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What Ethical Consumerism Means For Business: McDonalds

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Question:

An analytical Business Report based on what ethical consumerism means for businesses. Choose one company evidencing how they operate ethically.
 
 

Answer:

Executive summary:

This study provides an analysis and evaluation of the relevance of ethical consumerism in a business. The method of analysis is done by evaluating McDonalds’ ethical operation through primary survey and secondary research. Result of analysis reveals that most consumers are making ethical choices except for the fact that the fast food products are not healthy for children. This report also finds out the prospects of the company in its current situation needs to be transformed for the betterment of the consumers. The area of weakness needs remedial action that must be taken by the company management.

Introduction and background:

A proliferating number of individual make their economic decisions based on ethical values. These include adaptation of environmentally friendly product and production technique, labor standards (wage rates and conditions related to working) and consideration of human rights. Ethical consumerism is a thriving phenomenon that predicates ethical trading activities. The motivations behind the ethical business practices are evident and diverse. By ethical business practices we mean that the values of the people are involved, environmental responsibilities are recognized, and production is done in an efficient way and effectively. (Lewis and Potter, 2011) Most of the businesses endorse ethical business practices because they believe the consumer wants are an important aspect of business. (Healey, n.d.)

Ethical consumerism aims to identify consumers who choose to purchase goods that are ethically sourced, produced and ethically distributed. (McGregor, 2005) What do we mean by ethically sourced, produced and distributed? By ethical source we mean that the origination of the product must be done in ethical terms. A production is said to be ethical if the process of production involved elements of recycle or using labor who are not identified as a slave or child. If one purchases this type of product then he can be symbolized as an ethical consumer. (Hudson, Hudson and Edgerton, 2013)

This study focuses on the basic concept of Ethical Consumerism and its importance in the businessWe have taken up a company, McDonalds which is the largest hamburger chain restaurant and tried to analyze its ethical operation. Every Organization must strive to ensure customer satisfaction and take into account ethical consumerism. Secondary and primary research has been taken towards the necessity and implementation of ethical consumerism within the organization. (Payne, 2015)

 

Importance of Ethical Consumerism in Business

Now with the advent of globalization, consumers are exposed to a lot of choices and options. Keeping in mind that consumers are alarmingly engaging themselves into Green Economy, it is necessary for business enterprises to understand and evaluate the needs of a consumer. Ethical consumers are concerned more about other ethical issues than the quality and price of the good. They are seeking for certain standards in the products. (Confino, 2011) This includes that the product must contain natural and pure ingredients, ethical sourcing, production and distribution must be exercised, there must be clear information about the nutritional values of the product, transparency, fair labor engagement, honoring of Human Rights, protect human health must be exercised, company must consider the aspect of sustainability and clean and green environment, company must participate in  ethical ways of marketing and advertising and must engage in renewable or recyclable techniques of packaging. (Leading in Context, 2012)

The key pivot for a company is consumer and his behavior regarding the company and its product. In this regard it is necessary for a company to develop objectives that would focus on rendering quality customer service. Corporate Social Responsibility (CSR) companies aim to achieve a striking balance in economic, social and environmental imperatives. According to CSR, the key issues that must be adapted by a company are environmental management, eco-efficiency, labor standards and proper working conditions, relationship between employee and community, gender balance, human rights issues, measure of good governance and measures against corruption. (Harrison, Newholm and Shaw, 2005)

Companies today are realizing that development of more responsible and accountable products and corporate practices are necessary. This thinking of the companies from the theory called ‘Ethical Consumerism’ which implies that more and more consumers are making their purchase decisions based on the product’s social, ethical or environmental aspects. (Bell, 2015) But do the consumers really practice ethical choice in reality is an alarming issue. A recent article depicted this debate. But this is short sighted issue. In recent years, consumers are becoming judicious and demand that the companies take an initiative to responsibly produce their goods. (Cleanagency.com, 2013). (Romu, 2009)

Mcdonalds:

McDonalds is the world’s largest hamburger chain restaurant of fast food. The global strategy of McDonalds is named as the Plan to Win which is focused on remarkable customer experience. The mission of this company is to become customer’s favorite place. (Small Business - Chron.com, 2015)

 

Values And Ethical Decisions Of Mcdonalds

Customer experience at the core- the company strives toward quality, service, cleanliness and value rendered to each and every customer.

Commitment- the company believes in providing opportunities, nurturing talent and developing leaders so that a healthy and well trained working environment ensures the continued success of the company.

Balancing the interest of three key groups- McDonalds trusts in the business model that depicts balancing among the owner, suppliers and employees of the company.

Ethical business practice- the company is believed to engage in high business standards with fairness, honesty and integrity.

McDonalds supports Ronald McDonald House Charities and leverage size, scope and resources to make the world a better place to live in.

Business profitability is ensured by the company by focusing on the well-being of the customers.

Strive to improve- constant innovation is adapted by the company to respond to the changing needs of the customers and employees. (Aboutmcdonalds.com, 2015)

The CSR strategy of the McDonalds rotates around sustainability. This is because that the company recognizes that by abiding by sustainability, it will be able to acquire constant supply of inputs for production of hamburgers and other fast food products. (McDonalds jumps on the CSR bandwagon, 2002) It took an initiative by selling salads and cholesterol free fast food products. It established the Global Advisory Council (GAC) which works by collaborating with international teams regarding expert advice on nutritional values. (Knowmore.org, 2015) (Unido.org, 2015)

McDonalds is well aware of its environmental responsibility. It had taken massive efforts in reducing the greenhouse emissions by saving energy and averting carbon emission. Ethical consumerism denotes that the production techniques must be ethical which is practiced by the McDonalds. (Ukessays.com, 2015) It has adopted a design of green restaurant. In addition to this McDonalds banned the use of plastics and replaced it with paper based packages. (America, 2012)

Secondary & Primary Research

A primary research based on the Convenience Random Sampling was carried on 50 consumers who are acquainted to McDonalds (Refer Appendices for Questionnaire). The survey is as follows:

Do you visit McDonalds for eating?

Likert scale range

Number of respondents

Frequency percentage

Strongly disagree (1)

2

4

Disagree (2)

7

14

Indifferent (3)

15

30

Agree (4)

20

40

Strongly agree (5)

6

12


It can be seen from the data that the people 52% of the people either agree or strongly agree that they visit McDonalds for eating. While others are doesn’t eat or are indifferent

Do you believe that the company is ethical in giving 100% more vegetables, fruits, whole grains or low fat grains?

Likert scale range

Number of respondents

Frequency percentage

Strongly disagree (1)

4

8

Disagree (2)

10

20

Indifferent (3)

8

16

Agree (4)

20

40

Strongly agree (5)

8

16

 

It is seen from the above data that the 56% of the people either agree or strongly agree that the company gives 100% more fruits and vegetables.

How far are you satisfied with the animal meat used in McDonalds?

Likert scale range

Number of respondents

Frequency percentage

Strongly disagree (1)

8

16

Disagree (2)

6

12

Indifferent (3)

16

32

Agree (4)

14

28

Strongly agree (5)

6

12


It can be seen from the above data that the 40% of the people believe that McDonalds uses good animal meat while 32% of the people are indifferent.

Do you think the food provided by McDonalds is nutritional for the children?

 

Likert scale range

Number of respondents

Frequency percentage

Strongly disagree (1)

12

24

Disagree (2)

16

32

Indifferent (3)

10

20

Agree (4)

8

16

Strongly agree (5)

4

8


From the above data it can be seen that the 56% of the people thinks that the McDonalds food is not nutritional for the children and 24% of them thinks that the food is nutritious.

How far do you think the company is successful in ethically recycling the water?

Likert scale range

Number of respondents

Frequency percentage

Strongly disagree (1)

8

16

Disagree (2)

6

12

Indifferent (3)

16

32

Agree (4)

14

28

Strongly agree (5)

6

12


It is seen from the above data that the company is successful in recycling its waste water. And the company is ethically sound company.

Does the company comply with the standards of ethics and values when it comes to using paper bags and recycling the wastes?

Likert scale range

Number of respondents

Frequency percentage

Strongly disagree (1)

5

10

Disagree (2)

8

16

Indifferent (3)

10

20

Agree (4)

14

28

Strongly agree (5)

13

26


It is seen in the above data that the company complies with the values and ethics and uses paper bags and recycles waste according to 54% of the people. 

What is your perception about McDonalds when it comes to Green Economy? How would you rate it?

Likert scale range

Number of respondents

Frequency percentage

Strongly disagree (1)

5

10

Disagree (2)

6

12

Indifferent (3)

10

20

Agree (4)

17

34

Strongly agree (5)

12

24


It is seen from the above data that McDonalds is a economically green company which means that the company reduces the environmental risks making it a sustainable company.

A secondary research reveals that a program undertaken by The White House (The Huffington Post, 2015) which approaches to promote a sound consumer awareness and leverage market power collaborated with the Walmart, McDonalds and Subway had helped to fight labor trafficking which had taken place within the Sunshine Stat’s tomato industry. (Sun, Chen and Wang, 2012)

Innova Marketing has portrayed that more and more consumers are concerned and are demanding pure products. The concept of sustainability is already in the minds of the people when making decisions regarding purchase of goods.

GlobeScan’s and SustainAbility’s recent survey done on global consumers reveal that consumers in the developing countries are emphasizing more on Green Economy.

McDonalds had taken a small step to approach an environmental friendly initiative by recycling the polystyrene coffee cups and replacing them with paper cups. (News, 2015) This eco-friendly approach can be seen as an adoption of ethical consumerism By this step, McDonalds have successfully captured the interest of the consumers regarding eco-friendly approach. (The Huffington Post, 2015)

 

Policies:

McDonalds had been criticized on grounds of unethical practices in environmental, health and labor fields. (McDonald's worker strike goes global, 2015) McDonalds was believed to contribute to the obesity epidemic in society to which McDonalds must formulate policies to serve and nutritious food. McDonalds must make policies regarding the environmental degradation it caused by implementing eco-friendly and emission free food processing unit. Recently McDonalds was in news as Brazilian unions have taken legal action against McDonald’s franchise. The allegation that they posed is violation of labor laws by time-clock fraud and unhygienic & unsanitary working conditions. (Financial Times, 2015) McDonalds must formulate policies regarding protection of their employees.

Critical evaluation:

The importance of ethical consumerism will be recognized only when ethical consumers are identified. The primary survey done may reveal that customers are making ethical choices but in reality do they really make such choices? In this regard should a company really consider ethical consumerism? (Paish, 2011) The answer is that most consumers do not really go through the ingredients of food products (in our case) (Foodispower.org, 2015) which reveal that they are not making ethical choices. Also McDonalds is the largest fast food center and fast foods are considered to be harmful for health yet the fast food restaurants are making it big in business (Young, 2003) (Schröder and McEachern, 2005). Thus there is a need to recognize the ethical consumers to practice ethical consumerism. (Devinney, Auger and Eckhardt, 2010)

 

Recommendations:

To ensure that McDonalds doesn’t participate in environmental hazardous activities, it should make use of a renewable form of energy which is the solar energy. This is will lead to less carbon emission in the long run.

The advertisements of the McDonalds must promote its balanced healthy diet regime. The advertisements should also aim at rendering nutritional advice regarding healthy fast food eating habits.

Another aspect that McDonalds must focus is the diversification of diets to ensure that the requirements of different age groups are met. (Schonberger, 2014)

Conclusion:

Consumers are considered to be the basis for the existence of a business. Realizing the customer needs and expectation is an important aim of a company. In doing so the company must keep in mind the most talked about issue of ethical consumerism. As far as McDonalds is concerned, it continues to abide by the CSR and exercise good business conducts and ethics across its operation and also ensure that now and in the near future enhanced quality programs are initiated to promote ethical consumerism. Thus the need for ethical consumerism is inevitable in a business. (Marketing, 2012)

 

References

Aboutmcdonalds.com, (2015). McDonald’s Mission and Corporate Values :: AboutMcDonalds.com. [online] Available at: https://www.aboutmcdonalds.com/mcd/our_company/mission_and_values.html [Accessed 24 Feb. 2015].

America, 1. (2012). 10 Most Ethical CEOs in Corporate America - OnlineMBA.com. [online] OnlineMBA.com. Available at: https://www.onlinemba.com/blog/10-most-ethical-ceos-in-corporate-america/ [Accessed 24 Feb. 2015].

Cleanagency.com, (2013). Ethical Consumerism: What's More Important, Values or Value? - Clean Agency. [online] Available at: https://cleanagency.com/ethical-consumerism-whats-more-important-values-or-value/ [Accessed 24 Feb. 2015].

Devinney, T., Auger, P. and Eckhardt, G. (2010). The myth of the ethical consumer. Cambridge: Cambridge University Press.

Financial Times, (2015). McDonald’s franchisee sued by Brazilian unions - FT.com. [online] Available at: https://www.ft.com/intl/cms/s/0/a0ae49f0-bc6f-11e4-a6d7-00144feab7de.html#axzz3SivSbskD [Accessed 25 Feb. 2015].

Healey, J. (n.d.). Ethical consumerism.

Hudson, M., Hudson, I. and Edgerton, J. (2013). Political Consumerism in Context: An Experiment on Status and Information in Ethical Consumption Decisions. American Journal of Economics and Sociology, 72(4), pp.1009-1037.

Knowmore.org, (2015). McDonald's Corporation - Knowmore.org. [online] Available at: https://www.knowmore.org/wiki/index.php?title=McDonald%27s_Corporation [Accessed 25 Feb. 2015].

Leading in Context, (2012). What Does Ethical Consumerism Mean for Business?. [online] Available at: https://leadingincontext.com/2012/10/10/what-does-ethical-consumerism-mean-for-business/ [Accessed 24 Feb. 2015].

Lewis, T. and Potter, E. (2011). Ethical consumption. Milton Park, Abingdon, Oxon: Routledge.

McDonalds jumps on the CSR bandwagon. (2002). Strategic Direction, 18(9), pp.8-11.

McDonald's worker strike goes global. (2015). ETHICAL CONSUMER. [online] Available at: https://www.ethicalconsumer.org/corporatenews/storyoftheday/entryid/1565/mcdonalds-worker-strike-goes-global.aspx [Accessed 25 Feb. 2015].

McGregor, S. (2005). The Ethical Consumer. International Journal of Consumer Studies, 29(4), pp.387-388.

Payne, J. (2015). Ethical Consumerism and Conservatism – Hand In Glove. The Heinz Journal. [online] Available at: https://journal.heinz.cmu.edu/2012/01/ethical-consumerism-and-conservatism-hand-in-glove-2/.

Schonberger, (2014). Here’s What McDonald’s Can Do To Turn Around Its U.S. Business. [online] Fox Business. Available at: https://www.foxbusiness.com/industries/2014/08/21/heres-what-mcdonalds-can-do-to-turn-around-its-us-business/ [Accessed 25 Feb. 2015].

Schröder, M. and McEachern, M. (2005). Fast foods and ethical consumer value: a focus on McDonald's and KFC. British Food Journal, 107(4), pp.212-224.

Small Business - Chron.com, (2015). Examples of Objectives for a Company. [online] Available at: https://smallbusiness.chron.com/examples-objectives-company-10536.html [Accessed 25 Feb. 2015].

Ukessays.com, (2015). McDonald's business ethics. [online] Available at: https://www.ukessays.com/essays/business/mcdonalds-business-ethics.php [Accessed 24 Feb. 2015].

Unido.org, (2015). What is CSR?. [online] Available at: https://www.unido.org/en/what-we-do/trade/csr/what-is-csr.html [Accessed 24 Feb. 2015].

Young, B. (2003). Does food advertising make children obese?. Young Consumers, 4(3), pp.19-26.

Bell, P. (2015). Ethical Consumerism: what is it and how can you make it work for you?. 1st ed. [ebook] Available at: https://Glasgow Caledonian University [Accessed 25 Feb. 2015].

Confino, J. (2011). What motivates consumers to make ethically conscious decisions?. [online] the Guardian. Available at: https://www.theguardian.com/sustainable-business/motivates-consumers-environmental-ethical-decisions [Accessed 25 Feb. 2015].

Foodispower.org, (2015). Food Empowerment Project | Because your food choices can change the world. [online] Available at: https://www.foodispower.org/ [Accessed 25 Feb. 2015].

Harrison, R., Newholm, T. and Shaw, D. (2005). The ethical consumer. London: SAGE.

Marketing, C. (2012). Ethical Sourcing: A Blossoming Trend in Food - CBD Marketing. [online] CBD Marketing. Available at: https://www.cbdmarketing.com/about/blog/ethical-sourcing-a-blossoming-trend-in-food/ [Accessed 25 Feb. 2015].

News, U. (2015). McDonald's testing eco-friendlier coffee cups. [online] NBC News. Available at: https://usnews.nbcnews.com/_news/2012/03/21/10792917-mcdonalds-testing-eco-friendlier-coffee-cups [Accessed 25 Feb. 2015].

Paish, M. (2011). Ethical food choices influencing product development, research finds | Australian Food News. [online] Ausfoodnews.com.au. Available at: https://ausfoodnews.com.au/2011/12/21/ethical-food-choices-influencing-product-development-research-finds.html [Accessed 25 Feb. 2015].

Romu, H. (2009). Ethical consumption as an identity project - A narrative approach to Finnish ethical consumers’ identity construction. 1st ed. [ebook] Available at: https://epub.lib.aalto.fi/en/ethesis/pdf/12188/hse_ethesis_12188.pdf [Accessed 25 Feb. 2015].

Sun, P., Chen, H. and Wang, K. (2012). Ethical evaluation by consumers: the role of product harm and disclosure. British Food Journal, 114(1), pp.54-69.

The Huffington Post, (2015). This Human Rights Group Is A Model For How The U.S. Can End Slave Labor. [online] Available at: https://www.huffingtonpost.com/2015/02/10/human-trafficking-ciw_n_6647692.html?ir=India [Accessed 25 Feb. 2015].

Adair, J. and Allen, M. (2003). The concise time management and personal development. London: Thorogood.

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