Marketing Case Study

CASE 4? 6 Making Soci tot each(prenominal)yy amenable and Ethical strategical decisions move a guild toward its stated goals and perceived success. Strategic decisions similarly re? ect the ? rms social business and the honorable values on which such decisions be made. They re? ect what is considered important and what a company sine qua nons to achieve. Mark Pastin, writing on the function of ethics in business brass instrument decisions, observes thither be fundamental principles, or understanding rules, by which organizations act. Like the ground rules of individuals, organizational ground rules determine which actions be possible for the organization and what the actions mean.Buried at a small(a)er displace the charts of organizational responsibility, the ar groundworke strategies, the crunched recites, and the political intrigue of e actually ? rm ar sound rules by which the game unfolds. The pursuit setuations re? ect distinguishable decisions made by mult inational ? rms and g overnments and withal re? ect the social responsibility and honest values underpinning the decisions. break surmount the following situations in the orbiculate hind end tradeplace carefully and assess the ground rules that draw and quarterd the decisions of ? rms and organisations.Marketing Decisions Selling tobacco to 3rd World Countries expanding market. As an example, Ind s jackfruitsias per cowlita fanny consumption quadrupled in less(prenominal) than go years. Increasingly, fanny announce on radio and television is being restricted in some countries, merely other means of promotion, peculiarly to young battalion, are non controlled. China, with more(prenominal) than 300 zillion roll of baccy plantrs, produces and consumes ab give away 1. 4 trillion fags per year, more than any other country in the existence. Estimates are that China has more smokers than the unify States has people.Just 1 percent time of that 1. 4 trillion cig arette market would increase a baccy plant companys overseas gross revenue by 15 percent and would be worth as much as $300 one one thousand thousand million million in added revenue. American cigarette companies afford verit up to(p) a warm welcome in Russia, where at least 50 percent of the people smoke. Consumers are hungry for most things Western, and baccy taxes are low. contradictory in the United States and other countries that limit or ban cigarette advertising, in that respect are few effective controls on baccy plant products in Russia.Russia, the globes fourth largest cigarette market, has proved to be an extremely pro? table territory for British American Tobacco ( clobber). BAT Russia, established in 1949, sold 65 one million million cigarettes in Russia in 2005, giving it almost one? fth of market share. EXPORTING U. S. CIGARETTE CONSUMPTION In the United States, 600 billion cigarettes are sold annually, but sales are shrinking rapidly. Unit sales adopt be en dropping well-nigh 1 to 2 percent a year, and sales have been down by almost 5 percent in the last six years. The U. S.Surgeon Generals advertize against fume, higher(prenominal) cigarette taxes, non- grass rules in public areas, and the concern Americans have about general health have led to the decline in baccy plant consumption. Faced with divers(a) class-action lawsuits, the success of states in winning lawsuits, and pending federal decree, tobacco companies have stepped up their international merchandise activities to maintain pro? ts. nevertheless though companies have agreed to sweeping restrictions in the United States on cigarette marketing and secondhand smoke and to bolder cancer-warning labels, they are ? hting as hard as ever in the trinity World to convince the media, the public, and policymakers that similar changes are not needed. In seminars at highlife resorts worldwide, tobacco companies invite journalists, all expenses paid, to expositicipate in pro grams that shimmer down the health risks of fume. It is hard to gauge the in? uence of such seminars, but in the Philippines, a government plan to constrain bullet by children was neutralize by a public relations campaign from cigarette companies to remove cancer awareness and prevention as a let out concern. A profligate in favor of the tobacco industrys point of see seemed to prevail. At a time when most industrialized countries are discouraging have, the tobacco industry is avidly courting consumers throughout the ontogeny world using catchy slogans, obvious image campaigns, and supers pitching-cigarette sales that ? t a hard-pressed customers budget. The reason is clear The Third World is an ADVERTISING AND PROMOTION In Gambia, smokers send in cigarette box top to qualify for a chance to win a refreshing car. In Argentina, locoweed commercials ? ll 20 percent of television advertising time.And in crowded African cities, billboards that link smoking to the unassa ilable life tower above the sweltering shantytowns. Such things as baby clothes with cigarette logos, health warnings printed in foreign languages, and tobaccosponsored contests for children are a lot have in tobacco ads in Third World countries. Latin American tobacco consumption rose by more than 24 percent over a ten-year period. Critics claim that sophisticated promotions in unsophisticated societies entice people who cannot afford the necessities of life to spend money on a luxuryand a dangerous one at that.The sophistication theme runs throughout the smoking ads. In Kinshasa, Zaire, billboards depict a man in a business suit stepping out of a black Mercedes as a chauffeur holds the door. In Nigeria, promotions for Graduate brand cigarettes show a university bookman in his cap and gown. Those for Gold Leaf cigarettes have a barrister in a white wig and the slogan, A very important cigarette for very important people. In Kenya, a magazine ad for Embassy cigarettes shows an el egant executive of? cer with troika young men and women equivalent to American yuppies.The most deplorable trend in developing countries is advertising that associates tobacco with American af? uence and culture. Some women in Africa, in their struggle for womens rights, de? antly smoke cigarettes as a emblem of freedom. Billboards all over Russia feature pictures of skyscrapers and white sandy beaches and slogans like Total Freedom or Rendezvous with America. They arent advertising foreign travel but American cigarette brands. Cases 4 Developing planetary Marketing Strategies Every cigarette manufacturer is in the image business, and tobacco companies say their promotional slant is both presumable and everyday.They point out that in the Third World a lot of people cannot understand what is written in the ads anyway, so the ads postal code in on the more understandable visual image. In most of the world, the Marlboro Man isnt just a symbol of the Wild West hes a symbol of the West. You cant convince people that all Americans dont smoke. In Africa, some of the most effective advertising includes images of af? uent white Americans with recognizable landmarks, such as the New York City skyline, in the background. In much of Africa, children as young as ? e are utilise to sell single cigarettes, affordable to other children, to support their own nicotine habits. Worldwide n aboriginal one-fourth of all teenage smokers smoke-dried their ? rst cigarette before they were 10 years old. The scene of promotional activity is enormous. In Kenya, a major tobacco company is the fourth-largest advertiser. Tobaccosponsored lotteries bolster sales in some countries by pass as prizes big-ticket(prenominal) dear(p)s that are beyond most peoples budgets. Gambia has a population of just 640,000, but a tobacco company draft attracted 1. million entries (each move in on a cigarette box top) when it raf? ed off a Renault car. Evidence is strong that the strategy of tobacco companies is to bum young people as a means of expanding market demand. Report afterward report reveals that adolescents receive cigarettes free as a means of promoting the product. For example, in Buenos Aires, a landrover decorated with the yellow Camel logo pulls up in front of a high civilize. The driver, a blond woman wearing khaki safari gear, begins handing out free cigarettes to 15- and 16-year-olds on lunch recess.Teens visiting MTVs Web sites in China, Germany, India, Poland, and Latin America were given the chance to click on a measure ad that led them to a questionnaire about their exposure to cigarette ads and other marketing tools in their countries. Some 10,000 teens responded to the banner ads. In the outgoing week, more than 62 percent of teenagers in these countries have been exposed to tobacco advertising in some form, the 17-year-old SWAT (Students Working against Tobacco) chairman told Reuters. The tobacco companies in condition(p) that marketing t o teens and kids worked in this country, but since they cant 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 long as theyre 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 cow man out? ts on a regular basis meet teenagers going to rock concerts or discos in Budapest and hand them Marlboros.Those who accept a light on the spot in any case receive Marlboro sunglasses. accord to the American Lung Association Tobacco Policy Trend Alert, the tobacco industry is offering candy-? avored cigarettes in an attempt to continue to target teens. 1 denote and promotion of these products uses hip-hop imagery, attractive women, and other imagery to attract to youth in similar ways that Joe Camel did a decade ago. Marketing efforts for candy-? avored cigarette s came after the Master resolving Agreement prohibited tobacco companies from using cartoon characters to sell cigarettes.Researchers recently released the results of several surveys that showed that 20 percent of smokers ages 17 to 19 smoked ? avored cigarettes, term solitary(prenominal) 6 percent of smokers ages 17 to 20 did. In Russia, a U. S. cigarette company sponsors disco parties where thousands of young people dance to thriving music. Admission is the get of one pack of cigarettes. At other cigarettesponsored parties, attractive women give cigarettes away free. In many countries, foreign cigarettes have a locating image that also encourages smoking.A 26-year-old Chinese man says he switched from a domestic brand to Marlboro because You feel a higher social position when you smoke foreign cigarettes. weed is a sign of luxury in the Czech Republica as well as in Russia and other Eastern countries, says an executive of a Czech tobacco ? rm that has a joint venture with a U. S. company. If I can smoke Marlboro, then Im a well-to-do man. The global tobacco companies affirm that they are not attempting to recruit recent smokers. They say they are only trying to encourage smokers to switch to foreign brands. The same number of cigarettes are consumed whether American cigarettes or not, was the comment of one executive. Although cigarette companies deny they sell higher tar and nicotine cigarettes in the Third World, one British tobacco company does pretend that some of its brands sold in developing countries contain more tar and nicotine than those sold in the United States and Europe. A recent field of operation found three major U. S. brands with ? lters had 17 milligrams of tar in the United States, 22. 3 in Kenya, 29. 7 in Malaysia, and 31. 1 in South Africa. some other brand with ? ters had 19. 1 milligrams of tar in the United States, 28. 8 in South Africa, and 30. 9 in the Philippines. The ? rm says that Third World smokers are used to smok ing their own topically made product, which might have several times more tar and nicotine. Thus, the ? rm leaves the tar- and nicotine-level decisions to its foreign subsidiaries, who tailor their products to local tastes. C. Everett Koop, the retired U. S. Surgeon General, was quoted in a recent in placeigence information conference as saying, Companies claims that science cannot say with certainty that tobacco causes cancer were ? t-footed lies and that sending cigarettes to the Third World was the export of death, disease, and disability. An Oxford University epidemiologist has estimated that, because of increasing tobacco consumption in Asia, the annual worldwide death toll from tobaccorelated illnesses volition more than triple over the next two decades. Perhaps 100 million people died untimely during the 20th century as a result of tobacco, making it the get outing preventable cause of death and one of the top killers overall. agree to the World wellness Organization, ac h year smoking causes 4 million deaths globally, and it expects the annual toll to rise to 10 million in 2030. GOVERNMENT INVOLVEMENT Third World governments frequently stand to pro? t from tobacco sales. Brazil collects 75 percent of the retail price of cigarettes in taxes, some $100 million a month. The Bulgarian state-owned tobacco company, Bulgartabac, contributes almost $30 million in taxes to the government annually. Bulgartabac is a major exporter of cigarettes to Russia, exporting 40,000 tons of cigarettes annually. Tobacco is Zimbabwes largest immediate payment crop.One intelligence information report from a Zimbabwe newspaper reveals strong support for cigarette companies. Western anti-tobacco lobbies demonstrate unbelievable hypocrisy, notes one editorial. It is relatively easy to sit in chapiter or London and prattle on about the so-called evils of smoking, but they are far removed from the day-to-day grind of earning a living in the Third World. It goes on to comme nt that it doesnt dispute the fact that smoking is addictive or that it may cause diseases, but smoking does not of necessity lead to certain 1See From Joe Camel to Kauai KoladaThe Marketing of Candy-Flavored Cigarettes, http//lungusa. org. Part 6 Supplementary Material 350 million smokers, China has 50 million more cigarette buyers than the U. S. has people, according to Euromonitor. While smoking rates in developed countries have slowly declined, they have shot up dramatically in some developing counties where PMI is a major player. These include Pakistan (up 42 percent since 2001), Ukraine (up 36 percent), and Argentina (up 18 percent). death. Nor is it any more dangerous than other habits. Unfortunately, tobacco smoking has attracted the precaution of a particularly sanctimonious, meddling sector of society. They would do better to keep their opinions to themselves. Generally, smoking is not a big concern of governments chevy by debt, intimate con? ict, drought, or famine. It is truly tragic, but the worse famine flexs, the more people smokejust as with war, when people who are worried want to smoke. In any case, says one representative of an international tobacco company, People in developing countries dont have a long adequate life expectancy to worry about smoking-related problems.You cant turn to a guy who is going to die at age 40 and tell him that he might not live up to 2 years extra at age 70. As for promoting cigarettes in the Third World, If there is no ban on TV advertising, then you arent going to be an idiot and impose restrictions on yourself, says the representative, and likewise, if you get an order and you see that theyve got money, no one is going to turn down the business. Cigarette companies ? gure Chinas self-interest will preserve its industry.Tobacco permits huge revenues for Beijing because all tobacco moldiness be sold through the China National Tobacco Company monopoly. Duty on imported cigarettes is nearly 450 percent of their value. Consequently, tobacco is among the central governments biggest source of funding, accounting for more than $30 billion in income in 2005. China is also a major exporter of tobacco. ANTISMOKING PROMOTIONS Since the early 1990s, multinational tobacco companies have promoted youth smoking prevention programs as part of their Corporate Social Responsibility campaigns.The companies have partnered with third-party allies in Latin America, most notably nonpro? t educational organizations and education and health ministries to promote youth smoking prevention. Even though there is no evidence that these programs reduce smoking among youths, they have met the industrys goal of portraying the companies as concerned corporate citizens. In fact, a new occupy proves that youth smoking prevention ads created by the tobacco industry and aimed at parents actually increase the likelihood that teens will smoke.The study, Impact of Televised Tobacco patience Smoking Prevention Advert ising on offspring Smoking-Related Beliefs, Intentions and Behavior, published in the December 2006 issue of the American Journal of populace Health, sought to understand how the tobacco industry uses youth smoking prevention programs in Latin America. Tobacco industry documents, so-called social reports, media reports, and material provided by Latin American public health advocates were all analyzed. The study is the ? rst to examine the speci? c effect of tobacco company parent-focused advertising on youth.It found that ads that the industry claims are aimed at preventing youth from smoking actually provide no bene? t to youth. In fact, the ads that are created for parental audiences but also are seen by teens are associated with stronger intentions by teens to smoke in the future. Brazil has the worlds strictest governmental laws against smoking, consisting of highly visible antismoking campaigns, severe controls on advertising, and very high tax rates on smoking products. Desp ite these obstacles, the number of smokers in Brazil continues to grow. In 2006, there were approximately 44 million smokers in the country, up from 38 million in 1997.Factors driving this trend include the low price of cigarettes, which are among the lowest in the world the easy access to tobacco products and the actions taken by the powerful tobacco companies to slow down antismoking legislation in Brazil. revolve around ON DEVELOPING MARKETS Lawsuits, stringent legislation against advertising, laws restricting where people can smoke, and other antismoking efforts on the part of governments have caused tobacco companies to step forward their efforts in those markets where restrictions are fewer and governments more friendly.As part of a strategy to increase its sales in the developing world, Philip Morris International (PMI) was spun off from Philip Morris ground forces in 2008 to natural spring the threat of litigation and government regulation in the United States. The move frees the tobacco giants international operations of the jural and public-relations headaches in the United States that have hindered its growth. Its practices are no longer constrained by American public opinion, paving the way for broad product experimentation. A new product, Marlboro Intense, is plausibly to be part of an aggressive blitz of new smoking products PMI will roll out around the globe.The Marlboro Intense cigarette has been shrunk down by about a half inch and offers smokers seven potent puffs apiece, versus the average of eight or so milder draws. The judgement behind Intense is to appeal to customers who, due to indoor(prenominal) smoking bans, want to dash outside for a quick nicotine hit but dont always ? nish a life-sized cigarette. The CEO of PMI says there are possibly 50 markets that are interested in deploying Marlboro Intense. former(a) product innovations include sweet-smelling cigarettes that contain tobacco, cloves and ? voringwith twice the tar and nicotine levels of a conventional U. S. cigarette. Marlboro Mix 9, a high-nicotine, high-tar cigarette launched in Indonesia in 2007, and a clove-infused Mix 9 will be exported to other southeast Asiatic markets next. Another loop of the Marlboro brand, the Marlboro Filter Plus, is being sold in South Korea, Russia, Kazakhstan, and Ukraine. It touts a special ? lter made of carbon, cellulose acetate, and a tobacco plug that the company claims lowers the tar level while giving smokers a smoother taste.One of PMIs immediate goals is to harness the huge potential of Chinas smoking population, as well as some of that countrys own brands, which it has agreed to market worldwide. With some ASSESSING THE ETHICS OF STRATEGIC DECISIONS Ethical decision making is not a simple right or wrong determination. Ethical ground rules are complex, tough to sort out and to prioritize, tough to articulate, and tough to use. The complexity of ethical decisions is compounded in the international sett ing, which comprises different cultures, different perspectives of right and wrong, different legal requirements, and different goals.Clearly, when U. S. companies conduct business in an international setting, the ground rules become further compound by the values, customs, traditions, ethics, and goals of the troops countries, which each have developed their own ground rules for conducting business. Three prominent American ethicists have developed a framework to view the ethical implications of strategic decisions by American Cases 4 Developing Global Marketing Strategies ? rms. They identify three ethical principles that can guide American managers in assessing the ethical implications of their decisions and the degree to which these decisions re? ct these ethical principles or ground rules. They suggest asking, Is the corporate strategy acceptable according to the following ethical ground rules? These questions can help uncover the ethical ground rules embedded in the tobacco consumption situation described in this case. These questions lead to an ethical psychoanalysis of the degree to which this strategy is bene? cial or harmful to the parties and, ultimately, whether it is a right or wrong strategy, or whether the consequences of this strategy are ethical or socially trusty for the parties regard.These ideas are incorporated in the decision tree in Exhibit 1. Principles Utilitarian ethics (Bentham, Smith) Question Does the corporate strategy optimise the common good or bene? ts of all constituencies? Does the corporate strategy respect the rights of the individuals involved? Does the corporate strategy respect the canons of justice or impartiality to all parties? Rights of the parties (Kant, Locke) Justice or fairness (Aristotle, Rawls) Exhibit 1 A Decision Tree for Incorporating Ethical and Social Responsibility Issues into Multinational Business DecisionsDoes the decision efficiently optimize the common good or benefits of THE BUSINESS FIRM? Stockholders Management Profits Growth new(prenominal) SOCIETY? Culture Order Justice The good life Other THE ECONOMY? THE INDIVIDUAL? Economic growth Freedom Allocation of resources Health and welfare Production and distribution Self-realization of goods and services gracious dignity Other Opportunity Other YES NO YES ar there critical factors that justify suboptimizing these goals and satisfactions? NO Does the decision respect the rights of individuals involved? YES NO baulk Decision YES Are there critical factors that justify the abrogation of a right? NO Does the corporate decision respect the canons of justice or fairness to all parties involved? YES YES NO hold out Decision Are there critical factors that justify the violation of a canon of justice? NO stand Decision Reject Decision Part 6 Supplementary Material See www. who. int, the World Health Organizations Web site, for more details regarding the current tobacco controversy. See also www. getswat. com for a worldwi de student initiative against smoking.Laczniak and Naor discuss the complexity of international ethics or, more precisely, the ethical assumptions that underlie strategic decisions for multinationals. 2 They suggest that multinationals can develop consistency in their policies by using federal law as a baseline for stamp down behavior as well as respect for the host countrys general value structure. They conclude with four urgeations for multinationals 1. Expand codes of ethics to be worldwide in scope. 2. Expressly consider ethical issues when developing worldwide corporate strategies. . If the ? rm encounters major ethical dilemmas, consider withdrawal from the problem market. 4. Develop bimonthly ethics-impact statements, including impacts on host parties. 2 QUESTIONS 1. implement the model in Exhibit 1 as a guide and assess the ethical and social responsibility implications of the situations described. 2. Can you recommend alternative strategies or solutions to the dilemmas confronting the tobacco companies? To governments? What is the price of ethical behavior? 3. Should the U. S. government support U. S. tobacco company interests abroad? . Should a company be compel to stop marketing a product that is not illegal, such as cigarettes? Gene R. Laczniak and Jacob Naor, Global Ethics Wrestling with the Corporate Conscience, Business, July folk 1985. Sources Smoke all over the Horizon U. S. Gains in Tobacco Control Are Being Offset Internationally, The Washington Post, July 23, 2006 Death and Taxes England Has Become the Latest in a Series of Countries to balloting for Restrictions on Smoking in Public Places, Financial Management (UK), April 1, 2006 Trick or Treat?Tobacco Industry Prevention Ads get dressedt foster Curb Youth Smoking, PR Newswire, October 31, 2006 China Exclusive China, With One Third of Worlds Smokers, Promises a Non-Smoking Olympics, Xinhua News Agency, May 29, 2006 Tobacco Consumption and Motives for Use in Mexican University Stu dents, Adolescence, June 22, 2006 A Change in the Air Smoking Bans Gain Momentum Worldwide, Environmental Health Perspectives, August 1, 2007 Adams wint propel the BAT Habit The Head of British American Tobacco Is Stoical About the Looming Ban on Smoking in Public Spaces BAT will Adapt, The Sunday Telegraph London, June 10, 2007 Heart Disease, Stroke Plague Third World, Associated call forth (Online), April 4, 2006 Get a Detailed Picture of the Tobacco Industry in Brazil, M2 Press Wire, December 20, 2007 Vanessa OConnell, Philip Morris Readies Global Tobacco Blitz Division Spin-off Enables Aggressive Product Push High-Tar Smokes in Asia, The contend Street Journal, January 29, 2008 The Global Tobacco Threat, The New York Times, February 19, 2008 How to Save a Billion Lives Smoking, The Economist (London,) February 9, 2008 Whether Here or There, Cigarettes Still Kill People, The Wall Street Journal, February 4, 2008.Marketing Case Study1. When 7-UP introduced itself into the soft drink industry, they were generally thought of by consumers as a company that produced a clear soft drink for mixing dry beverages. subsequently conducting lengthened research, 7-UP found that colas were the best-selling category in the soft drink industry. 7-UP then repositioned itself in the market by introducing the slogan, 7-UP, the uncola. This repositioning allowed them to take third place in the market, after Coca Cola and Pepsi, and also allowed for growth and gains over competitors in the lemon-lime category of soft drinks. In addition, 7-UP differentiates itself from other soft drink manufacturers in several ways. Within the lemon-lime category, 7-UP has introduced a new tagline, all things in green bottles are not the same. This tagline is meant to differentiate 7-UP from Sprite and sierra Mist. Two other new taglines will include for less sweet, syrupy taste, the only way to go is Up and When you add it all up, the only way to go is Up (Wikipedia).2. 7-UP was able to change consumer behavior by using psychology and working with the concept that everyone wants to be an individual. When introducing the uncola tagline, 7-UP based this introduction on consumer research. Purchasing and consuming Coke and Pepsi were part of going along with the group since many people were purchasing those products at the time. Introducing 7-UP as the uncola brought to mind a sense of individuality for consumers. The 7-UP marketing executives put the idea in their heads that purchasing and consuming 7-UP products would make them stand out from the crowd. 7-UP has continued this tradition of changing consumer behavior since that time.The company hopes to change consumer behavior in the 21st century by introducing a product called 7-UP Plus. This product will create a whole new category within the soft drink industry, as it is going to be sold as a soft drink with added nutritional value. Again, 7-UP is basing the introduction of this product on consumer trends and re search. Due to the obesity epidemic in America, combined with raised health awareness on the part of many men and women, 7-UP will be introducing this reduced sugar product with added vitamins and minerals. Introducing this product shows that 7-UP is on top of trends in consumer spending and, by introducing this product, the executives may be able to change consumer behavior from purchasing sugar-laden soft drinks with empty calories to purchasing a less sweetened product with vitamins and minerals that are needed to fuel the human body (Dillon).3. Like any company, 7-UP has had many successes and failures throughout its history. In the initial stages of the company, there were 600 lemon-lime beverages competing for market share with 7-UP. 7-UP was able to survive and rise to the top of the market by successfully becoming one of the first lemon-lime soft drinks to be nationally distributed. 7-UP also floundered in the soft drink market due to poor marketing. Originally, the soft dri nk was a means of calming children with upset stomachs. Later, it became a mixer for alcoholic beverages. Because 7-UP was thought of as a bartending mixer and not an individual beverage, sales were mostly due to people intending to mix the 7-UP with a type of alcoholic beverage.7-UP conducted extensive research and found that cola drinks were the best-selling soft drink in the industry. However, these cola drinks contained a considerable amount of caffeine. After careful consideration, they introduced the slogan, 7-UP, the uncola. This slogan appealed to consumers because it carried a sense of individualism and it also appealed to those who were health-conscious and knew the effects of too much caffeine. This was one of 7-UPs great successes. Another failure by 7-UP was the introduction of 7-UP Gold. 7-UP Gold was designed as a spiced version of 7-UP, similar in taste to the ginger ale soft drink. Although it was widely marketed and advertised, the product was never a hit and was d iscontinued.Another successful marketing campaign capitalized on the principles of Zen. A television commercial featured a Zen master asking disciples to correctly choose. The 7-UP symbolized light and consciousness while the cola featured in the commercial symbolized darkness. With that commercial, 7-UP made consumers think they were making a good life choice by purchasing and consuming 7-UP. Another failure in 7-UPs history is its poor bottling and distribution structure. When 7-UP was first introduced, it had little competition because Coca Cola and Pepsi did not manufacture lemon-lime soft drinks. This changed when Coca Cola introduced Sprite and Pepsi introduced Sierra Mist. Bottlers were then forced by these respective companies to discontinue bottling 7-UP and exclusively bottle their products. Unfortunately, this had led to an inability for 7-UP to be widely distributed to smaller stores. As a result, 7-UP can often only be found in large stores or chains (Wikipedia).4. 7-UP s marketing strategy has been successful in many ways. With the introduction of new taglines and slogans, 7-UP has been successful at positioning themselves in consumers minds and increasing market share in the soft drink industry. 7-UPs marketing strategy has also been successful because marketing executives have capitalized on consumer trends throughout the history of the company.In the 1970s, the company seized upon the fact that the popular cola drinks had high levels of caffeine and redesigned their advertising to reflect the healthier choice that 7-UP was. In addition, they appealed to the consumers sense of wanting to be an individual and introduced advertisements geared toward that concept. With the invention of new technology, 7-UP has also gained a presence on the World Wide Web with a well-designed web site that gives important information about the company and its products (Wikipedia).Marketing Case StudyCASE 4? 6 Making Socially Responsible and Ethical Strategic decisio ns move a company toward its stated goals and perceived success. Strategic decisions also re? ect the ? rms social responsibility and the ethical values on which such decisions are made. They re? ect what is considered important and what a company wants to achieve. Mark Pastin, writing on the function of ethics in business decisions, observes There are fundamental principles, or ground rules, by which organizations act. Like the ground rules of individuals, organizational ground rules determine which actions are possible for the organization and what the actions mean.Buried beneath the charts of organizational responsibility, the arcane strategies, the crunched numbers, and the political intrigue of every ? rm are sound rules by which the game unfolds. The following situations re? ect different decisions made by multinational ? rms and governments and also re? ect the social responsibility and ethical values underpinning the decisions. Study the following situations in the global ci garette marketplace carefully and assess the ground rules that guided the decisions of ? rms and governments.Marketing Decisions Selling Tobacco to Third World Countries expanding market. As an example, Indonesias per capita cigarette consumption quadrupled in less than ten years. Increasingly, cigarette advertising on radio and television is being restricted in some countries, but other means of promotion, especially to young people, are not controlled. China, with more than 300 million smokers, produces and consumes about 1. 4 trillion cigarettes per year, more than any other country in the world. Estimates are that China has more smokers than the United States has people.Just 1 percent of that 1. 4 trillion cigarette market would increase a tobacco companys overseas sales by 15 percent and would be worth as much as $300 million in added revenue. American cigarette companies have received a warm welcome in Russia, where at least 50 percent of the people smoke. Consumers are hungry for most things Western, and tobacco taxes are low. Unlike in the United States and other countries that limit or ban cigarette advertising, there are few effective controls on tobacco products in Russia.Russia, the worlds fourth largest cigarette market, has proved to be an extremely pro? table territory for British American Tobacco (BAT). BAT Russia, established in 1949, sold 65 billion cigarettes in Russia in 2005, giving it almost one? fth of market share. EXPORTING U. S. CIGARETTE CONSUMPTION In the United States, 600 billion cigarettes are sold annually, but sales are shrinking rapidly. Unit sales have been dropping about 1 to 2 percent a year, and sales have been down by almost 5 percent in the last six years. The U. S.Surgeon Generals campaign against smoking, higher cigarette taxes, non-smoking rules in public areas, and the concern Americans have about general health have led to the decline in tobacco consumption. Faced with various class-action lawsuits, the success of s tates in winning lawsuits, and pending federal legislation, tobacco companies have stepped up their international marketing activities to maintain pro? ts. Even though companies have agreed to sweeping restrictions in the United States on cigarette marketing and secondhand smoke and to bolder cancer-warning labels, they are ? hting as hard as ever in the Third World to convince the media, the public, and policymakers that similar changes are not needed. In seminars at luxury resorts worldwide, tobacco companies invite journalists, all expenses paid, to get in in programs that play down the health risks of smoking. It is hard to gauge the in? uence of such seminars, but in the Philippines, a government plan to reduce smoking by children was neutralized by a public relations campaign from cigarette companies to remove cancer awareness and prevention as a key concern. A slant in favor of the tobacco industrys point of view seemed to prevail. At a time when most industrialized countrie s are discouraging smoking, the tobacco industry is avidly courting consumers throughout the developing world using catchy slogans, obvious image campaigns, and single-cigarette sales that ? t a hard-pressed customers budget. The reason is clear The Third World is an ADVERTISING AND PROMOTION In Gambia, smokers send in cigarette box tops to qualify for a chance to win a new car. In Argentina, smoking commercials ? ll 20 percent of television advertising time.And in crowded African cities, billboards that link smoking to the good life tower above the sweltering shantytowns. Such things as baby clothes with cigarette logos, health warnings printed in foreign languages, and tobaccosponsored contests for children are often featured in tobacco ads in Third World countries. Latin American tobacco consumption rose by more than 24 percent over a ten-year period. Critics claim that sophisticated promotions in unsophisticated societies entice people who cannot afford the necessities of life t o spend money on a luxuryand a dangerous one at that.The sophistication theme runs throughout the smoking ads. In Kinshasa, Zaire, billboards depict a man in a business suit stepping out of a black Mercedes as a chauffeur holds the door. In Nigeria, promotions for Graduate brand cigarettes show a university student in his cap and gown. Those for Gold Leaf cigarettes have a barrister in a white wig and the slogan, A very important cigarette for very important people. In Kenya, a magazine ad for Embassy cigarettes shows an elegant executive of? cer with three young men and women equivalent to American yuppies.The most disturbing trend in developing countries is advertising that associates tobacco with American af? uence and culture. Some women in Africa, in their struggle for womens rights, de? antly smoke cigarettes as a symbol of freedom. Billboards all over Russia feature pictures of skyscrapers and white sandy beaches and slogans like Total Freedom or Rendezvous with America. Th ey arent advertising foreign travel but American cigarette brands. Cases 4 Developing Global Marketing Strategies Every cigarette manufacturer is in the image business, and tobacco 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 ads zero in on the more understandable visual image. In most of the world, the Marlboro Man isnt just a symbol of the Wild West hes a symbol of the West. You cant convince people that all Americans dont smoke. In Africa, some of the most effective advertising includes images of af? uent white Americans with recognizable landmarks, such as the New York City skyline, in the background. In much of Africa, children as young as ? e are used to sell single cigarettes, affordable to other children, to support their own nicotine habits. Worldwide nearly one-fourth of all teenage smokers smoked their ? rst cigarette before they were 10 years old. The scope of promotional activity is enormous. In Kenya, a major tobacco company is the fourth-largest advertiser. Tobaccosponsored lotteries bolster sales in some countries by offering as prizes expensive goods that are beyond most peoples budgets. Gambia has a population of just 640,000, but a tobacco company lottery attracted 1. million entries (each sent in on a cigarette box top) when it raf? ed off a Renault car. Evidence is strong that the strategy of tobacco companies is to target young people as a means of expanding market demand. Report after report reveals that adolescents receive cigarettes free as a means of promoting the product. For example, in Buenos Aires, a Jeep decorated with the yellow Camel logo pulls up in front of a high school. The driver, a blond woman wearing khaki safari gear, begins handing out free cigarettes to 15- and 16-year-olds on lunch recess.Teens visiting MTVs Web sites in China, Germany, India, Poland, and Latin America were given the chance to click on a banner ad that led them to a questionnaire about their exposure to cigarette ads and other marketing tools in their countries. Some 10,000 teens responded to the banner ads. In the past week, more than 62 percent of teenagers in these countries have been exposed to tobacco advertising in some form, the 17-year-old SWAT (Students Working against Tobacco) chairman told Reuters. The tobacco companies learned that marketing to teens and kids worked in this country, but since they cant 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 long as theyre 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 out? ts regularly meet teenagers going to rock concerts or discos in Budapest and hand them Marlboros.Those who accept a light o n the spot also receive Marlboro sunglasses. According to the American Lung Association Tobacco Policy Trend Alert, the tobacco industry is offering candy-? avored cigarettes in an attempt to continue to target teens. 1 Advertising and promotion of these products uses hip-hop imagery, attractive women, and other imagery to appeal to youth in similar ways that Joe Camel did a decade ago. Marketing efforts for candy-? avored cigarettes came after the Master Settlement Agreement prohibited tobacco companies from using cartoon characters to sell cigarettes.Researchers recently released the results of several surveys that showed that 20 percent of smokers ages 17 to 19 smoked ? avored cigarettes, while only 6 percent of smokers ages 17 to 20 did. In Russia, a U. S. cigarette company sponsors disco parties where thousands of young people dance to booming music. Admission is the purchase of one pack of cigarettes. At other cigarettesponsored parties, attractive women give cigarettes away f ree. In many countries, foreign cigarettes have a status image that also encourages smoking.A 26-year-old Chinese man says he switched from a domestic brand to Marlboro because You feel a higher social position when you smoke foreign cigarettes. Smoking is a sign of luxury in the Czech Republica as well as in Russia and other Eastern countries, says an executive of a Czech tobacco ? rm that has a joint venture with a U. S. company. If I can smoke Marlboro, then Im a well-to-do man. The global tobacco companies insist that they are not attempting to recruit new smokers. They say they are only trying to encourage smokers to switch to foreign brands. The same number of cigarettes are consumed whether American cigarettes or not, was the comment of one executive. Although cigarette companies deny they sell higher tar and nicotine cigarettes in the Third World, one British tobacco company does concede that some of its brands sold in developing countries contain more tar and nicotine than those sold in the United States and Europe. A recent study found three major U. S. brands with ? lters had 17 milligrams of tar in the United States, 22. 3 in Kenya, 29. 7 in Malaysia, and 31. 1 in South Africa. Another brand with ? ters had 19. 1 milligrams of tar in the United States, 28. 8 in South Africa, and 30. 9 in the Philippines. The ? rm says that Third World smokers are used to smoking their own locally made product, which might have several times more tar and nicotine. Thus, the ? rm leaves the tar- and nicotine-level decisions to its foreign subsidiaries, who tailor their products to local tastes. C. Everett Koop, the retired U. S. Surgeon General, was quoted in a recent news conference as saying, Companies claims that science cannot say with certainty that tobacco causes cancer were ? t-footed lies and that sending cigarettes to the Third World was the export of death, disease, and disability. An Oxford University epidemiologist has estimated that, because of increas ing tobacco consumption in Asia, the annual worldwide death toll from tobaccorelated illnesses will more than triple over the next two decades. Perhaps 100 million people died prematurely during the 20th century as a result of tobacco, making it the leading preventable cause of death and one of the top killers overall. According to the World Health Organization, ach year smoking causes 4 million deaths globally, and it expects the annual toll to rise to 10 million in 2030. GOVERNMENT INVOLVEMENT Third World governments often stand to pro? t from tobacco sales. Brazil collects 75 percent of the retail price of cigarettes in taxes, some $100 million a month. The Bulgarian state-owned tobacco company, Bulgartabac, contributes almost $30 million in taxes to the government annually. Bulgartabac is a major exporter of cigarettes to Russia, exporting 40,000 tons of cigarettes annually. Tobacco is Zimbabwes largest cash crop.One news report from a Zimbabwe newspaper reveals strong support f or cigarette companies. Western anti-tobacco lobbies demonstrate unbelievable hypocrisy, notes one editorial. It is relatively easy to sit in Washington or London and prattle on about the so-called evils of smoking, but they are far removed from the day-to-day grind of earning a living in the Third World. It goes on to comment that it doesnt dispute the fact that smoking is addictive or that it may cause diseases, but smoking does not necessarily lead to certain 1See From Joe Camel to Kauai KoladaThe Marketing of Candy-Flavored Cigarettes, http//lungusa. org. Part 6 Supplementary Material 350 million smokers, China has 50 million more cigarette buyers than the U. S. has people, according to Euromonitor. While smoking rates in developed countries have slowly declined, they have shot up dramatically in some developing counties where PMI is a major player. These include Pakistan (up 42 percent since 2001), Ukraine (up 36 percent), and Argentina (up 18 percent). death. Nor is it any mo re dangerous than other habits. Unfortunately, tobacco smoking has attracted the attention of a particularly sanctimonious, meddling sector of society. They would do better to keep their opinions to themselves. Generally, smoking is not a big concern of governments beset by debt, internal con? ict, drought, or famine. It is truly tragic, but the worse famine becomes, the more people smokejust as with war, when people who are worried want to smoke. In any case, says one representative of an international tobacco company, People in developing countries dont have a long enough life expectancy to worry about smoking-related problems.You cant turn to a guy who is going to die at age 40 and tell him that he might not live up to 2 years extra at age 70. As for promoting cigarettes in the Third World, If there is no ban on TV advertising, then you arent going to be an idiot and impose restrictions on yourself, says the representative, and likewise, if you get an order and you know that th eyve got money, no one is going to turn down the business. Cigarette companies ? gure Chinas self-interest will preserve its industry.Tobacco provides huge revenues for Beijing because all tobacco must be sold through the China National Tobacco Company monopoly. Duty on imported cigarettes is nearly 450 percent of their value. Consequently, tobacco is among the central governments biggest source of funding, accounting for more than $30 billion in income in 2005. China is also a major exporter of tobacco. ANTISMOKING PROMOTIONS Since the early 1990s, multinational tobacco companies have promoted youth smoking prevention programs as part of their Corporate Social Responsibility campaigns.The companies have partnered with third-party allies in Latin America, most notably nonpro? t educational organizations and education and health ministries to promote youth smoking prevention. Even though there is no evidence that these programs reduce smoking among youths, they have met the industry s goal of portraying the companies as concerned corporate citizens. In fact, a new study proves that youth smoking prevention ads created by the tobacco industry and aimed at parents actually increase the likelihood that teens will smoke.The study, Impact of Televised Tobacco Industry Smoking Prevention Advertising on Youth Smoking-Related Beliefs, Intentions and Behavior, published in the December 2006 issue of the American Journal of Public Health, sought to understand how the tobacco industry uses youth smoking prevention programs in Latin America. Tobacco industry documents, so-called social reports, media reports, and material provided by Latin American public health advocates were all analyzed. The study is the ? rst to examine the speci? c effect of tobacco company parent-focused advertising on youth.It found that ads that the industry claims are aimed at preventing youth from smoking actually provide no bene? t to youth. In fact, the ads that are created for parental audienc es but also are seen by teens are associated with stronger intentions by teens to smoke in the future. Brazil has the worlds strictest governmental laws against smoking, consisting of highly visible antismoking campaigns, severe controls on advertising, and very high tax rates on smoking products. Despite these obstacles, the number of smokers in Brazil continues to grow. In 2006, there were approximately 44 million smokers in the country, up from 38 million in 1997.Factors driving this trend include the low price of cigarettes, which are among the lowest in the world the easy access to tobacco products and the actions taken by the powerful tobacco companies to slow down antismoking legislation in Brazil. FOCUS ON DEVELOPING MARKETS Lawsuits, stringent legislation against advertising, laws restricting where people can smoke, and other antismoking efforts on the part of governments have caused tobacco companies to intensify their efforts in those markets where restrictions are fewer and governments more friendly.As part of a strategy to increase its sales in the developing world, Philip Morris International (PMI) was spun off from Philip Morris USA in 2008 to escape the threat of litigation and government regulation in the United States. The move frees the tobacco giants international operations of the legal and public-relations headaches in the United States that have hindered its growth. Its practices are no longer constrained by American public opinion, paving the way for broad product experimentation. A new product, Marlboro Intense, is likely to be part of an aggressive blitz of new smoking products PMI will roll out around the globe.The Marlboro Intense cigarette has been shrunk down by about a half inch and offers smokers seven potent puffs apiece, versus the average of eight or so milder draws. The idea behind Intense is to appeal to customers who, due to indoor smoking bans, want to dash outside for a quick nicotine hit but dont always ? nish a full-si ze cigarette. The CEO of PMI says there are possibly 50 markets that are interested in deploying Marlboro Intense. Other product innovations include sweet-smelling cigarettes that contain tobacco, cloves and ? voringwith twice the tar and nicotine levels of a conventional U. S. cigarette. Marlboro Mix 9, a high-nicotine, high-tar cigarette launched in Indonesia in 2007, and a clove-infused Mix 9 will be exported to other southeast Asian markets next. Another iteration of the Marlboro brand, the Marlboro Filter Plus, is being sold in South Korea, Russia, Kazakhstan, and Ukraine. It touts a special ? lter made of carbon, cellulose acetate, and a tobacco plug that the company claims lowers the tar level while giving smokers a smoother taste.One of PMIs immediate goals is to harness the huge potential of Chinas smoking population, as well as some of that countrys own brands, which it has agreed to market worldwide. With some ASSESSING THE ETHICS OF STRATEGIC DECISIONS Ethical decision making is not a simplistic right or wrong determination. Ethical ground rules are complex, tough to sort out and to prioritize, tough to articulate, and tough to use. The complexity of ethical decisions is compounded in the international setting, which comprises different cultures, different perspectives of right and wrong, different legal requirements, and different goals.Clearly, when U. S. companies conduct business in an international setting, the ground rules become further complicated by the values, customs, traditions, ethics, and goals of the host countries, which each have developed their own ground rules for conducting business. Three prominent American ethicists have developed a framework to view the ethical implications of strategic decisions by American Cases 4 Developing Global Marketing Strategies ? rms. They identify three ethical principles that can guide American managers in assessing the ethical implications of their decisions and the degree to which these decisio ns re? ct these ethical principles or ground rules. They suggest asking, Is the corporate strategy acceptable according to the following ethical ground rules? These questions can help uncover the ethical ground rules embedded in the tobacco consumption situation described in this case. These questions lead to an ethical analysis of the degree to which this strategy is bene? cial or harmful to the parties and, ultimately, whether it is a right or wrong strategy, or whether the consequences of this strategy are ethical or socially responsible for the parties involved.These ideas are incorporated in the decision tree in Exhibit 1. Principles Utilitarian ethics (Bentham, Smith) Question Does the corporate strategy optimize the common good or bene? ts of all constituencies? Does the corporate strategy respect the rights of the individuals involved? Does the corporate strategy respect the canons of justice or fairness to all parties? Rights of the parties (Kant, Locke) Justice or fairnes s (Aristotle, Rawls) Exhibit 1 A Decision Tree for Incorporating Ethical and Social Responsibility Issues into Multinational Business DecisionsDoes the decision efficiently optimize the common good or benefits of THE BUSINESS FIRM? Stockholders Management Profits Growth Other SOCIETY? Culture Order Justice The good life Other THE ECONOMY? THE INDIVIDUAL? Economic growth Freedom Allocation of resources Health and welfare Production and distribution Self-realization of goods and services Human dignity Other Opportunity Other YES NO YES Are there critical factors that justify suboptimizing these goals and satisfactions? NO Does the decision respect the rights of individuals involved? YES NOReject Decision YES Are there critical factors that justify the abrogation of a right? NO Does the corporate decision respect the canons of justice or fairness to all parties involved? YES YES NO Reject Decision Are there critical factors that justify the violation of a canon of justice? NO Accept De cision Reject Decision Part 6 Supplementary Material See www. who. int, the World Health Organizations Web site, for more details regarding the current tobacco controversy. See also www. getswat. com for a worldwide student initiative against smoking.Laczniak and Naor discuss the complexity of international ethics or, more precisely, the ethical assumptions that underlie strategic decisions for multinationals. 2 They suggest that multinationals can develop consistency in their policies by using federal law as a baseline for appropriate behavior as well as respect for the host countrys general value structure. They conclude with four recommendations for multinationals 1. Expand codes of ethics to be worldwide in scope. 2. Expressly consider ethical issues when developing worldwide corporate strategies. . If the ? rm encounters major ethical dilemmas, consider withdrawal from the problem market. 4. Develop periodic ethics-impact statements, including impacts on host parties. 2 QUESTIO NS 1. Use the model in Exhibit 1 as a guide and assess the ethical and social responsibility implications of the situations described. 2. Can you recommend alternative strategies or solutions to the dilemmas confronting the tobacco companies? To governments? What is the price of ethical behavior? 3. Should the U. S. government support U. S. tobacco company interests abroad? . Should a company be forced to stop marketing a product that is not illegal, such as cigarettes? Gene R. Laczniak and Jacob Naor, Global Ethics Wrestling with the Corporate Conscience, Business, JulySeptember 1985. Sources Smoke Over the Horizon U. S. Gains in Tobacco Control Are Being Offset Internationally, The Washington Post, July 23, 2006 Death and Taxes England Has Become the Latest in a Series of Countries to Vote for Restrictions on Smoking in Public Places, Financial Management (UK), April 1, 2006 Trick or Treat?Tobacco Industry Prevention Ads Dont Help Curb Youth Smoking, PR Newswire, October 31, 2006 China Exclusive China, With One Third of Worlds Smokers, Promises a Non-Smoking Olympics, Xinhua News Agency, May 29, 2006 Tobacco Consumption and Motives for Use in Mexican University Students, Adolescence, June 22, 2006 A Change in the Air Smoking Bans Gain Momentum Worldwide, Environmental Health Perspectives, August 1, 2007 Adams Wont Kick the BAT Habit The Head of British American Tobacco Is Stoical About the Looming Ban on Smoking in Public Spaces BAT will Adapt, The Sunday Telegraph London, June 10, 2007 Heart Disease, Stroke Plague Third World, Associated Press (Online), April 4, 2006 Get a Detailed Picture of the Tobacco Industry in Brazil, M2 Press Wire, December 20, 2007 Vanessa OConnell, Philip Morris Readies Global Tobacco Blitz Division Spin-off Enables Aggressive Product Push High-Tar Smokes in Asia, The Wall Street Journal, January 29, 2008 The Global Tobacco Threat, The New York Times, February 19, 2008 How to Save a Billion Lives Smoking, The Economist (London,) Fe bruary 9, 2008 Whether Here or There, Cigarettes Still Kill People, The Wall Street Journal, February 4, 2008.