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(Honesty and Marketing Ethic)

Prepared for :

Prepared By :
(1109346) Rafita Khairunnisak
(1109356) Suci Marcelina Efendi
(1109368) Dabitha Wise Maliha




The business competitions are increasingly tight at this present time. Success or failure of
business achievement are depend on the fields of marketing, production, finance, and other fields
such as personnel. Besides, it also depends on their ability to combine all of these functions so
the entrepreneur can run their business smoothly. Marketing is a one of most important discipline
in business. The issues of marketing ethics are never endless and the high level of competition
faced by enterprises today is not directly necessary strategic moves by the companies dealing
with the problems because it is so complex and the high level of competition to satisfy consumer
needs become opportunities to generate profits. Not a few of entrepreneur who perform a variety
of non ethic strategies that may be beneficial to their business, while other parties are aggrieved.
Customer satisfaction plays an important role because it is the central discourse in a
business to develop and ensure the survival of business for long-term. In addition, it can provide
a good basis for re-purchase the products or services and create customer loyalty. It can establish
recommendations from mouth to mouth (word of mouth) which very beneficial, because it would
lead to causal relationships which increase the business profit. However, the most important in a
business is the business people need to know and understand how ethics in business.
Management and marketing ethics talk about the values espoused by the organization in
connection with the exercise of business activities.
Trust in others honesty is a key component of the long-term performance of firms,
industries, and even whole countries. However, in recent years, numerous scandals involving
fraud have undermined confidence in trade. It can be scandals to the business. Wide variety of
ethic issues are frequently faces in business, because many of business owners are running
fraudulent practices such as dishonesty in business practices. Often, this breach of ethics happens
on an organization-wide scale, where an entire business promotes, supports or condones
coverups, falsification, or fact-twisting. More often, dishonesty is simply personal
misrepresentation. It includes outright lies, skewing of facts, and failure to communicate truth.
From ancient times until today honesty has been upheld as a virtue, and dishonesty widely
considered as a negative character quality.

A. Marketing theoy of dishonesty in business cases.

Marketing comes in a wide variety of flavors based on audience, media platform and
business in todays evolving and dynamic marketplace. According to the American Marketing
Association (AMA) Board of Directors, Marketing is the activity, set of institutions, and
processes for creating, communicating, delivering, and exchanging offerings that have value for
customers, clients, partners, and society at large. Dr. Philip Kotler (2009) defines marketing as
the science and art of exploring, creating, and delivering value to satisfy the needs of a target
market at a profit. Marketing identifies unfulfilled needs and desires. It defines measures and
quantifies the size of the identified market and the profit potential. It pinpoints which segments
the company is capable of serving best and it designs and promotes the appropriate products and

According to Velasquez (2005), Ethics is the discipline that examines ones moral
standards or the moral standards of a society to evaluate their reasonableness and their
implications for ones life. Moreover, business ethics is a specialized study of moral right and
wrong that focuses on business institutions, organizations, and activities. It is a study of moral
standards and how these apply to the social systems and organizations through which modern
societies produce and distribute goods and services, and to the activities of the people who work
within these organizations.

According to Business & Society - Ethics and Stakeholder Management Business

Stakeholders (Carroll & Buchholtz, 2000) is "Ethics is the dicipline that offer section with what
is good and bad and with moral duty and obligation". It is concerned with the behavior of good
and bad or right and wrong that happens in a business context. The concept ethics as the moral of
right and wrong are interpreted as fairness, justice and equality.

According Kreitner (1992.82), ethics is essentially the study of moral responsibility

considered as which one is true and wrong. Griffin (2000.82) succinctly states that ethics is the
beliefs of what is good and what is bad. Nugroho (1996) mentions that the rapid business
development often force businesses in the pursuit of profit in contact with ethical issues, even
though without having to violate laws and regulations.
There are five different approaches to values to deal with moral issues are: The
Utilitarian, the Rights, Fairness and Justice, the Goodness, and the Virtues.

1. The Utilitarian Approach

Utilitarianism was conceived in the 19th century by Jeremy Bentham and John Stuart Mill to
help legislators determine which laws were morally best. Both men suggested that ethical
actions are those that provide the greatest balance of good over evil. This approach focuses
on the consequences that actions or policies have on the well being (utility) of all persons
directly or indirectly affected by the action or policy.

2. The Rights Approach

According to Immanuel Kant, what makes human beings different from mere things is that
people have dignity based on their ability to choose freely what they will do with their lives,
and they have a fundamental moral right to have these choices respected. People are not
objects to be manipulated; it is a violation of human dignity to use people in ways they do
not freely choose. The rights approach focuses on the legitimate claims we make on each
other, such as life and liberty. The principle states: An action or policy is morally right only
if those persons affected by the decision are not used merely as instruments for advancing
some goal, but are fully informed and treated only as they freely and knowingly consented
to be treated.

3. Fairness and Justice Approach

The fairness or justice approach to ethics has its roots in the teachings of the ancient Greek
philosopher Aristotle who said that equals should be treated equally and unequals
unequally. This approach focuses on how fairly or unfairly our actions distribute benefits
and burdens among the members of a group. It asks what is fair for all stakeholders, or
people who have an interest in the outcome. Fairness requires consistency in the way
people are treated. The principle states: Treat people the same unless there are morally
relevant differences between them.

4. The Common Good Approach

This approach to ethics assumes a society compromising individuals whose own good is
inextricably linked to the good of the community. Community members are bound by the
pursuit of common values and goals.

The common good is a notion that originated more than 2000 years ago in the writings of
Plato, Aristotle, and Cicero. More recently, contemporary ethicist John Rawls defined the
common good as certain general conditions that are. equally to everyones advantage.

5. The Virtues Approach

The virtue approach to ethics assumes that there are certain ideals toward which we should
strive, which provide for the development of our humanity. These ideals are discovered
through thoughtful reflection on what kind of people we have potential to become. It
focuses on attitudes, dispositions, or character traits that enable us to be and to act in ways
that develop our human potential. It asks whether any given action demonstrates human
behavior at its best.

Based on our case about dishonesty in business, it includes actions violate the principles
of ethical business. Sonny Keraf (1998) explains that there are principles of business ethics:

1. The principle of honesty.

Honesty is the most important thing in a business to gain the trust of customers, suppliers,
distributors and others. The honesty will give positive impact to the business because it gain
trust of each parties. There are three scope of business activities relating to honesty:
Honesty is relevant in fulfilling the terms of the agreement and contract. Businessman
can trust each other with other parties because they carry out their promises. If one of
party breaks the honesty ethic, then the business agreement is no longer possible to
cooperate again.
Honesty is relevant to the supply of goods and services with quality and good price.
Consumer confidence is a fundamental principle in business. Because if consumers or
buyers cheated and harmed by the seller, they will disappointed and then leave or switch
to another product or service.
Honesty is relevant in the internal working relationships within a company which
between employers and workers, and hooked up. The business in company will be
collapse if the honesty among employees and employers are not going well.
2. The principle of autonomy.
This principle means that they (the businessman) realize what is good and what is bad to their
customers. This principle starts from self-consciousness. The company have obligation to
their customers, which are:
Provide products and services to the best quality accordance to their demands.
Treat customers fairly in all deal, such as improve high service and respond their
suggestion and complaints.
Keep improve products or services and ensure the health and safety of customers
The company must respect human dignity while offering their products and services.
3. The principle of justice
It means that each party should be imposed and served fairly. Everyone must be treated
equally with protect by the rules of fair by government so every act of injustice can be
4. The principle of mutual benefit
It means that all parties strive for mutual benefit each other. In the business, this principle
requires a business competition in win-win situation.
5. The principle of moral integrity
This principle suggests the business should maintaining moral integrity because it will give
benefit impact to reputation and brand of the company.

There are three concepts of ethics in marketing by John R. Boatright:

1. Fairness (Justice).
Fairness is the most basic needs in the market transactions. The exchanges or transactions in
market are considered fair or unfair when each party provide benefits (mutually beneficial)
and provide adequate information. However, the provision of information in this transaction is
still doubt. Because the seller has no obligation to provide all relevant information to the
buyer / customer, and the buyer has an obligation to be informed about what their bought. The
obligation concerning this information is divided into two traditional doctrine in marketing,
which is caveat emptor (let the buyer be careful) and venditor emptor (let the seller be
2. Freedom
Freedom means providing the range of consumer choice. Freedom can not exist when
marketers try to manipulate fair business practices.
3. Well-being
It means considerate to evaluate the social impact of products and advertising, and product

The paradigm of ethics and business is a different perspective and it is time changed the
paradigm of ethics related to business or synergy between ethics to profit. It is precisely that this
era of intense competition, the good reputation of the company which is based on business ethics
is a competitive advantage that difficult to duplicate. The managers are now aware because only
ethical businesses are able to survive. Even ethics itself is now believed to be a source of long-
term profitability for the company. So it can harmonize between ethics and profit in business.

Business must be controlled within limits that are not to undermine freedom and the right
of everyone: the right business and consumer rights or the rights of society as a whole. Business
activity occurred because of the desire to meet the needs of each individual human life, and each
party must gain from the process. There is no denying that in general people found the business
is to seek maximum profit. To get the maximum profit, the company must do their best to get the
product sold. It takes innovative marketing concepts to the market products. Sellers should not
only think about how to keep the product can be sold, but also have to create, grow and maintain
customers. Therefore, business ethics are needed in marketing products to prevent unethical
marketing practices, which can cause unfair competition and harm consumers.

B. The losses suffered by SMEs in running a dishonest business

One of key to be success as an entrepreneur or business owner in the nature of business is

honesty and trust of the consumer society. If they are dishonest, definitely they will get a lot
of bad impacts and risks. As a result, many consumers do not believe with them, either to the
line of business as well as to their career. This is all the more we feel the jobs in the company
and in trade. To be employees in the company, honesty and responsibility factors spotlight and
a serious assessment of the owner of the company.

Cultural perspective
If business owners or sellers are dishonest in an area then both locals and non locals
buyers will assume that most of the businesses in the area are the people who are
dishonest and cunning, and also customers will assume that it is the act of hereditary
become a habit for them. So that would be seen as a bad image in that area.

Economics perspective
Obviously, dishonest act will destroy the business from economics perspective. The
sellers who are dishonest will only gain their business in a short period of time because
the buyers are not loyal to them. They are feel dissapointed and definitely they will not
come back to the seller. It will lead bankruptcy in the business.

Religion perspective
Obviously in religion perspective especially in Islamic religion stated that all the
shameful and unjust deeds is a sin, including dishonest. Buying and selling in the form
act of dishonesty and highly forbidden usury in Islam as burdensome scales, giving the
price does not correspond to the products, and much more. Because it is a sin, then God
will give punishment for those who are dishonest.

According to Surah Al Muthaffifiin 1-6:

Woe to those who give less [than due], Who, when they take a measure from people,
take in full. But if they give by measure or by weight to them, they cause loss. Do they not
think that they will be resurrected, for a tremendous Day, the Day when mankind will
stand before the Lord of the worlds?

According to Surah Hud 84-86:

And to Madyan [We sent] their brother Shu'ayb. He said, "O my people, worship Allah ;
you have no deity other than Him. And do not decrease from the measure and the scale.
Indeed, I see you in prosperity, but indeed, I fear for you the punishment of an all-
encompassing Day. And O my people, give full measure and weight in justice and do not
deprive the people of their due and do not commit abuse on the earth, spreading
corruption. What remains [lawful] from Allah is best for you, if you would be believers.
But I am not a guardian over you."

Therefore, it is clear that Islam forbid dishonest acts of people who cheat, which is not
justified and extremely harmful, people who ask filled dose when he bought and reduce
the time it sells really include someone evil deeds that must be dealt with, therefore Allah
threatens to His servants who do so to great crash, which in the interpretation Jalalain,
said "Wailun" major accident is defined Azab or is the name of a valley in hell

Word prophet of Muhammad saw:

( )

Meaning: The Prophet forbade the sale and purchase to deception. (HR. Muslim).

Psychological perspective
If a seller who has dishonest attitude to the buyer, the merchant will be feeling
uncomfortable, uneasy, easy emotion, feeling inferior to others and feel ashamed
because they are labeled as a liar.

Social perspective
On this perspective, sellers who dishonest in trade, they do not have many customers,
people will not buy on their business premises, even suppliers were no longer willing
to cooperate to them. His business will not grow and tend to die. In addition, they have
been deprived of basic rights of the buyer. Where every person has the right to get the
right information that will not cause harm later. This is because the buyer
dissatisfaction will create distrust against the seller. Thus, the possibility to repurchase
will not be possible and the seller will not compete to its competitors and the loss of
the buyer.
C. Reasons dishonest practices in SMEs in West Sumatra

1. Economics perspective
In general, most of sellers argue that the businesses are to seek maximum profit. To
maximize these profits, it is unavoidable to do the dishonest attitude and behaviors. If
maximize the profit is the only goal of the seller, then it would evoke unethical
The sellers of SMEs do unethical business like dishonest act it also encourage by their
pressure of their economics condition which are not fixed or the occurrence of
poverty. Where, they only have minimal capital to start a business, therefore they
have high expectations and trying to justify a variety of ways to get the maximum
benefit without thinking about the long-term effects.
Sellers are willing to lie in selling because they look through the financial condition
shown by the appearance of their buyers. Thus, the impulse to commit fraudulent acts
by providing an expensive price. They assume that people who have an exclusive
appearance have high income or new travelers who do not know the price.

2. Individual perspective
The decline in ethical formalism (which focuses on the moral intention and
behavior associated to certain rights.
Lack of awareness utilarian moral (moral relating to maximize the best thing for
people as much as possible)
Low level of education, knowledge and information about the materials,
hazardous materials
Low levels of honesty and ethics in the individuals
The wrong view opinion in running the business (the main purpose of business is
only looking for a profit, not for social interest)
Low social responsibility or CSR (Corporate Social Responsibility)
Lack of understanding of the principles of business ethics

3. Cultural perspective
The sellers who are dishonest to buyers caused a trend in the consumer. Age and
technology is always evolving over time. People who do not follow the trend will be
missed, resulting in the thinking of the sellers to deceive customers by creating a
product such as a bag or shoes that have the same shape and style of to original and
say it is a genuine product to a very expensive price. In addition, the presence of a
fault make natural habits contribute to form a negative culture in society.

4. Law perspective
The strength of binding or regulations governing trade, business and the economy
is still weak. Thereby cheating that occurs as a legal practice carried out without
warning making naughty seller becomes a deterrent.
Weak position of institutions that protect rights of consumers.

5. Social perspective
The sellers are only oriented to the money, not the orientation to the customer or
buyer. So sellers tend not to pay attention to ethics in business. Sense of social and
humanity seemed to have faded and do not care about it all. They only meet the
demand. So they are not responsible for an item / food harmful or potentially harmful
to consumers. They forgot how to prosperous life together through fulfillment, but
only expects earnings received in the short term even though it would harm his
neighbor either morally or material.
For example in the case of foods that contain hazardous substances, traders only meet
the needs and demands of consumers. The foods contain harmful substances
detrimental to human health, the merchant is not liable, because the community itself
in need, while traders only fulfill what the community needs.

6. Law perspective
The law is closely related to the sale and purchase, because every sociocultural and
different places will give different effects.

7. Technology perspective
The development of technology can not be denied create unethical business practices.
Various news about the rise of ethical violations in doing business in exposure
through print and electronic media, tends to bring out a new trick merchant. Due to
lack of awareness and education level, they will mimic how the process of making a
product that violates the ethics. Technology makes the world without limit, so that a
variety of easily accessible information including negative impact.
8. Religion perspective
Fraudulent practices carried out in the business due to the absence of the fear of God.
It happen due to the lack of understanding and understand every teaching and
religious education, especially Islam. The seller is only oriented to money, money that
control their lives as if they were not aware of the power of God.

9. Generic perspective
Chance and opportunity for cheating depend on the position of the object fraud
perpetrators. Opportunity to commit fraud is always at every position. However, some
of seller has a big opportunity and some of them only have small opportunity. In
general, the management of an organization / company has a greater opportunity to
commit fraud than employees.
Additionally, disclosure and exposure of a fraud not guarantee any recurrence of such
fraud either by the same actors as well as by other actors. Therefore, any fraud
perpetrators should be penalized if his actions revealed.

D. In global competition, dishonest practice will strengthen or weaken the


In the context of global competition at this present time, one of the effects of
globalization is the increasingly fierce business competition, which is characterized by
business activities that are now grown and evolved past what ever predicted and previous
vission. Business can be run in different ways between a country or organization or company
both in terms of culture, politics, law, economics, behavior and viewpoint. Business already
knows no space and time, from a business those just exchanging goods to goods (barter) to
the business by means of technology and information. Business transactions can now be
realized without having any physical meeting buyers and sellers. They can live anywhere,
and anytime can organize their business activities. Technology and Information
(communication) has changed the world so vast become smaller, as if the world has now
become a large village within easy reach of man.
In the business can be found violations of ethics, ethical values deviations are
increasingly subtle and without serious treatment will negatively affect the competitive
situation, the business climate, and the course of the nation's economic activity. Some deviant
behavior that occurs when this is the attitude justifies all the way to earn revenue and profits,
business with the pattern of violence has become a tradition, considered fraudulent tricks of
the business and mediocre, the increasing number of businessmen masked ethics.
According to the analysis that we did, dishonesty and unethical practices in business done
by sellers, especially in the area of West Sumatra will weaken competitiveness. It can be seen
from all perspective:

1. Cultural perspective
The main key to being a phenomenal business is honesty. The foundation of
honesty will create the continuity of business. Obviously if you want to establish this
culture, honesty is a fixed price that we need to apply in business. Especially businesses
that involve partner arrangements, certainly necessary fundamental lie to each other how
to builds a culture of honesty. Culture is not only insulated honest in relation to the
psychological character of the human individual. But honestly coverage an area of
strategic supports other businesses that each other has a close relationship.

2. Economics perspective
Business communication patterns without any honesty would only run temporary
business. If the sense of disappointment felt by the customer, then they will not want to
re-purchase on our products. The seller will be perceived image negatively. This will
have an impact on sales, which the seller will incur a loss for the long term and they will
go out of business because they can not compete amid global competition. While buyers
will tend to move and choose another vendor that can meet their needs. In addition,
buyers will tend to put a sense of distrust to the merchants and switch to modern markets
such as supermarkets more accurate example in terms of the scales. So that over time the
traditional market will be destroyed because of interest in purchasing power and a low
level of confidence.

3. Sosial perspective
Aspects of this business would be detrimental to others. The concept of a true
marketing ethics always involves other people; the other one has a goal to create wealth
and prosperity together. While fortunately it only feedback alone, because it is running a
business. Importantly how the business can run sustainable.
Therefore, if other areas or overseas travelers who already know our dishonesty in
business, then they will have a negative view of our region due primarily to losses
incurred by the public works in the region.

4. Individual perspective

In the long term, it will certainly weaken the competitiveness of our region to other
regions. Lack of awareness and knowledge about the seller who evoked negative impact
perceived corporate image of the customer and the community will be better and will
automatically increase the sales of the company itself. Why sellers believe that honest
trade will lose?

E. Trade honesty will get lose?

In our opinion, most of the sellers believe that if they were honest in selling their products
they definitely get the loss. But it just loss for a while and it does not cause negative impact
for them especially for longer term.

For example, a Salak seller served buyers. They often showing nice salak. The buyers
agree, including the price offered. Unfortunately, when considering, not just a nice salak as
shown earlier given, but also included salak that has begun to rot. In the short-term
perspective salak seller said, she felt lucky for being able to sell rotten salak. But is not so
buyers be disappointed and reluctant to again buy salak in her place. In the long-term
perspective, this salak seller lose because she will lose the relationship, even a buyer, if the
sale of this deceptive way will be transmitted buyers disappointed that word of mouth to
others. So we can conclude that the seller was no longer won the trust due to dishonesty in
the trade. Many cases could be an example of that dishonesty in business it would be
detrimental. We notice how quiet the gas station filling station-usual naughty reduce their
dose liter.

One of key to success in business is trust; and trust built by honesty. So it is convenient to
carry this motto, "price negotiable, but not for the (quality) materials and dosage. If the trader
is transparent to the buyer by saying that their profit is much cheaper than the price, so they
will not get much profit. Therefore, in their opinion dishonest is the best way to increase

Moreover, fairness is emphasized for online businesses. Currently, the products offered
only limited photos and videos only. When the buyer has transferred the money to the seller's
account, in fact, received quality is not the same as shown previously. Although not the least
reliable online store, honesty in terms of sales remains to be prioritized so that consumers can
feel comfortable while shopping. This is a result that can be generated if there is even one of
them to commit fraud. Opportunities to shop really honest when transacting business, could
be involved suspected and no longer be trusted.

In addition, the level of trust and loyalty of customers is not easy to get instantly
without offset by an equivalent feedback from sellers. High quality for a product will
always be able to create satisfaction for customers. Complacency will be followed by the
loyalty of customers so that they will not hesitate to repeat purchase on the merchant.
Thus, the resulting margin will be higher sales and increase profits for merchants.
Moreover, when demand is high, then the trader will be able to minimize the cost. So the
production level will be high without being followed by the increase in costs. This can be
seen from the definition of economies of scale.
Honesty will be directly proportional to the trust. Satisfied buyers will be free
marketer for the sellers. Because the buyers can create word of mouth which will affect to
the sellers business in the long term. Their efforts will be able to win the competition
amid global competition. Because they are able to deliver what consumers need and
want. In addition they are able to meet the challenges of global business, where they can
realize by side between what consumers expect to what they expect anyway. For the
sellers who are dishonest in business, they tend to experience losses due to consumers are
beginning to switch to another trader or market to different categories to address their
wants and needs. In the short term, unethical business practices will generate a profit. But
the catastrophe will come when customers will turn into enemy or foe for the sellers.

Selling or trading activities should pay attention to ethics in the business. Honesty
practice should be done consistently in order to avoid mutual harm such as dishonesty and lack
of transparency, and commit fraud or deception to consumers. It is in the background backs by
several factors such as the terms of some of the social, moral, religion, law, culture etc. Of the
various factors, the community will be encouraged to perform a variety of fraud in order to meet
the needs of complex life. Cheat and fraud will give negative impact on trade because the buyers
become distrust which will damage to business ethics.
Therefore, the consumer must be considered as an asset not to be used as an object that
can be manipulated and deceived. Business owners expected still have moral awareness and
responsibility to pay attention to the negative effects of its business activities for the community,
either in relation to health, moral, cultural, social and economic. Business owners must sensitive
to the interests of society and the state not to ruin it not only just for the sake of profit to

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