Business ethics comparative report 1500 words - excel_prof

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Course of Study: (3006IBA) Business Ethics and Corporate Governance

Title of work: Business ethics; managing corporate citizenship and sustainability in the age of globalization, 3rd ed. (2010)

Section: Introducing business ethics pp. 39--43

Author/editor of work: Crane, Andrew; Matten, Dirk.

Author of section: Andrew Crane, Dirk Matten

Name of Publisher: Oxford University Press

INTRODUCING BUSINESS ETHICS 39

and provides a good platform for thinking about why the idea that business ethics is an

oxymoron is so embedded in organizational life. Read the cartoons, have a laugh, and

then consider what needs to change in organizations in order to get people to take

ethics more seriously.

Case 1 :�- _

McEthics in Europe and Asia: should McDonald's extend its response to ethical criticism in Europe?

This case examines ethical criticisms of the US fast food giant McDonald's, and

explores demands for the company to extend their vigorous efforts to restore their

dented credibility in Europe to markets in Asia. The case focuses on the problems of

obesity and unhealthy eating that have confronted the company, which are present­

ed in the context of the broader critique of the chain. These issues cover many of the

key concepts around ethics, globalization, and sustainability that we have discussed

in Chapter 1.

McDonald's is truly a multinational corporation. By 2009, the firm was operating some

31,000 restaurants in 118 countries, serving almost 60 million customers a day. The mar­

ket leader in its industry, and one of the most vigorous exponents of a global business

approach, McDonald's has pioneered an innovative business model that has since been

widely imitated in the fast food industry and beyond.

However, there are many who are not so positive about the corporation's approach

and criticisms of McDonald's have been a common feature of the past three decades.

Nowhere has this been more evident than in Europe, where McDonald's became the bete

noir of environmentalists and social justice campaigners in the 1980s and 1990s. Not

only did the cornpany gain the distinction of being the subject of England's longest ever

trial-the by now legendary McLibel case-but anti-globalization campaigners in France

and elsewhere famously targeted the company with store occupations and assaults. More

recently, nutritionists and healthy eating campaigners roundly criticized the company for

its standard fare of high calorie burgers and fries that many saw as a major cause of spiral­

ling obesity rates, especially among young people. With a loss of market share to appar­

ently healthier offerings, and governments pushing for increasing regulation of fast food

advertising to children, McDonald's reached a crisis that saw it attempt an ethical make­

over in the mid-2000s. In came healthy options, such as fresh salads and fruit, as well as

sports campaigns for young people, and enhanced nutritional labelling. Meanwhile, with

increasing affluence in Asia leading to a wave of diet-related problems similar to those in

Europe-such as escalating rates of obesity and diabetes in children and young adults­

some started to question whether the new directions McDonald's was starting to take in

Europe shouldn't be replicated in India, China, and other developing countries.

Big Mac under attack

When the epic McLibel trial came to an end in 1997, after more than three years of hear­

ings, court proceedings, and deliberation, the McDonald's corporation must have thought

VISIT THE WEBSITE

for links to useful sources

of further information

40 UNDERSTANDING BUSINESS ETHICS

that things couldn't have got any worse. Although the company was partly vindicated

by the judge's verdict concerning the veracity of some of the claims made by an obscure

London activist group in the late 1980s, the two unemployed campaigners that the huge

company had spent millions of dollars taking to court were ruled to have proven several

of their claims. These included accusations that the company 'exploits children' with its

advertising; was 'culpably responsible' for cruelty to animals; 'strongly antipathetic' to

unions; paid its workers low wages; falsely advertised its food as nutritious; and risked the

health of its most regular, long-term customers-hardly a positive message to be sending

to its millions of customers and critics across the world. The trial attracted massive interna­

tional publicity, and even sparked the publication of an acclaimed book, a TV programme,

a documentary film, and most damaging of all, the McSpotlight website, which immedi­

ately made a wealth of information critical of McDonald's, much of it used in the trial,

freely available to an international audience.

More trouble was soon to come for the company from across the channel, when Jose

Bove and his radical farmers' union, the Confederation Paysanne, made internation­

al headlines for his campaign to defend small, local producers and resist the march of

the American multinational in France. McDonald's continued to meet resistance within

France and other parts of the world throughout the 2000s, due to an upsurge in anti­

American feeling following the invasion and occupation of Iraq. However, probably the

biggest ethical challenge faced by McDonald's in Europe and other developed countries

concerned issues of health and nutrition. With critics claiming that a diet of fast food had

been a major contributor to escalating rates of obesity, McDonald's, as the world's leading

fast food company, inevitably found itself first in the firing line. Among the arguments

made by its critics were that the company had failed to provide a balanced menu, that it

provided insufficient nutritional information and guidance, and that it actively encouraged

consumers (especially children) to make unhealthy choices, for example by promoting

'supersize' portions.

The hauling over the coals of the company's nutritional record continued with the

box office success of the film Supersize Me across much of Europe and the US in the mid-

2000s. In the movie, the filmmaker Morgan Spurlock experiments with eating nothing

but McDonald's for a month and records the subsequent effects on his health. Whilst the

company was aggressive in its response to the film in the US, its European response was

considerably more accommodating, suggesting on a website specifically launched to pro­

vide 'a balanced debate' on the nutrition issues raised by Spurlock that 'What may surprise

you is how much of the film we agree with'.

Meanwhile, European governments also started to tackle the fast food industry in efforts

to address health and nutrition issues. The UK government, for example, initiated a Com­

mons Health Committee inquiry into obesity that saw executives from McDonald's and

other food companies giving evidence. In France, meanwhile, the government introduced

a tax on all food and drink advertising not bearing a health message.

Big Mac fights back

In the face of such sustained criticism, McDonald's did not stand idly by, especially once

profits looked to be at risk. The chain launched a substantial turnaround strategy in 2003

where, to many people's surprise, the firm dropped its supersizing options, and put a range

of new healthy options on the menu, including salads and grilled chicken flatbreads,

INTRODUCING BUSINESS ETHICS 41

porridge for breakfast, and even the opportunity for concerned parents to replace fries

with carrot sticks and fruit in the ubiquitous children's 'happy meals'. A huge advertising

campaign emphasizing the firm's fresh and healthy new approach accompanied the menu

changes, with the slogan 'McDonald's. But not as you know it' splashed across close-up

pictures of fruit and salad. The campaign was also backed by booklets detailing the new

menus and healthy options for children, which were sent to 17m households across the

UK and elsewhere. Extended in-store nutritional labelling also followed-a move once

vigorously resisted by the company.

Beyond its own stores, McDonald's also launched exercise and sports initiatives especially

targeted at young people. Promoted under the theme of 'balanced lifestyles', the company

sought to show young people the two sides to a healthy lifestyle-a balanced diet and exer­

cise. Country websites in Europe began including sports sections in addition to the usual

information about stores and menus, and have now become a standard feature on national

websites. For instance, in France in 2009 the company was promoting its 'McDo Sports Tour',

which enables children to try out Olympic sports for free across the country, as well as the

'McDo Kids Iron Tour', a series of triathlons for the under twelves. And not to miss out on

Europe's passion for its favourite sport, the firm also sponsored the UEFA EURO 2008 Football

Championship and introduced partnerships with football associations in the UK to train

community football coaches and make coaching more widely accessible to young people.

Initially, such developments were viewed with considerable scepticism, especially when

it was revealed that one of the new salads, the Chicken Caesar salad, had more fat and cal­

ories than the much maligned hamburger. However, to this and many other criticisms the

company was quick to respond (in the case of the Chicken Caesar salad by introducing a

lower-fat dressing). Over time it has become clear that the shifts under way at McDonald's

are part of a long-term strategic realignment towards changing societal values and expecta­

tions. This was further emphasized by 2007 commitments to only serve lOOo/o Rainforest

Alliance-certified sustainably grown coffee in its UK restaurants, as well as switching its

delivery trucks to biodiesel made from its own reprocessed used cooking oil.

In most respects, McDonald's strategy appears to have been a success. Even though evi­

dence suggests that the vast majority of McDonald's customers still order a burger, fries, and

cola, it clearly feels more acceptable to eat at McDonald's again in Europe because the menu

is healthier, and families especially have greater opportunity now to provide their children

with a more balanced meal under the golden arches. Even the firm's fiercest critics seemed

to have lost their momentum, with the anti-McDonald's site McSpotlight apparently aban­

doned in 2005. Notably, the strategy seems to have contributed to a turnaround in the firm's

faltering prospects. From a slump in the early to mid-2000s, sales rebounded following the

menu relaunch-and even in the downturn of the late 2000s, the company was able to

maintain steady growth in profits. Although its ethical commitments had led to some cost

increases and a diversion from its standardized model, the firm's commitment to good value

continued to attract price-conscious consumers. Remarkably, by 2009 Europe was the firm's

highest growth region, driven in part by considerable popularity in food-loving France,

where according to The Times, the chain had become the country's 'worst-kept dirty secret'.

Big Mac goes East

However, despite the apparent success of the McDonald's turnaround in Europe, many

of the same threats to its reputation have returned to haunt the company in Asia. With

42 UNDERSTANDING BUSINESS ETHICS

increasing prosperity in emerging economies such as India and China, the demand for

eating out and for a whole range of convenience foods has expanded substantially in

recent years. In both India and China, the market for eating out now exceeds $120bn

a year, much of it in fast-food restaurants, with further growth widely predicted across

Asia. Capitalizing on this trend, McDonald's announced in 2009 plans to open a further

500 restaurants in China over the next three years, including more drive-in formats and

24-hour delivery. But as eating habits are changing, so too are health problems. Rates of

obesity in China have doubled in the last ten years, and even though only a few decades

ago famine was a more common threat, the country is said now to be facing an oncom­

ing obesity epidemic. Other diet and exercise-related problems such as diabetes and heart

disease are also on the rise.

To date, activists and regulators have not challenged fast food companies such as McDon­

ald's to the same extent that they were attacked in Europe, but growing pressure is clearly

evident. A 2008 report by the group Consumers International claimed that global brands

take advantage of lax laws in Asian countries to promote calorie-dense and nutrition-poor

foods to children. A follow-up by Ethical Corporation magazine revealed that, although

widespread in Europe, nutritional information was absent on McDonald's websites for the

Philippines, Hong Kong, and China. Moreover, practices now halted in Europe appeared

to be much in use in Asia-such as dedicated online kids' zones where the company has

been accused of targeting young children with unhealthy food.

The company this time has been less slow to respond to its critics-a healthy option

corn soup has emerged on the menu in China, a vegetarian burger features in India, and

the games, competitions, and special offers featured on the company's Asian kids' zones

have largely been scaled back. But the overall emphasis on healthy eating, exercise, and a

balanced lifestyle has yet to be actively promoted to anything like the same extent as in

Europe. Whether this means that the company is planning a different strategy in Asia or

is simply rolling out a global ethical response over time, remains to be seen.

I Questions 1 Set out the main criticisms that have been levelled at McDonald's in Europe. To what

extent are these criticisms likely to be replicated in Asia? What differences can be

predicted?

2 Describe and evaluate the tactics used by McDonald's in responding to their critics in Europe? Will these work to the same degree in Asia?

3 Should McDonald's offer healthy alternatives to the same extent in all the countries in which it operates, or just those where it has been criticized in the past, or is it expecting

further regulation? What if customers overseas do not want healthy options?

4 How could McDonald's seek to avoid further criticism in the future? Can the company realistically present itself as an ethical corporation?

5 How sustainable is the fast food industry from the point of view of the triple bottom line?

I Sources Chhabara, R. 2008. Brand marketing-catering for local tastes. Ethical Corporation, 13 November:

http:/ /www.ethicalcorp.com/ content.asp ?ContentlD=6200.

INTRODUCING BUSINESS ETHICS 43

Choueka, E. 2005. Big Mac fights back. BBC News, 8 July: http:/ /www.bbc.eo.uk/news. Frean, A. 2009. McDonald's sales driven by French hunger. The Times, 10 August: http://www.

timesonline.com.

Schiller, B. 2006. Consumer health: food fears. Ethical Corporation, 19 June: http://www.

ethicalcorp.com.

The Economist. 2004. Big Mac's makeover-McDonald's turned around. The Economist, 16

October.

Yan, F. and Li, H. 2009. McDonald's eye 500 stores in China in 3 years: exec. Reuters, 18 February:

http:/ /www.reuters.com.

Notes

·

.¢'.. $ ..

For example, Kelemen and Peltonen (2001) analyse the different usage of the concepts of 'ethics' and 'morality' in the writings of Michel Foucault and Zygmunt Bauman, two leading authors in the area of postmodern business ethics. They reveal strikingly different distinctions that in fact virtually provide a direct contradiction to one another.

2 GoodCorporation/GfK Fairness Index Survey: http:/ /www.goodcorporation.com.

3 KPMG, Fraud and misconduct in Hong Kong: 2006 findings, http://www.kpmg.com.m. 4 There is a wide range of literature addressing globalization and its meaning. A good introduction is

provided by Scherer and Palazzo (2008a). 5 See Anon. 2006. Playboy halts operations in Indonesia after protests. Hindustan Times, 21 April: 15. 6 For an early articulation of this relationship, see Meadows et al. (1974). Whilst many of their initial

predictions of growth limits proved to be overly pessimistic, the basic principle of carrying capacity has become largely accepted.

7 See http:// www.taxjustice.net.