MARKETING ETHICS

Submitted to: Prof. Supriti Mishra

Submitted By: Suman Pradhan Shiva Padhi Japkirat Singh

DECLARATION

We hereby declare that the report titled Marketing Ethics submitted to IMI- Bhubaneswar is a work done by us under the esteemed guidance of Prof. Dr.Supriti Mishra, faculty member, IMI- Bhubaneswar.

Suman Sekhar Pradhan, Shiva Krishna Padhi Japkirat Singh Oberai PGDM 2012-14

CONTENTS
HEPATITIS E VACCINE TRIAL IN NEPAL AMERICAN APPAREL: UNWRAPPING ETHICS KING JEWELS: ETHICAL LEADERSHIP IN PRACTICE FMCG SKINCARE PRODUCTS NESTLE BOYCOTT

Hepatitis E vaccine trial in Nepal

Drugs: Hepatitis E vaccine Sponsors: GSK, Walter Reed Army Institute of Research Period: 2001 2003 Location: Kathmandu, Nepal

Unethical aspects: In 1998, GSK and the Walter Reed Institute, which conducts medical research for the US army, started cooperating to develop a Hepatitis E vaccine. Hepatitis E is a common disease in poor countries and there have been outbreaks in countries where US troops are deployed. Preparations for phase II trials were made in February 2000. Before launching the trials, GSK had already decided the vaccine would not be commercially developed for a travellers market, while Walter Reed decided it would be unsuitable for US soldiers. Still, GSK and Walter Reed went ahead with phase II trials and wanted to test the candidate vaccine on 8,000 Nepalese volunteers in Lalitpur, without a plan to further develop the vaccine and make it available to the local population if the trials were successful. The Nepalese NGO Lumanti and municipal officers protested against the tests in Lalitpur because the majority of its population is illiterate and highly vulnerable. Walter Reed then decided to test the vaccine on 2,000 soldiers offered by the Royal Nepalese Army as volunteers. However, the soldiers were also considered a vulnerable group as they are poor and potentially subject to coercion by their superiors.

Violated norms: Vulnerable subjects may not have received the required special protection. The population where the research was carried out is unlikely to benefit from the study. Consent may not have been fully informed and freely-given. Post-trial access arrangements were apparently lacking. Outcome: In March 2006, civil society groups sent a letter to GSK demanding that the vaccine is made available for free to the Royal Nepalese Army and the Lalitpur community and offered to the Nepali Ministry of Health at not-for-profit prices. Furthermore, GSK should sign prior agreements with the communities impacted by the research to ensuring post-trial access if the vaccine is approved before further testing takes place. Apparently, the company did not publicly respond to the letter. In March 2007, the results of the study were published in the New England Journal of Medicine (NEJM). In June 2007, the NEJM published two letters to the editor, reiterating the need to further

develop the vaccine and make it available to the Nepalese community, and a response from GSK. The company explained that measures had been taken to remove the influence of military commanders over participation by subordinates and that most soldiers approached for the trial refused to participate. GSK affirmed that it is committed to continue development of the Hepatitis E vaccine so that it can be available in Nepal, but calls for external financing for the introduction of the vaccine through partnerships.

American Apparel: Unwrapping Ethics

American Apparel, a popular clothing manufacturer, has socially progressive labour policies and uses significant environmental advances in its manufacturing process. In addition, it has a wellestablished philanthropic arm. Set against these socially responsible policies is the highly sexualized nature of the companys advertising. This element of the marketing mix seems, at least to some consumers, very much at odds with the other aims and policies of the company. The question facing students is whether this disconnect can be maintained or whether the brands advertising should change. American Apparel finds itself once again in a familiar place sued again for sexual harassment and creating a hostile work environment, because of the vulnerability its CEOs philosophy of sexual freedom in the workplace creates for the publicly held company. In discussing a 2006 sexual harassment suit, founder, chairman and CEO Dov Charney expressed the belief that consensual sexual relationships in the workplace were appropriate: I think its a First Amendment right to pursue ones affection for another human being. Recently, Irene Morales, 20, sued Charney, 42, American Apparel, and its directors for about $250 million, alleging Charney forced her into sex acts when she was 18 and an employee. The company has accused Morales of extortion. A lawyer for the company dismissed the allegations, saying when Morales left the company and accepted severance, she signed a statement saying she had no claims against the company and agreed that any future claims would be addressed by confidential arbitration. A judge has halted Morales suit until March 25, pending a decision on whether it should go to arbitration or trial. Notwithstanding the distinction of being dubbed American Apparels chief lawsuit officer, Charney is a complex figure. His website, filled with photos of him and provocative shots he took of the companys young models, tells the story of his immigrant family, religion, creating the company as a teenager, philosophy on sexual freedom, and politics. Passionate about immigration reform, proud his clothing is made in America, he pays his 10,000 workers well above garment industry rate. Charney owns 51.8 percent of the company and the board has thus far apparently gone along with his philosophy of sexual freedom. However, the company is no longer on solid financial footing. Blame the recession or other factors, but it appears that sexy marketing isnt selling American Apparel the way it did several years ago; stock prices have been dropping. American Apparels ethics policy talks about promoting ethical conduct, including the handling of actual or apparent conflicts of interest between personal and professional relationships.

In interviews, Charney has tied the importance of sexual energy to creative energy on which he says the fashion industry depends. No argument about the value of released endorphins. Interesting to note that many leaders have championed endorphin highs to stimulate creativity. Among dozens of examples, they set aside areas for ping pong, volleyball, or fitness equipment, or hold events recognizing employee achievements few, if any of which, have resulted in litigation and loss of company and CEO reputation. Every leader gets to figure out if what she or he is doing is working and what to change (before a board answers that question for them). Charney enjoyed the reputation as a wunderkind. Now the company is in a different phase facing financial and strategic challenges, as well as another lawsuit about its culture.

The irony of sexual freedom in the workplace is that it is about power, not romance. It often ends up exploiting those most vulnerable the way, for example, immigrants have often been treated in some workplaces; it also gives ammunition to those who, seeing where a company has made itself most vulnerable, move in for their own kill. Learning Objective: This case is intended for an introductory marketing course and for use as supplementary material to stimulate discussion on marketing ethics. The case presents a company that does well in some areas of social responsibility (labour, environment) but is seen to do far less well in other domains (advertising). The case engages students to discuss marketing ethics and the link between ethics and strategy.

King Jewels: Ethical Leadership in Practice

DESCRIPTION KingJewels, one of the leading jewelry manufacturing and trading companies in Hong Kong, was having another profitable year. With its operations director essentially running the company in Hong Kong while the owner and CEO focused his energies on expanding the business into international markets, an opportunity had arisen for foul play. Accounting records had been manipulated and some senior staff were found to have forged shipping documents and accepted bribes from suppliers in exchange for awarding contracts. To complicate matters further, the professional and personal relationships between some key players in the company were blurred, making it even more difficult for the eventual whistle blower to decide her course of action. Illustrates the importance of corporate governance and internal control, even for SMEs, and especially when senior management members of the company concerned had ties that extended beyond professional relationships.

Learning Objective: To reinforce the importance of professional ethics and whistle blowing in preventing commercial crimes and upholding high moral standards; serve as an exercise to analyze what corporate governance structures and systems should be in place to minimize the risks of financial fraud; and identify the importance of internal communication and control mechanisms in deterring commercial crimes 1. Discuss how the leadership style may have contributed to unethical behavior.

Leadership style refers to approach of providing direction, implementing plans and motivating people. In 1939, Kurt Lewin led a group of researchers to identify the different styles of leadership. The three major styles of leadership are (a). authoritarian when leaders tell their employees what to do and how they want it accomplished with employee input; (b). participative when the leader includes one or more employees in the decision making process and (c). delagative when the leader allows the employees to make the decisions. The leadership style of Andy Wong may have contributed to unethical behavior in the following ways: (1). His personality may have played a factor in his leadership style. He was described as being gregarious (fond of the company of others; sociable) and entrepreneurial (a person who organizes, operates, and assumes the risk for a business venture). The business was founded by himself and his wife and it started off as a two-person company. This lets us he was very passionate about the company. He had a hands-on leadership style and this motivated his staff. These qualities are good but are not good enough to prevent unethical behavior.

(2). As the C.E.O of KingJewels, Wong believed a good vision and direction were critical leadership qualities. This is true, but a good vision and direction by themselves they are not enough. The company had a well-defined organizational structure, but it lacked the critical internal structure needed for the implementation of policies and procedures. (3). The final way Wongs leadership style may have contributed to the unethical behavior is that he left the internal management to some one else, Clement Tam. He was being delagative instead of setting the foundation himself. The unethical behavior could have been prevented by conducting held regular group and one-on-one staff meetings with Clement Tam and the other department heads to be more informed of what was going on and after being informed telling Clement Tam and the other staff what he wanted done; (being authoritarian) or allowing the staff to make decisions and approving them (being participative). 2. Discuss how the proper segregation of duties could have prevented Tam from fraudulently sourcing the gems. Segregation of duties is an internal control policy that means no one person has the responsibility for more than one related function. It reduces the risk of mistakes and unethical business actions. It also helps fight fraud by hampering collusion. The implementation of proper segregation of duties could have prevented Tam from fraudulently sourcing the gems in 4 ways. (1). It would ensure that his uncle and close friend Peter Tam wasnt a supplier of gems to KingJewels because this was a conflict of interest. (2). It would ensure that he didnt have too much internal power because he was both the operations director (almost overseeing the whole company) and the head of the gem sourcing department. (3). It would prevent him from having complete control over the assets (the gem) and using lower quality gems. (4). It would prevent him from using in power to bribe his subordinates (Jonathan Ho and the quality controllers) to use substandard gems and to remain silent. The examples of proper segregation of duties in this situation are: 1. The functions of Operations Director and Gem Sourcing would not be performed by Clement Tam only. 2. Tam would not be in the role of Operations Director to prevent a conflict of interest with his sister Tam. 3. The role of Human Resources would be filled by a person other than Clement Tam. 4. The person who approves the purchase of gems should not be the same person who obtains custody of the gems. 5. The person who approves the purchase of gems should not be able to obtain custody of check to pay for it.

These are just a few examples of the proper segregation of duties would be implemented within King Jewels. A good rule to remember for proper segregation of duties is that at least two sets of eyes are required for any one transaction. 3. Discuss how the companys compensation plan contributed to the deceptive behavior. The companys compensation plan contributed to the deceptive behavior because of the way it was structured. Compensation is the salary and wages paid to employees for their work performed. Compensation is managements tool that is used to further the existence of the company. Compensation may be used to reward and encourage peak performance from employees. The annual bonuses were contingent upon the companys growth target. This was mentioned by Clement Tam in his conversation with Wai Man. The companys growth target for 2005 was HK$600 million as total revenue and 2% of market share. Revenue is the monies received from the sale of a companys goods and/or services. Market share is the percentage of total sales volume in a market captured by a brand, product, or firm. In order to attain the growth target goal, it was imperative for King Jewels to keep sales volume high to attain the market share and price the jewellery high enough to attain the revenue, but still keep in affordable for its consumers. How the companys compensation may have also contributed to the deceptive behaviour is that it pushed Clement Tams personal and professional ethics over the limit to where he felt he had to revert to unethical practices to achieve Wongs ambitious goals and remain in his position. 4. Discuss how culture may have influenced the employees attitude towards exposing Tam. Culture can be defined as the behaviors and beliefs characteristic of a particular social, ethnic, or age group. Again, the corporate culture within an organization influences the behaviour of everyone within that organization and can have a positive effect on the success of the organization or it can doom any organization. The key people who influence corporate culture are top management and other past or present organizational leaders. In China, it was common culture that business dealings were either unethical or potentially illegal. Chinese employees were rewarded for their job efforts and no one was willing to report any wrong doing that would put their job stability in danger. Unfortunately, this attitude even seeped into the culture at KingJewels. The employees at KingJewels were afraid of losing their jobs. Wai Man knew this about the employees within KingJewels. She had been with the company since 1998.

5. How would you recommend Wai Man proceed. I would recommend Wai Man proceed in the following manner: (1). Wai Man should start by making a definite decision to give the report on malpractices she had discovered and how they could have taken place without her knowledge. This is a hard position to take now, but it will pay off both professionally and personally and in the end. She will be able to redeem herself professionally after this hard lesson. (2). Secondly, she should continue by divorcing herself from her personal concerns and look at, the entire situation not only objectively but also critically by always asking herself the question How would I proceed in this situation if Clement Tam was not my brother? (3). Finally, she will have to accept the fact that her personal relationships with both her brother and her uncle will be different due to the decisions they both made in regards to the company. She has to remember that she is a Certified Public Accountant and has to adhere to a code of professional ethics.

FMCG SKINCARE PRODUCTS

With increase in per capita income and corresponding shift towards Western lifestyle, Indians have begun spending more on personal grooming. The desire to look healthy and beautiful is on the rise. All these factors, coupled with near obsession of the Indians for fair skin, have given an unprecedented impetus to the Indian fairness market in the past few decades. The fairness products (Skin lightening cream) under the brand name 'Fair & Lovely' was developed by Hindustan Unilever Ltd in 1975. The product was then marketed nationally in 1978. According to industry estimates, Fair and Lovely holds 80% market share. In 1988, the brand went international, and is now available in 40 countries. Banking on the opportunity, Hindustan Unilever Limited (HUL) launched Fair & Lovely fairness cream in 1975. With its positioning as the first ever fairness cream targeted at common man, the brand turned out to be a huge success. Challenging HULs dominance, CavinKare, a Chennai-based FMCG, introduced Fairever. The product, aimed at middle class consumers, was differentiated on the basis of the ingredients used i.e., Kashmiri saffron and milk used in the preparation. The companies like Hindustan Unilever, Garnier, Nivea, Emami, Paras Pharma and Godrej Sara Lee launch tens of skin care, hair care, bath and shower products, and deodorants for men; a face that has helped Axe, Fair & Handsome and Set Wet grow into Rs. 100-crore brands. Other notable brands included Cavincare Ltd.'s Fairever, Godrej Group's Fairglow, Elder Group's Fair Oneand Emami Group's Gold Turmeric and Naturally Fair. In addition to this, many global cosmetic brands had also begun offering skin-lightening products in the Indian market. Kolkata-based Emami introduced Fair and Handsome in 2005 after learning that males used Fair & Lovely. Annual sales of Fair and Handsome quadrupled to 1 billion rupees after Indias biggest movie star, Shah Rukh Khan, became its pitchman in 2007. Emami spends 150 million rupees a year on advertisement and endorsement fees. In India, fairness creams dominate the space with over a 45 per cent share, followed by moisturisers at 22 percent. In the other words skin-lightening products accounted for almost 45 percent of the Indian cosmetics industry. overall cosmetics industry is growing at 15 per cent yearon-year, fairness creams constitute a huge market with sales worth nearly Rs 2,000 crore (Nielsen 2010 figures). Advertisements depicted depressed, dark-complexioned women, who had been ignored by employers and men, suddenly finding new boyfriends and glamorous careers after the cream had lightened their skin. HUL has exploited and reinforced the preference for fair skin, portraying it as a necessary prerequisite for success, and promoted the use of their products as a means of achieving that ideal. Monetary gains have been made notwithstanding the negative impact these products have engendered in terms of social consciousness and strengthening of stereotypes. The outburst began with the All India Womens Democratic Association (AIDWA) lodging a complaint about HULs advertisements to the National Human Rights Commission alleging that their advertisements were demeaning to women. Also, there is no scientific backing for the manufacturer claims that these products enhance fairness preventing darkness of skin or removing blemishes. In human skin, the amount of melanin cannot be reduced by applying fairness cream, bathing with sun blocking soaps or using fairness talcum. But still, the sales keep increasing because of the big Indian market increasing in potential day by day, especially the ignorant lot. This is clearly an issue of utilitarianism where the company showed minimum concern for the customers and was concentrating only on its profits.

Ethical issues There is no scientific backing for the manufacturers claims that there product enhance fairness prevented darkening of the skin or removed blemishes. In human skin, the amount of melanin cannot be reduced by applying fairness cream, bathing with sun blocking soaps or using fairness talcum. Even then the sales of fairness product continued to increase. Here the market is big and the potential is even bigger. So in India beauty seemed to be associated with fairness more than anything else. The statement given by Dr R.K. Pandhi, who heads the department of dermatology at AIIMS in Delhi said no externally applied cream can change the screen colour, indeed the amount of melanin in an individual skin cannot be reduced by applying fairness creams. although which didnt effect the Indian consumers.

Nestle Boycott
Infant Formula- It was ironically that the biggest controversy in Nestles history involved the product on which the company was built. Critics said that Nestle had promoted the use of infant milk formula, in developing countries, in an unethical manner. Will talk on the basis 4ps of the marketing-

Product- Infant Formula

Problems of the Product The formula is not really as healthy as mothers milk Its not a substitute for mothers milk Mothers milk provide protective antibodies to the baby-

Breast milk has many natural benefits lacking in formula. Nutrients and antibodies are passed to the baby while hormones are released into the mother's body. Breastfed babies are protected, in varying degrees, from a number of illnesses, including diarrhoea, bacterial meningitis, gastroenteritis, ear infection, and respiratory infection but not in the case of Infant Formula.

Formula must normally be mixed with water, which is often contaminated in poor countries, leading to disease in vulnerable infants. Because of the low literacy rates in developing nations, many mothers are not aware of the sanitation methods needed in the preparation of bottles. Even mothers able to read in their native tongue may be unable to read the language in which sterilization directions are written.

PriceInitially they distributed formula as a free sample through hospitals and doctors, once baby get adjusted with taste, then they stopped free samples. The infant formula is too costly, its difficult for the poor women of the developing country to afford or to buy it.
Place- Where they are distributing

Less economically developed countries.

Promotion (Advertising): The Company was severely condemned by health agencies around
the world for its marketing of infant formula in developing countries, by conveying the message that the formula was better for babies than mothers' milk. To promote the product- The Company also seen to distribute free samples only where it had a competitor in the infant foods market.

Consequences of unethical Marketing practices:

The Nestl boycott is a boycott launched on July 7, 1977, in the United States against the Swiss-based Nestl corporation. It spread quickly throughout the United States, and expanded into Europe in the early 1980s. In Canada, the controversy lasted from 1978 to 1984. It was prompted by concern about the Nestle's promotion of breast milk substitutes (infant formula), particularly in less economically developed countries (LEDCs), which campaigners claim contributes to the unnecessary suffering and even deaths of babies, largely among the poor. Among the campaigners, Professor Derek Jelliffe and his wife Patrice, who contributed to establish the World Alliance for Breastfeeding Action (WABA), were particularly instrumental in helping to coordinate the boycott and giving it ample visibility worldwide.

Current status of the boycott

The Nestl boycott is currently coordinated by the International Nestl Boycott Committee, the secretariat for which is the UK group Baby Milk Action. Company practices are monitored by the International Baby Food Action Network (IBFAN), which consists of more than 200 groups in over 100 countries

References
http://somo.nl/html/paginas/pdf/Examples_of_unethical_trials_dec_2006_NL.pdf

http://www.scribd.com/doc/67707145/Case-Study-Marketing-of-Fairness-Creams-and-theQuestion-of-Ethics#download

http://www.slideshare.net/ManjunathaAdii/nestles-case-study

http://www.termpaperwarehouse.com/essay-on/Case-King-Jewels-Ethical-Leadership/94086

http://www.studymode.com/essays/Case-Study-American-Apparel%E2%80%99s-UnwrappingEthics-40221559.html