Case 4-6 Making Socially Responsible and Ethical Marking Desisions: Selling Tobacco to Third World Countries.
Strategic decisions move a company toward its stated goals and erceived success. Strategic decisions also reflect the firm's socia esponsibility and the ethical values on which such decisions are ade. They reflect what is considered important and what a com- pany wants to achieve. Mark Pastin, writing on the function of ethics in business deci ions, observes. There are fundamental principles, or ground rules, by which organizations act. Like the ground rules of individuals, orga- nizational ground rules determine which actions are possible for the organization and what the actions mean. Buried be- neath the charts of organizational responsibility, the arcane strategies, the crunched numbers, and the political intrigue of every firm are sound rules by which the game unfolds. The following situations reflect different decisions made by ultinational firms and governments and also reflect the social re ponsibility and ethical values underpinning the decisions. Stud the following situations in the global cigarette mark care ly and assess the ground rules that guided the decisions of firms and governments.
*EXPORTING us. CIGARETTE CONSUMPTION but n the United States, 600 billion cigarettes are sold annually ales are shrinking rapidly. Unit sales have been dropping abou to 2 and sales have been down by almost 5 per percent a year, ent in the last six years. The US. Surgeon General's campaign gainst smoking, higher cigarette taxes, non-smoking rules i ublic areas, and the concern Americans have about genera ealth have led to the decline in tobacco consumption. Face th various class-action lawsuits, the success of states in win ing lawsuits, and pending federal legislation, tobacco compa ies have stepped up their international marketing activities to aintain profi Even though companies have agreed to sweeping restrictions i the United States on cigarette marketing and secondhand smok nd to bolder cancer-warning labels, they are fighting as hard as er in the Third World to convince the media, the public, and olicymakers that similar changes are not needed. In seminars at uxury resorts worldwide, tobacco companies invite journalists, enses paid, to participate in programs that play down the health of smoking. It is hard to gauge the influence of such semi ars, but in the Philippines, a government plan to reduce smoking y children was "neutralized" by a public relations campaign from igarette companies to remove cancer awareness and prevention a "key concern" A slant in favor of the tobacco indu poin f view seemed to prevail. At a time when most industrialized countries discourag are ng smoking, the tobacco inadustry is avidly courting consum thr oughout the developing world using catchy slogans, obvious ge campaigns, and single-cigarette sales that fit a hard-pressed customer's budget. the reason is clear: The third World is an
expanding market. As example, Indonesia per capita ciga an rette consumption quadrupled in less than ten years. Increasingly igarette advertising on radio and television is being restricted in some countries, but other means of promotion, especially to youn ple, are not controlled. China, with more than 300 million smokers, produces and con mes about 1.4 trillion cigarettes per year, more than any other untry in the world. Estimates that China has more smoke are han the United States h people. Just 1 percent of that 1.4 tril ion cigarette market would increase a tobacco company's overseas les by 15 percent and would be worth as much as $300 million in added revenue. American cigarette companies have received a warm welcome Russia, where at least 50 percent of the people smoke. Consum are hungry for most things Western, and tobacco taxes are low Unlike in the United States and other countries that limit or b garette advertising, there are few effective controls on toba roducts in Russia. Russia, the world's fourth largest cigarette mar t, has proved to be an extremely profitable territory for British merican Tobacco (BAT). BAT Russia, established in 1949, sold 5 billion cigarettes in Russia in 2005, giving it almost one-fifth of arket share.
*ADVERTISING AND PROMOTION
in Gambia, smokers send in cigarette box tops to qualify for hance to win a new car. In Argentina, smoking commercials fil 20 percent of television advertising time. And in crowded A th ties, billboards that link smoking to the good life to above weltering shantytowns. Such things as baby clothes with cigarett ogos, health warnings printed in foreign languages, and t ads in sponsored contests for children are often featured in tobacco Third World countries. Latin American tobacco consumption by more than 24 percent over a ten-year period. Critics claim that sophisticated p in unsophis ted societies entice people who cannot afford the necessi ies of life spend money on a luxury and a dangerous on to t that. The sophistication theme runs throughout the smokin ds. In Kinshasa, Zaire, billboards depict a man in a busines uit stepping out of a black Mercedes as a chauffeur holds th oor. In Nigeria, promotions for Graduate brand cigarettes show university student in his cap and gown. Those for Gold Lea igarettes have a barrister in a white wig and the slogan, "A ve mportant cigarette for very important people In Kenya, a mag ine ad for Embassy cigarettes shows an elegant executive of cer with three young men and women equivalent to American ies. The most disturbing trend in developing countries i dvertising that associates tobacco with American affluence an culture. Some women in Africa, in their struggle for women rights, defiantly smoke cigarettes as a symbol of freedom. Bill oards all over Russia feature pictures of skyscrapers and whit andy beaches and slogans like Total Freedom" or "Rendezvous with America." They aren't advertising foreign travel but America cigarette brands.
Every cigarette manufacturer is in the image business and to bacco companies say their promotional slant is both reasonable and common. they point out that in the Third World a lot of people cannot understand what is written in the ads anyway so the ad ro in on the more understandable visual image. "In most of th rld, the Marlboro Man isn't just a symbol of the wild West: he bol of the West" You cant convince people that all Ameri s dont smoke" In Africa, some of the most effective advertis ng includes images of affluent white Americans wi recognizabl andmarks, such as the New York City skyline, in the background n much of Africa, children as young as five are used to sell singl garettes, affordable to other children, to support their own nico rly one-fourth of all teenage smokers ine habits. Worldwide moked their first cigarette before they were 10 years old. The of promotional activity is enormous. In Kenya, scope ajor tobacco company is the fourth-largest advertiser. Tobacco red lotteries bolster sales in some countries by offering as rizes expensive goods that are beyond most people's budgets ambia has a population of just 640,000, but a tobacco company ottery attracted 1.5 million entries (each sent in on a cigarette box op) when it ramed off a Renault car Evidence is that the strategy of tobacco companies is to strong target young people as a means of expanding market demand Re ort after report reveals that adolescents receive cigarettes free as means of promoting the product. For example, in Buenos Aires Jeep decorated with the yellow Camel logo pulls up in front of gh school. The driver, a blond woman wearing khaki safari gear begins handing out free cigarettes to 15- and 16-year-olds on lun ecess. Teens visiting MTV's websites in China, Germany, India oland, and Latin America were given the chance to click on a ban er ad that led them to a questionnaire about their exposure t igarette ads and other marketing tools in their countries. Som 0,000 teens responded to the banner ads. "In the past week, mor han 62 percent of teenagers in these countries have been expose o tobacco advertising in some form the 17-year-old SWAT (Stu ents Working against Tobacco) chairman told Reuters The to bacco companies learned that marketing to teens and kids worked n this country, but since they can't do it here anymore, theyve taken what they learned to other countries At a video arcade in Taipei, free American cigarettes are strewn atop each game. "As ong as they're here, I may as well try one," says a high school girl. In Malaysia, Gila-Gila, a comic book popular with elementary school students, carries a Lucky Strike ad. Attractive women in cowboy outfits regularly meet teenagers going to rock concerts or discos in Budapest and hand them Marlboros. Those who accept ight on the spot also receive Marlboro sunglasses. According to the American Lung Association Tobacco Policy Trend Alert, the tobacco industry is offering candy-flavored ciga rettes in an attempt to continue to target teens. Advertising and romotion of these products uses hip-hop imagery attracti omen, and other imagery to appeal to youth in similar ways tha oe Camel did a decade ago. Marketing efforts for candy-flavored garettes came after the Master Settlement Agreement prohibited obacco companies from using cartoon characters to sell cigarett esearchers recently released the results of several surveys that howed that 20 percent of smokers ages 17 to 19 smoked flavor cigarettes, while only 6 percent of smokers ages 17 to 20 did.
In Russia, a US sco parties where cigarette company sponsors ousands of people booming music. Admission i young dance to e purchase of one pack of cigarettes. At other cigarette-sponsor parties, attractive women give cigarettes away free. In many countries, foreign cigarettes have a status image tha h encourages smoking. A 26-year-old Chinese man says so witched from a domestic brand Marlboro because "You feel a to her social position" smoke foreign cigar