GlaxoSmithKline Ethical Problems - Essay Example

? Running head: Corporate and Social Responsibility Ethical Problems Insert Insert Insert 19 April In 2004, Anna Devathasan and Jenny Suo - high school students in New Zealand local high school - analyzed the pre diluted ready to drink ribena manufactured by GlaxoSmithKline in a chemistry project and found that it did not conform to the four times the vitamin C content of oranges as advertised (Eames, 2007). On contacting GlaxoSmithKline their query was dismissed and handled unprofessionally. Their experiment concluded that the levels of vitamin C in the ribena product were far much lower than the amounts printed on the packaging. The girls made known their findings to the company and stated that the company’s advertisement was "intentionally misleading and quite inappropriate” (Jacques, 2008) in that it misled people to actually believe that the ribena fruit drink actually contained four times the vitamin C found in oranges. Though they even telephoned the company they were put off with a casual reply “it’s the black currants which have it"(Eames, 2007). Their findings and reservations were casually dismissed and they were dully informed that the advertisement related only to the black currant fruit and not the actual product. With determination to be heard Anna and Suo contacted New Zealand’s Advertising Standards Authority and Brand Power without any support. They got a reprieve when Fair Go, a consumer affairs television show got interested in their case and the case found its way to the commerce commission, which determined that the advertising claims about the amount of vitamin C in ribena was misleading. The New Zealand Commerce Commission took up the case and sued GlaxoSmithKline. The company pleaded guilty to 10 representative charges arising from the "four times" advertising claim. They also pleaded guilty to another five charges of falsely labelling ribena cartons and packages though they contained no quantifiable vitamin C whereas it was advertised as having 7 mg of vitamin C per 100 ml. The Auckland district court fined GlaxoSmithKline $NZ227500 and it was forced to carry out a $NZ96000 (Jacques, 2008), corrective advertisement detailing the contents of their product to its customers in New Zealand and Australia; a very costly affair in customer fallout and brand tarnishing (AFP, 2007). GlaxoSmithKline violated the Fair Trading Act 1986 statute of New Zealand that encourages competition and protects consumers from misleading, deceptive conduct, and unfair trade practices. The consumers were not given accurate information about the products they were consuming and ribena being marketed as a health drink probably made many people buy the drink on that basis. GlaxoSmithKline did not apply the rules of fairness and honesty in their advertisement campaigns. They were ethically and morally wrong in misstating the content of vitamin C in their product sorely for commercial gains. Many people trusted and had confidence in the company and their products; they consumed the products based on that trust. Many customers were duped into believing that the company drinks were healthy only to be disapproved by the high school girls experiment. By incorrectly advertising the wrong vitamin C content, the company confused the public into consuming their products. This is manipulative as most of the consumers bought the drinks for their health benefits. The company also gained unfair competitive edge over its competitors as many consumers used GlaxoSmithKline products based on the health benefits it was allegedly having. By selling an inferior product marketed as a superior product, it was bound to be produced cheaply but sold expensively and hence GlaxoSmithKline had a larger profit margin than their competitors did. The labelling information in the ribena ready to drink packages and cartons unethically suggested that the product contained more of vitamin C than it had. The packages stated that the ribena product had over 22mg/100ml vitamin content whereas the product levels were significantly lower than the stated amount. The company would have omitted any mention of vitamins in its packages. Manipulation is the acts of employing tricks to play on an individual’s will (Chandan, Singh., & Machan, 1990). GlaxoSmithKline attempted and succeeded in making the public believe that its product had 4 times vitamin the level found in orange and hence it was good for health; a fact disapproved by the high school experiment. It is possible that millions of consumers all over the world bought ribena on the false precincts as they took advantage of their customers’ vulnerability. GlaxoSmithKline was obligated by the law to be truthful, fair, and honest in its operations and in the information it supplied to the public. Its action of deliberately misleading the public is criminal and resulted in stiff penalties. It failed in its inherent mandate to protect the consumer as it promoted its products as having intrinsic health values, which was not true. The company would have desisted from mentioning the vitamin contents levels in all its advertising. GlaxoSmithKline was a respected company by both government institutions and the public. It was held in high esteem both in its business world and in its corporate responsibility, hence it failed in its civic responsibility of maintaining its credibility and integrity as the developments offended the public who held the company in high esteem. The company was bound to suffer a public relations blunder due to a weak strategy to respond to early warning signs and market evaluation. Indicators of major problems that can lead to major corporation problems arise from low level customer complaints. These complaints should be adequately addressed with a view of satisfying the customer. The company failed to clearly identify an impending quality issue and to adequately use an effective management strategy to solve the problem. Lack of clear objectives within a proper planned approach can lead to confusion, mixed messages, wasted effort, and ultimate failure (Jacques, 2005). By not taking the high students query seriously and not instituting measures to correct the advertising problem, the company failed to present a compelling defence of the company’s organizational practices and it failed to place its shortcomings in upholding ethical and legal requirements in a more favourable context to the initial accusation by the students (Hearit, 1995a). Because the company had failed in its ethical duty to the public and to itself, the top management should have set up an ethical committee to investigate the ethical and legal failures GlaxoSmithKline had committed with an objective of correcting the problem at hand. They should have communicated a strong desire to uphold high ethical standards in advertising and would have made a public commitment through advertisements a strong organizational desire to promote and develop astute moral and professional codes of conduct in both the internal and external environment of the organizations. The public announcement of commitment to uphold the legal and ethical requirements in the company’s operations could have softened the public’s anger towards the company. Its loyal and ardent supporters could have gotten a chance to support the company through its public commitment to correct the errors in its system. By refusing to acknowledge the problem and blatantly refusing any responsibilities in the fiasco, the public perception towards the company hardened as they felt betrayed and taken advantage of. It is very easy for the customers to develop long lasting hatred towards a company if the company acted in a way that suggested it did not value them or in a way that indicated a disdain for the customers rights to truthful information. At the onset of the issue the firm would have responded swiftly by having its products tested by an independent organization. If the tests results failed to meet the accepted standards it would have recalled its products from the shelves and offered a public apology to the extent that it was a human error rather than an organizational system derived error. This option would have saved the company some of its well deserved reputation while at the same time avoiding litigation charges that have the potential of publicly eroding the company’s integrity and loosing the trust and confidence of its customers. By accepting its failures the company would have admitted all charges brought against it and speedily paid up the fines without contesting the charges. This could have communicated to the public that the company took quality issues seriously and they were ready to accept full responsibilities for any shortcoming of their products. This could have retained some of its customers because of the level of integrity used in handling the case thereby saving some of its reputation. Upon the company getting wind of the discovery by the students, they could have immediately taken the matter seriously and could have immediately issued a public statement confirming the labelling discrepancies on its ready to drink beverages to the public and to the relevant authorities and would have undertaken to remove all labelling information related to the levels of vitamin C in its products. This could have avoided litigation charges in the New Zealand courts as any criminal charges against such a large company are bound to become international news with wide customer fall out and corresponding fall in beverage sales. The company would also have fired its public relations officials and the advertising team for failure to correctly and timely address the advertisement problem. From the way they dismissed the high school girls, to the way they publicly denied any responsibility, they failed in maintaining the company’s good image and also failed in adequately dealing with the media and the public after the scandal broke. By firing both teams, the company would have delivered a message that it had good customer care principles and that it was committed to customer satisfaction. Firing the teams would have created a diversion to the media who would have focused more on the fired team. They could have shouldered the bulk of the blame avoiding the media glare on the company. Facing impending prosecution from the New Zealand Commerce Commission, GlaxoSmithKline adopted several strategies to address the ethical problem highlighted. The company did not send a public relations official to the TV show "Fair Go” to clear the air rather the company issued a written statement that insisted that its advertisement and labelling of its ready to drink packages was up to standard and met all legal and ethical standards. The advertisement in part read: The claim "black currants in ribena contain four times the vitamin C of orange" is correct and relates to black currants and oranges in their natural fruit state. This is a claim applicable to all ribena products not just concentrate. We make no comparison to juices, fruit drinks or any other pre packaged drink product. The advertising statement has appeared as part of advertising worldwide for more than a decade. All ribena products boldly highlight the actual and correct vitamin C content as required by law. We sincerely apologize for the way in which Anna and Jenny's complaint was dealt with (Fair Go, 2004). The company policy at that time was to counter any accusations levelled against its products and its practices as shown by the written statement. It is true to say that the company was not fully committed to solving the issue in its early stages as shown by its lack of commitment to send a representative to the Fair Go TV show. In responding to the ethical problems facing it, GlaxoSmithKline gave several explanations over time in an effort to explain the circumstance surrounding the issue. The company first insisted that the four times claim was correct (Fair Go, 2004) and later admitted that the weight to weight basis of measurement had a potential to mislead its customers (GSK, 2007). The company also insinuated through a British tabloid that the girls analyzed the wrong product (Vasagar, 2007) a fact they were proved wrong by the New Zealand Commerce Committee after their tests showed no detectable vitamin C in the ready to drink ribena. The company then blamed the testing methods for the failure to detect the vitamin levels and later stated that their testing methods for determining the vitamin C levels was outdated and they claimed that they were unaware of the fact during that time (NZZZ, 2007). The company then gave another explanation to the effect that their testing method had revealed that vitamin C levels in a number of ready to drink packages deteriorated over time making them not to meet the labelled nutritional composition on the packages. Their explanation was undone by one of their spokesperson in London who asserted that the ribena products in New Zealand and Australia under prosecution did not meet the nutritional requirements labelled on the packages because they were left on the shelf’s too long discrediting the earlier explanation. The various explanations given by GlaxoSmithKline personalities were not effective and the ribena sales correspondingly fell by 8-12% in New Zealand supermarkets (Gregory, 2007). The company attempted to isolate the ribena ready to drink from the ribena syrup to protect the parent brand. This was made easier by the fact that ribena brands in New Zealand and Australia were trademarked using the ribena name only. The task was made hard because the public could not differentiate between the associated brands and refereed to the ribena brand in general. The management of the issue was further compounded by the prior statement written to the Fair Go television show, which conclusively stated that the four times claim was applicable to all ribena products and not just the concentrated fruit pulp (Fair Go, 2004). The company spirited attempts to distinguish the ribena syrup and ribena ready to drink with an objective of protecting the parent brand had no real significance as the two brands were the subject of the prosecution due to misleading marketing. This strategy in the end failed to give the company any significant advantage as the company finally pleaded guilty to all charges levelled against it. It was further discredited by the extensive media coverage given to the ribena ready to drink which directly related to the parent brand. The news coverage even gave wrong statements to the detriment of GlaxoSmithKline and in the end despite the aggressive attempts to distinguish the Ribena Syrup and the pre diluted ready to drink ribena juice, the public, consumers, media personalities, and the general public made no distinction between the two products. Containing the Ribena Brand Damage GlaxoSmithKline made it clear that the ribena ready to drink variety under prosecution was marketed and produced only in New Zealand and in Australia. The company made varied attempts to geographically isolate the problem of the ribena juice. The GlaxoSmithKline headquarters in Britain, a large consumer of ribena issued an official statement containing the problem of the ribena juice to New Zealand and Australia. The statement read in part: GlaxoSmithKline has conducted thorough laboratory testing of vitamin C levels in all other markets. The testing confirmed that ribena in all other markets, including the United Kingdom, contains the stated levels of vitamin C as described on product labels. The original ready to drink ribena provides 115% of all recommended daily allowance (Vasagar, 2007). The company had avoided prosecution in Australia by reporting that its ribena ready to drink packages and four times advertisements contained false information and indeed could have been misleading. In line with the self report, the company agreed to place corrective advertisement in Australia (Jacques, 2008). The company campaign was hampered by the extensive global coverage of its New Zealand case. Despite the change of four times advertisement across the globe its Malaysian website still contained the original wording of the advertisement, which was changed afterwards. The fact that the company was reported by high school girls made the issue global news and they gave extensive interviews further deepening GlaxoSmithKline woes as its side of the story was not as well covered by the media outlets making this strategy less effective. Though GlaxoSmithKline pleaded guilty to all the charges in a New Zealand court, they minimized the impact of any admissions made in court and in corrective advertisement by arguing a lack of intent. In their worded apology statements and advertisements they consistently used statements that did indicate that the company had no intent to mislead the customers. Statements such as "we sincerely regret any confusion to customers who feel that they may have been misled” (Jacques, 2008) indicated a lack of intent on the side of the company. Rather than accept complete responsibility for its misleading advertisement and false labelling, the company blamed the quality assurance methods in the ribena ready to drink production process. They did this through expertly worded print, television advertisement which stated that the testing methods used to determine the level of vitamins was unreliable. In Australia, they claimed that the level of vitamin C content in ready to drink ribena beverages could not be substantiated by acceptable testing methods (Jacques, 2008). The company declined to take full responsibilities for its mistakes but instead shifted the blame; in every situation the company dissociated itself from the processes responsible for making the errors in an attempt to regain its legitimacy (Hearit, 1995b). This however was not bought by a majority of the stakeholders as the company opened a new avenue for critics. The New Zealand Commerce commission chair Paula Rebstock blasted the company by saying that as a multinational company specializing in pharmaceuticals and health products they should have a robust testing and quality assurance system in place to ensure its products were up to the specified standards (NZCC, 2007). Through website updates and television commercials, the company succeeded in using lack of intent in its defence and this may have somehow redeemed the customer confidence lost in the problem. They successfully fought a court decision that had ordered it to carry out corrective advertisement in television but later carried out the advertisement to apologize for confusing its customers. The advert acknowledged its mistakes and also put it across that the company was committed to fix all the issues facing it probably restoring customer trust. Ethics are moral principles and value that obligate an individual or a group to act and decide in a particular way that conforms to the accepted norms of the particular society the group is socializing with (Berkowitz et al, 1992; Morf, Schumacher, & Vitell, 1999). The ethics go hand in hand with the moral standards, morals being inherent beliefs and principles that guide an individual in deciding what is right, and what is wrong (Clow & Baack, 2004). Ingrained ethical behaviours, expectations and principles makes human behaviour predictable (Mahdavi, 2003). As businesses expand into the international markets, the advertising and marketing personnel have to deal with ethical issues across many cultures (Murphy & Laczniak, 1981). Many marketers are left in a dilemma but they should always operate ethically across all countries. The normative theory suggests that all our actions should be done morally (Chonko, 1995) justifying the requirement that business organizations operate morally and ethically across all their dimension of their operations. International marketers have a moral duty to operate in a trustworthy and open manner. GlaxoSmithKline marketer’s decisions were wrong and harmful to the consumers. They failed in their inherent social and corporate responsibility to advertise correctly and label their products truthfully. GlaxoSmithKline was found guilty of all the charges indicating that the company was aware of its unethical operations and that it had no chance of winning the case before the courts (Michael, 2006). GlaxoSmithKline would have addressed the issues brought up by the high school girls in a prudent way and would have speedily acted to correct the problem before it got out of hand. It could have completely accepted all the mistakes and taken corrective measures voluntarily, which could have maintained customer confidence and its integrity. It could have immediately scrapped all its lying and inappropriate advertisement in the media houses and in its website and used truthful advertisements. Advertisements gives the public incentives to buy a particular product and the publicity advertisement generate the demand for products and services (Kotler, 1980) and hence their power to influence the public is unquestionable necessitating control by statutory bodies. The management should put in place adequate systems to address early warning signs of an impending issue in all its operations. The company should develop a conclusive strategy to deal with issues that could threaten its image especially when introducing new products into the market. In the event that the company breaks the ethical and legal laws governing its operations, it should value the importance of genuine and truthful apologies to restore its image and customer confidence. The risks associated with fallout with the public are severe and requires GlaxoSmithKline Company to develop self policing activities that encourage and maintain ethical standards in its advertisements. 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