ETHICAL PRACTICES IN MARKET PLACE

M.CHANDRIKA UDAY SANGHI

ETHICS

The word ETHICS is derived from a Greek word “ETHIKOS” which means customs or character.

Ethics are the moral principles and values that govern the actions and decisions of an individual or group.

PERFECT COMPETITIONUnder perfect competition, "no buyer or seller has the power to significantly affect the prices at which goods are exchanged."Seven features of perfectly competitive markets:• There are numerous buyers and sellers, none of whom has a substantial share of

the market.• All buyers and sellers can freely and immediately enter or leave the market.• Every buyer and seller has full and perfect knowledge of what every other buyer

and seller is doing, including knowledge of prices, quantities, and quality of all goods being bought and sold.

• The goods being sold in the market are so similar to each other that no one cares from which each buys or sells.

• The costs and benefits of producing or using the goods being exchanged are borne entirely by those buying or selling the goods and not by any other external parties.

• All buyers and sellers are utility maximizes. Each tries to get as much as possible for as little as possible.

• No external parties(such as government) regulate the price, quantity, or quality of any of the goods being bought and sold in the market.

MONOPOLY

A market in which a single firm is the only seller in the market and which new sellers are barred from entering.MONOPOLY MARKET CHARACTERISTICS:• One Seller• High Entry Barriers• Quantity below Equilibrium• Prices above equilibrium and Supply Curve• Can extract monopoly profit.

OLIGOPOLYA market shared by a relatively small number of large firms that together can exercise some influence on process.• The firms under oligopoly are interdependent in making decision. They are

interdependent because the number of competition is few and any change in price & product etc by an firm will have a direct influence on the fortune of its rivals, which in turn retaliate by changing their price and output.

• Price rigidity refers to a situation in which price tends to stay fixed irrespective of changes in demand and supply conditions. Firms use other methods like advertising, better services to customers, etc. to compete with each other.

• The main reason for few firms under oligopoly is the barriers, which prevent entry of new firms into the industry. Patents, requirement of large capital, control over crucial raw materials, etc, are some of the reasons, which prevent new firms from entering into industry.

To determine whether a payment is ethical, there are three relevant points to consider: 1. Is the payment initiated by the payer, or is the payment demanded by the payee? If the former, it is a bribe; if the latter, it is extortion, which diminish the moral responsibility of the payer. 2. Is the payment attempting to induce behaviour that is contrary to duty illegal? If so, it is a bribe; if the behaviour being induced is not contrary to duty or illegal, the payment may be morally neutral. 3. Are the nature and purpose of the payment common local practice? If so, the payment may be a local custom that does not represent a market barrier, and therefore not a bribe.

The following list identifies practices that are clearly unethical: • Price Fixing-when companies agree to set prices artificially high. • Manipulation of Supply-when companies agree to limit production. • Exclusive Dealing Arrangements-when a company sells to a retailer only on condition that the retailer will not purchase products from other companies and/or will not sell outside a certain geographical area. • Tying Arrangements-when a company sells a buyer certain goods only on condition that the buyer also purchases other goods from the firm. • Retail Price Maintenance Agreements-when a company sells to a retailer only on condition that they agree to charge the same set retail prices. • Price Discrimination-when a company charges different prices to different buyers for the same goods or services.

MARKETING ETHICS AND CONSUMER RIGHTS

• The law and regulations are generally designed to protect the consumer from unethical practices by businesses

• These law and regulations recognizes that consumers have certain basic rights in the market place

• Each marketer must relay on his/her own value system to determine what is and is not ethical

Why ETHICS ?

• When an organization behaves ethically, customers develop more positive attitudes about the firm, its products, and its services.

Marketing Ethics:

Marketing ethics as a right or wrong action

Marketing ethics means a standard by which a marketing action may be judged “RIGHT” or “WRONG”.

Marketing Ethics

• is the area of applied ethics which deals with the moral principles behind the operation and regulation of marketing. Ethics in marketing applies to different spheres such as in product, pricing, Placing(Distribution), promotion & advertising etc...

Why we need Ethics in Marketing?We can give many reasons but will notify some:• When an organization behaves ethically, customers develop more

positive attitudes about the firm, its products, and its services.• To create Values or trust with key stakeholders• To build good image about the organization in the minds of customer,

employees, shareholders and the society.

Ethical Issues in Marketing:

We discuss Marketing issues by using 4P’S OF MARKETING:

• PRODUCT & PACKAGING• PRICE• PLACING (DISTRIBUTION)• PROMOTION (ADVERTISING & BRANDING)

Product

• Consumer safety • Product liability and reliability• Designing for special needs

Packaging

Label information Packaging graphics Packaging safety Environmental implication of packaging

Price: Second P of Marketing

• Bid rigging

• Supra competitive pricing

• Price fixing

• Price skimming

• Predatory pricing

• Price war

• Dumping (pricing policy)

• Variable pricing

PLACING: DISTRIBUTION

Product distribution (or place) is one of the four elements of the Marketing MIX.

Distribution of product or service is transporting them from manufacture to stockiest, wholesalers, retailer and then to consumers.

Ethical issues in distribution

• Ethical questions may also arise in the distribution process.• Because sales performance is the most common way in which marketing

representatives and sales personnel are evaluated.• performance pressures exist that may lead to ethical dilemmas. For

example: pressuring vendors to buy more than they need and pushing items that will result in higher commissions are temptations.

ADVERTISING &BRANDING

• Promotion is one of the four elements of marketing mix (product, price, promotion, place). It is the communication link between sellers and buyers for the purpose of influencing, informing, or persuading a potential buyer's purchasing decision.

• To present information to consumers as well as others

• To increase demand • To differentiate a product

Ethical Issues in Advertising

• Puffery • Advertising to Children• Promoting Unhealthy Products• Subliminal Advertising• Deceptive Advertising

Thank You