Business Ethics Analysis: Abercrombie and Fitch - Literature review Example

? Business Ethics Analysis: Abercrombie & Fitch BY YOU YOUR SCHOOL INFO HERE HERE Introduction and case Just recently in comments uttered by the CEO of the clothing retailer Abercrombie & Fitch met with considerable social backlash from a variety of stakeholders, including special interest groups, celebrities, and general society. Abercrombie & Fitch maintains a business model that attempts to utilise marketing as a means of creating an exclusive brand, one that is aspirational and caters only to attractive and youthful consumers. The CEO Mike Jeffries once indicated that he “did not want his core customers to witness people who are not as hot wearing Abercrombie branded clothing” (Devon 2013, p.2). This is apparent in the company’s advertising and sales catalogues which depict aspirational youths maintaining the physical characteristics the company believes are stimulating to other youths who look toward reference groups to determine and shape their identities. The brand engages the desirable and shuns what the business considers the undesirable, the less attractive (Logue 2013). The CEO Mike Jeffries made an explicit commentary that the business hires only nice-looking individuals as sales representatives and managers in-store and that the company does not want people who are not cool to wear the company’s clothing (Levinson 2013). The majority of the branded clothing merchandise provided by Abercrombie & Fitch serves as a billboard for the company, presenting the business’ trading name in very visible and eye-catching font. As the CEO believes that this aspirational brand should retain its most loyal markets, this being trends-focused, attractive and youthful buyers, the company believes that marketing to other market segments would depreciate the brand value of the organisation and make it less inspiring to loyal consumers. Offered the CEO in a 2006 interview (which has recently resurfaced in mass media), “Candidly, we go after the cool kids. A lot of people don’t belong in our clothes, and they can’t belong” (Levinson 2013, p.1). These comments angered one famous celebrity, Hollywood actress Kirstie Alley, who recently shed considerable weight and after having been the victim of media taunting about her explosive weight gain in recent years. Offered Alley, “blah, blah, blah, blah. That would never make me buy anything from Abercrombie. I’ve got two kids...they will never walk in those doors” (Winston 2013, p.1). In addition, advocates for the rights of overweight consumers have even developed mock advertising campaigns in an effort to bring public attention to the alleged unethical behaviours of the company. Figure 1: Mock A&F Publicity Exposing Hostile Sentiment about CEO Comments Source: LeTrent, S. (2013). ‘Attractive & Fat’ ad spoofs Abercrombie, CNN Living. [online] Available at: http://www.cnn.com/2013/05/23/living/abercrombie-attractive-and-fat (accessed 21 May 2013). The CEO responsible for creating this negative public backlash had, historically, stood by his comments, defending the statements as justifiable with brand strategy and corporate rights. However, with a sudden 17 percent drop in retail sales in the United States as a result of the controversy (Become Gorgeous 2013), the CEO offered, “We look forward to continuing this dialogue and taking concrete steps to demonstrate our commitment to anti-bullying” (News Limited 2013, p.2). However, prior to this apologetic statement, Abercrombie & Fitch had been the historical target of special interest groups and general societal stakeholders for unethical business behaviours associated with alleged pornographically-centric depiction of its advertising models and for offending youth markets that are, essentially, shunned by the business and its representatives. Sales continue to fall with this company quarter by quarter. Literature review – Ethical leadership and stakeholder values Some of those who argue that Abercrombie & Fitch is acting unethically by stating that overweight individuals do not (and cannot) belong in their merchandise argue in favour of social justice theory. Flynn (1995) asserts that social justice advocates maintain the viewpoint that all stakeholders in a society should be granted equal social rights and equal opportunities. Running under the assumption that adhering to social justice expectations is a moral and culturally-accepted form of good, then this would require the CEO to maintain an ethical leadership stance that prescribes to social justice by ensuring that equal opportunities and respect for the rights of others should be considered. By isolating certain segments because they maintain so-called unfavourable physical characteristics, this would, under social justice theory, be an infringement on basic human value and tolerance to diversity. Hence, what is ethical leadership? According to Resick, Hanges, Dickson and Mitchelson (2006, p.347), it is “leading in a manner that respects the rights and dignity of others”. To be an ethical leader, per Resick et al. (2006) means to be people-oriented and utilising their authority in a manner that inspires others to follow a vision. By specifically targeting heavyset individuals and those who the CEO believes are not cool, he is, in most Westernized cultures, conducting unethical leadership behaviours. One cannot be considered an ethical leader unless adhering to the aforementioned principles (Watts 2008). Ethical leadership is aligned with social justice theory in that one in authority, especially with visibility in a public stakeholder environment, should be providing equal rights and opportunities to all of society’s stakeholders. Why should this be considered important when examining the alleged unethical behaviour of Abercrombie & Fitch? Den Hartog et al. (1999) inform that cultural groups have varying beliefs on what constitutes effective leadership. In certain cultures, leaders who are sensitive and nurturing toward others can be perceived as weak. Concurrently, in another culture, more decisive and authoritarian would be considered strong and viable (Den Hartog et al. 1999). Abercrombie & Fitch does not sell its products in just the United States, but also the United Kingdom, Japan, Canada, Hong Kong and several other countries in Europe and Asia. While sales continue to drop in the United States (allegedly as a continuing result of negative public backlash), profits continue to remain stable and predictable in Asian markets (Forbes.com 2013; Reuters 2013). It is very possible, based on the cultural characteristics known in Asian consumers, that buyers and other societal stakeholders believe that the CEO’s comments were justified as a decisive and authoritarian leader simply attempting to rationalise what has historically been a top-performing brand in terms of loyalty and revenue growth. According to Hofstede’s Cultural Dimensions Framework, as just one example, Japanese society is one of the most masculine in the world, which indicates a very competitive culture where success and achievement are paramount beliefs (Hofstede Center 2012). It is, perhaps, a product of cultural disparities between Western and Eastern societies that these off-hand comments defending brand strategy have met with such negativity only in North America and the United Kingdom, two countries sharing values associated with nurturing and transformational, ethical leadership (Bass, Avolio, Jung and Berson 2003; Webley 2001). Furthermore, Komninos (2002) indicates that in the contemporary business environment, it is becoming more difficult for business leaders to recognise signals that their products are reaching a decline stage. It is not until sales revenues fall that businesses begin responding to market conditions and determine how to avoid allowing the product to reach the final stage of its life cycle. As identified, Abercrombie & Fitch had been the victim of declining sales, especially in Western markets, recurring over a period of nearly six different fiscal quarters. Milton Friedman, a respected business theorist, proposed that the main responsibility of business leaders is to ensure the longevity and profit of their company (Dunn 2010). Abercrombie & Fitch had not, historically, been overtly critical or allegedly unethical as a response to consumer backlash that occurred during the course of operations due to the fact that sales volumes were positively influenced by loyal consumer markets. This new controversy over justifying statements regarding a dislike for heavyset individuals and unpopular youths wearing Abercrombie & Fitch’s clothing justifies Komninos’ (2002) statement that there are not enough metrics or evaluation tools available other than revenue analysis to realise there is a problem with the company or its brand. If the CEO Mike Jeffries was merely responding to a sudden movement from maturity to decline along the product life cycle, then he is simply fulfilling a means to extend the brand longevity in a manner that had always historically brought the business positive consumer market sentiment. Hence, to a business investor, this was ethical and thoughtful leadership on behalf of the CEO. The case pertaining to cultural relativism It has been established that cultural and ethical norms in Westernised nations value ethical leadership, which varies from other cultures internationally. As such, the case study of alleged unethical behaviours associated with Abercrombie & Fitch should be examined utilising the theory of cultural relativism. Relativism recognises that cultural disparities should be sufficient for justifying ethical behaviours, as what is acceptable morally and ethically in one culture varies with another. As such, society as a homogenous whole should be tolerant of the behaviours of others even if they do not share the same cultural sense of ethics (Swoyer 2003). Fleischacker (2011) provides comparative literature addressing business values provided by Adam Smith, who suggested that so long as a business provides value to society and its stakeholders, it is justified in securing, first and foremost, the longevity and profitability of the company. In Western countries, Smith’s sentiment of acceptable business practices and ethical behaviours are satisfied through more contemporary investment in corporate social responsibility (e.g. urban renewal and charity philanthropy), which also satisfies general societal stakeholders. In the company’s corporate social responsibility report, the company boasts charitable donations to such agencies as the United Negro College Fund, The Human Rights Campaign, and the Asian Pacific Islander American Scholarship Foundation (A&F 2011). According to Adam Smith, “the wise and virtuous man is at all times willing...to sacrifice his own needs for the greater good of the universe” (Fleischacker 2011, p.32). Even though Abercrombie & Fitch was experiencing recurrent sales declines in certain markets, mostly those with negative publicity pervading the business model, it still maintained its ethical and moral good to continue with its philanthropy efforts when, in reality, these donations could better serve expansion and business improvement. Hence, since Abercrombie & Fitch is satisfying the ethical demands of many Western cultures and respected business theorists, deviation from compassionate and helpful behaviours, even if only short-term, are necessary to secure the business and its profitability. Having the business remain successful impacts consumers that trust and rely on the brand and its quality, the volume of employees, executives and managers that work within the business model, and those in general society who are given advantages through philanthropic work on behalf of the company. This is why the cultural relativism model is so relevant for examining the case of Abercrombie & Fitch. It is largely business self-protectionism serving as a catalyst for what drove the CEO to make comments about the types of consumers viable and desirable to the business whilst, at the same time, fulfilling abundant moral obligations throughout the world. The United Nations, as one relevant organisation, continues to press many different international cultures to adopt a universal set of human rights and then apply these new norms in tangible social practice within their national borders. However, these concepts are not widely accepted in all international cultures. According to Pollis and Schwab (1979) the human rights norms imposed by Western nations cannot be defended in a very diverse global culture and thus have limited applicability universally. Abercrombie & Fitch maintains its headquarters and the majority of its retail organisations in the United States, a country highly influential in establishing the expected norms of acceptable human rights both domestically and internationally. Advocates sharing the same ideology of Pollis and Schwab (1979) would likely scoff at any notion that a company which has provided such financial benefits to society and brought shareholders considerable profit would be defying the established Western norms of human rights simply by making a statement that certain people do not belong in their clothes. Hence, negative sentiment about the company is certainly culturally driven and, under this theory, there should be more tolerance domestically and internationally about what the CEO is attempting to accomplish with the brand. Evaluation using cultural relativism As identified by Carr (1968) the game strategy of business is comparable to poker, in which it is an expectation of all players to not only distrust other players, but to be actively deceptive and cunning as a means of maintaining a superior game play position. As Carr (1968) points out, it would be a strategic disadvantage to be benevolent and kind-hearted and poker players are not considered unethical during the course of the game. In poker, it is the goal of the player to ensure receipt of the remuneration available by taking actions that maximise one’s personal utility. This can be legitimately compared to the business environment, in which utility (in this case revenue growth) is accomplished with marketing that creates a desirable brand personality in the minds of consumers. Clearly, in certain Asian markets, the recent negative publicity and attacks that have been experienced by Abercrombie & Fitch are not meeting with negative consumer sentiment, but in the United States, celebrity sentiment and the general consuming public are being dissuaded from patronizing the retailer as a result of this publicity. Under cultural relativism, the actions of Abercrombie & Fitch were innocuous in certain cultures, attempting only to achieve utility, whilst also satisfying important shareholders. Abercrombie & Fitch has developed an internal culture at the organisation that maintains the same values and vision offered by CEO Mike Jeffries. There is a belief in psychology that individuals in a culture make routine status comparisons against others and, when the assessing individual believes they are in an advantageous situation, it builds self-esteem and improves psychological well-being (Suls, Martin and Wheeler 2002). Abercrombie & Fitch sets the tone of this exclusive social advantage when employees and managers are hired as the company has clearly established its policies and desire to recruit attractive and youthful representatives associated with the company’s brand identity. The idea of social comparisons provided by Suls et al. (2002) are assumed to be universal traits and it is further supported by Taylor and Brown (1988) that people have a genuine desire to believe they are better than others. For those people that gain a sense of personal satisfaction making downward social comparisons, utility is maximized by chastising or ignoring the needs of others who are perceived to be in a less-advantaged situation. Why should this necessarily matter to cultural relativism? The longevity of career growth, including compensation and benefits (if applicable), are dependent on the success of the business model in gaining revenues from its most desirable target market segments. To the internal culture that shares the same vision and brand concept of Abercrombie & Fitch, the CEO would only be accomplishing what is absolutely critical to ensure that the retailer does not lose capital (from shareholders) and stay profitable. If Abercrombie & Fitch were to change its brand personality to a more empathetic and inclusive ideology, as a response to one culture’s belief that the business is acting unethically by shunning larger-sized customers, it would erode years of loyalty that had been established with its historical marketing strategies. Though the business might experience very short-term revenue gains by satisfying certain buyer markets that believe Abercrombie is acting more empathically, it would reduce the feeling of exclusiveness and social superiority that drives the majority of its youth buyers that provide considerable profitability. This is why the theory of cultural relativism should actually serve to validate the decision-making of the CEO, rather than criticizing with the rather unrealistic belief that social justice should be an opportunity for all stakeholders and be recognized through leadership behaviours of the Chief Executive of Abercrombie & Fitch. Consider China, another country in which Abercrombie & Fitch maintains presence (Eaton 2011). China’s cultural characteristics are theorised to be very hedonistic, which is akin to self-serving behaviours and the maximum pursuit of personal pleasure and increasing personal utility (Overskeid 2002). Abercrombie & Fitch has always maintained a very masculine-centric brand identity which has brought the company considerable loyalty from male youth buyers sharing the same values of the organisation. In China, according to Wen (2007) there are two important factors that are considered socially relevant in what constitutes a Chinese gentleman: having nice looking skin and dress. Hence, in China, pursuit of maximising one’s utility and satisfying inherent and culturally-driven hedonistic desires is considered widely acceptable. An overweight and under-groomed Chinese individual would be considered distasteful and certainly not a respectable Chinese gentleman. Having considered the situation associated with Chinese culture, cultural relativism, again, justifies the notion that international society should be tolerant of what CEO Jeffries is attempting to accomplish. Though well-established moral and ethical norms in countries such as the United Kingdom might impose certain negative social connotations on individuals that attempted to defy established norms, shedding social empathy in favour of maximising one’s own social position and self-fulfilment, yet another culture would whole-heartedly embrace this as normal behaviour. Conclusion As illustrated, the Abercrombie & Fitch case is a clear example of where cultural relativism should be applied when judging the business on its commentary whilst attempting to secure the long-term utility of internal stakeholders and general society, as well as the business itself. If there had been significant sales declines in markets other than the United Kingdom and the United States, it is likely that there is a universal belief of right versus wrong. However, stable sales in certain Asian countries where the business has presence, even after the very public negative press provided about alleged unethical leadership and behaviours, illustrates that cultural relativism is the most appropriate ethical theory for enacting judgement against the organisation. Park (2006) disagrees, however, stating that citing a stance of tolerance is ultimately self-defeating and believes that there are some universal standards on what constitutes ethical behaviours. Citing a radical example of Adolf Hitler, Park justifies that cultural relativism is not a justified theory otherwise the entire globe, as a collective whole, would believe that Hitler’s activities in Europe would be morally tolerable. Of course, the Abercrombie & Fitch example is not akin to the alleged atrocities of Hitler and Nazi Germany, it is necessary to compare a more stoic set of ethical values with the concept of cultural relativism to put into perspective that not all of society’s stakeholders prescribe to cultural relativism, which may explain why only U.S.-based stakeholders and some European stakeholders felt outrage against Abercrombie. American celebrities were perturbed; however, no other international famous figure spoke out about the problem. Hence, society should be tolerant in this particular case and provide fair evaluations even if conflicting with established, regionalised norms of ethics. References A&F (2011). A&F Cares: 2010/2011 Corporate Responsibility Report. [online] Available at: http://www.anfcares.org/pdfs/12.19.11%20CR%20REPORT.pdf (accessed 22 May 2013). Bass, B.M., Avolio, B.J., Jung, D.I. and Berson, Y. (2003). 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