A Review of Marketing Ethics: An International Perspective

Citation

Schlegelmilch, B. (1999), "A Review of Marketing Ethics: An International Perspective", International Marketing Review, Vol. 16 No. 3, pp. 1-7. https://doi.org/10.1108/imr.1999.16.3.1.1

These are exciting times for marketing practitioners. The continuing globalisation of business has substantially increased the scope for working in new and often dramatically different business environments. Marketing opportunities beckon in exotic locations that many previous practitioners may have been unable to place on a map, let alone visit, such as Kazakhstan or Indonesia. However, these opportunities often bring significant challenges, including difficult ethical issues.

A recent article in the Wall Street Journal Europe (Copetas, 1998) captured the seriousness of such problems for businesspeople in Russia. Del Monte Food Inc.′s managing director for Russia, commenting on business conditions there, said: ‘‘The rule for success and survival in this environment is to trust nobody, believe nobody and realise absolutely nothing is predictable′′. The erratic nature of business in Russia and the associated ethical conflicts have led to problems in recruiting Western executives. An executive recruitment specialist explained that there′s ‘‘excitement to help rebuild Russia, but the real talent is tired and scared of the corruption′′. A vice‐president with Bain and Co., the global strategic consulting firm, recommended ‘‘outsourcing′′ the corruption: ‘‘We suggest that Western companies take on a Russian partner who can handle all the black activity′′[1]. While many businesspeople no doubt attempt to distance themselves from bribery and other forms of corruption in this way, it is said to still result in a ‘‘moral churn′′ inside Western executives, leaving them reluctant to continue doing business in Russia.Bribery is only one example of the type of ethical issues that executives may find themselves increasingly having to confront as they attempt to manage differences in values across different country markets. There are also plenty of ethical issues to consider in serving domestic markets too (including bribery, which is still found in developed markets such as the USA, even if it is not institutionalised in the way found in Russia, say, or Nigeria). Accordingly, the pressure on marketing managers to deal with ethical issues continues to grow.

Perhaps some guidance in handling these issues may be sought from marketing ethics texts, such as Chonko′s (1995) Ethical Decision Making in Marketing, Laczniak and Murphy′s (1993) Ethical Marketing Decisions: The Higher Road, and Ethics in Marketing by Smith and Quelch (1993/1996). These books have, at least, served in business schools as required texts for a small but growing number of elective courses on marketing ethics (and/or related topics such as marketing and society, marketing and public policy, macromarketing, etc.). They are also useful sources for instructors seeking to include ethics materials in marketing management and other courses. Appropriately enough, the latest addition to this group, Marketing Ethics from Bodo Schlegelmilch (1998), has an explicit focus on marketing ethics from an international perspective. He correctly observes: ‘‘As multinational corporations become larger and span more countries, the problems facing the corporations become more complex. What is ‘appropriate′ in one country, will not necessarily apply in others′′ (1998, p. 21).

Schlegelmilch, formerly a professor at Thunderbird, the American Graduate School of International Management, now has the Chair of International Marketing and Management at Vienna University of Economics and Business Administration. In Marketing Ethics, he provides a compilation of text materials, readings, and cases that would surely be a valuable source of reference for business executives as well as an excellent required text for many marketing ethics courses. The book is in four parts. In Part I, there is an introduction to the fundamentals of marketing ethics. In Part II, there are four case studies. Part III provides readings in marketing ethics with a distinctly international flavour that are mostly drawn from academic journals. Finally, in Part IV, are business ethics resources, such as information on business ethics Websites and examples of corporate codes of conduct. Below, I discuss each part in turn, with reference where appropriate to what Marketing Ethics has to offer as compared against earlier texts in marketing ethics. In conclusion, I return to the topic of marketing ethics in an increasingly global business environment and the overall contribution of the book to this important topic.

Schlegelmilch makes good use of Laczniak and Murphy (1993) and Smith and Quelch (1993/1996) throughout Part I. This means that readers familiar with these sources may find that this part has little new to offer. However, this is appropriate to the author′s purpose and target audience of business students and managers. As the author makes clear, his goal in Part I is to provide an introduction to key concepts in marketing ethics. That said, he has also made a commendable effort to include international examples in this overview. Moreover, as discussed below, chapters three and eight do offer less familiar material and some interesting insights on marketing ethics from an international perspective.

The introductory chapter lays out the scope and importance of business ethics. It includes a discussion of ethical relativism, a particularly important topic in international marketing ethics because of the risk of managers mistakenly adopting the maxim, ‘‘When in Rome, do as the Romans do′′. As Schlegelmilch (1998, p. 10) rightly advises, managers must seek a middle ground between ethical relativism and moral absolutism: ‘‘neither the extremes of relativism, nor the ethnocentric belief that our ethics represents the only reasonable approach provide suitable guidance to managers grappling with cross‐cultural business dilemmas′′.

Chapter Two, which examines ethical decision‐making, is disappointing. It covers the role of ethics in corporate decision‐making, identifies primary and secondary stakeholders of the firm, discusses theories of moral philosophy, and concludes with some frameworks for analysing business ethics. Hence this chapter is where students and managers would look for guidance in evaluating the ethical issues identified in the rest of the book. While other chapters show persuasively that decision‐making in international marketing ethics can be extremely difficult, this chapter has little to offer by way of solutions. Of course, some hesitation is called for, but with care it is possible to provide normative guidance to the students and managers for whom this book is intended. While this guidance would be unlikely to consist of definitive answers to specific ethical problems, it could show how such problems might be more adequately understood and management judgement better exercised. A notable omission in this regard is Integrative Social Contracts Theory (Donaldson and Dunfee, 1994), especially given its applicability to international business ethics issues.

Granted, Schlegelmilch (1998) does give more explicit attention to moral philosophy theory than Smith and Quelch (1993), but far less than Laczniak and Murphy (1993). More important, he does not offer a framework for the use of this theory or some other basis for normative evaluation. He does include Tom Donaldson′s (1989) ethical algorithm, developed specifically for addressing conflicts in norms between countries in which a firm is operating, though it is incorrectly attributed to John Donaldson (1992). In contrast, Laczniak and Murphy (1993, pp. 48‐50) offer a series of questions or ‘‘tests′′, derived from moral philosophy (the legal, duties, special obligations, motives, consequences, utilitarian, rights, and justice tests). These tests are not intended to provide definitive answers, but should ‘‘inform′′ ethical reasoning. Smith and Quelch (1993, pp. 30‐34) propose the consumer sovereignty test, a more narrowly applicable heuristic that is grounded in theories of moral philosophy (the CST requires marketing managers to assess whether consumers are capable of exercising informed choice). While the CST has limitations (see Smith, 1995), it is useful in helping marketing managers evaluate ethical issues affecting their customers. In fairness, it should be noted that Chonko (1995) also hesitates to provide normative guidance. However, his emphasis is on ‘‘descriptive marketing ethics′′, providing a thorough discussion of how managers are believed to make decisions with ethical content, which, as he shows, is certainly of considerable value in better understanding how to make these decisions.

In chapter three, Schlegelmilch takes good advantage of some of his prior research and provides an overview of historical, geographical, religious, and philosophical differences between the USA, Europe and Japan. Again, this can only be a brief outline, but it provides a useful basis for understanding how these cultures might approach business ethics issues and differences in the amount of public discussion of ethics. While there is a long tradition of talking about ethical issues in the USA, he suggests there is a reticence in discussing ethical issues in public in Europe and, at least at the micro‐level (dealing with the roles and responsibilities of individual managers), in Japan.

In chapters four, five, and six, Schlegelmilch discusses ethical issues associated with specific marketing practices: marketing research, competitive intelligence gathering, and product, pricing, distribution, and promotion policies. Throughout these chapters, he attempts to emphasise those issues more likely to arise in an international marketing context and to provide international examples. For instance, he astutely observes on marketing research that ‘‘we can expect to witness attempts toward a global harmonization of codes of conduct and legislation \ldots [but] differences in culture will continue to influence the observation and interpretation of these codes′′ (p. 77). In chapter six, Schlegelmilch identifies substantial differences in the regulation of advertising in the USA, Europe and Japan (the most strictly regulated), though he concludes that ‘‘views on the moral aspects of advertising do not differ much from culture to culture, but rather from person to person′′ (p. 110).

Chapter seven is devoted to the implementation of ethics initiatives. Again, Schlegelmilch makes good use of his prior research, this time in discussing international differences in the use of ethics codes. This chapter also offers a sound discussion of ethics and the corporate mission (good mission statements include organisational key values), ethics training programmes, ethics offices and committees, whistle‐blowing and hot‐lines, and ethics audits. Schlegelmilch predicts an increase in international ethics initiatives: ‘‘As people from different cultures with different values conduct more and more business together, it will be necessary to increase the efforts to establish mutually acceptable means of conducting such business, in ways perceived as ethical by all′′ (p. 131).

Although reluctant to offer his own framework for the normative evaluation of marketing, Schlegelmilch is willing to forecast future developments in international marketing ethics. In chapter eight, he identifies three major (and highly plausible) challenges to the advance of business ethics and discusses the need for ethical initiatives that transcend the individual corporation. First, cultural diversity means that corporate ethics and national culture may be in conflict (e.g. US firms can face hiring problems in Japan and Saudi Arabia because the local culture in both these countries discourages gender equality in the workplace). These problems must be resolved on a case by case basis, Schlegelmilch suggests. Second, different economic conditions may indicate that different standards are required (e.g. paying lower wages in LDCs than in a firm′s more developed domestic market may be criticised as exploitative, but paying substantially above local wage rates would distort the local labour market). However, Schlegelmilch suggests, certain minimum moral standards must be upheld, such as the guidelines for dealing with LDCs advanced by De George (1993). Third, the possibly conflicting expectations of different stakeholders of the firm (e.g. shareholders versus consumers) may require a long term perspective, in keeping with ‘‘the realization that social responsibility need not come at the expense of the bottom line′′ (p. 142). Finally, acknowledging the power of large corporations, Schlegelmilch anticipates increased efforts to control firms by governments and international organizations (e.g. recent initiatives by the OECD on bribery) and by consumers. In concluding Part One, Schlegelmilch observes that the globalisation of business means that: ‘‘Managers are challenged to resolve increasingly complex ethical dilemmas and are charged to strike the right balance, not only between different stakeholder demands but also between cultural relativism and ethnocentricity ′′ (p. 149).

Part Two comprises four, well‐written case studies that could be used within the same marketing ethics course. Clearly, an instructor preferring to teach primarily via cases would likely need to find additional case study material, but this is also true of Laczniak and Murphy (1993) and Chonko (1995).

‘‘RU 486′′, by Henri‐Claude de Bettignies and Gilda Villaran, is a full‐length case study in three parts. It deals with decisions by the French pharmaceutical firm, Roussel‐Uclaf, about the marketing of the so‐called ‘‘abortion drug′′ in France and (in the ‘‘C′′ case) in the rest of Europe, the Third World, and the United States. ‘‘Starnes‐Brenner Machine Tool Company ‐‐ to bribe or not to bribe′′, by R. Philip Cateora, is a shorter and (apparently) ‘‘armchaired′′ case about a US company that may be paying bribes in violation of the Foreign Corrupt Practices Act while marketing its machines in an unspecified Latin American country. ‘‘Levi Strauss & Co.: global sourcing′′, by Jane Palley Katz and Lynn Sharp Paine, is a full‐length case about the scope of corporate social responsibility and, more specifically, Levi′s global sourcing guidelines and the decision whether to continue sourcing jeans from China given its poor human rights record. ‘‘Audi of America′′, by John A. Quelch, is another short case about the charges of bait‐and‐switch made against Audi when it introduced a rebate program designed to boost Audi′s flagging automotive sales following its alleged ‘‘sudden acceleration′′ problems.

The first three cases clearly provide ample scope for examining some of the dynamics of international marketing ethics. ‘‘Audi′′ might seem an odd choice in this regard because it is focused on the US market. Presumably, however, it is included because of the potential to explore how Audi′s German values may have led to its mishandling of the unintended acceleration problem in the first place. Audi was unwilling to accept that the perception of a mechanical problem was reality for US consumers, despite the likelihood that driver error was to blame.

Part Three provides an interesting mix of previously published articles addressing issues in international marketing ethics. One might question why some articles were included rather than others. Tom Donaldson′s (1996) excellent Harvard Business Review article, ‘‘Values in tension: ethics away from home′′, would have been a useful addition, as would possible extracts from De George′s (1993) book Competing with Integrity in International Business. Nonetheless, there is ample material here for students to explore some issues in more depth and, indeed, articles of potential interest to thoughtful managers (despite the author′s reluctance to recommend Part Three to this group of readers).

In ‘‘Ethics and working with the Japanese′′, Ernest Grundling provides a series of thought‐provoking examples of value conflicts between US and Japanese executives and offers explanations based on the underlying cultural differences. For instance, one mini‐case is of a Japanese executive in New York complaining of the disloyalty of a US employee who left to join a competitor. The chapter on ‘‘Corporate policy and the ethics of competitor intelligence gathering′′, by Lynn Sharp Paine, extends the discussion of this topic in chapter four and provides sound recommendations on how managers may discourage questionable intelligence gathering practices.

In ‘‘Ethical attitudes to bribery and extortion′′, Jack Mahoney shows why commercial bribery is generally considered unethical and differentiates between bribery and extortion. Mahoney urges ‘‘moral courage′′ when faced with extortion, despite its coercive nature. This chapter could be usefully assigned to students with the Starnes‐Brenner case. Extortion is not the only ethical issue in international marketing that calls for moral courage, as one finds in reading ‘‘The need for moral champions in global marketing.′′ Here, Lyn S. Amine points to the typically greater vulnerability of consumers in LDCs than in developed countries (e.g. due to a lack of basic skills or knowledge) and argues that managers need to be ‘‘moral champions′′ when marketing potentially harmful products in these countries.

Schlegelmilch includes two of his own prior publications. His paper with Diana C. Robertson, ‘‘The influence of country and industry on ethical perceptions of senior executives in the US and Europe′′, reports the results of a large‐scale survey of the perceptions of ethical issues by senior executives in the USA, UK, Germany, and Austria. Consistent with the discussion in chapter three, this article highlights a number of interesting differences among respondents. For instance, US managers were found to be more likely than their European counterparts to identify personnel issues as ethical issues of concern, while German and Austrian managers were more likely to express ethical concern about political and local involvement. Implications for the formulation of ethics policies and training are also identified. The other chapter by Schlegelmilch, coauthored with Catherine C. Langlois, also identifies cross‐cultural differences. ‘‘Do corporate codes of ethics reflect national character?′′ reports a 1990 study that found significantly fewer European than US firms had adopted codes of ethics. Analysis of the content of the codes indicated a distinctly European approach to codifying ethics, again with notable differences on employee relations.

Part Three contains two further readings. Robert S. Tancer′s article, ‘‘International marketing of organs for transplantation′′, and Richard A. Spinello′s article, ‘‘Ethics, pricing, and the pharmaceutical industry′′, examines provocative issues associated with healthcare, including concerns of distributive justice.

Part Four is a compilation of resources that may be useful for practising managers and for student research projects. It includes addresses of centres and institutes of business ethics throughout the world, business ethics Website addresses, examples of credos and corporate codes of ethics (mostly from US companies), and addresses of companies offering ethics consulting. Part Four also contains the controversial ethics audit of The Body Shop. An interesting student project would be to evaluate this report in the light of the many provocative newspaper and magazine articles by Jon Entine that criticise firms such as The Body Shop and Ben and Jerry′s for allegedly deceptive practices when they charge consumers an ‘‘ethics premium′′.

In conclusion, while some parts of Marketing Ethics might have been further developed or additional readings included, overall this book is a very useful and timely contribution to the field of marketing ethics. The recent problems of Russia and other former Eastern Bloc countries as they attempt the transition to market economies has added to the recognition of the importance of business ethics, with bribery and other forms of corruption identified as a significant stumbling block. As Schlegelmilch convincingly shows, firms operating in the international business environment face many other ethical challenges as well as bribery and marketing managers, in particular, need to be adequately prepared.

N. Craig Smith, McDonough School of Business, Georgetown University, Washington, DC, USA and INSEAD, the European Institute of Business Administration, Fontainebleau, France

Note

1.Interestingly, a subsequent letter to the editor of the WSJE from another Bain vice‐president offered a retraction of this claim, suggesting that Bain consultants ‘‘do not advise [our] clients to engage in questionable activities′′.

References

Chonko, L.B. (1995), Ethical Decision Making in Marketing,Sage Publications, Thousand Oaks, CA.

Copetas, A.C. (1998), ‘‘Fed up and fearful, Western executives bail out of Russia′′,Wall Street Journal Europe, 17 September, pp. 1, 12.

De George, R.T. (1993), Competing with Integrity in International Business, Oxford University Press, New York, NY.

Donaldson, J. (1992), Business Ethics: A European Casebook, Academic Press, London.

Donaldson, T. (1989), The Ethics of International Business, Oxford University Press, New York, NY.

Donaldson, T. (1996), ‘‘Values in tension: ethics away from home′′, Harvard Business Review, Vol. 74, September‐October, pp. 48‐59.

Donaldson, T. and Dunfee, T.W. (1994), ‘‘Towards a unified conception of business ethics: integrative social contracts theory′′, Academy of Management Review, Vol. 19, April, pp. 252‐84.

Laczniak, G.R. and Murphy, P.E. (1993), Ethical Marketing Decisions: The Higher Road, Allyn and Bacon, Boston, MA.

Schlegelmilch, B.B. (1998), Marketing Ethics: An International Perspective, International Thomson Business Press, London.

Smith, N.C. (1995), ‘‘Marketing strategies for the ethics era′′, Sloan Management Review, Vol. 36, Summer, pp. 85‐97.

Smith, N.C. and Quelch, J.A. (1993/1996), Ethics in Marketing, Richard D. Irwin, Homewood, IL.