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Lecture 12.Business Practices, Ethics, Corporate Governance,

and Social Responsibility

Consumer Protection

• Product Safety– Dairy/Cosmetic

• Fake products • Intellectual Property• Inconsistant pricing• Promotional tactics

– Real estate/Medical products

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2020/11/17 3

IPR: a uniquely China problem？

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Other Ethics Problems in Marketing

• Deceptive advertising, not telling the truth, implied • Bundled promotion• Impact on the environment: pollution , waste• Monopoly and unfair competition• Ambush marketing

Ambush marketing or ambush advertising is a marketing strategy in which an advertiser ”ambushes“ an event to compete for exposure against competing advertisers.

2008 Olympic Lining ambushed Adidas and Nike in Beijing

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• Anti Unfair Competition Laws

1、Fake products (of another brand)；Danone vs. Wahaha

2、Unauthorized use of others’ trademark, packaging, brand name , company name, certificate of quality, origin of product, and mislead the buyers

• Anti monopoly laws Once a judgment is passed, the offender is subject to 50k-200k

RBM in fines – enough a deterrence?

Legal Frameworks in China

• Anti corruption / graft laws

hidden commissions or kickbacks

• Deceptive AdvertisingUntruthful representation of quality, content, function, usage, maker, expiration date, and place of origin

• Concerning commercial secrets and privileged information:Such as technology and proprietary practices, through means such as theft, bribery, extortion, unauthorized use, breach of nondisclosure agreement

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• Sales with rewards

Deception, rewards to promote defected products, lotteries

• BundlingTo promote some products against the will of consumers

• Dumpingselling below cost to hurt the competition, not including perishable products, products with close expiry dates, overstocks, seasonal price reduction, bankcrupcies, divestment, etc..

Advertising: 1) cannot have any detrimental effect on the under-aged and

other disadvantaged

2) cannot badmouth the others: comparative advertising

3) must clarify your information and commitment, e.g., functions, price, maker, expiry date, content of service, exact prize

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Laws concerning medical products

• unscientific promise of benefits and guarantees

• unclear healing power or effects

• compare with others in functions or safety

• advertise in the name of research, academic, medical institutes or that of doctors, experts, patients

Tobacco Products:

• No advertising through broadcast, movie, TV, newspaper or magazines

• No advertising in waiting rooms, theaters, meeting rooms, sports facilities

• Must indicate the harm.• Very much up to the international standards.

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Guanxi or Relationship• Social capital and networks:

– Lubrication, greasing– Mutual benefit

• Westerners often view Guanxi as related to unethical behavior– Lead to corruption– Privileged treatment– Under-table dealing

It’s a special type of relationship which contains trust, favor, dependence, and adaptation and often leads to insider-based decision making in the business world.

Guanxi is perceived as an ethical efficient means to efficiently conduct business in China based on Confucian cultural values

The Dynamics of Guanxi and Ethics for Chinese Executives

R. Chan, L. Cheng, and Ricky Szeto, J. of Business Ethics,12/2002

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Legal(law)Legal(law)

Ethics(Opinions)

GrayAreaGrayArea

Ethics In Business

Corruption

• Reforms and opening: opportunities for some, but many others cannot access

• Incomplete laws and regulations: loopholes• Concentration of power among a few • Lax enforcement and oversight mechanism• Separation of regulators and the regulated• Organizational culture and climate• Things changing for the better slowly: recent anti-corruption

campaigns and the emphasis on the rule of law!

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Corporate Social Responsibility

• Labor issues: sweat labor, product safety, worker safety, human treatment, new laws, child labor

• Environment protection: the air-quality regulations in China were comparable to the 1950s in the United States

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Ctrip apologizes for child abuse in day care center

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Corporate Social Responsibility

• Sustainability: business models and consumption• Scientific view of development:

– Raw materials, cheap labor, environmental crisis• Charity:

– helping the poor, education, • Compliance: cost vs. benefit

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