Asda - Marketing Ethics - Case Study

MARKETING ETHICS - CASE STUDY - ASDA

Executive Summary

This report summarizes the background of ASDA, their best codes of practice, their ethical challenges and an analysis of previous accusations made against the company. As well as a discussion on the changes that ASDA has implemented to overcome their ethical issues. And will finish with some recommendations to enhance ASDA’s ethical values.

Background

ASDA began in the 1920s when a group of Yorkshire Farmers formed Hindell’s Dairies. The first supermarket opened under 'Queens' name in Castleford in the early 1960s. But the name we know it for came up was when Peter Asquith and his brother Fred made contact with Associated Dairies ASquith + DAiries = ASDA. In 1989, they introduced their own clothes label, George, in partnership with George Davis. Arquie Norman arrived to ASDA in 1991 and brought back their foundation core values. Just before the end of the millennium, ASDA became part of the Walmart Group. This acquisition had a long-term impact on ASDA’s strategy and strengthened their position on the ‘Big Five’, but their urge to expand nationwide, and now compete against other retailers like Primark, made ASDA forget their core values. Their first Northern Ireland store was opened in 2005 and during they began their online sales on the late 2000’s. Up to this date ASDA has a workforce of over 17,000 employees in more than 370 stores, 28 depots and 8 recycling centres. In an average week, more than 18 million people shop in their stores and these days their foods are sourced from internal suppliers who work exclusively for ASDA. They have come a long way, there have been some bumps along the way but their future looks very bright. (ASDA, 2015)

ASDA’s main ethical issues

Being Britain’s second main supermarket, ASDA’s business and marketing ethics have been stained by past accusations concerning working conditions in their Bangladesh factory. In order to keep their low price against PRIMARK and other retailers, ASDA employees in this workshop are required to work for up to 80 hours a week for an hourly salary of 4 pence an hour in poor quality working conditions. Sadly, these individuals still struggle in order to offer a decent living for their families. Further reports identified physical and verbal abuse and laborers being fired for going on sick leave.

This throws up an ethical dilemma, because on one hand, it could be argued that it is better that these workers have a job earning 4p per hour, than no job at all; and as such, ASDA is allowing these workers to eat. It is also true that some economists like Milton Friedman have argued that the only job of a corporation is to increase long-term profits to shareholders, and therefore ASDA should try and keep wages as low as possible, and should not try and improve working conditions. Going down this theory, it may be that the cheapest type of labor may actually be found in a different country to Bangladesh, and therefore ASDA should relocate altogether. However the opposite side of the argument says that 4p an hour is too low to form a living wage, it is in breach of international working standards. Philosophers like Kant would argue that there are some factors of production like machinery and capital which should be run as hard as possible, however labor is different because it is real people’s lives and they should not be exploited.

ASDA’s success on the clothing market generated a substantial turn over by using their employees unethically and as a result having bad business ethics. For instance, ASDA’s £10 school uniform sold in their stores especially at the end of summer is another example of egoism and consequentialism a really bad ethical approach taken by them. The owner of Bangladesh factory reported on a interview to the Guardian that when ASDA buyers come to make new deals with them, they threaten them that they would go to China to find a manufacturer as their price is cheaper over there. Then he added that he would be the happiest man if he could pay their workers good money, health benefit and air conditioning but he can no longer afford to run his business as ASDA’s contract just covers all his fixed costs. The most disturbing thing about this is that they were already asking to very low prices compared to European factories and this ASDA consequentialist approach to make the company lower the price without taking into account that it would have negative consequences to the factory and their workers is a habit that most retailers are used to do in order to obtain the cheapest deal possible. Price war in between ASDA, Tesco and Primark’s clothing department is fierce have driven down high street process up to a 50%. The whole thing is unethical as big companies could charge more, most consumers would pay a little bit extra if the knew that their clothes were made in a fair environment. The ETI commission has agreed that UK buyers are the main reason why wages other wages are coming down.

An interview of eight workers showed that 7 of them claimed that supervisors forced them to expend their 8 hour shift for an extra 4 hours everyday, making them work 12 hours a day a the same rate of 4 pence an hour and employee would be threaten to be fired if they were willing to stay and do overtime. (The Guardian, 2007) Supervisors would impose these working hours and force them to even work overnight in order to meet particular orders, this is a true act of egoism where only the self interest of the company was taking into account and not considering their employees. Trade unions are forbidden to create, 4 workers providing ASDA’s clothes label, George, claimed they were dismissed shortly after their managers found out they tried to access a trade union. Such practice does not only happen at ASDA, Tesco and Primark workers also face dismissal if they attempt to join a trade union. They three hold an approximate market of £7.8 billion. ASDA being in amongst the two others the biggest retailer as they hold 17% stake of the market.

Similarly, in the UK, all of the supermarkets have come under fire for offering zero-hours contracts under which the staff have no guarantee of work, and therefore no guarantee of income. This came to a head in the recent UK General Election when the Labour party campaigned on making these contracts illegal. In this case the ethical arguments are more blurred. These workers are not working in “sweatshop” conditions, and when they do get assigned work the pay per hour is acceptable due to minimum wag requirements, and living wage requirements. In addition, workers who are