Belhaven University Universal Paper Company Ethics in Marketing Case Study

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I’m working on a health & medical question and need an explanation to help me study.

Ethics and ethical decision making are important matters in marketing asthey are in our lives. Basically ethics concerns what is right and whatis wrong. Our ethical values are grounded in our family of origin andin our own societal norms. Many of us agree on certain ethicalprinciples, and yet we may disagree at times, depending on thesituation.In marketing work, ethics is often a concern. Why? Marketing people havea lot of pressure on them because their job is to bring money throughthe front door of the company! That’s a lot of responsibility! Shortcutsand schemes can exist with marketing personnel because of the pressurethey are under.Read the short case below and comment on where you believe that ethicalconflicts existed. What could have been done to avoid this ethicaldilemma? What action should be taken now?Universal Paper CompanyThe Universal Paper Company, UPC, sells copy paper to commercialcustomers for use in printers and copy machines. UPC has about 500customers that they sell to and ship to throughout the United States,and their yearly sales normally exceeds $25 million.During the fourth quarter of the fiscal year the VP of Sales, BillSmith, needed to show a higher sales figure than what was currentlyprojected for the fourth quarter. Bill received a year-end bonus that isbased upon company profits and sales volumes achieved. Additionally,the five Sales Associates are compensated with a base salary plus acommission for exceeding their sales projections.Bill Smith met with the Sales Associates at the beginning of the fourthquarter and proposed a program to increase fourth quarter sales by 20%.He told the Sales Associates to ship 20% more of their usual orders to their customers and offer a 2% discount on the price for the fourthquarter. Furthermore, he told the Sales Associates to allow customers toreturn any excess paper that they did not need for a refund, providedthat it was returned in the next fiscal year. This practice is commonlyreferred to as “channel stuffing”.Mary Tyler is an administrative assistant who works in the sales office.Mary felt uncomfortable about the practice that Bill Smith and theSales Associates were engaged in. Mary left a voice message with theChief Operating Officer, Tom McCabe, indicating that she felt thispractice was unethical and could hurt the company’s reputation. Tomdecided not to act on this information from Mary, as he felt that BillSmith and the associates generally did an exceptionally good job insales and servicing its customers’ needs. The company CEO, Ray Holtz,was not aware of the channel stuffing scheme. Bonuses and highercommissions were paid to Bill and the Sales Associates at the end of thefiscal year based upon increase sales revenues and profits reported.During the first and second quarters of the following fiscal year, UPCreceived several complaints from their customers about their channelstuffing tactic. Roughly 15% of the excess product shipped to customerswas returned to UPC for a refund. UPC lost 20% of their customers due tothe channel stuffing tactic. Two of the sales associates left thecompany. Mary Tyler was terminated by Bill Smith. The board of directorsdecided to meet to review the loss of business and bad will createdamong their customers.