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Business Ethics and Brand Management:

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Business Ethics and Brand Management: Do Good Brands need Ethics? Andrew Gustafson Professor of Business Ethics and Society, Creighton University – PowerPoint PPT presentation

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Title: Business Ethics and Brand Management:


1
Business Ethics and Brand Management Do Good
Brands need Ethics? Andrew Gustafson Professor
of Business Ethics and Society, Creighton
University January 10, 2008
2
Business Ethics???
  • Business needs ethics to thrive
  • Trust is foundational to contracts
  • Customer Satisfaction/loyalty
  • Happy Employees productive employees
  • Transparency is essential to development
  • Unethical practices ultimately undermine business
  • Globalization requires some common values
  • Many Customers want ethical businesses

3
Business Its purpose/goal
  • The purpose of business is to make me money, and
    increase stockholder value
  • (Milton Friedman)

4
What is Ethics?
  • Minimal What we shouldnt do
  • Dont steal, dont kill, dont lie
  • Better What we should do (justice)
  • Be fair, Be honest, Fulfill duties, work hard
  • Best What we could do to make things excellent
    for all of us
  • Create a Beautiful World

5
Is Ethical Business Profitable?
  • Positioning your brand as having an ethical
    reputation can be quite profitable.
  • Many researchers have done empirical research
    which shows that ethical behavior does not harm
    the company, and often helps the company make
    more money.

6
Question
  • Does Ethical perception play any role in a
    Brands performance?
  • --In other words
  • Do Customers really buy products according to the
    ethics of companies??

7
Answer Yes.
  • Boycotts by ethical shoppers cost big brands at
    least 2.6bn a year
  • 2002 ethical consumption in the UK was worth
    19.86bn in 2002
  • (Co-operative Bank EP Index, 2003)

8
Consumers Care about Ethics
Co-operative Bank Ethical Consumerism Report
  • In 2002 every household in the UK spent an
    average 366 in line with their ethical values
  • In 2006 they spent 664
  • ( 81 per cent)

9
The Ethics Factor
  • In developed competitive markets, many companies
    distinguish themselves by positioning their brand
    as ethical or socially concerned

10
Ethics Rankings
  • The 100 Best Corporate Citizens list ranks firms
    based on eight categories 
  • Shareholders
  • community
  • governance
  • diversity
  • employees
  • environment
  • human rights
  • product

11
Business Ethics 100 Best Corporate Citizens 2007
  • 1. Green Mountain Coffee 13. Texas Instruments
  • 2. Advanced Micro Devices 14. Herman Miller
  • 3. NIKE 15. Rockwell Collins
  • 4. Motorola 16. Interface,
  • 5. Intel Corporation 17. Steelcase
  • 6. IBM Inc. 18. Dell Inc.
  • 7. Agilent Technologies 19. Cisco
  • 8. Timberland 20. Lam Research
  • 9. Starbucks 21. Johnson Johnson
  • 10. General Mills 22. Adobe Systems Inc.
  • 11. Salesforce.com, Inc. 23. Kimberly-Clark Corp
  • 12. Applied Materials 24. Gaiam, Inc.

12
Business Ethics 100 Best Corporate Citizens 2007
  • 25Gap, Inc. (The) 39United Parcel Service
  • 26Chaparral Steel 40Microsoft
  • 27Pitney Bowes, Inc. 41Chittenden, Inc
  • 28Freddie Mac 42PepsiCo, Inc.
  • 29Google, Inc. 43Energy Conversion Devices
  • 303M Company 44McGraw-Hill
  • 31Heartland Financial USA 45Ecolab
  • 32Chicago Mercantile Ex 46Wells Fargo
  • 33Southwest Airlines Co. 47Autodesk
  • 34Eastman Kodak 48Xilinx,
  • 35Cummins, Inc. 49Xerox Corporation
  • 36American Express 50TradeStation Group
  • 37Northwest Natural Gas 51Kellogg Company
  • 38Wainwright Bank Trust

13
Most Ethically Perceived Brands
  • United Kingdom United States Germany
  • 1. Co-op 1. Coca Cola 1. Adidas
  • 2. Body Shop 2. Kraft 2. Nike
  • 3. Marks Spencer 3. Procter Gamble 2. Puma
  • 4. Traidcraft 4 Johnson Johnson 4. BMW
  • 5. Cafédirect 4. Kelloggs 5. Demeter
  • 6. Ecover 4. Nike 5. gepa
  • 7. Green Black 4. Sony 7. VW
  • 7. Tesco 8. Ford 8. Sony
  • 9. Oxfam 8. Toyota 8. Trigema
  • 10. Sainsburys 10. LEVI 10. Bio Produkte
  • 11. Innocent 10. Starbucks 10. Body Shop
  • 12. Waitrose 12. Ben Jerrys 10. Hipp
  • 13. Clipper Tea 12. Dell 10. Mercedes
  • 14. Asda.. 14. Campbells 10. Wrangler

14
BIG Brands want Ethical Brands
  • Cadbury Schweppes bought Green Black's, a niche
    but fast growing UK-based organic and fair trade
    chocolate firm.
  • Nestlé launched Fairtrade certified Partners'
    Blend coffee
  • Kraft Foods introduced their Kenco Sustainable
    Development coffee brand

15
Unethical Behavior Costs Companies
  • Corporate ScandalsUnited States
  • - Enron
  • - Tyco
  • - Adelphia
  • - Xerox
  • - Rite-Aid
  • - Martha Stewart
  • - ImClone
  • - K-Mart
  • - Boeing
  • - WorldCom

16
Corporate Scandals-- Europe
  • - Mannesmann
  • - ELF
  • - Royal Dutch Shell
  • - VW
  • - ABB
  • - France Telecom
  • - ABN-Ambro
  • - Heidelberg Cement
  • - Ahold
  • - Bank of Italy
  • - Siemens
  • - Daimler-Chrysler
  • - Parmalat

17
These Scandals cost
  • Settlements
  • - AIG (1.6B)
  • - Time Warner-AOL (510M)
  • - KPMG (465M)
  • - Adelphia (715M)
  • - Tyco (750M)
  • - HCA (1.7B)
  • - Prudential (600M)
  • - Tenet (325M)
  • Marsh McLennan (850M)
  • Cardinal Health (600M)

18
Results of Recent Scandals
  • Investors have become more demanding about
    transparency
  • Consumers have become more demanding about
    corporate behaviors (accounting, environment,
    production methods, etc)
  • In U.S., government has become involved to ease
    investors concerns more regulation for
    business!!

19
What Can Be Done?
  • There are a number of ways to improve the ethical
    image of your brand.
  • Superficial changes are not enough, and
    authentic ethical commitment of a brand is
    displayed in real action on the part of companies
    in order to have real effect.

20
  • Some Examples

21
Environmentally green
  • Today, social norms regarding the environment
    are changing and consumers are increasingly
    holding brands accountable for what they do As
    a result, more and more companies are making
    investment decisions that incorporate brand
    impact and brand risk into their equations.
    (David Wigder)

22
Example CocaCola
  • Coke is proactively redesigning its bottle to
    reduce material use and pledging to recycle 100
    of bottles sold in the US.
  • Results
  • Reduce Material Costs 10
  • Improve Public Relations/Image with Public

23
Ethical Production
  • Nike was criticized for sweatshop labor issues in
    East Asia, and many consumers boycotted Nike.

24
Nikes Response
  • Nike responded to these criticisms, changed some
    of their production arrangements, and returned
    to the list of the 100 most ethical companies
    list

25
Treatment of Customers
26
Financial Honesty and Transparency
  • Bad Example

27
Financial Honesty and Transparency
  • Wells Fargo Bank is known for its disclosure of
    financial data.

28
Treatment of Workers
  • Costco is well known for its great treatment of
    employees

29
vs
  • 48 Insured 82 Insured
  • 2 yr wait for ins. 6 month wait
  • 66 paid by walmart 92 paid by costco
  • 50 Turnover 92 Turnover
  • 7.50-11.45/hr 10.50-17/hr

30
Strong Moral Leadership
  • CEO leads troubled Tyco into turnaround
  • Ed Breen, CEO
  • Fired Management
  • Fired Board

31
  • What Causes Unethical Behavior?
  • Irrational exuberance uninhibited self-interest
  • Arrogance
  • Fraud
  • Conflicts-of-interest
  • Preferential treatment
  • Accounting arbitrage
  • Failure of independent auditors
  • Failure of analysts
  • Failure of rating agencies
  • Failure of regulators
  • Failure of board oversight
  • Culture of greed


32

Corporate Culture and Performance Starbucks Nord
stroms FedEx Southwest Airlines Costco Intel Googl
e

33

The Risks of Doing Business The risks of doing
business have never been greater!

34
Development Requires Some Ethics
  • Business Ethics became especially important in
    the U.S. after the recent scandals
  • Most Business Schools in the U.S. offer or
    require a specific business ethics class
  • In a healthy competitive market, trust is
    essential.

35
Defining Trust What is trust?

36

Defining Trust Trust is the expectation that
the faith one places in someone or some
institution will be honored.

37

Earning Trust The Trust and Reputation of a
Brand is slowly built, and easily lost.

38
How to encourage ethics
  • External Sanctions
  • Positive (evaluation criteria, bonuses)
  • Negative Regulations, Rules Enforcement
  • Internal Sanctions
  • Establishing a corporate culture through vision
    and leadership

39

Defining Culture What is culture?

40

Defining Corporate Culture A system of
shared values.

41

Defining Corporate Culture What is
corporate culture?

42

Defining Corporate Culture The underlying
assumptions, beliefs, attitudes and expectations
shared by an organization.

43

Defining Corporate Culture The way we do
things around here.

44
Conclusions
  • Business Ethics is important for Brands
  • Consumers concerns are driving the demand for
    ethical and socially conscientious behavior by
    companies
  • Moral business can be very profitable
  • Intentional development of Corporate Culture
    works best.

45
The End
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