GROUP 5:

WHAT IS BUSINESS ETHICS? Ethics describes the moral content of behavior. Business Ethics the study of how business people behave when facing a situation with moral consequences. Sales management ethics the specific component of business ethics that deals with ethically managing the sales function.

SALESPEOPLE ARE BOUNDARY SPANNERS Boundary spanner someone who performs his or her job in the boundary between a company and a customer. Salespeople represent the company to the customer. Salespeople represent the customer to the company.

Sales managers have a special role in maintaining an ethical work and sales environment. To make sure morally corrupt individuals are not employed by the firm and To put a check on any system providing an incentive for immoral behavior. Responsible for the way the firms sales force treats its customers.

Customer Vulnerability Ignorance a lack of some vital knowledge, often product knowledge, needed to participate in a fair exchange. Salesperson Advantage: o Salesperson has superior technological knowledge. Customer Disadvantage: o Customer is technologically challenged and salesperson.

cannot

understand

Naivet a lack of experience or the ability to conduct a transaction or negotiate terms of a fair deal. Salesperson Advantage: o Salesperson allows room for negotiation in setting prices Customer Disadvantage: o Customer doesnt understand the negotiation process.

Powerlessness a lack of either competition within a marketplace or sufficient assets with which to be persuasive. Salesperson Advantage: o Salesperson works for an exclusive supplier to the customer who is under contractual obligation to purchase from the supplier. Customer Disadvantage: o Customer represents a small retail company with few assets and little access to other markets.

APPLYING PROFESSIONAL SALES CODES OF ETHICS Codes of Ethics express the values of a firm by specifying, in writing, specific behaviors that are consistent or inconsistent with those values. - Its effectivity is often debated and its existence alone does not guarantee a more ethical environment. - Must embody values truly epitomized by top management. Types of Codes of Ethics: 1.) 2.) 3.) 4.) Company codes Professional Codes Business Association Codes Advisory Group Codes

Prohibited employee behaviors: Bribes, gifts, kickbacks Conflicts of Interest Violation of Laws in general Use of insider information Violations of secrecy agreements Falsification of sales accounts Moonlighting Violation of antitrust laws Fraud and deception Illegal payments abroad Justifying the means by the intended end

Do Codes of Ethics affect behavior? YES!!!

ETHICAL PHILOSOPHIES AND MORAL JUDGMENTS Moral Philosophy deals with the systematic ways that individuals recognize and resolve decisions having moral content. Idealism Ideals set of principles by which individuals determine morality. Golden rule is considered a widely-held moral principle or moral absolute Moral absolute a rule that should always be applied with no exceptions or excuses. But a sales manager may also develop other rules. Strict idealism is associated with universal standards Sometimes called deontological process

Relativism As a moral philosophy, is a process by which individuals reach moral decisions based more on the actions they perceive to be acceptable given a particular situation. Its all relative, It depends Usually rejects moral absolutes and imperatives Sometimes called situational ethics

Teleology Teleology is a philosophy based on the consequences of the behavior. Based on the argument that the good that results is more important than the harm caused. The end justifies the means

Moral Judgments Ethical Dilemma a situation with alternate courses of action, each having different moral implications. Moral Judgment a persons evaluation of the situation from a moral perspective.

Three Criteria: 1.) Moral equity the inherent fairness or justice in a situation. 2.) Acceptability describes how culturally or socially acceptable we perceive an action can be. 3.) Contractualism the extent to which an act is consistent with stated or implied contracts and/or laws.

Are Salespeople more unethical than anyone else? Researches show that: Sales managers and salespeople are not more likely to engage in unethical practices than are people with other marketing and management jobs. Age is positively related to ethical behavior among sales managers older sales managers tend to make more ethical decisions. Relatively high levels of relativism are associated with less ethical decision making among sales managers. Relatively high levels of idealism are associated with a lower likelihood of hiring a controversial job candidate.

Dealing with unethical behavior Sales managers should not encourage or tolerate sales behaviors inconsistent with professional sales or moral standards of the firm. An effective sales manager will strive to discipline all salespeople with the same standards.

Creating an ethical work climate Ethical work climate is specific aspects of the organizational climate. 4 unique aspects: 1. Policies and Rules-govern dealing and marketing conduct within the firm when the sale managers and salespeople internalize. 2. Trust and responsibility-defines how far people are trusted behave in a responsible way are held personally responsible for their actions and trust is increased when salespeople allowed to set their own schedules and are not constantly being monitored. 3. Peer behavior-is the extent to which employees view coworker as having high moral standards. 4. Bottom line sales emphasis-is the extent to which employees feel pressured to prioritize increased sale profits, margins or other financial return all other concerns.

Managing the Ethical Climate Sales managers should make sure employees are aware of rules and policies. Based on employees actions, reward and reprimand them with no favoritism or bias. Employees should also be aware of the extent to which they foster a bottom-line orientation. Promoting an ethical climate is the responsibility of management at all levels of the organization.

Legal considerations in the Sales Environment Federal Regulation Two major categories of U.S. legislation regulating business: Laws protecting companies from each other Laws and policies protecting consumers and society from unfair business practices.

It deals with issues including price discrimination, collusion, price fixing, exclusive dealing, restraint of trade, reciprocity, tie-in sales, unordered goods, orders and terms of sale, business description, product description, secret rebates, customer coercion, disparaging competitors products and services, and business defamation. Price Discrimination The Clayton act prohibits a seller from discriminating on price or terms of sale among different customers when the discrimination has a harmful effect on competition. This practice is known as price discrimination. Price differences or different terms of sale are allowed under two conditions: 1. The price differential is given in good faith to meet a price offered by competitors. 2. The price differential is based upon cost savings reflecting a difference in the cost of manufacturer, sale, or delivery resulting from the differing method or quantities in which products are sold or delivered.

Collusion When the competitors conspire to set prices, agree to divide territories on a noncompetitive basis, or join together to act detriment of another competitor, they are practicing illegal collusion.

Price Fixing Competitors who conspire to set or maintain uniform prices and profit margins are fixing prices. Even informally exchanging price information with competitors or discussing pricing policies at trade association meeting has been found illegal by the courts. Exclusive Dealing Agreements in which a manufacturer or wholesaler grants one dealer exclusive rights to sell a product in a certain trading area or insist that the dealer not carry competing lines are illegal under the Clayton act. Restraint of Trade Under the Sherman and Clayton acts, competitors colluding to divide a market into noncompetitive territories or to restrict competition in a market are in restraint of trade. Nor can dealers be required to retrain from selling competitors products as a condition of receiving the right to sell the manufacturers product. Reciprocity Selecting only suppliers who will also purchase from the buyer. Tie in Sales Purchases cannot be forced to buy an unwanted item or items in return for being allowed to purchase a product in heavy demand. Unordered goods Section 5 of the FTC Act prohibits companies from shipping unordered goods or shipping larger amounts than ordered, hoping the buyer will pay for them. Orders and term of sale The FTC Act makes it illegal to sell substitute goods different from those ordered, intentionally misrepresent delivery dates, fail to actually fill an order, and not fill an order in a reasonable time. Terms of sale or condition of sales offers cannot be misinterpreted. Key terms of sale include of sale warranties and guarantees, the ability of the buyer to cancel a contract or obtain a refund, and important facts in a credit or financing transactions.

Business Descriptions Salespeople must never misinterpret the companys financial strength, length of time in business, reputation, or facts concerning its plant, equipment or facilities. Product Description Salespeople must not misinterpret the method by which a product is produced. Furthermore, no statements can be legally made about proven claims unless scientific or empirical evidence has been obtained to establish their truth. Costumer coercion Coercing a costumer into a sale can be illegal when sales practices places undue pressure, intimidation, or fear on the buyer. This behavior includes practices such as badgering a costumer with repeated sales calls. Business Defamation Defamation of businesses occurs on the Internet every single day, and it does so with an increasingly alarming frequency. Businesses have to be careful to guard their reputations against this sort of anonymous online graffiti. It may seem like the resulting damage is not all that important, but it can drive paying customers away from a company that otherwise would have thrived on them. Business Defamation is here to inform readers about how to avoid having their businesses defamed, and how to deal with business defamation after the fact.

1. Business slander when an unfair and untrue oral statement of is made up the competitor. The statement becomes an actionable when it is communicated to a third party and can be interpreted as a damaging the competitors reputation or the personal reputation of an individual in that business.

2. Business libel when an unfair and untrue statements about the competitor is made in writing (usually a letter, sales literatures, advertisement or a company brochure.

3. Product disparagement false or deceptive comparison or distorted claims are made concerning a competitors product, services, or property.

4. Unfair competition injury to competitors can result from the false advertising of ones own product, misrepresentation of the qualities or characteristics of the product or related unfair or deceptive trade practices.

International regulation of sales International sellers must cope with three different sets of laws restricting their operators. First US laws sometimes forbid U.S companies to trade with foreign countries Personal selling In the language of sales and marketing, "personal selling" singles out those situations in which a real human being is trying to sell something to another face-to-face. One might well ask what other type of genuine selling there is. The answer is that personal selling has a functional equivalent. The modern differentiation between "personal" and other selling arises from the fact that a very substantial volume of ordinary purchasing of food, textiles, household goods, entertainment, travel, subscriptions, fuel, books, etc., takes place without the presence of a live facilitator. The only human contact is usually the check-out clerk; and corporations are laboring hard to replace even this humble functionary by machines that read barcodes and recognize credit cards. In the vast majority of these situations whatever persuasion has been applied to the shopper has been delivered by disembodied images on television, radio, in print, by coupons, by signage, and by packaging. Thus "impersonal selling" is by advertising, sales promotion and public relations.

State and Local Regulations Uniform Commercial Code A basic set of guidelines adopted by most states that set forth the rules of contracts and the law pertaining to sales Regulates performance of goods, sellers warranties, and the maximum allowable, rates of interest and carrying charges.

Green River Ordinances Originally passed in Green river, Wyoming in 1993. Requires nonresidents to acquire to obtain a license from city authorities to sell goods or services direct to consumers in that vicinity.

Cooling-Off Rules Closely related to Green River Ordinances Require door-to-door salespeople to give written notice to customers placing orders of $25 or more that they can cancel their purchase within 3 days.

PRACTICING GOOD ETHICS AMONG THE SALES FORCE Legal actions may be unethical and illegal actions may be ethical. Ethical Stress: Ambiguity when the sales manager simply doesnt know what to do in a given situation. Conflict when the sales manager is torn between multiple courses of action, each with different moral implications for the people involved.

Understanding Ethics If the firm has strong ethical values, then ethics training is essential. Awareness is an essential part of morally virtuous behavior. Ethical Maturity is reached when salespeople place the moral treatment of others ahead of short-term personal gain.

Leading by Example Salespeople should realize that the people they supervise look to them in forming expectations of their own moral behavior. Sales managers must thoroughly know and practice the company code of ethics (assuming one exists) if they expect salespeople to follow it.