Business Ethics vs Profit Motives

Chapter One: Introduction

1.1 Background Information

The subject of ethics has attained great attention in today’s business research (McMurrian and Matulich 2016). Ethics refer to a set of rules, principles, and codes of conduct that govern an individual or a group (Crane and Metten 2004). In the business context, ethics can be defined as a set of standards, rules, principles, or codes offering guidelines for truthfulness and morally right behaviour in different situations (Abend 2016). Over the years, international organisations have sought to create awareness on ethical behaviour and suggest guidelines for better practices by organisations. For example, in 2012, the European Commission published a special Eurobarometer 374, which revealed that corruption was an issue of major concern in both private and public organisations (Lashley, 2016). In order to curb corruption, the EU invited companies to adopt the international corporate social responsibility (CSR) Guidelines. Despite such measures, it is widely held that businesses maximise their profits at any cost to the consumer, the environment, and to the community (Barry 2016). In agreement, McMurrian and Matulich (2016) state that mistrust in the role of businesses in the society remains in many countries but mainly in Europe. Similarly, Crane et al. (2019) hold that businesses are driven solely by profit motives whereby they tend to relax ethical standards to enhance their profitability. Ethics in marketing and advertising can be seen as a set of well-defined rules that govern how an organisation communicates with its customers (Lashley, 2016). In the advertising industry, an ethical ad can be defined as one that does not lie, does not make false claims and remains in the limit of decency (Pittz, Steiner and Pennington 2019). Gapper (2019) argues that in the current business environment, adverts are exaggerated and advertisers do not follow ethical norms with an aim of increasing organisational profitability. In the same vein, Madhani (2016) postulate that advertisers are nowadays more interested in increasing their sales and increasing the demand for their products through presenting colourful, well-decorated, and puffed adverts. West (2018) writes that while most organisations claim their products are the most effective, beneficial, and the best, this information is not always true, misleads customers, and is unethical. Such practices denote the availability of unethical business practices in the current business world.

Sayilir and Victor, (2019) write that unethical advertising is the most unethical business practice, particularly that related to internet and mass media advertising and selling. While many organisations engage in unethical advertising with an attempt of increasing their profitability, Carrigan and Bosangit (2016) state that ethical advertising can increase organisational profit in that customers develop positive expectations and beliefs of the organisation’s ethicality and righteousness. Similarly, He et al. (2016) argue that ethical advertising is positively associated to profitability since consumers have increased trust in the organisation and its products thus tend to prefer buying the products or services of that particular organisation. Analogously, Laczniak and Murphy, (2019) hold that trust and credibility are important factors organisational performance thus organisations should always strive to be ethical in their marketing practices. Therefore, it is evident that customers often have a positive response to ethical adverting, which ultimately raises an organisation’s profit margin. In the contemporary business environment, Mansouri (2016) argues that the most profitable organisations meet legal, economic, ethical and discretionary expectations at all times. In the same vein, West (2018) states that achieving profits is necessary for any company’s survival but being ethical builds to the credibility of a company which is even more important. In light of this information, this study seeks to establish whether businesses making profits in the current hypercompetitive business environment are always ethical in their advertising. The study will evaluate the ethical stand of different organisations and how it has affected their profit margin. The overall ethicality of each organisation will be assessed as well as the advertising ethics.

1.2 Problem Statement

It is quite evident that every business exists to make profits while all advertising efforts are aimed at increasing profits thus it can be concluded that advertising and profits are intimately related. In the compatibility equation, the biggest question remains what is the role of business ethics in either advertising or profits. Barry (2016) argues that ethics is a set of moral rules that serve to inhibit malicious pursuit by businesses thus ethics has a significant effect on profits as well as on advertising since the latter is intended to boost the former. Some organisations believe that ethics has an adverse effect on profit thus tend to use unethical advertising to raise their profit margins (Trevino and Nelson 2016). On the other hand, some organisations believe that ethics has a positive effect on profit thus always tend to be ethical in their marketing practices in order to increase their profitability (Mansouri 2016). In light of the above information, the problem that prompts this study is the perception that ethics is adversely correlated to profits. The study seeks to investigate whether ethical advertising is positively or negatively associated with profits and business growth. West (2018) argues that ethics can be used as a management tool in increasing productivity of an organisation and ultimately profits. Similarly, Mansouri (2016) argues that profits are the reward to an organisation that ethically continues to provide true value to its customers and behave in a socially responsible way. While at times it appears like relaxing ethical standards enhances profitability and rigorously enforcing ethical standards attenuates the profits of an organisation, Trevino and Nelson (2016) assert that such perceptions are faulty, misleading and deceptive to organisations.

1.3 Aim and Objectives

The overall aim of this study is to establish whether business ethics, advertising and profits and compatible in the current hypercompetitive business environment. To attain this aim, the following objectives will guide the study:

To understand business ethics and ethical practices in advertising

To establish how ethical advertising affects consumer purchase intentions

To explore how ethical advertising affects consumers’ perception of an organisation and its products

To investigate the effect of ethical advertising on organisational profitability

1.4 Justification of the Study

According to Mansouri (2016), the social responsibility of any business is to increase its profits, which implies that businesses are free to use their resources and engage in different activities as long as they continue realising profits. Many businesses have relied on this argument and as a result engage in unethical advertising in order to increase their sales an ultimately their profits. This study is therefore worth conducting in that it challenges this argument and shows that ethical business practices such as ethical adverting has a positive relationship with profit. As such, the study contains worthwhile knowledge that will guide business practitioners into ethical advertising that increases their profit.

1.5 Significance of the Study

This study makes worthwhile contribution to ethical advertising literature as it expounds on the role of ethical advertising on firm profitability. The study is important to researchers in the field of marketing and those in the field of corporate social responsibility as it cuts between the two fields by establishing the relationship between ethical advertising and organisational profitability. The study is also relevant to future researchers as it offers a basis for investigation of contradictory arguments.

1.6 Scope of the Study

The scope of this study focuses specifically on investigating the extent to which business ethics, profits, and advertising are compatible in the current hypercompetitive business environment. the study hypothesises that ethical advertising is positively correlated to profits and refutes the argument that relaxing ethical standards in relation to advertising promotes business profitability. To support the argument that ethical advertising enhances profitability, the study analyses five companies based in the United Kingdom.

Chapter Two: Literature Review

2.1 Business Ethics

Robin (2009) says that the area of ethics in business has many astonishing perceptibility due to misinterpretations of the concepts of principles, values and morality. This individual claims that understanding the importance of ethics in business and its aspects like ethical codes, ethical compass, ethical teaching, ethical dilemmas and ethical training can aid firms to improve the relationship between the firms and their stakeholders to avoid practices which are prejudicial. The researcher says that ethics in business has been understood and seen as a link between ethics and the business’ mission, that is, the way the organisation’s goals align with their ethical mission or codes, as well as how it affects business practices. According to Robin (2009), there is a need for businesses to make their business practices more ethical and streamline how stakeholders interacts with the company in an ethical way. This point is supported by Kaptein (2017) who states that one equally crucial aspect in businesses is to remain ethical all the time in all their operations. Wines (2008) writes that business ethics is seen as opinions and values which should govern how a business behaves. The researcher adds that training relating to business ethics should help in addressing the traditional subjects of ethical social responsibilities and dilemmas and the emerging moral psychology, business interactions and behaviour. Wines (2008) posits that it is not possible to talk about business ethics and leave out how to address the key areas of ethical verdicts, social responsibility and moral psychology. According to Gibbs, Llkan and Pouloukas (2007), marketing and advertising in the modern world is a big business and many sectors like the magazines, newspapers and TV industries rely on the influx of money it gets that help sustain its survival. Therefore, advertisers use all sorts of tricks to get the consumers’ attention. As highlighted by Githui (2013), the modern advertisers have become savvy. Additionally, the communication medium is everywhere and is all-encompassing. According to Kavanaugh (2003), marketing is used to legitimise matters, as well as, confer status on items or issues which are important. Based on Kavanaugh (2003), the influence of marketing resonates in almost all aspects of people, for instance, in their behaviour, values, beliefs, decisions, actions and thoughts. Additionally, the researcher claims that marketing is a controversial subject because of the numerous issues it can cause in the community. According to Borgerson and Schroeder (2002), marketing can encourage and celebrate consumption and materialism, stereotype and can drive people to purchase unfulfilling or meaningless items. It can also provide a platform for business to take advantage of young people or children and manipulate people’s behaviour thus contributing the fall of a society’s system.

According to Schivinski and Dabrowski (2016), communication messages in marketing and advertising have led to many ethical issues which are debatable because of public opinion that marketing immensely affect how people see the world and themselves, including important behaviours and actions. Furthermore, moral matters in advertising and marketing are crucial because marketing can help predict, identify and satisfy consumers’ needs profitably.

2.2 Ethical Dimensions in Marketing and Advertising

Lanzel et al. (2017) says that in their day-to-day lives, individuals make decisions in circumstances they experience. These people decide on things that are wrong or right but are often faced with the controversy or debate around what should be considered immoral or moral, unethical or ethical. This researcher says that based on each person’s perception, the correct decision or choice is made from their own perceptions. This author says that morals can this be defined as people’s beliefs which they hold against either the wrong or right things. Therefore, this researcher says that morals direct individuals in the process of decision-making, both in professional and personal lives. On the other hand, the author says that ethics include the principles which guide both organisations and individuals. According to Lanzel et al. (2017), ethics help establish boundaries concerning whether or not an action is acceptable, since such actions or behaviours are liked to moral feelings regarding wrong and right. Kemp (2017) says that business ethics in the current world comprise of life values which a person has learned since they were born. This author says that the values used by business people to make critical decisions are those which have been learned through religious and educational institutions and through family. According to Kemp (2017), ethical values consist of specific situations and are time oriented. Nonetheless, everybody is require an ethical foundation or base which can guide them to adopt ethical business or personal behaviour. These claims are supported by Abbas (2018) who says that ethical considerations must be integrated in all decisions of marketing communication. This author says that promotions and advertising are fields where low ethical judgments or standards can cause actions which are damaging both to the organisation and to the entire society.

2.3 Stakeholder Satisfaction

Research by van Niekerk and Getz (2019) shows that stakeholder theory is a theory of contingency that emphasises the responsibility of firms in establishing and maintaining a balance of interests of all stakeholders and benefiting different stakeholder groups. These researchers say that an important first step in using the stakeholder theory include identifying and classifying relevant stakeholders into different groups. The authors say that there can be conflict between the function of marketing in an organisation and different stakeholder groups, the firm’s finance function, customers and the government. According to Niekerk and Getz (2019), the finance and marketing departments in an organisation are usually set to work in opposition where marketers advocate for the interests of the customers while the finance departments serves by protecting the interests of shareholders. According to Othman and Hafez (2019), the government also has a responsibility in the marketing sector as it develops antitrust legislation, regulates and stops fraudulent practices in marketing, deceptive marketing especially of harmful goods. It also regulates how medical products are advertised. Othman and Hafez (2019) says that another important group of stakeholders who are at the core of organisational operations are customers because high degrees of their satisfaction often lead to increased profits and revenue. Therefore, the researcher suggests that inclusion of ethics or morality in the theory of stakeholder offers basic principles or guidelines on how firms can solve conflicts as well as how they can optimise and take advantage of mutual benefits for the stakeholders and for the companies.

2.4 The Harm that is caused by Marketing and Advertising

According to Udu and Florence (2016), advertising or marketing can betray its intentions as a reliable information source by withholding or misrepresenting important facts about a product or service. As stated by the researcher, brand-related marketing practices can cause serious issues in many countries as usually, there are many products with negligible differences, items which belong to different brands. These authors say that advertising can try to make people to behave or act on their irrational motives like sex appeal, fashion, status and brand loyalty rather than showing these customers the differences in their product’s prices and qualities to allow them make rational decisions or choices. Yuan et al. (2019) says that the current stiff competition to win over or attract many customers or a larger audience can tempt communicators to set apart high moral standards and engage in moral squalor and superficiality. These communicators can also be tempted to set aside or ignore social and educational needs of some market segments like the poor, the old or the younger audiences who do not align with some demographic patterns such as education, age, income and habits of consuming and buying. Women have also been and continue to be exploited by advertisers (Alam, Aliyu and Shahriar, 2019). This researcher says that the role of females has been undervalued, giving them the role of mothers or wives. Furthermore, women have been ridiculed in professional and business life. Advertisers have often deliberately appealed to motives like status seeking, lust and envy. The researcher says that some communicators or marketers have also consciously titillated and shocked by using content that are pornographic, perverse and morbid in nature. They have made violence and pornography accessible to many people, including children and young people thus corrupting the ethical and moral values in both developing and the developed nations. According to Kotler and Keller (2016), the concept of holistic marketing is based on the creation and design, as well as the implementation of programs of marketing, processes and events or activities which recognise their interdependencies and breadth. These researchers say that holistic marketing or advertising acknowledges that all things are important in marketing and an integrated and broad perspective must be applied. According to Kottler Keller (2016), holistic advertising reconciles and recognises the complexities and scope of advertising activities. These authors say that performance advertising or marketing needs organisations to understand both nonfinancial and financial returns of advertising programs and activities to the society and business. They say that top advertisers currently look more past sales revenues to evaluate marketing scorecards. They also do so to interpret the levels of customer satisfaction, rates of customer loss, market share and the levels of product quality. These researchers also consider social responsibility of marketing including legal, social, ethical, environmental and social impacts of the programs and activities of marketing.

2.5 The Society and Marketing

According to Prahalad (2010), the field of marketing receives many contributions linked to the nexus between the society (economic development and growth) and the discipline of marketing. The authors say that it should consider the economy as an area for dealing with those lowest in the pyramid and should try to increase the distribution of wealth and its capacity to generate wealth. Prahalad (2010) says that few wealthy people are usually located at the top where many opportunities generate huge amounts of income while billions of people are found lowest in the pyramid earning less income as compared to the rich individuals. According to Kaufmann et al. (2009), the number of commentary in the literature of marketing, which specifically looks at the link between social responsibility and marketing ethics are few. According to Kaufmann et al. (2009), on marketing, ethics need that an individual or an organisation should behave according to the well thought-out regulations of morality while organisations should be socially responsible concerning their social contracts between the society and the business it operates. Based on this claim, marketing is considered by the authors as more function-specific or micro while social responsibility is more about the impact of the business on the society. Ndubisi et al. (2016) says that marketing ethics is associated with Kolberg’s (1984) phases of moral development because it might impact the society. Maignan and Ferrell (2004) also talked about marketing ethics with regard to corporate social responsibility (CSR). They claim that ethical marketing understandably pays more attention on two principal stakeholder groups including channel members and customers. According to Maignan and Ferrell (2004), CSR marketing is an element of social responsibility the same way that marketing ethics is an aspect of business ethics. These authors developed the idea of responsiveness among stakeholders. They say that stakeholder responsiveness is the main denominator of CSR and marketing ethics. According to the authors, stakeholders are usually the immediate area of focus for corporate social responsibility in advertising. Many researchers have conducted work with the aim of better understanding and establishing the field of social responsibility in the activities of marketing for instance (Murphy and Schlegelmilch, 2013). These researches highlight that ethical activities done in organisations, particularly those impacting consumers are found to be a single aspect of the main CSR oriented marketing. The remaining two dimensions are linked to impacts on the physical environment and on the society with regard to making marketing decisions. According to Murphy and Schlegelmilch (2013), social responsibility in marketing is about managing the concerns of stakeholders about irresponsible and responsible acts.

According to Vaaland, Heide and Grønhaug (2008), marketing that is socially responsible is the one which uses responsibility as an important specification in the process of decision making on which marketing strategies that are beneficial to both stakeholders, consumers and the society should be adopted. According to these researchers, a marketing professional or practitioner should not do harm knowingly. Instead, the marketing practitioners should foster trust in the system and should totally avoid deception. The authors believe that these norms or measures are fundamental or important precepts in moral philosophy with distinct roots in ethical theory. More importantly, there is a more complex norm that requires marketers to embrace about six values when conducting different marketing activities (Sharma, 2018). These values include citizenship, transparency, respect, fairness, responsibility and honesty. According to Sharma (2018), it is this norm that calls marketers to strictly follow some specific important business virtues, in which the link between CSR and marketing ethics is evident. With regard to such virtues, marketers are required to be socially responsible and goes past or beyond the law when considering a firm’s societal responsibility when making marketing decisions. Therefore, ethical marketers are asked to embrace actions which centre on social responsibility. In other words, advertisers must acknowledge their social obligation to different stakeholders. They should also think of environmental stewardship in the processes of decision-making. Further, marketers should treat all people and their competitors in the same way they would want to be treated. They should also carry out activities which do not harm or interfere with the ecology of the environment. Lastly, Plewnia and Guenther (2017) says that businesses should give back to their society by conducting charitable donations and through volunteerism.

2.6 The Link between Business Ethics and Profitability

According to Bowie (1998), ethics can be looked at as a constraint on business profitability. This point of view show that profit and ethics are related inversely. There are occasions when conducting business in an ethical manner results in reduced profit for businesses. However, the researcher claims that there is also a positive side to business ethics where a company’s ethical activities and behaviours and its bottom line are correlated positively. Bowie (1998) says that a good ethical reputation for organisations can make it more profitable by lowering business transactions costs, establishing a foundation of stakeholder trust, creating a successful internal environment teamwork, as well as maintaining a strong social capital which portrays a company’s image in the market-place. Ferrell (2004) says that some managers look at business ethics programs as being very expensive endeavours which only reward the society. However, instances from community businesses suggest that firms which are seen as being ethical by their stakeholders, that is, the public, suppliers, employees and customers, often enjoy various competitive benefits. The advantages are such as higher efficiency levels in operations, increased employee loyalty and commitment, higher perceived levels of quality in their products, increased customer retention and loyalty, and improved financial performance. A study by Donaldson (2003) found a positive relationship between profitability and corporate ethics. Similar findings were found by Allouche and Laroche (2005), who then concluded that there is a positive correlation and impact of corporate social responsibility or CSR on the organisations’ financial performance. According to Heskett et al. (1997), firms like the American Express, Ritz-Carlton Hotels and Southwest Airlines are the market leaders in the respective sectors because they manage their service-profit chain and maintain ethical behaviours. These researchers discovered a robust correlation between market-place and internal variables including profit and customer loyalty, customer loyalty and employee loyalty, and customer satisfaction and employee satisfaction. With the help of a service-profit chain framework, developed to help explain the link between customers and employees within the service environment, the authors claim that skilled workers that are satisfied with their duties are often loyal to their companies and are highly productive concerning quality service delivery to clients. Therefore, this high service level make customers to develop positive attitudes to the business shown through increased customer satisfaction. Furthermore, increased customer satisfaction is shown through high customer loyalty levels, whereas the increased loyalty leads to referrals and repeat purchases. As a result, the business experiences stable and long-term profitability and revenue growth. LeClair, Ferrell and Fraedrich (1998) claim that highly satisfied clients show high loyalty because they see value in in the organisation’s products, and as such, make the firm more profitable through increased and repeat purchases. Additionally, the loyal customers do not cost a lot to market to. Therefore, businesses with more loyal and satisfied customers spend less finance in expensive marketing. Moreover, the authors claim that salespeople are not needed to contact the loyal customers on a frequent basis to maintain a profitable and positive relationship. These researchers say that businesses that show ethical behaviours are the ones which have the capacity to deliver high customer value levels by maintaining quality relational activities that are based on acceptable or ethical behaviours. As a result, these businesses can generate higher revenue and sustained growth over longer periods while experiencing less expenses in marketing, leading to quarterly growth, stable and long-term profits.

Leclair, Ferrell and Fraedrich (1998) highlighted various company examples to show the benefits of maintaining ethical business behaviours. They claim that these companies have been highly successful because they have invested their resources, people and finances, in creating a culture integrity and ethics. One of the firms is Hershey Foods, a leading confectioner north of the US with sales hitting the ceiling at 4 billion US dollars due to their ethical values which are the basis of their corporate culture. Hershey’s business philosophy is based on fairness, honesty, respect and integrity, which are put before the idea of adequate profits or return on their investment. The other company mentioned by these authors is Waste Management, Inc. This company, which started as a small garbage collection service became a multibillion firm by developing an ethical code of behaviour and starting training programs to ensure that all employees understood what was expected of hem and how to face ethical issues. As a result, the company’s employees were continuously reminded about trust, integrity, honesty and fairness. Because of high customer value levels, the company experienced increased customer loyalty and satisfaction.

CHAPTER 3: Methodology

3.1 Introduction

This study uses a systematic literature review in order to identify and synthesise the current knowledge on business ethics and how they affect advertising and profits in the contemporary business world. According to Savino, Messeni Petruzzelli and Albino (2017), the systematic literature review approach is particularly suitable in cases where the existing literature is fragmented or contains mixed results. In this case, a systematic literature review was selected owing to the fact that some researchers argue that relaxing ethical standards in relation to advertising increases a firm’s profits while other hold that adhering to ethical standards enhances profits. The systematic literature review approach was also selected as it provides a procedure that can be replicated thus warranting clarity and transparency while helping the researcher overcome some limitations of the narrative review (Lamb and Roundy 2016). Through this approach, relevant studies were identified and then reviewed to establish whether ethics, advertising, and profits are compatible in the current hypercompetitive business environment.

3.2 The Search Strategy

Three databases (Business Source Complete (EBSCO Host), ABI/Inform Complete (ProQuest), and Emerald Full text) were selected as they were deemed relevant to the field of business, advertising, and business ethics in order to maximise the probability of finding the most relevant articles. In addition, the search was conducted on Google Scholar and in some cases, specific company websites were searched to identify their ethical practices in relation to advertising as well as their profit margins. In order to identify the most relevant publications, search strings were formed by combining the key words ‘business ethics’ with a different range of terms and phrases. The set of search terms used include business ethics OR ethics AND advertising OR marketing AND profits OR profitability OR profit maximisation OR financial performance. The results were limited to articles published between 2015 and 2020. Given that business ethics and its effect on profit is a fast-developing research area, the date restriction ensured that the study identified and discussed the most relevant and recent information thus make a positive contribution to the discussion on the future of advertising ethics.

3.3 Inclusion and Exclusion Criteria

The major limiter applied during the search was the abstract field whereby the title, abstract and keywords of every articles were used to determine if it was relevant in this study. A total number of 112 articles were downloaded and reviewed. These were then collated into endnote and then duplicates removed to leave 109 papers, which were further assessed to establish their relevance to the research topic and objectives. The exclusion criteria were: (i) articles not published in English (n=4), (ii) articles with no focus on profits (n=63), which included studies assessing advertising ethics but not focussing on how advertising ethics affect profits; (iii) articles assessing business ethics but not specifically advertising ethics (n=31); and (iv) studies exploring effect of business ethics on business growth but not in relation to profits (n=8), including articles that discussed business ethics but not in the context of advertising. Articles were included in this study if they remained after the exclusion criteria were applied. Following the application of this exclusion criteria, 3 original articles were identified. The application of the exclusion criteria limited the number of sources to a too small size that would not help to exhaustively answer the research question and meet all the research objectives. Therefore, backward searching, forward and searching organisational websites were applied to help identify more relevant articles. Backward searching means that the reference lists of the selected articles were read in order to identify potentially relevant articles while forward searching means that study and author names were used to find other relevant articles that cite any of the three studies found during the initial search. The backward and forward search yielded 13 papers, which after applying the exclusion criteria 7 were added to the initial list. In total, 10 articles were selected for this review 5 of which were selected from those is databases while the remaining five were acquired from company websites (Deloitte, NHS, FORD, Fairtrade Foundation, and Tesco). The studies were then grouped as source studies rather than reviewing each as an individual on the same source; for example instead of reviewing the five that were acquired of organisational websites individually, the content was grouped and assessed against the ethical standards and the potential effect on profit indicated in the other five sources acquired from the searched databases.

3.4 Data Analysis

The study adopted a thematic analysis of the literature review. Having read through the 5 articles acquired form the searched databases, a list of themes was developed and the study ensured the themes were aligned to the research objectives. These themes were definition of business ethics, the concept of ethical advertising, the effect of ethical advertising on consumer purchase intentions, the effects of ethical advertising on consumers’ perception of an organisation and its products, and the effects of ethical advertising on profits. Although the selection of themes was informed by the themes derived from the literature review and the study objectives, the researcher was open to identify more dimensions that were absent in the literature as long as it made a positive contribution to the study. Nonetheless, the researcher established a correspondence between themes in the initial literature search and those identified when reading through the selected sources. It is worth noting that in presentation of the findings, the selected articles appear more than once since they capture multiple aspects under investigation and they all have insights into the effect of ethical advertising on profits.

Chapter 4: Research Findings

4.1 Business Ethics

In relation to definition in the reviewed articles, there are a wide range of aspects that come into play in the definition of business ethics making it difficult or impossible to come up with a single and conclusive definition of business ethics. However, based on the information contained in these articles, some bits are important in the definition of business ethics including emphasis on fairness and honesty, focus on social responsibility, the values that are aligned to the common ones, behaviour that is aligned to a region’s religious beliefs, the emphasis of leadership, virtue, and character, and the philosophical stance of what is good and bad. In their study, Ghosh, Ghosh and Zaher (2017) assert that business ethics is not just integrity, virtue, or character but involves one’s application of what is morally right and truthful at a single time of ethical dilemma. On the other hand, Van Quaquebeke et al. (2019) posit that business ethics are the principles that an organisation uses to rule out whether an action is good or bad. In their study, Vranceanu (2018) differentiate code of conduct from code of ethics stating that code of ethics outlines and/or explains that principles that are important to an organisation. Through the reviewed articles, six values in relation to business ethics can be identified including respect, trustworthiness, fairness, responsibility, citizenship, and caring. These values are all aimed at improving the human condition through enforcing ethical behaviour in the business world. In the European context, ethical business is based more on stakeholder dialogue and sustainable development than on compliance to predefined ethical standards (Ghosh et al. 2017). This implies that ethical business practice focuses on environmental protection and promoting the wellbeing of the society as organisations have an obligation to social responsibility. In agreement, Vranceanu (2018) write that the European understanding of ethical business is based on the Triple Bottom Line whereby ethics have to be implemented for the benefit of different stakeholders including the stakeholders, the environment, and the society at large. Nonetheless, Doorasamy and Baldavaloo (2016) posit that the corporate social responsibility strategies adopted in the EU differ from country to country based on the understanding of the market economy, law traditions, entrepreneurship, and economic liberty. In the UK, organisations give more emphasis to a performance-driven approach to corporate social responsibility (Ghosh et al. 2017). Additionally, ethical business practice in the UK is based on respect for other, which is primarily expressed through support for the basic human rights (Kolstad 2017). In the UK organisations, Vranceanu (2018) write that it is people rather than organisations who make decisions but there is a possibility that the strategies and cultures adopted by organisations can affect the decisions made by people. As a result, the study indicates that business ethics correspond to the people’s moral values, are fair and their application is fair to all consumers. The study also establishes that it is a legal requirement for business to adopt ethical business practices and ensure their ethical codes are holistic. Analogously, Van Quaquebeke et al. (2019) establish that organisations in the UK should provide evidence that they operate with ethical values thus mere claims cannot suffice. This tasks every organisation to develop mechanisms that produce reliable evidence of trust.

4.2 Ethical Advertising

Throughout the reviewed articles, ethics in advertising were described as what is good or right when carrying out the advertising function. According to Van Quaquebeke et al. (2019), ethical advertising is concerned with what needs to be done and how it should be done to comply with the advertising regulations. However, the authors emphasise that what is legal and what is ethical could be controversial but what is ethical should always be prioritised. For example, the authors maintain that adding warning labels to tobacco ads is legal but advertising tobacco to children even with all the necessary labels is unethical. In marketing, Deloitte (2020) assert that the ethics of truthfulness in an advertisement should be based on what the audience expects as well as what they know. Similarly, Tesco (2019) writes that advertising can only be termed as ethical if it considers the expectations of the target audience and provides truthful information to ensure that if purchased, the advertised product will meet the expectations and needs of the consumer. These articles agree that ethical advertising should not fall short of what consumers expect to be truthful information. Vranceanu (2018) provides a different perspective of ethical advertising whereby advertising is considered ethical only if it provides maximum good for maximum people in the society and if the negligible minority do not understand the non-truth element in the advert. The author adds that in such a case, the advertising would be considered ethical because the greatest percentage of the population is satisfied and the damage of the advert is negligible. From another different perspective, Ghosh et al. (2017) propose that ethical advertising should be found on justice, which ensures that every advert is morally acceptable in the entire society. From this perspective, the author argues that an advert that meets the expectations of the majority yet neglects that of the minority cannot be said to be ethical. In describing the nature of the advertising message, the articles agree that in ethical advertising practices, all the information and publicity materials regarding personality, products or services should be honest, legal, truthful and decent. Among the identified unethical practices in advertising include use of children, use of vulgar language, using women as sex objects in promoting products, making unsubstantiated claims, adverts that make unfair comparisons, puffery, embroideries, and surrogate. Ghosh et al. (2017) and Van Quaquebeke et al. (2019) argue that using fear appeals in advertising is unethical a concept which the authors describe as disseminating advertising message that contains some kind of threat aimed at persuading consumers to acquire the advertised product or service. The two studies argue that use appealing to fear continues to be widely used despite it being unethical with the aim of changing behaviours such as safety driving, smoking, unsafe sexual practices, and alcohol and drug abuse among others. Even though the intentions of fear appeals have positive consequences, the authors argue that fear is an effective state that protects humans against danger thus appealing to fear in advertising changes the attitudes of consumers as well as their behaviour thus appealing to fear is more of a persuasion technique. Kolstad (2017) and Doorasamy and Baldavaloo (2016) expound on deception in advertising as one of the most common breach of marketing ethics. While both agree that different forms of deception exist, Kolstad (2017) argues that the use of humour is the most common form of deception. In such advertisements, humour is used as a masking device in order to mislead potential customers. Analogously, Ghosh et al. (2017) state that most advertisers use humour in deceptive advertising as humour offers relief from some forms of human constraint. Across the reviewed articles, advertising to children has received a lot of attention. The articles agree that children have a low likelihood of understanding the persuasive intent of advertising and may lack the ability to differentiate between what is advertised and what they will buy. Vranceanu (2018) emphasise that for an audience to comprehend advertisements, it must be able to distinguish commercial from non-commercial information and should also be able comprehend the persuasive intent of advertisements, which makes the information biased. The authors argue that since children do not have the ability to discern these differences, advertising to children is unethical in most cases.

4.3 The Effect of Ethical Advertising on Purchase Intentions

Of the review articles, 2 agree that with the growing focus on ethical business practices, many organisations address ethical and/or corporate social responsibility on their websites and are also investing significant resources in implementing marketing strategies that are aligned to corporate ethical behaviours. The two argue that an organisation’s commitment to ethical behaviours has significantly promotes consumer preference for a company, its products or services, and purchase intentions. On a contrary perspective, Ghosh et al. (2017) argue that consumers are less concerned with ethical behaviour of organisations providing the goods they require. This stand is sharply objected by the rest of the reviewed articles which all indicate that consumers are highly concerned about organisations’ ethical behaviour. Indeed, the article by Vranceanu (2018) indicates that a significant proportion of consumers are willing to pay extra for products offered by organisations with ethical business practices. Van Quaquebeke et al. (2019) establishe that businesses today are under increase pressure to be recognised by consumers as observers of ethical business practices in that consumers basically expect businesses to behave ethically, thus are more likely to purchase from businesses that behave ethically. In agreement, Kolstad (2017) states that today customers are willing and after rewarding ethical companies through continued consumption of their products and at the same time penalising unethical companies through withdrawal of their consumption. Ghosh et al. (2017) establish that for most organisations, repeat purchases and a long-lasting relationship of cooperation and mutual respect is paramount for success. In such organisations, the authors argue that a company seeks to continually deepen customers’ dependence on the company and its products, which can only be attained through providing honest and truthful information and by observing ethical advertising standards. While most of the reviewed articles agree that consumers are always willing to purchase from ethical businesses, Van Quaquebeke et al. (2019) assert that some consumers would opt to purchase from unethical organisations if their prices are low enough compared to those of ethical companies, if their products and easily available, and if the organisations are conveniently positioned. On the other hand, Vranceanu (2018) argue that for products facing weak competition, which implies that consumes have less choice, ethical business practices may have insignificant effect on consumer purchase intentions. Nonetheless, Vranceanu (2018) hold that consumers’ baseline expectations certainly have an effect on purchase intentions: if they expect all companies to behave ethically, they are more likely to change their purchasing behaviour as a result of news on unethical business practices. This supports that argument that consumers’ expectations of ethical business practices significantly affected the purchase intentions. The reviewed report by Deloitte UK supports the argument that ethical business practices including ethical advertising has a positive effect of consumer purchase intention. In the report, Mark FitzPatrick who is the managing partner for clients and markets states that clients who know the company have great loyalty but those that don’t work with the company are not loyal customers. In the statement, Mark adds that it is therefore the role of the organisation to provide truthful information to its customers in order to help them know the company and in return become loyal customers. From this statement, it is evident that Deloitte understands the role of ethical business practice in influencing consumer purchase intentions. In addition, Deloitte’s marketing strategy is anchored in a human-first philosophy, whereby the company provides consumers with honest and truthful information in all its marketing practices to ensure consumers have the best knowledge of the company. In this sense, it is evident that Deloitte practices ethical advertisement not only with an aim of persuading customers but also intending to realise loyalty customers. In its ongoing campaign, Deloitte Do, the company seeks to market itself as a company that focuses on action and delivery rather than juts words. Through this campaign, the company affirms its customers that it is truly what it says to be, which promotes consumers’ ethical perception of the company.

The NHS’ code of ethics was also reviewed to establish the ethical standards the company has adopted in relation to marketing and advertising. The review established that all advertising in the NHS is controlled and follows approved procedures in order to protect the company’s standards of integrity and future business interests. Additionally, the organisation requires any advertising to be honest and in line with what the public expects as wells as the standards of patient care. To ensure ethical advertising, the organisation ensures all its marketing activities are performed by advertisers that are employed and trained by the organisation, which ensures all the information contained in the advertising materials is accurate, truthful and honest (NHS 2019). The organisation holds that for any advertisement to be undertaken by a third party, the advertiser must have an existing relationship with the organisation, which seeks to ensure all advertisers have a better understanding of the organisation thus provides the public with only truthful information (NHS 2019). Any other organisation that uses NHS’ name to raise advertising must be referred to the organisation by the Ethics Committee. With such a strict ethical stand, NHS has managed to positively influence the purchase intentions of its customers.

4.4 The Effect of Ethical Advertising on Consumers’ Perception of an Organisation and its Products

The reviewed articles agree that research on how companies’ behaviour is received by consumers is scarce but rapidly increasing as ethical business practice has received increasing public scrutiny. The articles agree that unethical business practice attracts negative consumer responses in relation to the firm and its products (Ghosh et al. 2017). In addition, Ford (2019) argue that unethical business practice has detrimental effects which appears in the form of a long-lasting damage to the organisation’s reputation. Analogously, Vranceanu (2018) write that how consumer morally evaluate an organisation has a significant role in the formation or organisational reputation, which implies that if an organisation is perceived to be conducting its business unethically, the overall reputation is damaged. On the other hand, Doorasamy and Baldavaloo (2016) asserts that unethical business practice not only harms an organisation’s reputation but also its ability to survive in the current competitive business environment. Similarly, Van Quaquebeke et al. (2019) purport that unethical business practice tarnishes the image of an organisation in that consumers view the organisation as one with self-serving interests which are fulfilled at the expense of the wider society. According to Ford (2019) and Van Quaquebeke et al. (2019), ethical business practices provide a rich domain used in examining the reputation of an organisation given that unethical business practices attract controversy thus sending negative signals about the company. Fairtrade Foundation (2019) state that some of such unethical business practices are misleading advertising and tax evasion. On the other hand, Ghosh et al. (2017) write that unethical business practices negatively affect a company’s reputation in that it shows the organisation cannot meet the standards that the society has set for it and the company does not consider the expectations and the standards of the society in which it operates. Vranceanu (2018) argue that in the current competitive business environment, businesses no longer rely on product differentiation to build their reputation but on ethical business practices. In addition, the authors note that observing ethical business practices hints that the products of an organisation are ethical, which means that they are characterised as ones that acts with responsibility, integrity, respect, honesty, and accountability towards different stakeholders a notion that promotes positive perception of the products or services offered by an ethical company. In the same vein, Ghosh et al. (2017) propose that firms should always uphold ethical business practices so their products or services can be perceived as ethical because in the current business environment, consumers have an increasing value for products and services that address their ethical concerns.

In the conceptual framework of what consumers perceive as ethical, most of the studies suggest that consumers’ attitude towards a company’s ethical behaviour plays a very significant role. This role is: when consumers perceive an organisation to be ethical and to uphold values upheld by the society, they are more likely to identify with the organisation and development commitment to the organisation and its products. Vranceanu (2018) state that ethical business practice is positively related to organisational commitment which arises from positive consumer perception of the organisation and its products. Of the reviewed articles, Ford (2019) argues that ethical business practice affects customer perceived quality, which in turn influences purchase decisions. On the other hand, Van Quaquebeke et al. (2019) argue that by witnessing ethical business behaviour, customers are likely to develop positive expectations and beliefs of the organisation’s ethicality and righteousness, which goes a long way in promoting the organisation’s reputation. Similarly, Ghosh et al. (2017) write that when customers believe that an organisation is ethical in all its business practices, they tend to develop commitment to the organisation as they perceive the organisation to be sustainable in its activities. Analogously, Kolstad (2017) argues that upholding ethical business practices enables customers to perceive an organisation as trustworthy and credible leading to consumers’ perception that an organisation and its products outperform those of competitors. Therefore, the articles reviewed confirm that ethical business practices such as ethical advertising promotes a positive perception of the organisation and its products by consumers.

4.5 The Effect of Ethical Advertising on profits

Of the 10 reviewed articles, only one study Vranceanu (2018) maintains that organisations should pursue the interests of their shareholders purporting that businesses exist to increase value for shareholders. The study argues that it is not legitimate for an organisation to act in a manner that negatively affects the returns of shareholders, which implies that profit maximisation is the core purpose of all business organisations. The study adds that if an organisation has to consider the interests of other stakeholders, such interests must also benefit shareholders. To such organisations, ethical business practices can only be permitted if they are used as instruments to protect and promote the interests of shareholders. Precisely, the authors in this study argue that ethical business practices and profits do not always go together. The article maintains that to some extent, an ethical company might get reputation boost through engaging in socially beneficial work, which extends its daily operations. However, the article argues that with such an initial boost, the organisation cannot maximise its profits because it would have to further extend its ethical activities. The authors add that with time, the cost of extending ethical practices outweighs the benefits realised by the company, which means that the company’s profits do not increase. Therefore, the study concludes that ethical business practices have a detrimental on profit. The remaining articles agree that upholding ethical business practices generates profit for business organisations regardless their size and type. According to Van Quaquebeke et al. (2019), ethical behaviour is the reference point against which consumers evaluate business organisations and therefore, unethical behaviour is interpreted as failure to attain the reference point thus punished through purchase withdrawal. In the same vein, Vranceanu (2018) establishes that through ethical advertising, organisations are able to develop and maintain a long-term relationship with their customers, which creates a loyal customer base. Further, Ghosh et al. (2017) assert that through providing customers with truthful and honest information about a company and its products, a company realises a high number of repeat purchases and a lasting relationship for mutual cooperation, which enhances profits. Analogously, NHS (2019) write that consumers feel inclined to reward business behaving ethically through continued purchases, which further promotes profits. The authors add that through ethical business practices, an organisation is able to improve its image and its brand, which are important elements of the organisation’s reputation: a good reputation allows a firm to build customer loyalty and increase commitment, which exponentially enhances profits. Two of the reviewed articles (Doorasamy and Baldavaloo 2016 and Fairtrade Foundation 2019) agree that upholding ethical business practices allows customers to develop positive expectations and beliefs about an organisation, which leads to increased trust in the organisation. The authors argue that with increasing trust, consumers end up preferring to buy products and services from ethical organisations, which increases profits. Additionally, Vranceanu (2018) believes that ethical business practice promotes trust and credibility factors that influence customers into perceiving the products offered by an organisation as of high quality compared to those of unethical organisations. As a result, customers prefer buying from ethical business, which increases profits. In exploring the role of ethical advertising in profit maximisation, Ghosh et al. (2017) establish that customers positively respond to ethical advertising as they wat a better world. This is found on the notion that purchasing ethical products is an expression of a consumer’s moral values. This implies that through behaving ethically, business organisations show respect to moral values, which influences purchase actions, thus enhancing profits.

Chapter 5: Discussion And Conclusion

5.1 Discussion of the Findings

Regarding the definition of ethics in business, the study establishes there is no single definition of ethics but the core component of ethics is honesty, fairness, truthfulness, integrity, and generally doing what is good and right. In the context of business, the study establishes that ethical business practice relates to observing ethical standards. This is in line with Wines (2008) who argues that business ethics is values that govern how a business should behave. While the review establishes that most businesses in the European Union such as the United Kingdom understand ethical business practice based on the Triple Bottom Line whereby ethical practices are upheld for the benefit of the organization, the environment and the wider society, previous literature holds that most businesses do not understand the importance of ethical business practice thus training on ethical business practice is needed. Contrary to the findings of this study, Robin (2009) assert that many organisations misinterpret the concept of ethical business practice; nonetheless, the findings of this review shows that some companies such as the NHS and Deloitte have a good understanding of ethical business practices and are indeed governed by these ethical standards in their business activities. This review establishes that ethical advertising pertains to understanding the ethical standards of advertising and upholding them in all the marketing practices of a firm. The review also emphasises the need for truthfulness and honesty while designing advertisements. While Gibbs, Llkan and Pouloukas (2007) assert that advertisers use all sorts of tricks to get consumers’ attention, this study establishes that organisations adhere to the guidelines of ethical advertising and rely of ethical advertising to develop and maintain a long-lasting relationship with their customers. In line with the existing literature (Lanzel et al 2017), this review establishes that ethical marketing has a significant effect of consumer decision-making thus influences purchase intentions. Therefore, the findings of the review agree with previous literature that ethical considerations in relation to marketing should be integrated in all decisions of marketing communication. In line with Lanzel et al. (2017), this review establishes that unethical advertising has detrimental effects on an organisation as it damages its reputation.

This review also sought to establish the parties affected by ethical business practices and the results reveal that ethical businesses benefit the organisation and all its stakeholders. This in in agreement with the results of a study conducted by Niekerk and Getz (2019), which revealed that ethical business practice maintains a balance of interests of all stakeholders thus benefiting different stakeholder groups. In line with the purpose of a study conducted by Udu and Florence (2016), this study investigates the effect of unethical advertising on consumer perception of an organisation and its products. The findings of this review concur with those of the study conducted by Niekerk and Getz (2019) both holding that unethical marketing negatively affects consumer perception of an organisation. In particular, this review establishes that unethical advertising shows disrespect to the moral values held by consumers and the society, leading to the generation of a negative public perception of the organisation. In the same line, the study conducted by Kaufmann et al. (2009) asserts that upholding ethical business practices translated to respecting societal values thus ethical business are known to obtain favour from the society, which builds the corporation image and brand. Therefore, the study agrees with previous research that ethical advertising can be used as a tool to build trust and credibility, which are essential elements towards realisations of a reputable organisation. To build a positive image, the study agree with previous literature that organisations should incorporate respect, fairness, transparency, honesty, responsibility, and citizenship in all their advertising and marketing activities. This study agrees with Sharma (2018) who claims that ethical organisations should go beyond the law restricting business practice to finding out societal moral values and integrating them in marketing, so as to gain favour from the society the organisation serves. The last objective of this study was to establish the relationship between ethical business practices and business profitability. The results of this review contradict those of a study conducted by Bowie (1998), which asserts that business ethics is a constraint to business profitability. This study finds out there is a positive relationship between ethical business practice and profitability. In line with Ferrell (2004), the study establishes that ethical business practice results in good ethical reputation for organisations, which makes them more profitable. Additionally, the study establishes that ethical business practice increases customer loyalty and commitment to an organisation, which enhances profitability. Additionally, the study reveals that ethical businesses have more loyal customers, which reduces the marketing cost making the organisation more profitable. The study concurs with (Heskett et al. 1997) who posit that with loyal customers, an organisation does not need to hire salespersons, which further lowers the operational cost while increasing profitability. The study findings also concur with those of Donaldson (2003) who establishes that ethical business practice results in higher perceived level of quality in an organisation’s products, which promotes the demand for those products leading to higher profitability. Therefore, the study establishes that ethical business practice is positively related to business profitability.

5.2 Practical Implications

The present study provides several insights for business practitioners. First, the study establishes that not all organisations understand the role of business ethics, which implies that businesses should conduct trainings of ethical business practices so that all employees understand the need of integrating ethics in their daily endeavours. Second, the study establishes that some organisations misunderstand ethical advertising and do not pay much attention to ethics when it comes to advertising in that they solely focus of profit maximisation. This discovery supplements the existing research on ethical marketing, which reveals that some firms relax ethical standards to increase their profit. The study reveals that ethical advertising builds trust and credibility, which positively influences consumer purchase intentions. Therefore, business organisations should revisit their marketing strategies and integrate ethics in order to reap the benefit of increased sales. Third, the study establishes that ethical business practice build consumers’ perception of an organisation and its products. Therefore, business organisations should always strive to operate ethically so they can benefit with positive reputation that drives customer traffic. Finally, the study establishes that ethical business practice enhances profitability. In other words, ethical business organisations are perceived to respect social moral values, which attracts more customers to an organisation. Additionally, ethical business practice results in increased customer loyalty and commitment to a company, which lowers marketing cost thus increasing profitability. Generally, the study finds out that business ethics, ethical advertising and profits are compatible thus business organisations seeking to survive in the current hypercompetitive business environment should always strive to integrate ethics in all business and advertising activities.

5.3 Limitations and Future Research

The first limitation of this study pertains to the adopted design. Although a secondary approach was appropriate in answering the research question and meeting the study objectives, a primary study would have been more suitable in that it would have allowed the researcher to collect first-hand information and establish how application of advertising ethics affects sales in real organisations. In some instances, it was difficult to draw the link between ethical advertising and the generated sales revenue, which would have been offset through getting examples from managers. Therefore, future studies should use primary data to establish the relationship between business ethics and profitability. Second, the primary purpose of this study was to find out the effect of ethical advertising on organisational profitability. However, in real sense, there are other factors other than ethical advertising that influence consumer purchase intentions such as cost and convenience among others. This implies that when organisations would remain ethical, consumers would opt to purchase from unethical organisation if their prices are low, which has a detrimental effect on the profitability of the ethical organisation. For future studies, a conjoint analysis such as between factors as ethical advertising, product price or product quality could help rule out the effect of ethical business on profitability. Third, this study uncovered a large effect of business ethics and rather insignificant effect of ethical advertising. This implies that the findings of this study are more relevant in terms of linking business ethics to profitability without considering the role of ethical advertising. While this limitation does not have a major effect on the purpose of the study, future studies may want solely consider the effect of advertising ethics on profits to establish the real strength of advertising ethics as far as financial performance is concerned.

5.4 Conclusion

In the current hypercompetitive business environment, business organisations need to realise that solely pursuing profit maximisation will hinder their sustainability. Today, consumers have higher value for ethics and therefore expect business organisation to remain socially responsible, which implies that ethical businesses are sustainable. This study provides insight that business ethics and ethical advertising show respect for consumer moral values, which builds commitment and customer loyalty. Indeed, this study suggest that ethical business practices drive consumers’ purchasing deliberations. As such, business organisations should make sure the observe ethical standards in all their operations including in their marketing activities.

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