I have difficulty analyzing this ethical dilemma in my strategic management cour
ID: 358302 • Letter: I
Question
I have difficulty analyzing this ethical dilemma in my strategic management courses ( not marketing or law) , it's a case that needs analysis and answering the questions with the required criteria in two pages.
Case: A team of marketing managers for a major differentiated consumer products company has been instructed by top managers to develop new strategies to increase the profitability of the company’s products. One idea is to lower the cost of ingredients, which will reduce product quality ;another is to reduce the content of the products while maintaining the size of the packaging ; a third is to slightly change an existing product and then offer it as “new” premium brand that can be sold at a higher price.
Questions: Do you think it is ethical to pursue these strategies and present them to management? In what ways could these strategies backfire and cause the company harm?
Required criteria: originality of approach; quality of analysis; coverage of all issues in the ethical dilemma; quality of written presentation; and evidence of serious work.
Explanation / Answer
Are these strategies ethical?
Well, I think these strategies are completely ethical. The companies are not harming any individual, it is just a matter of value proposition provided to their customers. Companies can definitely increase or decrease the value provided, based on the methodologies they follow or according to their mission and vision. Actually, most of the companies follow these kind of strategies in order to reduce cost or increase profitability. When it comes to presenting these strategies to the management, it depends on a lot of factors:
1) Company's work culture
2) Company's current market share in that product category
3) Competitive advantage over their competitors
4) Number of competitors in the market
5) Buying power of the customers
6) Threat of new entrants
7) Threat of substitution
8) Supplier power
Now, Lets talk about in what ways these strategies could backfire and cause the company harm.
Lower the cost of ingredients, which will reduce product quality
Quality is ultimately the best weapon in the fight for a strong brand image as well as customer loyalty, especially considering it takes only one quality issue to potentially lose a customer for life. Regardless of the various viewpoints from the public, product quality is a competitive marker for brands that affects purchasing decisions and profitability.
Brands and marketers can’t afford to overlook product quality for the following five reasons:
1) Customers will not trust the Brand
2) Bad word of mouth and reviews which will lead to negative publicity
3) More Customer complaints and returns
4) People care about aesthetics
5) Low quality product may not have the same ROI as a high quality product
Reduce the content of the products while maintaining the size of the packaging
In this case the customer might feel cheated or consider the product as less valuable than it used to be. This will influence the customer to choose a different brand. The company might lose on their long term clients which can eventually reduce the market share of the company.
Customers response from a finding- “The key word is ‘deceive.’ I find it underhanded. I would rather they were upfront about it and raised the price. Don’t they know we’re watching?”
Slightly change an existing product and then offer it as “new” premium brand that can be sold at a higher price
The issue is one of credibility. Most consumers will question whether a formerly inexpensive brand will have the knowledge, capability, and will to operate an upscale brand and deliver the expected functional and emotional benefits. Even brands that enjoy solid reputations are suspect.