From Retailing to Ethical Marketing Legal and Ethical

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Forms of Relativism l l l 1) What is ethical varies from one situation and society to another 2) Whether a lie is judged to be immoral depends upon the circumstances surrounding the actions 3) Whether a lie is permissable totally depends upon the situation 4) A person should make certain that their actions never intentionally harm another even to a small degree 5) The existence of potential harm to others is always wrong, irrespective of the benefits to be gained (Strongly Disagree) 1 2 3 4 5 6 7 (Strongly Agree)

Is there a difference? l l Listening to a song playing on the internet (i. e. streaming) from a 3 rd party source not affiliated with the record label (ex: Ka. Za. A, Limewire, etc) Downloading a song on the internet from a 3 rd party source not affiliated with the record label (ex: Ka. Za. A, Limewire, etc) and deleting it after listening to it. A) Ethical & Legal B) Not Ethical, but Legal C) Ethical, but Not Legal D) Not Ethical & Not Legal l Downloading a song on the internet from a 3 rd party source not affiliated with the record label (ex: Ka. Za. A, Limewire, etc) and keeping it on your computer after listening to it.

Legal and Ethical Behavior

Learning Objectives 1. 2. 3. 4. Explain how legislation constrains pricing policies. Differentiate between legal and illegal promotional activities. Explain the retailer’s responsibilities regarding the products sold. Discuss the impact of governmental regulation on a retailer’s behavior with other supply chain members.

Learning Objectives 5. Describe how various state and local laws, in addition to federal regulations, must also be considered in developing retail policies. 6. Explain how a retailer’s code of ethics will influence its behavior.

Ethical and Legal Constraints Influencing Retailers

Primary U. S. Laws that Affect Retailing

Examples of Laws Designed to Protect Consumers

On Consumer Protection and Surveys l SPAM l http: //www. archive. dcita. gov. au/2007/12/ spam_report/us_laws

Pricing Constraints l l l Horizontal Price Fixing Vertical Price Fixing Price Discrimination Deceptive Pricing Predatory Pricing LO 1

Pricing Constraints l Horizontal Price Fixing: Occurs when a group of competing retailers (or other channel members operating at a given level of distribution) establishes a fixed price at which to sell certain brands of products. LO 1

Pricing Constraints Exhibit 6. 4 LO 1

Pricing Constraints l Vertical Price Fixing: Occurs when a retailer collaborates with the manufacturer or wholesaler to resell an item at an agreed-on price. LO 1

Pricing Constraints l Price Discrimination: Occurs when two retailers buy an identical amount of “like grade and quality” merchandise from the same supplier but pay different prices. LO 1

Price Discrimination l Cost justification defense. l Changing market defense. l Meeting competition in good faith defense. LO 1

Pricing Constraints l Deceptive Pricing: Occurs when a misleading price is used to lure customers into the store; usually there are hidden charges or the item advertised may be unavailable. LO 1

Pricing Constraints l Predatory Pricing: Exists when a retail chain charges different prices in different geographic areas to eliminate competition in selected geographic areas. LO 1

Promotion Constraints Deceitful Diversion of Patronage l Deceptive Advertising l Deceptive Sales Practices l LO 2

Promotion Constraints l Palming Off: Occurs when a retailer represents that merchandise is made by a firm other than the true manufacturer. LO 2

Promotional Constraints Exhibit 6. 5 LO 2

Deceptive Advertising l Deceptive Advertising: Occurs when a retailer makes false or misleading advertising claims about the physical makeup of a product, the benefits to be gained by its use, or the appropriate uses for the product. http: //www. ftc. gov/opa/1996/02/azrak. shtm LO 2

Deceptive Advertising l Bait-and-Switch Advertising: Advertising promoting a product at an unrealistically low price to serve as “bait” and then trying to “switch” the customer to a higher -priced product. http: //openweb. tvnews. vanderbilt. edu/1976 -10 -21 -NBC-9. html LO 2

Deceptive Sales Practices l Failing to be honest or omitting key facts in either ad of the sales presentation. l Using deceptive credit contracts. LO 2

Product Constraints Product Safety l Product Liability l Warranties l LO 3

Product Constraints Exhibit 6. 6 LO 3

Product Constraints l Product Liability Laws: Deal with the seller’s responsibility to market safe products. These laws invoke the “foreseeability” doctrine, which states that a seller of a product must attempt to foresee how a product may be misused and warn the consumer against hazards of misuse. LO 3

Product Constraints l Expressed Warranties: Are either written or verbalized agreements about the performance of a product and can cover all attributes of the merchandise or only one attribute. LO 3

Product Constraints l Implied Warranty of Merchantability: Is made by every retailer when the retailer sells goods and implies that the merchandise sold is fit for the ordinary purpose for which the such goods are typically used. LO 3

Product Constraints l Implied Warranty of Fitness: Is a warranty that implies that the merchandise is fit for a particular purpose and arises when the customer relies on the retailer to assist or make the selection of goods to serve a particular purpose. LO 3

Supply Chain Constraints l Territorial Restrictions Dual Distribution l Exclusive Dealing l Tying Agreements l LO 4

Supply Chain Constraints l Territorial Restrictions: Are attempts by the supplier, usually a manufacturer, to limit the geographic area in which a retailer may resell merchandise. LO 4

Channel Constraints Exhibit 6. 7 LO 4

Supply Chain Constraints l Dual Distribution: Occurs when a manufacturer sells to independent retailers and also through its own retail outlets. LO 4

Dual Distribution l Ralph Lauren has a dual distribution strategy where it markets its Polo brand apparel through its own retail stores as well as through traditional department stores. LO 4

Exclusive Dealing l One-Way Exclusive Dealing: Occurs when the supplier agrees to give the retailer the exclusive right to merchandise the supplier’s product in a particular trade area. LO 4

Exclusive Dealing l Two-Way Exclusive Dealing: Occurs when the supplier offers the retailer the exclusive distribution of a merchandise line or product in a particular trade if in return the retailer will agree to do something for the manufacturer such as heavily promote the supplier’s products or not handle competing brands. LO 4

Tying Agreements l Tying Agreement: Exists when a seller with a strong product or service requires a buyer (the retailer) to purchase a weak product or service as a condition for buying a strong product or service. LO 4

State, and Local Regulations Affecting Retailers Exhibit 6. 8 LO 5

Ethics in Retailing Ethical Behavior in Buying Merchandise l Ethical Behavior in Selling Merchandise l Ethical Behavior in Retailer-Employee Relationship l LO 6

Ethics in Retailing l Ethics: Is a set of rules for human moral behavior. LO 6

Ethics in Retailing l Explicit Code of Ethics: Consists of a written policy that states what is ethical an unethical behavior. LO 6

Ethics in Retailing l Implicit Code of Ethics: Is an unwritten but well understood set of rules or standards of moral responsibility. LO 6

Ethical Behavior in Buying Merchandise Product Quality l Sourcing l Slotting Fees l Bribery l LO 6

Ethical Behavior in Buying Merchandise l Slotting Fees (Slotting Allowances): Are fees paid by a vendor for space or a slot on a retailer’s shelves, as well as having its UPC number given a slot in the retailer’s computer system. LO 6

Ethical Behavior in Buying Merchandise l Markdown Money: Is what retailers charge to suppliers when merchandise does not sell at what the supplier intended. LO 6

Ethical Behavior in Selling Merchandise Products Sold l Selling Practices l LO 6

Ethical Behavior in Selling Merchandise l Home Depot’s no commission sales approach does not put the sales person at odds with the customer. However, given Home Depot’s self-service operation, paying a commission would be difficult. LO 6

Ethical Behavior in the Retailer-Employee Relationship Misuse of Company Assets l Job Switching l Employee Theft l LO 6

National Retail Federation Principles on Customer Data Privacy Exhibit 6. 9 LO 6

Marketing and Ethics

Relativism l l l 1) What is ethical varies from one situation and society to another 2) Whether a lie is judged to be immoral depends upon the circumstances surrounding the actions 3) Whether a lie is permissible totally depends upon the situation 4) A person should make certain that their actions never intentionally harm another even to a small degree 5) The existence of potential harm to others is always wrong, irrespective of the benefits to be gained (Strongly Disagree) 1 2 3 4 5 6 7 (Strongly Agree)

On Relativism and Ethics l 1. Cultural relativism holds that (a) the elements embodied in a culture are relative to the norms of that culture, and (b) there are no objective, neutral, or nonarbitrary criteria to evaluate cultural elements across different cultures. l 2. Ethical relativism holds that (a) what is ethical can only be evaluated relative to some moral code held by an individual, group, society, or culture, and (b) there are no objective, impartial, or nonarbitrary standards for evaluating different moral codes across individuals, groups, societies, or cultures.

On Relativsm and Ethics l 3. Conceptual framework-relativism holds that (a) knowledge claims are relative to conceptual frameworks (theories, paradigms, world views, or Weltanschauungen), and (b) knowledge claims cannot be evaluated objectively, impartially, or nonarbitrarily across competing conceptual frameworks. l 4. Reality relativism (a view often associated with constructionism), holds that (a) what comes to be known as “reality” in science is constructed by individuals relative to their language (or group, social class, theory, paradigm, culture, world view, or Weltanschauung) and (b) what comes to count as “reality” cannot be evaluated objectively, impartially, or nonarbitrarily across different languages (or groups, etc. ).

Question 1 “Does the sun revolve around the earth or does the earth revolve around the sun? ” l Conceptual framework relativism, for example Kuhn’s (1962) relativism, implies the following answer: “First I must know whether you subscribe to the paradigm of Copernicus or Ptolemy, for these paradigms—like all paradigms—are incommensurable and, therefore, there is no truth to the matter independent of the paradigm you hold. ” l

Question 2 Was Great Britain morally right in leading the drive in the 19 th century to abolish slavery in cultures throughout the world? ” l Relativism responds: “Since slavery is a cultural element that cannot be evaluated independently of the norms of the culture within which it exists, no judgment on this matter can be made—to apply one’s own norms elsewhere is simply cultural ethnocentrism l

Question 3 l Should Great Britain work toward the abolition of slavery in the few remaining states in which slavery continues to exist? ” l Answer: “See response to previous question.

Question 4 l “Did the Holocaust occur? ” l Answer: “Since the Holocaust is a “constructed” reality (Lincoln and Guba, 1985: 84), just one of many ‘multiple realities, ’ the Holocaust’s occurrence or nonoccurrence cannot be objectively appraised independent of the world-view of a particular social grouping or culture. ”

Question 5 Is a culture that is tolerant of individuals from other cultures preferable to a culture that oppresses everyone outside the dominant culture? ” l Answer: “Although the predisposition toward tolerance is a cultural element that varies widely across different cultures, no judgment can be made across cultures as to the moral superiority of tolerant versus intolerant cultures l

Question 6 l Should an academic discipline be open to the views of those outside the discipline? ” Answer: “Although it is true that different academic disciplines differ in their relative openness to the views of outsiders, no judgment can be made across disciplines as to the relative desirability of such openness.

What Relativsm Really Means l Relativism does not imply a constructively critical stance toward knowledge claims, nor does it simply acknowledging that the knowledge claims of science are fallible.

What Relativsm Really Means l Relativism implies nihilism—the belief that we can never have genuine knowledge about anything. l Relativists, incoherently, know that no one else can ever know anything. (If it is true that all knowledge is impossible, how can one know that “all knowledge is impossible”? )

What Relativsm Really Means l Furthermore, relativism doesn’t imply a tolerant stance toward outside ideas and other cultures; it implies indifference to the norm of tolerance. l Moreover, relativism does not imply ethical sensitivity; it implies ethical impotence.

What Relativsm Really Means l Finally, subjectivism (a view usually paired with relativism) does not caution science to work at minimizing bias; it maintains that the human condition makes the very idea of objectivity to be a chimera. l Therefore, —like be abandoned. truth—objectivity should

Ethics in Global Business l Role of Ethics l Social norms (deontological) l Stakeholder outcomes (teleological) l Hypernorms (see Donaldson and Dunfee)

Cultural environment a. Religion b. Legal system c. Political system Hunt-Vitell Theory of Ethics Perceived ethical problem Professional environment a. Informal norms b. Formal codes c. Code enforcement Deontological norms Perceived alternatives Deontologica l evaluation Action control Industry environment a. Informal norms b. Formal codes c. Code enforcement Ethical judgments Organizational environment a. Informal norms b. Formal codes c. Code enforcement Personal characteristics a. Religion b. Value system c. Belief system d. Strength of moral character e. Cognitive moral development f. Ethical sensitivity Intentions Behavior Probabilities of consequences Perceived consequences Desirability of consequences Teleological evaluation Actual consequences Importance of stakeholders SOURCE: Hunt and Vitell (1986, 1993). Copyright © 1991 by Shelby D. Hunt and Scott J. Vitell. NOTE: The portion of the model outside the dashed lines constitutes the general theory. The portion inside the dashed lines individuates the general model for professional and managerial contexts.

Global Procurement Is it right to outsource as much work as possible to foreign countries or is it right to retain as much work as possible in house?

Global Procurement l Trust, l Dependence, Caution Order fulfillment l Basic & Fashion notebook story

Ethics in Global Business For instance, consider “Carla, ” who concludes that it is ethically right to outsource as much work as possible to foreign countries. She might do so believing (deontologically) that it is inherently right to maximize stockholder value by sourcing products from the least expensive global source. She might believe that favoring any country (such as America) more or less than another (such as India or China) is discrimination and that such discrimination is inherently wrong. Additionally, she might believe she has a duty to help those who are less fortunate, and that those outside the United States are, on average, less fortunate than those inside the United States. At the same time, Carla might (teleologically) reason that outsourcing jobs to companies in foreign countries with lower wage costs would (1) result in personal recognition from superiors, (2) provide an organizational return on labor profitability that is consistent with benchmarked firms in the same industry (who are outsourcing the functions globally), (3) increase the value of her stock options, (4) increase employment opportunities for workers overseas whom she cares about, and (5) not decrease employment opportunities for Americans (because she believes displaced workers can quickly find comparable jobs).

Ethics in Global Business Now consider “Roberta, ” who concludes that it is ethically right to keep as much work as possible in house. Her patriotism convinces here that it is (deontologically) right to “save American jobs for Americans. ” She might also believe (deontologically) that she has a duty to focus on the long term organizational intellectual capital embedded in employees (rather than the organization’s short term financial performance). Further, she may believe that it is simply wrong to fund or sponsor any employment of individuals working overseas in facilities that have sub-American workplace (“sweatshop”) conditions. Further, she may believe many managers are shipping job overseas in an anti-American fashion (discrimination). At the same time, Roberta might (teleologically) reason that retaining the jobs in house would (1) increase (or at least maintain) the morale, trust, and commitment of current employees, (2) increase shareholder confidence, and (3) protect organizational competences from being lost to the organization. Furthermore, she cares greatly about the welfare of her firm’s employees and cares less about workers in other countries.

Ethics in Organizations l Is it right to clock in and out of work using the time clock closest to the building entrance, or is it right to use the time clock closest to the assigned work? l When funding is very limited, is it right to give pay raises that are equally distributed across all employees, or is it right to continue to give raises based on performance? l Is it right to base layoffs only on performance evaluations, or is it right to take into account either personal employee circumstances or corporate initiatives? l Is it right to perform surveillance on employees’ nonworkplace conduct, or is it right to limit surveillance to workplace conduct?

Q 1. Marketing and Property Rights Transfer H 1. Greater restrictiveness leads to greater perceptions of ethicalness/legality H 2: Perceptions of increased ethicalness/legality lead to greater amounts of file sharing.

Q 2. Product Imports l What should be the limits on importing products from China?

Q 3. Product Imports l To what extent (and why) should firms be involved in “sustainable” business?

Ethics in Global Business Role of Standards l Technology systems l l Child Labor Laws l l BTS shipment Material Source l l Composition Notebook UPCs Sponge. Bob Portfolios Limiting Customer Choice l l Ozzy Osbourne Bobble Heads “Hottie, ” “Cutie” Screen Print Shorts

Conclusion Although understanding ethical diversity—the objective of this part of the presentation—is good, accepting all forms of ethical diversity is neither good for organizations nor the societies in which they are embedded.