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Write an Analytical Business Report on what Ethical consumerism means for Business Essay Example

  • Category:
    Business
  • Document type:
    Assignment
  • Level:
    Undergraduate
  • Page:
    4
  • Words:
    2530

Executive summary

This report address issues on ethical consumerism. The report looks at Body Shop as a case study of an ethical company. Body Shop is considered as the pioneer of ethical business due to its values and principles since it was founded. The report has looked at ethics as a major factor that have an influence on consumer decision making process. With increasing awareness, ethical consumerism is on rise. Companies are under pressure from empowered consumers to be ethical. An opinion survey carried out shows that ethics plays a major role on consumer decision making. Two thirds of the respondents cite ethics as a major tool in their purchase decisions. In conclusion, the report is able to show that ethics play a major role in consumer purchase decision making.

Table of Contents

Executive summary 2

Introduction 4

Ethical consumerism 5

Case study of Body Shop Ethical business 6

Against animal testing 7

Human rights 7

Community trade 7

Controversial takeover 8

Results of a short opinion survey on what influences consumer buying behaviour 9

Conclusion 10

Recommendations 11

References 12

Appendix 14

Introduction

The number of consumer making purchase decision based on ethical values has been increasing (Doane, 2001). This includes ethical values such as human rights, labour standards, method of production and environmental standards. This has led to high motivation for ethical business. There have been rise of ethical brands over the recent past (Irving, Harrison & Rayner, 2002). The trend towards ethical consumerism has been linked with the loss of confidence by consumers on most of conventional products. Body Shop international Plc. who are a retailer of natural based and ethically sourced beauty products is one of the well-known ethical companies. The company was involved in a controversial takeover with L’Oreal who was seen as unethical due to animal testing (Purkayastha & Fernando, 2007). Body Shop was the pioneers of ethical business and the acquisition raised a lot of concerns on how its ethics would be affected. This report will analyse ethical consumerism. This will be achieved through analysing Body Shop using ethical consumerism and discussing the approaches that have been used to make the company more ethical conscious by linking their ethics and values. The report will carry out an opinion survey on influence of consumer buying behaviours from a sample of 15 respondents. The report will conclude with evaluation of ethical consumerism based on evidence from primary and secondary research with focus on Body Shop.

Ethical consumerism

Consumerism has been a major tool used by stakeholders to encourage social change. This is due to fact that companies will make decisions based on the consumer demands. Consumer power has been used to make companies accountable to the society. Ethical consumerism looks at animal welfare, environment and the human rights (Doane, 2001). Consumers uphold those companies that promote the three aspects of ethical consumerism and boycott those that do not. The increase in public awareness on ethics and rising disposable income has enabled the consumers to practice ethical consumerism. At the moment, trade unions and charities have been running campaigns that are aimed at informing consumers on ways products are manufactured or produced. Ethical consumerism therefore implies buying goods and services that are made and sold by companies in an ethical environment (Irving, Harrison & Rayner, 2002). Ethical consumerism has been advocated through consumer activism. The main principal of consumer activism is to ensure that there is fairness, social justice, protection of consumers and equality. The main challenge that faces ethical consumerism is the fact that consumers are obliged to make purchase decisions based on varying priorities and realities (Wheale, 2007). For a business, adopting ethical consumerism is a great strategy. Most of the consumers at the moment are selective and boycotts products which are unethical. Some of the products which falls are ethical categories are; foodstuffs, manufactured goods and services, apparel, beauty products and electronics (Bedford, 2011).

In most cases, purchase behaviour involves making moral judgements. Despite this, consumers are pressured with other constraints which make it hard to make an ethical decision. At the moment, a lot of organisations have started to be socially minded due to pressure from consumers (Doane, 2001). Body shop was the pioneer in ethical business and since then, new breed of socially responsible business has emerged. Consumers have been angered by the corporate greed and have used their purchase power to force change (Wheale, 2007). Those companies who have responded to the consumers’ pressure on ethical business have won a lot of consumers. Ethical business is not about turning the business to charity but involves acknowledging the role of people and environment for future business. Ethical investment involves investing in an investment strategy that maximise both profits and social wellness (Bedford, 2011).

Case study of Body Shop Ethical business

Body Shop was started by Dame Anita Roddick in 1976. The company was able to embrace ethical consumerism during its early years. This was through adopting practices such as recycling, reusing, and refilling. This made the company a pioneer in environmental activism. The company was started in an era when Europe was adopting “green” strategies. The company founder believed that business held great powers in doing good (Ethical Consumer, 2015). The company used its products and stores to communicate on human and environment rights. In the 1990s, the company was able to help in pressuring Shell Oil in committing to human rights in Nigeria (The Body Shop, 2015). In 2001, Body Shop among other companies worked together to raise awareness on fossil fuel contribution to global warming. The company also raised awareness on renewable energy alternatives (Purkayastha & Fernando, 2007).

Against animal testing

Body Shop ensured that they did not test their cosmetic products on animals. The company considered this to be unethical practice (Purkayastha & Fernando, 2007). The company collaborated with customers and animal protection group to campaign against animal testing. The company was among the few players in the industry who complied with Humane Cosmetics Standards (HCS). The company also made sure that any of the animal derived ingredients were suitable for vegetarians (The Body Shop, 2015).

Human rights

Body shop operations ensured that they were in line with human rights. The company ensured that it sourced its products from countries which upheld human and civil rights. The company had been involved in a lot of human rights campaign (The Body Shop, 2015). The company employment activities were based on the international standards. In its operations, the company ensured that it had all suppliers were in compliant with ethical standards (Kaur, 2015).

Community trade

Community Trade was a key area where Body Shop was able to combine personal and business interests. This was an act of fair trade in the industry. The company was the first to come up with a program to engage a direct relationship with the communities. In return, the company provided natural ingredients in their products. Through use of Community Trade, the company was able to provide essential income to a lot of people globally. Through this partnership, the company was able to help the communities to maintain their natural way of life. This is an example of devotion to ethical consumerism. The company acted in a socially responsible manner. This is through ensuring that they have maximum positive impacts on their stakeholders. This is a company that engaged in fair trade in its operations (Kaur, 2015). The consumers were made aware of the products, means of production and the market structure and how economic benefits within it are distributed (Arnold, 2009). The company addressed ethical sourcing and also made sure that their supply chains have no labour issues.

Controversial takeover

In 2006, Body Shop announced a takeover by L’Oreal through a cash deal. Following the agreement, the company faced a lot of criticism. Body Shop had already made a name as a pioneer of the corporate social responsibility (Purkayastha & Fernando, 2007). The company had been under social activism through its leader and the association was a major threat. L’Oreal was seen as a company which did not follow ethics in their operations. To make the matters worse, Nestle owned 26% of the L’Oreal Company. Nestle was one of the companies most boycotted for its unethical practices. Body Shop had been very critical on operation of companies such as Nestle and L’Oreal (Kaur, 2015).

Following the merger, critics called for boycott of the Body Shop products. Body Shop was accused to have sold its values and principles by merging with L’Oreal. Body Shop and the owner defended the company claiming that its ethics and values would not be compromised by the merger. Despite this, analysis felt that the company image on ethics would be affected through acquisition. There was a feeling that the company corporate social responsibility would be affected. Some of the critics believed that the acquisition would help L’Oreal in enhancing their ethics (Purkayastha & Fernando, 2007).

The company satisfaction and ethical rating dropped after the deal. The company responded by assurance that its ethical standards would not be diluted by the acquisition. The company justified the acquisition claiming that L’Oreal wanted to learn on ethical business from Body Shop. With the takeover, the company have continued on supporting ethical consumerism (Ethical Consumer, 2015).

Results of a short opinion survey on what influences consumer buying behaviour

The result of the survey carried on a sample of 15 people showed the variety of factors that influence consumer purchase behaviour. The primary research was able to identify the following factors; situational, psychological, economic, social and personal (Solomon, Russell-Bennett, & Previte, 2012). For some of the respondents, situational factors played a major role in making a purchase decision. Some of the respondents cited personal factors to play a major role in their decision making. This includes factors such as their lifestyle, interests and circumstances. Economic situation plays a role when making purchase decision. Most of the respondents cited that their income levels played a major role in their decisions. That with low incomes makes purchases based on what they can afford as compared to those with high incomes. Psychological factors such as motivation also play a role in some of the respondents. This is through perception, beliefs and attitudes. One factor that played a major role is family. Most of the respondents cited family influence on making their final decision. Disposable income was also relevant to some of the respondents. Social factors such as family roles and social status influenced the consumers in a great way.

Almost two thirds (9) of the respondents admitted to checking the frim ethical behaviour before making purchases. This is a large group of the sample which indicates how important ethical business is. The respondents made comments on ethical aspects that they look in a firm. For most respondents, supply chain was a major issue which they were concerned with. The consumers wanted to purchase goods and services that have been produced and sourced in ethical environment. This pointed out the importance of ethical sourcing by the companies. Most of the respondents commented that they were concerned about the sweat shops on developing countries.

This results shows that despite other factors affecting consumer purchase behaviour, ethical consumerism is growing and have a great impact on purchase decisions (Doane, 2001). Consumers are more aware on ethical business perfoamcne and are ready to boycott companies that do not comply. This research points out the importance of corporate social responsibility through ethical business. While the business focuses on factors affecting the consumer purchase behaviour, they must ensure that they are ethical in their operations to avoid product boycott.

Conclusion

Ethical consumerism is an evidence of the growing phenomenon of consumer power enhanced awareness. Most of the companies have realised the opportunities of doing ethical and fair business. Body Shop was the pioneers of ethical consumerism and their efforts paid off. The company was a pioneer of ethical consumerism through their activities. They ensured that they did not engage in animal testing and their sourcing was ethical. Based on the research, it is evident that consumers are looking for ethical companies when making their purchase decision. The research conducted proves that Body Shop growth was based on ethical consumerism. The research also shows that ethical consumerism is on rise with more respondents being keen on company ethics. When companies fail to practise ethics in their operations, they face product boycott and loss. The action of the critics on Body Shop after the merger with L’Oreal is a proof that ethical consumerism matters. The company had to struggle a lot to redeem their image after the merger. The report is a proof that business must adopt ethical investment to promote ethical consumerism and retain customers.

Recommendations

Ethical consumerism has been on rise. It is recommendable that business adopts ethical practices in order to remain relevant and avoid product boycott. There is also need to understand that customers do not make decisions in ideal situations. There are external factors that affect customer decision making process which may hinder ethical consumerism. Business should avoid moral criticism of their behaviour through being ethical in all their activities (Laroche, Bergeron & Barbaro-Forleo, 2001). As seen in the case of Body Shop, consumers will always judge a company based on their behaviours. It is recommendable for research to be carried out on a larger sample in order to come up with more conclusive evidence.

References

Arnold, C. 2009. Ethical marketing and the new consumer. John Wiley & Sons.

Bedford, T. 2011. Negotiating Ethical Consumerism in Everyday Life. RESOLVE Working Paper Series, 13–11, University of Surrey.

Doane, D. 2001. Taking flight: The rapid growth of ethical consumerism. London: New Economics Foundation.

Ethical Consumer, 2015, L’Oreal and Body Shop: L’Oreal to Take over Body Shop, Retrieved 14 July 2015 from, http://www.ethicalconsumer.org/mediainfo/lorealandthebodyshop.aspx

Irving, S., Harrison, R., & Rayner, M. 2002. “Ethical consumerism–democracy through the wallet”. Journal of Research for Consumers, Vol.3, no.3.p. 310-432.

Kaur, H. V. 2015. “The Body Shop’s Corporate Social Responsibility-Mere Greenwasher?”. Asian Journal of Management, Vol.6, no.2, p.117-124.

Laroche, M., Bergeron, J., & Barbaro-Forleo, G. 2001. “Targeting consumers who are willing to pay more for environmentally friendly products”. Journal of consumer marketing, Vol.18, no.6, p.503-520.

Purkayastha, D., & Fernando, R. 2007. The body shop: Social responsibility or sustained greenwashing. Case studies in sustainability management and strategy. Sheffield: Greenleaf, p.226-251.

Solomon, M., Russell-Bennett, R., & Previte, J. 2012. Consumer behaviour. Pearson Higher Education AU.

The Body Shop, 2015, Dame Anita Roddick, Retrieved 14 July 2015 fromhttp://www.thebodyshop.com/services/aboutus_anita-roddick.aspx

Wheale, P. 2007. “Ethical consumers in search of markets”. Strategic Direction, Vol.23, no.10, p. 243

Appendix

Instructions

Kindly give answers to the questions in an honestly and precise manner.

1. Please indicate your influence levels with the following statements by placing a tick (√) on the column you find most agreeable.

The question asks that you choose the most common factors that you consider in your purchase decisions.

Strongly non-influential

Non-influential

Influential

Firm ethics

Product availability

Durability

Appearance and taste

Dispensable income

Product quality

Position in the society

Brand recognition

Economy (income)

2. Do you have any last comments on ethical aspects important in a firm? State briefly

Fig.1, questionnaire used for opinion survey