Ethical Pressures Facing The Supermarket Industry Name Marketing Essay

1.0 Introduction

Ethics, in general, covers all the standards by which we humans judge whether our actions or behaviors are right or wrong. Ethics immerse in every corner of the world, playing the role where laws and regulations cannot work. Business ethics have caught public’s great concern in recent years. Enterprises are evaluated not only by their commercial profits but also by their performance of social responsibilities. This essay will explore the ethical issues in business and in management practice and conduct a deep discussion on the main ethical pressures facing the supermarket industry. A recommendation on how these issues might be tackled will also be made in this paper.

2.0 Concept of Ethics and Ethics in Business

2.1 Concept of Ethics

When combining with business, business ethics, guiding decision-makings and policies, is concerned with good and bad or right and wrong behaviors and practices within business context (Carroll and Buchholtz, 2008, p242). Business ethics are often associated with Corporate Social Responsibility (CSR), which is “the voluntary assumption by companies of responsibilities beyond purely economic and legal responsibilities” (Boatright, 1997). The main fields of corporate responsibility include “the social, economic and moral responsibilities” of the company, and “the management of the corporate responsibility activities of businesses” as well (Cannon, 1992).

Based on its great influence on the thinking and acting of all economic entities, whether small or big, business ethics has become a real hot business principle. It appertains to relations between stakeholders and shareholders, between employees and employers, between customers and corporation; it dedicated to product quality, customer satisfaction as well as social responsibility. With the imperative consensus on the reconstruction of social values, business ethics is bound to be pivot and prerequisite for business. However, Carroll and Buchholtz (2008) stated actual business ethics seems to be improving but not at the same pace as public expectations are rising. Furthermore, the economic globalization piles increasing pressure on international business ethics.

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2.2 Ethics in Business

Corporate ethics in modern world really have great influences on many social aspects. The most important aspect is the environment issue. Commerce activities are the main reasons behind the environment problems (Tunzalmann, 1997).The world is becoming more and more fragile, polluted air and water, global warming, melting glaciers, extinctions of rare animals and plants species, and more frequent natural disasters. Economical development is driven by natural resources and energy, and thus must lead to various pollutions and the high carbon emission. All businesses know clearly that making money at the cost of ecology damaging is wrong. However, they still pursue the one-sided development. It seems that in face of self interests, ethics and morals begin to lose their power. Besides, globalization and technical advancement present new challenges for companies to take social responsibilities. Companies from different countries cooperate more closely than ever before. Multi-national corporations operate their business in many countries overseas, which may bring into the problem that some companies behave ethically in their home country but cause great pollutions or other irresponsible actions in foreign countries. Some of the cases reveal the current situation of ethics in business.

The recent Toyota recall event shocked the whole world. Apart from its quality defect, more and more people also accuse of Toyota’s loss of ethics as a big business before and during its recall. Despite under multi-accusation and criticism, lacking initiative, Toyota did not respond timely. Even when appearing in the U.S. Congressional hearings, Toyoda firmly insist that electronic throttle control system has nothing to do with the safety issue, throwing the issue of pedal safety to Toyota’s suppliers (Frean, 2010). Clearly, Toyota’s approach is not a right one that a responsible company should adopt when problems exist. To some extent, this is not a blunder of its decision-making but the lack of business ethics. At present, Toyota’s recall problem seems not to be curbed. Having recalled a wide scope of vehicles, Toyota still has to face the U.S. criminal probe and litigation. What is more severe, with its market having been seriously affected, Toyota also suffered a crisis of confidence worldwide, which is undoubtedly a deadly threat to the world’s top-ranked automaker. It is considered that Toyota has paid a terrible price due to ethical dilemma rather than quality problems.

Emerged in the late 1990s, business ethics in international business are much more complicated, which are influenced by the factors such as nation, culture, religion and custom etc. (Georges¼Œ1999). As one of the most successful beverage brands in the world, Coca-cola has a lot of glory in its history. However, over last decade, the company was involved in “racial discrimination, misrepresenting market tests, manipulating earnings and disrupting long-term contractual arrangements with distributors” (Ferrell et al., 2005).

A survey on the ethics of the multinational business in China( China South Weekend in 2006), shows that quite a few corporations of Fortune 500 in China poorly carried out corporate social responsibility in 2006. In this report, 126 top corporations were selected according to the sales revenue, export volume, total profit before tax, and accumulative investment. However, the figures showing their implementation situation of corporate social responsibility is shocking: During 2006, 21 of the 126 corporations were involved in environmental violations, accounting for 17% of the total; 39 companies had products quality problems, accounting for 39.5%; 40 companies’ products were repeatedly complained by Chinese consumers, accounting for 31.7%.; the most serious one, 57 corporations refused to establish labor union in China , accounting for 45.2% of the total 126. Bribery is one of the hot issues when doing international business. Since the openness of Chinese market, a string of industry giants such as Wal-Mart, IBM, Lucent are involved in bribery scandals, which made the Chinese less enthusiastic about these big brands (Wang, 2006). According to a survey launched by Anbound, a Beijing-based information consultancy, these cases seem just a “tip of the iceberg”. The above brands, figures, and facts seriously hurt the Chinese consumers’ confidence followed by the distrust to the whole multinational group. In fact, compared with 10 years ago, today’s brand credibility of multinational corporations in China is much lower.

In all, with the development of the society and economy, companies face more challenges than ever before. Big brands are no exception. Some of the traditional business concepts cannot be used to solve problems encountered by the company today. Meanwhile, people have higher expectation for a successful company, which cannot only be measured by the products or the profits generated, but also its contribution to the whole society. Thus, companies need to adjust the strategies in time and flexibly put them into practice. Reviewing some of the ethical issues, it can be found that some big companies are reluctant and slow to keep up pace with the change of the world. The basic strategies do not follow up its step of expansion all over the world. The mechanism against risks within the organization is weak. That is why the company was criticized for slow response. Sometimes, the research and analysis of new market environment seems insufficient, which made it involved in legal troubles for competitive issues in other markets. To chase the commercial profits, some companies put the brand’s reputation and public image aside, involved in the immoral scandals.

In addition, with the economic globalization, the multinational corporation plays a key role in international business. The business activities of multinational corporations terribly influence the world economy; even change the value and the way of life of the local people. Multinational business is condemned to maximize profits by fair means or foul and causes serious problems in developing countries. Business ethics is an intangible concept, but the unethical business behaviors will eventually result in tangible and real losses. Many of multinationals have to pay heavy price for falling into disrepute and years of efforts have to be made for the recovery. These multinationals have adapted to the local business environment in the wrong way.

2.3 Possibility to be Fully Ethical in Business

Some people insist that the ultimate goal for a commercial activity is making profits. However, it should also be remembered that making money can never be the only thing of the business. If the earth is in danger, what the meaning is of making money. As early as 1970, Milton has pointed out that companies could attain short-term gains by acting in an unethical way, while the consequences of doing so could be very costly in fines, loss of licensure, or company reputation. Enterprises cannot pursue the short-term interest at the expense of the interest of the next generation. When setting development strategies, they should form a long-term perspective and make sustainable strategy. Thus, what should be confirmed is that making profits and being ethical are not contrary , but unitized. Being ethical in business is benefit for the long term development of the enterprises.

However, it should be admit that at present, to be fully ethical in business and in management practice is not an easy thing. Under some circumstances, profits and ethics cannot be obtained at the same time. A lot of businessmen will tempted by the short-term benefits. And the nature of economics seems to be selfishness and fierce competitions, and commerce is the zero sum game. However, that is only part of the story. Markets and price rules sometimes can not solve all the problems. At those points, government rules and ethics play the greater roles. When markets, laws, regulations and ethics all fail to work, the business world and even the society would fall into disorder or recession (Rowthorn, 1996). The significance of ethics to the modern corporations is that in modern business world the edging competitiveness of a company comes from the power of the brand. Establishing a positive corporate image and earning customers’ loyalty are effective ways (Abedian, 2010).It is believed that in the coming days with enhancement of people’s consciousness  about business ethics, it is possible to be fully ethical in business and in management practice. By now, facing these problems, how modern corporations can find a way out? In the short term, implementation of laws may help in dealing with the problems. However, from the long run the most important thing is to play full use of the power of ethics.

3.0 Main Ethical Pressures Facing the Supermarket Industry

Retailing is a dynamic sector in the UK economy. Supermarkets play a significant role in retailing sector. In recent years, supermarkets have developed very fast in UK. Tesco, Asda, Sainsbury, and Morrison, the four retail giants, sold 3/4 of all groceries bought in UK (Shaw, 2006).

Supermarkets are major food retailers in UK. The top ten in 2003 accounted for 82% of all sales of food. To some extent, supermarkets have played the dominant function in the food supply chain. Their business has close relations with people’s the everyday lives. Besides the food and household retail business, supermarkets have extended their business to wide ranges including clothing, books, home appliances, DIY materials, telecommunication products, etc. nowadays, half the space of a supermarket may be used for non-food products. Tesco even provides legal advice services in its shopping malls (Guardian, 25/7/2003, p.7). The supermarkets are even expanding their business in housing building. Asda has announced to plan building a new supermarket with 64 ‘social housing’ flats on the top In Poole. (The Grocer, 19/6/2003, pp.41-3)

It cannot be denied that the development of supermarkets brings a lot of convenience to consumers, however, with its business expansion, the ethical issues of the supermarket industry have been vigorously criticized. The negative effects are contested widely.

First, the supermarkets are accused of harming the environment. The environment issues include overconsumption of energy and water, waste, packaging issues, inappropriate usage of chemicals, genetically modified products, etc. The agency of Friends of the Earth blamed supermarkets for increasing the traffic jam and pollution in the country due to their centralised food distribution centres(Shaw, 2006).

Second, food safety in supermarkets is another ethical issue that the public have concerned most in UK. Food sold in supermarkets is blamed for being unhealthy and obesogenic. To get more profits, supermarkets try their best to promote the food products with a lot of fat, salt and sugar. The issues about whether these foods are good or bad for people’s health are slide over on purpose. In addition, some supermarket chains are accused of manipulating the goods products. For example, in areas with high competition, lower prices can be offered to consumers. However, the same products can be found at much higher price in the same chain in the other area where there are less rivals. What’s more, supermarkets are always promising their consumers to offer goods with good quality and low price. It is true with some food or products for daily usage, such as bread, sugar, battery, etc. But with those that the consumers are not familiar with at all and the price cannot be judged easily, the prices are always raised a lot.

Third, the supermarkets in UK are criticized by the public for deceasing the economy in rural areas by using their strong buying power to force down the prices of food products. Meanwhile, the demand for simplification and consistency for food products reduce the diversity of agriculture products cultivated in UK(Shaw, 2006). According to Boydon (2001), besides polluting the environment and damaging people’s health, supermarkets are “destroying British agriculture and ruining the countryside, dismantles communities and undermines local economies and that it reduces both biodiversity in the countryside and choice for the consumer.”

Fourth, it should be noticed that supermarkets especially those giants are extremely strong in buying and selling their goods. They are powerful enough to manipulate the market of certain products. To maximize their profits, sometimes the interests of their small rivals, suppliers and consumers are sacrificed. Blythman (2004) pointed that “the large food retailers wield too much power in the buying and supplying of many products thus damaging suppliers businesses and manipulating customers through promotions and that they are effectively destroying the independent retail sector.” Survey shows that due to the competition pressure, more than half the small retail shops have broken down in UK since 1950 (Burt, 1997).

Moreover, the supplier rationalization has become a hot issue in recent years. According to the work of Hornibrook and Fearne (2002), UK large supermarkets prefer to deal with fewer and larger suppliers through which the risks of food safety and quality can be reduced a lot. Since supermarkets control the channels from suppliers to consumers, the suppliers are in a passive position. They are feebly to fight for their interest with the supermarkets. A case in 1999 clearly demonstrates the above. In November 1999, a supermarket giant transferred the cost of promotion activities to the farmers, who were asked to pay 20,000 pounds for each product line in the name of guaranteeing the availability of its main products (NFU, 1999). In this situation, some famers trapped in a hardship for the excessive bills. Although this supermarket was criticized as immoral action by the National Farmers Union (NFU), some suppliers still feared business reprisals (NFU, 1999).

Fifth, with the expansion of supermarket industry, the sourcing issue for lager supermarkets catches public’s concern. Four aspects are commonly in controversy. They are “ethical trading, sourcing local and regional foodstuffs, food safety and animal welfare.”(Jones et al., 2005). What’s more, nowadays, some supermarket giants such as Tesco build their development strategy on a global view. The developing countries have become their new paradise. The ethical issues related to their global sourcing come up with this trend, including “working conditions, rates of remuneration, child labour and health and safety.” (Jones et al., 2005).

The last issue concerns with the internal management of the supermarkets. The supermarkets are always facing the pressure of condemnation for labor issues covering a range of topics such as remuneration and benefits; training and development; equality and diversity; health and safety; recruitment; retirement; and work-life balance(Jones et al., 2005).

4.0 Recommendations

As discussed, from a point of view of long term development, taking corporate social responsibilities will benefit the enterprises. Therefore, supermarkets should be engaged in taking measures to solve these ethical problems.

As in the past decades, the supermarkets have left “immoral” impression to the public. What’s the most important for supermarkets is to restore the complexion. For the issues the public have evidently pointed out, supermarkets are suggested to take steps to deal with, such as acknowledge the existing ethical problems, stop selling the unhealthy food, recall the unsafe products, negotiate with the suppliers to get a two-win strategy, etc. Although these measures may money and time consuming, they are effective to maintain corporate reputation when quality problem and crisis emerged. On the surface, the supermarket brand may be frustrated, but in a long run, these actions actually present the responsible attitudes of the supermarket to the society, that is, sincerity and faith. The ethical commitment, as a responsible big business, will enable supermarkets to win more loyal customers. From the viewpoint of long-term, it is beneficial and adoptable.

Re-build Image and Credibility is a critical step for supermarkets as well. To some extent, original good image of supermarket industry has been ruined in the minds of consumers due to the accusation of their ethical problems. Thus it is necessary for supermarkets to take actions to re-build its image and credibility.

The following are some practical methods. Firstly, supermarkets have to re-win consumers’ confidence and support. Companies could modestly listen to customers’ opinions and feedback to effectively address their concerns, by which companies are able to get customers’ understanding and continued support. Secondly, supermarkets could actively corporate with some powerful media who act as the government’s mouthpiece to publicize its ‘correct behaviors’. With positive publicity or promotion of those media, it is feasible for them to re-create its image as a noble company and to restore consumers’ confidence to it.

In addition, the ethical problems occurred with the development of the supermarket industry. Although these problems cannot be thoroughly avoided, these similar issues can be settled down with some precautions beforehand. It can be seen that some leading supermarkets have made effort to enhance their CRS. For example, to the environmental issues, the main ethical issues accused of, the investigation on supermarkets’ environmental performance finds that some of the leading supermarkets in UK, such as Sainsbury’s and Tesco has taken “an early and proactive response to the environment”, which made good examples for other supermarkets to follow (Chase, 1991).

However, it seems not enough. The attention to CRS should be paid all though the business development strategy of the supermarket industry, from their overseas expansion to internal management, from production, operation to human resources management. It should be emphasized that for supermarkets an emergency mechanism is really necessary. When ethical problems occur, the correct and instant response is ever important. Effective emergency mechanism can reduce the negative influence by and large

Last but not least, to deal with the ethical problems in supermarket industry, it cannot totally depend on the companies themselves. The external supervision on business ethics is critical. On the one hand, clearer, more integrated and detailed rules and legislations should be made to standardize the practices of supermarkets. On the other hand, a strong external supervision and restraint mechanism is necessary. External supervision could aid the company to establish an organizational environment that complies with corporate ethics to social responsibility. The external pressure comes from government, non-governmental organizations, media, and consumers. As wood (1991) indicated, these measures force the corporations reluctant to breach ethical standards, and eventually function as a built-in, self-regulating mechanism.

5.0 Conclusion

Nowadays, with the development of global economy and human cultivation, consumers and the society have higher demands to companies. Businesses only pursuing commercial profits cannot stand long. Therefore, companies should pay enough attention to the ethics in business and in management practices. Although it may sacrifice the short-term profits, companies who actively share social responsibilities can obtain long vitality. At present, it is still difficult to to be fully ethical in business and in management practice, since a lot of businessmen are still chasers of money. It is expected that with people’s more consciousness about business ethics, it can be put into practice in the future.

Supermarket industry in UK has developed very fast in the last decade. With its expansion, the sector is blamed for some ethical problems such as environment pollution, food safety, etc. It is suggested that supermarket industry should make efforts to restore the situation, rebuild its image and adjust its management to adapt to the new requirement of consumers and society, meanwhile, the external supervision from government, non-government organizations and consumers are necessary to help supermarkets regulate their performances as well.