Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 1-1 BA Business Environment Chapter 12 Consumer Stakeholders: Information Issues and Responses BA Business Environment Week 9 ~ Part 1

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 1-2 BA Business Environment Chapter 12 Consumer Stakeholders: Information Issues and Responses Agenda Chapter 12 - Consumer Information Issues Case Discussion Search the Web The Better Business Bureau maintains a web site useful to both business and individual consumers:

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 1-3 BA Business Environment Chapter 12 Consumer Stakeholders: Information Issues and Responses Overview Customer Revolution - A paradox The Consumer Movement Product Information Issues Gov’t involvement - FTC The role of Self-Regulation

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 1-4 BA Business Environment Chapter 12 Consumer Stakeholders: Information Issues and Responses The Paradox of the Customer Revolution Focus has shifted from problems of production to problem of marketing. Customer is King –Information flow –Choice/competition –Rising expectations But, Customer still feels ignored

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 1-5 BA Business Environment Chapter 12 Consumer Stakeholders: Information Issues and Responses Four Basic Consumer Rights AKA the Cosumer’s Magna Carta: The Right to Safety The Right to Be Informed The Right to Choose The Right to Be Heard

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 1-6 BA Business Environment Chapter 12 Consumer Stakeholders: Information Issues and Responses Important Historical Books

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 1-7 BA Business Environment Chapter 12 Consumer Stakeholders: Information Issues and Responses Ralph Nader’s Consumerism Nader’s Raiders –Legions of zealous activists –Funded by $480K settlement w/ GM Groups he formed –Public Interest Research Group –Center for the Study of Responsive Law –Public Citizen

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 1-8 BA Business Environment Chapter 12 Consumer Stakeholders: Information Issues and Responses Consumer Problems with Business High prices and poor quality Failure to live up to advertising claims Unreliable Misleading packaging Inadequate guarantees and warranties Handling of complaints Dangerous products The absence of reliable information about products Not knowing what to do if something is wrong

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 1-9 BA Business Environment Chapter 12 Consumer Stakeholders: Information Issues and Responses Consumerism in the 21 st Century Powerful but unorganized Grassroots activism is stregthening Internet –More responsive –More forceful –Quick

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 12 Consumer Stakeholders: Information Issues and Responses Product Information Issues Advertising Warranties Packaging & labeling

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 12 Consumer Stakeholders: Information Issues and Responses Advertising Issues Pros Increases consumer satisfaction Efficient means of distributing information –Effective –Low cost Increases standard of living Cons Decreases consumer satisfaction –No net benefit Inefficient means of distributing information –Ineffective –Costly Encourages consumption Lowers standard of living

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 12 Consumer Stakeholders: Information Issues and Responses Need for Information… That is clear That is accurate That is adequate

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 12 Consumer Stakeholders: Information Issues and Responses Abuses of Advertising Ambiguous advertising –Weasel words –Legalese Concealed facts Exaggerated claims –Puffery “King of Beers” Psychological appeals –Approval or acceptance Search the Web Adbusters is dedicated to reinventing the outdated paradigms of our consumer culture and building a brave new understanding of living:

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 12 Consumer Stakeholders: Information Issues and Responses Specific Controversial Issues Comparative Advertising Use of Sex and Women in Advertising Advertising to Children Advertising of Alcoholic Beverages Cigarette Advertising Health and Environmental Claims Ad Creep

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 12 Consumer Stakeholders: Information Issues and Responses Children’s Advertising Advertising should consider the audience level. Realize that children are imaginative. Recognize that advertising plays an important part in child’s education. Use advertising to nurture positive and beneficial behaviors. Incorporate minority groups as positive role models. Contribute to the parent-child relationship.

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 12 Consumer Stakeholders: Information Issues and Responses Warranties Express warranties –Promise or affirmation of fact that the seller makes Implied warranties –Uniform commercial code creates implied warranties when goods are sold or leased Merchantability Fitness for a particular purpose Full vs. Limited

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 12 Consumer Stakeholders: Information Issues and Responses Packaging and Labeling Federal Packaging and Labeling Act –Prohibits deceptive labeling on consumer products –Requires disclosure of certain important information on consumer products –Administered by the FTC

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 12 Consumer Stakeholders: Information Issues and Responses Other Product Information Issues Equal Credit Opportunity Act Truth-in-Lending Act Fair Credit Reporting Act Fair Debt Collection Practices Act

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 12 Consumer Stakeholders: Information Issues and Responses The Federal Trade Commission Maintains free and fair competition in the economy Protects consumers from unfair or misleading practices

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 12 Consumer Stakeholders: Information Issues and Responses The Role of the FTC Enforce federal antitrust and consumer protection laws Ensure markets function competitively Enhance the smooth operation of the marketplace Stop actions that threaten consumers’ opportunities Undertake economic analysis to support enforcement Carry out policies of Congressional mandates, such as consumer education

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 12 Consumer Stakeholders: Information Issues and Responses Self-Regulation in Advertising Types of Self-Regulation Self-disciplined regulation (firm in control) Pure self-regulation (peer controlled) Co-opted self-regulation (w/ non-industry outsiders) Negotiated self-regulation (w/ outside body) Mandated self-regulation (gov’t required)

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 12 Consumer Stakeholders: Information Issues and Responses Self-Regulation in Advertising National Advertising Division Private organization Created in ‘71 Initiates investigations Determines issues Collects and evaluates data Makes decisions

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 12 Consumer Stakeholders: Information Issues and Responses Moral Management Models Immoral Management: Customers viewed as opportunities to be exploited Amoral Management: Does not focus on what is fair for customers Moral Management: Customers viewed as equal partners