Sum|t kumar Internat|ona| Market|ng S03 Q02S46S19

CASE 4-7: MAKING SOCIALLY RESPONSIBLE AND ETHICAL MARKETING DECISIONS:

SELLING TOBACCO TO THIRD WORLD COUNTRIES.
This case deals with the ethical dilemma that Tobacco manufactures face when selling tobacco
products in third world countries. A number of factors have driven this overseas expansion,
including: the opening up of formerly socialist economies; cheaper labor and transport costs; the
attempt by these companies to shield an increasing proportion of their assets from lawsuits in
developed countries; and the desire to locate cigarette manufacturing plants closer to sources of
tobacco leaf, an increasing proportion of which is being purchased overseas.
789, there is the ethical dilemma of business versus health. The opening and development of
the tobacco business in Third World countries like China, Malaysia, ndonesia, ndia and Africa,
is considered against the health consequences of tobacco use which according to an Oxford
University epidemiologist, has estimated to cost 3 million lives annually rising to 10 million by
2050 without effective tobacco control program.

Second ethical dilemma is employment versus impoverishment, where the opportunities for
work in the tobacco industry are considered against a background of malnutrition. This is a
problem that is certainly worth consideration, but with those who have the power to change
things reaping huge profits.

Exh-9 1 in the case is a decision tree. A model for incorporating ethical and social
responsibility issues into multinational business decisions. The decisions are decided by the
user's responses to a number of relevant questions regarding the matter at hand. The first
question the model asks is whether the decision efficiently optimizes the common good or
benefits of the business firm, society, the economy, and the individual. From the tobacco
business standpoint, the answer is yes it does. They are making huge profits my doing business
in the Third World international markets. Next the economy benefits because Third World
government often profit from tobacco sales. Brazil collects 75 percent of the retail price of
cigarettes in taxes, over $100 million per month. As far as the society is concerned, one could
argue yes to this point as well. The people living in these Third World countries are not living in
the best of conditions. Our US tobacco manufactures offer them a small escape from their world
to our more affluent western world by smoking our products. This is questionable because the
idea of tobacco benefiting any society is one that is manmade, in that the idea is spawned
through aggressive advertising and promotions. You ask the people who live in these societies
they most all agree, being like their friends in the west no matter how brief is like heaven. Lastly,
Sum|t kumar Internat|ona| Market|ng S03 Q02S46S19
when considering the individual there are two perspectives to consider, the individual form
his/her perspective.

GIo-,I -7,nd8 ,nd m,7e9ng 897,9egy: Wherever U.S. cigarettes go, smoking rates rise.
Smoking rates in Japan, South Korea, Thailand and Taiwan rose 10 percent higher than they
would have following the massive inflow of American cigarettes after the U.S. Trade
Representative forced these countries to open their markets to U.S. tobacco exports.
Multinational cigarette companies are among the world's largest advertisers. As more and more
countries adopt restrictions on direct cigarette advertising, these companies have devised new
and creative ways to skirt these bans. By sponsoring sporting events and teams, rock concerts
and discos, these companies get exposure without violating bans against direct advertisement.
The companies also put their logos on clothing lines, racing boats, backpacks, coffee and even
travel agencies. They also distribute free samples and promotional items on college campuses,
shopping malls and other places where young people gather. The cigarette companies spend
millions of dollars on lobbying activities to avoid incurring the legal, political, regulatory and
cultural problems they face in the United States. Using their significant economic and political
clout they influence legislation, fight advertising restrictions, try to downplay the health effects of
smoking and corrupt the political process.

InvoIvemen9 of U.S gove7nmen9: Historically, the cigarette companies have been able to rely
on the full support of the U.S. government to help them sell cigarettes around the world. This
support reached its apex in the 1980s when the U.S. Trade Representative, working hand-in-
glove with the tobacco companies, used the threat of sanctions to pry open key markets in
Japan, South Korea, Taiwan and Thailand. Although the U.S. Congress has taken some steps
to end these abuses, the cigarette companies are finding new ways to pry open foreign markets,
again under the guise of "free-trade." They have sought to condition China's entry into the World
Trade Organization on the opening up of its cigarette market, and are lobbying for passage of
the Multilateral Agreement on nvestments which would give them expanded powers to
challenge countries' tobacco control measures.
Each year about a third of all cigarettes entering into international commerce are illegally
smuggled, escaping taxes and import restrictions. There is widespread belief among analysts,
and some substantial evidence from court cases in Canada and Hong Kong, that the tobacco
companies facilitate and benefit from this smuggling. Smuggling encourages people to smoke,
especially youth, by making cheap cigarettes available and helps to develop brand loyalty
among customers in countries where trade barriers will soon be lifted.