Page 338 - DMGT408DMGT203_Marketing Management

Unit 15: Sustainable Marketing

15.1 Ethical Behaviour of Firms Notes

Ethics refer to values and choices and focuses on standards, rules and codes of moral conduct that
control individual behaviour. Erik N. Berkowitz et al. maintain that: ethics are moral principles and
values that govern the actions and decisions of an individual or group. In the marketing context, ethics
is the moral evaluation of marketing activities and decisions as right or wrong. Whether a
marketing behaviour is ethical or unethical is determined on the basis of commonly accepted
principles of behaviour established by the society’s expectations of conduct, various interest
groups, competitors, company’s own management, and personal and moral values of the
individual. Each individual decides how to behave on the basis of these principles, and the
public at large and various interest groups evaluate if the actions are ethical or unethical.

15.1.1 Understanding the Ethical Conduct

Among other reasons, one reason for many instances of unethical behaviour is that businesses
generally do not understand how people make decisions when they face ethical dilemmas
leading to ethical conflict and it is not clear whether to use one’s personal values or the company’s
in a particular decision situation. An understanding of how people shape their ethical standards
and what induces them to get involved in unethical conduct may be helpful in decreasing
instances of unethical conduct. Three important factors presented in Figure 15.1 are understood
to influence an individual’s ethical behaviour:

Figure 15.1: Understanding Ethical Behaviour in Marketing Decisions
Individual Perceived Organisational
Factors Opportunity Factors

Resulting Ethical or
Unethical Behaviour

Individual Factors

When marketing managers face ethically challenging situations and are unable to resolve them
all alone, they experience ethical conflict, though they make decisions in their everyday lives
based on their personal concepts of right or wrong. It is true that individuals can freely make –
and do make – ethical choices in business situations. However, much depends on an individual’s
moral philosophies. According to O. C. Ferrell and John Fraderick, moral philosophies refer to
rules or principles that individuals use to decide what is right or wrong. People learn these
moral philosophies in the course of socialisation by family, religion, formal education, and
social groups. The two major concepts relevant to marketing situations are utilitarianism and
ethical formalism.
1. Utilitarianism is focused on maximising the greatest good for the maximum possible
number of people. Marketing managers believing in utilitarianism are inclined to compare
all possible options and choose the one that ensures the best outcomes for the maximum
possible people. Here the outcome of a decision is judged by the consequences for all
those affected by it.
2. Ethical formalism is concerned with intentions of an individual associated with a specific
conduct and on the rights of the concerned individual. F. Neil Brady says that ethical
formalism develops particular standards of conduct by examining whether an action can

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