Chapter 3: Marketing Ethics and Social Responsibility in Strategic Planning

MULTIPLE CHOICE

1. _____ is a broad concept that relates to an organization’s obligation to maximize its positive impact on society
while minimizing its negative impact.
a. Marketing ethics d. Strategic philanthropy
b. Corporate philanthropy e. Social engineering
c. Social responsibility
ANS: C

2.
Being economically responsible is the most basic social responsibility of any business. This responsibility has the
most immediate effect on:
a. customers. d. the media.
b. shareholders. e. All of the above.
c. the government.
ANS: B

3. The principles and standards that define acceptable marketing conduct as determined by the public, government
regulators, private-interest groups, competitors, and the firm itself are termed:
a. marketing standards d. marketing ethics
b. societal standards e. social responsibility
c. codes of conduct
ANS: D

4. Which element of social responsibility do most firms try to align with marketing and brand image?
a. philanthropy d. economic responsibilities
b. marketing ethics e. marketing behavior
c. legal responsibilities
ANS: A

5. In the context of marketing ethics, some businesspeople choose to behave ethically because of “enlightened self-
interest.” What does this mean?
a. They behave ethically because it pays in terms of enhanced profits and performance.
b. They behave ethically because they are forced to do so.
c. They behave ethically because they look out for their own interests.
d. They behave ethically because of deep-rooted religious beliefs.
e. They behave ethically because they are afraid of being caught.
ANS: A

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 6. Which of the following IS NOT a challenge associated with being ethical and socially responsible?
a. Business decisions involve complex and detailed discussions in which correctness may not
be so apparent.
b. Individuals who have limited business experience often find themselves required to make
sudden decisions concerning marketing’s gray areas.
c. A person's experiences and decisions at home, in school, and in the community may be
quite different from the experiences and the decisions he or she has to make at work.
d. When personal values are inconsistent with the configuration of values held by the work
group, ethical conflict may ensue.
e. Most employees perceive that the values of honesty, respect, and trust are infrequently
applied in the workplace.
ANS: E

7. Which of the following best fits the description of fraud?

a. accepting bribes or gifts d. putting own interests ahead of others
b. abusive behavior toward others e. stealing or theft
c. alteration of financial records
ANS: C

8.
_____ is the most common and recurring issue with respect to marketing deception.
a. Product tampering d. Lying to employees
b. False and deceptive communication e. Overstating sales and revenue
c. Misleading pricing
ANS: B

9. With respect to regulating marketing deception, a key advantage of self-regulatory programs is the fact that they
are:
a. less costly and more practical to implement.
b. typically stricter than government regulations.
c. easier to enforce.
d. tied to state and local regulatory agencies.
e. All of the above are advantages of self-regulation.
ANS: A

10.
As discussed in the text, the White Dog Cafe in Philadelphia exemplifies an organization with _____ because the
owner infuses social responsibility and ethics throughout the organization’s culture.
a. high cultural expectations d. exceptional integrity
b. a strong code of conduct e. a strong ethical climate
c. strong strategic philanthropy
ANS: E

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
11. Most firms that experience ethical or legal problems actually have a code of ethics or an ethical compliance
program in place. Why is it that these firms can still have ethical problems despite having a code of ethics or
compliance program?
a. Their codes typically don’t cover high risk issues.
b. Their codes are typically written by consultants outside the firm.
c. Their codes are typically not integrated into daily decision making.
d. Their codes are written with no input from employees or customers.
e. Their codes are mandated by regulation rather than originating from within the firm.
ANS: C

12. Research has found that corporate codes of ethics should contain six highly desirable core values or principles.
Which of the following IS NOT one of these core values?
a. Trustworthiness d. Fairness
b. Respect e. Citizenship
c. Legality
ANS: C

13. Why is the connection between marketing ethics and leadership so important in nurturing a strong ethical culture?
a. Employees look to the leader to enforce the ethical code of conduct.
b. Employees expect the leader to punish unethical behaviors.
c. Employees look to the leader to ensure that the firm is in legal compliance.
d. Employees look to the leader as a model of acceptable behavior.
e. Employees expect the leader to clearly specify in writing the high-risk activities in the
firm’s daily operations.
ANS: D

14. Research indicates that being ethical and socially responsible has a number of benefits for the organization.
Which of the following IS NOT one of these benefits?
a. Increased customer goodwill
b. Increased market orientation of the organization
c. Increased employee commitment and satisfaction
d. Increased marketing performance
e. Increased competitive orientation
ANS: E

15. The link between marketing ethics and firm performance has been documented repeatedly over time. This link is
most evident in firms that have a strong _____.
a. market orientation d. ethical climate
b. stakeholder orientation e. employee satisfaction program
c. sense of customer loyalty
ANS: D

16. Firms that are market oriented place _____ interests first, but do not exclude the interests of other stakeholders.
a. society’s d. employees’
b. organizational e. customers’
c. marketing
ANS: E

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 17. When a firm adopts a stakeholder orientation, it generates data about stakeholder groups, distributes this
information throughout the firm, and:
a. continuously monitors stakeholder interests.
b. trains employees on issues that are important to stakeholders.
c. responds as a whole to this intelligence.
d. conducts research on emerging market trends that are important to stakeholders.
e. ensures that customer interests are aligned with the interests of other stakeholders.
ANS: C

18. Essentially, having a climate of ethics and social responsibility is all about creating trust among a firm’s
stakeholders. To gain trust, the firm and its employees must continuously uphold:
a. their promises with respect to advertising and promotion.
b. their standards of integrity.
c. the firm’s right and responsibility to be profitable.
d. their standards of fair competition in the marketplace.
e. their legal responsibilities.
ANS: B

19. Socially responsible firms tend to enjoy higher _____ because customers perceive that the firm is dedicated to
doing the right thing and treating customers fairly.
a. profit margins d. corporate integrity
b. sales volume e. corporate reputations
c. customer loyalty
ANS: C

20. To ensure that ethics and social responsibility are thoroughly incorporated into the firm’s strategic planning
process, the firm’s _____ should never be silent about ethical requirements and social responsibility.
a. marketing plan d. culture
b. code of conduct e. training materials
c. leadership team
ANS: A

ESSAY

1. Why have ethics and social responsibility become so important in recent years? Why is it important that
marketing ethics be incorporated into the firm’s strategic plan?

ANS:
The importance of marketing ethics and social responsibility has grown in recent years, and their role in the
strategic planning process has become even more important as many firms have seen their images, reputations,
and marketing efforts destroyed by problems in these areas. The failure to see ethical conduct as part of strategic
market planning can destroy the trust and customer relationships that are necessary for success. Ethics and social
responsibility are also necessary in light of stakeholder demands and changes in federal law. Furthermore, ethical
and socially responsible behavior improves marketing performance and profits. Marketing ethics does not just
happen by hiring ethical people; it requires implementation of an effective ethics and compliance program.

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 In response to customer demands, along with the threat of increased regulation, more and more firms have
incorporated ethics and social responsibility into the strategic marketing planning process. Any organization’s
reputation can be damaged by poor performance or ethical misconduct. However, it is much easier to recover
from poor marketing performance than from ethical misconduct. Obviously, stakeholders who are most directly
affected by negative events will have a corresponding shift in their perceptions of a firm’s reputation. On the other
hand, even those indirectly connected to negative events can shift their reputation attributions. In many cases,
those indirectly connected to the negative events may be more influenced by the news media or general public
opinion than those who are directly connected to an organization. Some scandals may lead to boycotts and
aggressive campaigns to dampen sales and earnings.

2. Draw, label, and explain the pyramid of social responsibility. What are the requirements for a firm if it truly wants
to be ethical and socially responsible?

ANS:
The pyramid of social responsibility consists of four dimensions or responsibilities: economic, legal, ethical, and
philanthropic. From an economic perspective, all firms must be responsible to their shareholders, who have a keen
interest in stakeholder relationships that influence reputation of the firm and, of course, earning a return on their
investment. The economic responsibility of making a profit also serves employees and the community at large due
to its impact on employment and income levels in the area that the firm calls home.

Marketers also have expectations, at a minimum, to obey laws and regulations. This is a challenge because the
legal and regulatory environment is hard to navigate and interpretations of the law change frequently. Economic
and legal concerns are the most basic levels of social responsibility for good reason: Without them, the firm may
not survive long enough to engage in ethical or philanthropic activities.

At the next level of the pyramid, marketing ethics refers to principles and standards that define acceptable
marketing conduct as determined by the public, government regulators, private-interest groups, competitors, and
the firm itself. The most basic of these principles have been codified as laws and regulations to induce marketers
to conform to society’s expectations of conduct. However, it is important to understand that marketing ethics goes
beyond legal issues: Ethical marketing decisions foster trust, which helps build long-term marketing relationships.

In terms of philanthropy, firms that choose to take these extra steps concern themselves with increasing their
overall positive impact on society, their local communities, and the environment, with the bottom line of increased
goodwill toward the firm, as well as increased profits. Many firms try hard to align their philanthropy with
marketing and brand image. During major crises, like Hurricane Katrina or the more recent financial meltdown,
firms are given an opportunity to make their philanthropic programs more responsive and visible to the public.
Socially responsible behavior is not only good for customers, employees, and the community, but it also makes
good business sense. For this reason, philanthropic activities make very good marketing tools. Thinking of
corporate philanthropy as a marketing tool may seem cynical, but it points out the reality that philanthropy can be
very good for a firm.

3. Identify and discuss the many challenges of being ethical and socially responsible. Focus on challenges at both
the individual (employee) level and the managerial level.

ANS:
Although most consider the values of honesty, respect, and trust to be self-evident and universally accepted,
business decisions involve complex and detailed discussions in which correctness may not be so apparent. Both
employees and managers need experience within their specific industry to understand how to operate in gray areas
or to handle close calls in evolving areas.

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Individuals who have limited business experience often find themselves required to make sudden decisions about
product quality, advertising, pricing, sales techniques, hiring practices, privacy, and pollution control. The
personal values learned through socialization from family, religion, and school may not provide specific
guidelines for these complex business decisions. In other words, a person’s experiences and decisions at home, in
school, and in the community may be quite different from the experiences and the decisions that he or she has to
make at work. Moreover, the interests and values of individual employees may differ from those of the company
in which they work, from industry standards, and from society in general. When personal values are inconsistent
with the configuration of values held by the work group, ethical conflict may ensue. It is important that a shared
vision of acceptable behavior develop from an organizational perspective, to cultivate consistent and reliable
relationships with all concerned stakeholders. A shared vision of ethics that is part of an organization’s culture can
be questioned, analyzed, and modified as new issues develop. However, marketing ethics should relate to work
environment decisions and should not control or influence personal ethical issues.

It is imperative that firms become familiar with many of the ethical and social issues that can occur in marketing
so that these issues can be identified and resolved when they occur. Essentially, any time that an activity causes
managers, employees, or customers in a target market to feel manipulated or cheated, an ethical issue exists
regardless of the legality of the activity. Many ethical issues can develop into legal problems if they do not
become addressed in the planning process. Once an issue has been identified, marketers must decide how to deal
with it.

4. Describe the role that a code of conduct plays in ensuring ethical compliance within a firm. How should a code of
conduct be developed, what should it contain, and what are the keys to ensuring that the code is successfully
implemented?

ANS:
Most firms begin the process of establishing organizational ethics programs by developing codes of conduct (also
called codes of ethics), which are formal statements that describe what an organization expects of its employees.
According to a KPMG Integrity Survey, 82 percent of employees reported that their firm has a formal code of
conduct such as codes of ethics, policy statements on ethics, or guidelines on proper business conduct. These
codes may address a variety of situations from internal operations to sales presentations and financial disclosure
practices.

A code of ethical conduct has to reflect the board of directors’ and senior management’s desire for organizational
compliance with the values, rules, and policies that support an ethical climate. Development of a code of conduct
should involve the board of directors, president, and senior managers who will be implementing the code. Legal
staff should be called upon to ensure that the code has correctly assessed key areas of risk and that standards
contained in the code buffer potential legal problems. A code of conduct that does not address specific high-risk
activities within the scope of daily operations is inadequate for maintaining standards that can prevent
misconduct.

Research has found that corporate codes of ethics often have five to seven core values or principles in addition to
more-detailed descriptions and examples of appropriate conduct. Six core values are considered to be highly
desirable in any code of ethical conduct: (1) trustworthiness, (2) respect, (3) responsibility, (4) fairness, (5) caring,
and (6) citizenship. These values will not be effective without distribution, training, and the support of top
management in making them a part of the corporate culture and the ethical climate. Employees need specific
examples of how these values can be implemented.

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Codes of conduct will not resolve every ethical issue encountered in daily operations, but they help employees
and managers deal with ethical dilemmas by prescribing or limiting specific activities. Many firms have a code of
ethics, but sometimes they do not communicate their code effectively. A code placed on a website or in a training
manual is useless if the company doesn’t reinforce it on a daily basis. By communicating both the expectations of
proper behavior to employees, as well as punishments they face if they violate the rules, codes of conduct curtail
opportunities for unethical behavior and thereby improve ethical decision making. Codes of conduct do not have
to be so detailed that they take into account every situation, but they should provide guidelines and principles
capable of helping employees achieve organizational ethical objectives and address risks in an accepted manner.

5. What is the relationship among marketing ethics, strategic planning, and organizational performance? How is
being market oriented different than having a stakeholder orientation?

ANS:
One of the most powerful arguments for including ethics and social responsibility in the strategic planning process
is the evidence of a link between social responsibility, stakeholders, and marketing performance. An ethical
climate calls for organizational members to incorporate the interests of all stakeholders, including customers, in
their decisions and actions. Hence, employees working in an ethical climate will make an extra effort to better
understand the demands and concerns of customers. One study found that ethical climate is associated with
employee commitment to quality and intrafirm trust. Employee commitment to the firm, customer loyalty, and
profitability have also been linked to increased social responsibility. These findings emphasize the role of an
ethical climate in building a strong competitive position.

An ethical climate is also conducive to a strong market orientation. Market orientation refers to the development
of an organizational culture that effectively and efficiently promotes the necessary behaviors for the creation of
superior value for buyers and, thus, continuous superior performance of the firm. Market orientation places the
customer’s interests first, but it does not exclude the interests of other stakeholders. Being market oriented means
fostering a sense of cooperation and open information exchange that gives the firm a clearer view of the
customer’s needs and desires.

The degree to which a firm understands and addresses stakeholder demands can be referred to as a stakeholder
orientation. This orientation contains three sets of activities: (1) the organization-wide generation of data about
stakeholder groups and assessment of the firm’s effects on these groups, (2) the distribution of this information
throughout the firm, and (3) the organization’s responsiveness as a whole to this intelligence.

A stakeholder orientation can be viewed as a continuum in that firms are likely to adopt the concept to varying
degrees. To gauge a given firm’s stakeholder orientation, it is necessary to evaluate the extent to which the firm
adopts behaviors that typify both the generation and dissemination of stakeholder intelligence and responsiveness
to it. A given organization may generate and disseminate more intelligence about certain stakeholder communities
than about others and, as a result, may respond to that intelligence differently.

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.