex dimension. In the contemporary world, marketing in all stages of human activity is challenged to adapt to new and complicated requirements. Contemporary customers with greater access to information, connectivity and mobility have become increasingly demanding, as far as marketing strategies are concerned. This particular identity of customers keeps on changing in accordance with the relationship that they share with entities that satisfy their needs. As far as medical services sphere is concerned, need of consumers correlated with services provided to them has a special importance for every individual. This effectively suggests that customers live in a modern world, which facilitates effective information sharing. They seek more and more information regarding a particular product or service, before availing it. This is why they need companies to become more and more transparent in terms of revealing proper information related to products, which might help them to make an informed decision. This is a driving factor of trust between the consumers and service providers. Consumers do have certain expectations and when they are fulfilled accordingly, the relationship between them and the service providers become very strong and increasingly relevant. According to Ndubisi, Nataraajan and Lai (2014), ethical norms (be it in any field) have a considerable impact on customer commitment and relationship quality. Consumers more often than not tend to share better quality relationship as well as show commitment, when high ethical conducts were followed by service providers. By specifying ethical norms, authors are trying to refer to price and distribution norms, product and promotion norms, contract and information norms, general integrity and honesty norms and so on and so forth. According to the authors, these norms have a significant impact on quality of relationship between consumers and companies. The way in which norms are followed defines the identity as well as the culture of a particular organization, which in turn is related to its reputation to the customers. In view of the literatures provided above and on comparing them with actual scenarios of GSK, it can be said that GSK’s marketing principles were completely in contrast to ideas set forth in the literature. The company did not care too much about expectations of the public in general and neither were they concerned about delivering appropriate service to the public. Everything that the company had cared about was boosting its profit margins at end of the year, even if that meant compromising on quality of products manufactured by them. The company followed illicit marketing methods in order to promote drugs, which were not even approved for use. They concealed vital information regarding side effects of their drugs, which later proved to be detrimental to the health of various patients. This is why the company faced number of lawsuits from both federal authorities as well as patients. The repercussions of such activities coming into the limelight were severe and resulted in drastic deterioration of financial performance. However, this loss was tangible. The intangible losses incurred by the company were tarnished reputation, depleted level of trust and weakened relationship with consumers. The extent of these losses was so high that the company is still finding it difficult to recover. Recommended solutions In order to prevent company officials from indulging into such practices, the management has to ensure the fact that a strict code of marketing is followed and that all marketing operations conducted within the organization strictly adhere to the code. In order to be able to scrutinize the same, a robust governance framework has to be formulated. The people responsible within the framework have to state strict rules and penalties against individuals or groups who breach the code. Motivated marketing officials should be assigned with the responsibility of serving in key positions within the organization so as to avert elements of misconduct. An effective means of communication is required, whereby free flow of information can be facilitated between company and its stakeholders. Good Ethical Practices GlaxoSmithKline have taken a number of initiatives in order to enhance accessibility of clinical data to the public that can revolutionize this industry, which is less known for maintaining transparency. Being one of the world’s most renowned pharmaceutical companies, GSK has planned to report results of the clinical tests done on their drugs to public, regardless of the nature of results. The company has also adopted the plan of releasing nearly 200 promising leads of upcoming medicines for the treatment of TB to public. In the recent past, GSK was accused of concealing vital information related to their drugs by the public. They were even accused of manipulating the design of their clinical tests in order to obtain results that are highly in favour of the company. After the accusations were proven right, GSK was fined $3 billion by federal authorities in the United States for conducting false marketing of their products. Nevertheless, time has changed; the company has shown greater responsibility towards customers and have taken prudent steps in order to retain their trust. The company is promoting openness of information, which will enable customers to make informed purchasing decisions (Burke, 2012). The greatest fact about this policy is that other pharmaceutical companies will also be compelled to imitate the same so as to be able to survive the competition. Moreover, the company has also decided to stop paying doctors in order to prescribe their drugs. This will create a level playing field, whereby customers will get relevant and unbiased information from doctors regarding appropriate drugs for the problem that they are facing. This will significantly improve ways of marketing in the pharmaceutical industry as well as strengthen the code of ethical marketing. Ethical marketing audit GSK has an ethical responsibility towards people and the society at large. Even so, over the recent past, the company has failed to focus on responsibilities, which had led to their failure in various dimensions. In order to recommended proper solutions to the company regarding preventing ethical issues from escalating in the future, it is important to conduct an ethical marketing audit. In order to do so, a thorough analysis of the external environment is necessary. Political factors The government is the single most powerful purchaser. The government focuses a great deal on pharmaceutical companies as easy targets in order to control the rising need for health care. The government’s control over price creates parallel trade. The cost containment plan of the government keeps on changing. Economical factors Growth is shifting towards the emerging markets. R&D costs are increasing consistently. Declining growth rate of European economies. NHS in the United Kingdom is too slow to introduce latest treatment mechanisms. Emerging markets accounted for majority of GDP growth all over the world. Socio-cultural factors Ageing population intensifies need for funding in the health care sector. Increasing expectations of patients. Trend of customers to use general drugs as the first defensive measure against any minor disease. Increasing need for information. Technological factors High technology solutions are becoming increasingly expensive. Speedy innovation, rendering regulators less powerful (Cunningham and Harney, 2012). Conclusion and Recommendation GSK have to stay true to their vision and that is to enhance quality of human life by providing them with superior quality products and services and hence, enabling them to perform better and live longer. The company in order to design customer-centric operations should always cater to satisfy expectations of their customers by ethical means and not by illicit ones. One way of doing so would be to set up a robust governance framework consisting of procedures and rules; this will serve the role of governing ways in which operations are conducted within the organization. By doing do, the company will be able to create a strong organizational culture as well as retain the trust of their customers that they had previously lost. GSK is still an unmatched competition to many of its rival companies. They are an undisputed leader in the pharmaceutical industry and thus, their activities should reflect the same image. The company should learn from the ethical conducts followed by other companies and should thereafter strive to implement the same in their own organization. In this way, they can prevent any ethical misconduct. The company can set up governing bodies that would be majorly responsible for monitoring the fact that no individual working for the organization is involved in any unethical marketing practices. If an individual or a group is found to have violated the code of conduct, then they should be severely penalized. Lastly, GSK should portray appropriate marketing ethics in order to enhance brand image as a company that is transparent and customer-centric. Through this, the company will be able to strengthen the relationship with their customers, which in turn will help them to achieve higher customer loyalty and retention rate. This will enable them to augment their sales and henceforth, increase their profit margin. Reference List Appelbaum, S. H., Vigneault, L., Walker, E. and Shapiro, B. T., 2009. Good corporate governance and the strategic integration of meso ethics. Social responsibility journal, 5(4), pp. 525-539. Burke, M., 2012. GSK pledge on trials transparency. [online] Available at: http://www.rsc.org/chemistryworld/2012/10/gsk-clinical-trials-data-published-transparency [Accessed 22 March 2014]. Catoiu, I., Geangu, I. P. and Gardan, D. A., 2013. Applying Marketing Principles in the Field of Medical Services an Ethical Challenge? Procedia Economics and Finance, 6, pp. 449-456. Cunningham, J. and Harney, B., 2012. Strategy and Strategists. Oxford: Oxford University Press. Daily mail, 2012. GlaxoSmithKline to pay $3billion fine after pleading guilty to healthcare fraud - the biggest in U.S. history. [online] Available at: http://www.dailymail.co.uk/news/article-2167742/GlaxoSmithKline-pay-3b-fine-pleading-guilty-healthcare-fraud.html [Accessed 22 March 2014]. Ferrell, L., no date. Marketing ethics. 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