Ethics within companies.

Within this essay I will give my opinions on the statement, 'Companies do not have to be ethical, they are guided by the law; business ethics is an unnecessary consideration.' I will investigate two different organisations' responses to this statement in marketing and identify some other ethical issues. I will also analyse ethics within the marketing mix.

Ethics, in the broadest sense of the word, is rising to the top of the corporate agenda. Scarcely a week goes by without a leading company coming under attack, rightly or wrongly, for alleged unethical business practices whether it's Shell UK dumping it's oil in the North sea or McVities, the biscuit manufacture, use of fish oil from sand eels. Some of these scandals have made international news, such as the case of Union Carbide's plant in Bhopal, India, which negligently released toxic, fumes killing 25,000 people.

Shell businesses in the UK are part of the Royal Dutch/Shell Group of companies, one of the largest industrial undertakings in the world. Any oil company like Shell will have ethical issues to deal with, whether these issues are to do with extracting oil out of the sea or simply rising petrol prices, ethical issues will always have to be dealt with. It is important therefore that if the company wants people to buy their petrol, for example, they address these ethical issues as a matter of urgency. From research from Shell's website, www.shell.com they have discussions about ethics in different countries, they also show examples of some ethical issues which could affect the company.

One ethical issue that Shell has talked about is how it manages its business ethics in different countries. Shell responds to this by insisting that every Shell Country Chairman has an annual meeting with the Group Managing Director responsible for that region, where they discuss progress and problems in the implementation of the Shell Group Business Principles in that country. This, in turn forms part of the Business Principles annual letter produced by each Country Chairman. This response to the ethical issues of how Shell manages its business ethics in different countries shows that the company does care about the ethics of their company.

An example of an ethical issue that Shell has previously addressed is the difficulties they have faced in Nigeria. The two main ethical considerations they faced are the environmental problems caused by oil production in the Niger Delta and the current debate on Islamic Sharia Law. Shell response to the environmental problems is to press ahead with investment in infrastructure to replace pipelines where necessary, bury all flow lines and upgrade flow stations and production terminals. Shell have said they have also invested $52 million in 1999 in the Niger Delta, which has provided a wide range of infrastructure projects such as hospitals, health centres, schools, water schemes and electricity.

Taken from www.coca-cola.co.uk is a statement about Coca-Cola, the company. 'What started, as an ingenious exercise in packing design becomes perhaps the single most readily identifiable industrial object on the planet, a genuine icon.' Stephen Bayley - Creator

As for Coca-Cola's views on ethics they say that their aim is to conduct their business in ways that protect, preserve and enhance the environment. One ethical view they give is that all the packaging for Coca-Cola's products are capable of being recycled. Another environmental issue that Coca-Cola addresses is litter reduction and recycling. The company has been involved in campaigns to sort the above two problems out with a company know as ENCAMS, which is a local recycling company in the UK.

Another ethical issue that Coca-Cola UK addresses is that the company in the UK is supporting the Value Youth initiative, which addresses social exclusion and helps young people in reading. The 'Coca-Cola' Valued Youth initiative is a cross age reading/tutoring scheme that helps secondary school students, aged 14-15, who are at risk of dropping out of full time education.

I feel that Shell and Coca-Cola have shown that they have addressed some ethical issues that they both are faced with. I feel that Shell has more ethical issues to face up to because as an oil company they are always going to get people saying they pollute the air or cause damage to the environment. As I have chosen two companies that have two different ethical stances I am able to look at the statement and see how businesses guided by operating principles (Shell) and ones that operate using company objectives (Coca-Cola).

Lets first look at advertising. There are three main players in the power of advertising. These are the agency, the advertiser/company executive and the media. Advertising appeals to base motives meaning they make people buy things they don't really need. An ethical issue to be faced, in any promotion, is that some advertising has been deemed offensive and in bad taste. Some companies, which have been reported about to the Advertising Association, are FCUK, Opium and Benetton, for a variety of different reasons.

Surprisingly, a couple of charities have also been reported. These include Barnados and Help the Aged. Also a couple of television advertisements have been complained about. They are Jamie Oliver with Sainsbury's and Slim Fast. All of these companies will have to think about the ethical issues that they are advertising about and how their customers are seeing them.

Another issue is ambiguous statements such as 'helps prevent', 'helps fight' or 'can help'. An example of this is companies such as Johnson and Johnson claiming that if you wash your face twice a day with their product all your spots will disappear. Ethically it is not right that they should make such a statement unless they know for certain that if you use their product all your spots will disappear. This has been proved to be incorrect and misleading.

Another ethical issue is improving ethics in advertising. An example of this is the Gap advert. They are always full of young people, so ethically Gap could show older people in their adverts, as some people may say that Gap is a company that doesn't cater for older people or that they are prejudice to older people. Also promotion includes unethical practices such as overstating the product's features or performance or luring the customer to the store for a bargain that is out of stock.

One issue, in regard to pricing, in the marketing mix is price fixing. Price fixing is regarded as a heavily unethical practice that enables companies to charge high prices with no fear of being undercut by a competitor. This means that consumers have to buy the product at that artificiality-inflated price. A good example of this type of price fixing is the difference in price between cars in the UK and abroad.

Although all car manufacturers say that the prices of cars are more expensive in the UK, due to UK vehicles having a better specification, ethically car manufacturers should make prices of UK cars similar to that of cars abroad. For example, a brand new BMW 318 SE UK price �,495, in France the price is �,995 (Source What Car? October 2003). Predatory competition is driving a competitor out of business in order to be able to charge a higher price than otherwise.

Another unethical pricing practice is the failure to disclose the full price associated with a product. An example of this is booking up a holiday aboard. Most of time the price you pay is not the 'real' price as many taxes, airfares and insurance are left out of the price you are first given for the holiday.

Failure to make 'on time' payments to suppliers, for good or services received is an ethical issue. If suppliers are providing you with materials etc that a company needs to survive, it is ethically right that suppliers should be paid on time. Microsoft is a company widely known not to pay their suppliers for up to six months.

One other unethical practice for product is failure to inform customers, or business, of known product defects. If a supplier or company does not inform people about any product defects, that they know exists, and if that defect is serious enough, it could cause injury or be unsafe to consumers. An example of this is recalls on cars. A few months back many of the new Mini's had to be recalled due a risk of the fuel pipe catching fire. If the company had said nothing about this defect then a serious injury or death could have occurred. Another issue is that products lack the quality they should have. This is that the products are not made as well as they could be and services not performed to their best ability.

A third issue is that some products deliver little benefit. In an attempt to persuade customers to buy their brand rather than any other, manufactures sometimes make claims that are not fully substantiated. For example the Independent Television Commission (ITC) introduced new rules covering the advertising of medicines and treatments, health claims, nutrition, dietary supplements and slimming products.

There are many ethical issues in marketing to be faced. They can be grouped into the following headings selling issues, advertising price, channel decisions, competitive relations price, product price, packaging price and price issues. Some of these above issues are closely linked to issues within the marketing mix. As this is the case I will not discuss the advertising, price and product issues in this section.

Selling decisions include bribery, stealing trade secrets, misrepresenting, and unfair discrimination. An example of a selling issue is bribery. If a worker is injured in, say Coca-Cola's factory in India, and they might bribe him/her with money, extra holiday etc in order to stop them telling their story and giving the company a bad name.

Channel decisions include exclusive dealing, tying agreements and dealer rights. Exclusive dealing is an agreement between a supplier and its customer where the customer is restrained from dealing with any of the supplier's competitors. This could be unethical as very large companies could exclusive deal with all their customers meaning small competitors could be put out of business.

Competitive relations issues include barriers to entry and predatory competition. Predatory competition is driving a competitor out of business in order to be able to charge a higher price than otherwise.

Packaging decisions include fair packaging and labelling, excessive cost and pollution. An example of pollution is Shell advertising its commitment to reduce greenhouse gas emissions, hence contributing to the control of global warming.

To conclude to the statement 'Companies do not have to be ethical, they are guided by the law; business ethics is an unnecessary consideration', I believe from research into ethics within different companies that the law guides many companies. Some companies such as Shell had a great about of information on ethics and advertising. The fact that they are cutting down their pollution levels shows the public that they are trying to be ethical.

Coca-Cola had a lot of information on recycling and involving themselves in local community litter collection. I believe that these companies are advertising the fact that they are ethical companies to improve sales and profit. For example, Body Shop, I feel have shown that just because a business is ethical you can still produce high profits.

By using their ethical stance as a selling point they have been able to gain consumers who are environmentally aware. This is made easier due to the market that Body Shop is in. Therefore I believe if a business does have the chance, or the opportunity, to make an effort to be environmentally friendly, not only generally, but also locally, they should take advantage of that. I believe the main reasons that companies advertise that they are ethically aware is to increase profits. My opinion is that companies like advertising that they are ethical but most follow the law and if they're not breaking the law then they will carry on.

For a company to be regarded, in the public eye, as ethical, costs them hard currency. Many companies currently, do not feel that the benefits outweigh the costs involved and are not worth the added financial burden. Many only comply to the legal ethical requirements placed upon them, just because they 'have' to, in order that they continue to trade. There will have to be greater pressure brought upon them, especially from the public sector, before we see much change in companies views on ethics.

Bibliography Page

Websites

www.shell.com- website was used to collect information about the ethical issues of Shell.

www.coca-cola.co.uk- website was used to collect information about the ethical issues of coca-cola. Also a quote from Stephen Bayley was taken from the website.

Books

Principles of Marketing by Philip Kotler et al - used pages 43-76 for information on issues with the marketing mix and ethical issues within marketing