Tobacco industry – Ethics vs. Profits

Explain the meaning of the terms ‘ethics’ and ‘profits’ in the phrase ‘Tobacco Industry: ethics vs. profits’?

Ethics is the branch of philosophy that outlines acts that are right or wrong, good or bad, and moral or immoral (Quinn, J, Bahaudin G. and Cavico J. 2011, 114). Ethics is the moral foundations that dictates and to a business presupposes the activities that are acceptable within the structure of the environment as prescribed by set down values of a given society. In terms of ‘ethical,’ there are operations or activities done in a decently fitting way, as supported by routine moral values or main beliefs that are generally acceptable as good and appositive such as transparency, honesty, integrity, accountability, honorable and non-deceptiveness (Schwartz, S. 2003, 197). With the contemplation of ethical standards, an investigation into the tobacco industry has shown that it fails based on the principles of ethics. The principles include autonomy, doing good, justice and doing no harm, as tobacco products are associated with illness (cancers) and premature death, which have enabled tobacco companies to get a moral defense for their operations (Bolinder 1071-1072).

Profits are the returns realized by a business when its operating costs are deducted from sales. Considering the nature of tobacco, its sales are guaranteed thereby making profits is guaranteed too. The delivery and supply and trade of tobacco products can produce a huge magnitude of commerce in addition to creating a considerable amount of levies the public sector (Quinn, J, Bahaudin G. and Cavico J. 2011, 107).

‘Ethics’ and ‘profits’ in the tobacco industry are considered infamous for its continued legal undertaking to produce and sell tobacco products known to lead to health problems to consumers (Kelley, B. 1999, 119).

Why do investors choose to invest in the tobacco market?

The manufacture and trade in tobacco products, regardless of being considered a legal undertaking, is considered by some as unethical because the manufactured goods are considered as both addictive and potentially harmful (Schwartz, S. 2003, 203).Tobacco is harmful even when taken as prescribed and has higher social costs compared to other consumer products. Despite the negativities associated with it, tobacco and its derivatives enjoy substantial investments. Investors continue to invest in this industry for the following reasons;

Profits: Tobacco is made into products, especially cigarettes, which are sold at exorbitant prices that make it very profitable (Quinn, J, Bahaudin G. and Cavico J. 2011, 112). Tobacco is able to achieve profits through the continuous enrollment of new captivated consumers (Wander, N. and Malone R. 2007,  170). Cigarettes have been over time a very lucrative business with high returns (Balachandran, V. 2008, 54). With low costs in production and high retail sales, tobacco products have a high profit margin (Pampel, C. 2009, 50).

Markets: There is a guaranteed market thereby a guaranteed return on their investments. Tobacco is an addictive product and will therefore have customers that will always seek it; a non-durable product that is consumed habitually (Schwartz, S. 2003, 197). Success for tobacco products is assured wing to its unique products; for instance, cigarettes are addictive, thus have returning customers and their nicotine contents ingested through inhalation translates to no substitute product (Pampel, C. 2009, 49-50).

Economic gains: The tobacco industry has the benefits of creating many employment opportunities, and considerably creates very large tax incomes directly from cigarette taxes on producers and traders and indirectly from sales tax on the consumers, and income taxes from the workers in the tobacco industry (Quinn, J, Bahaudin G. and Cavico J. 2011, 112).

Which countries are the biggest emerging markets for tobacco related goods, and why?

With increased efforts in the first world to restrict tobacco sales, marketing has shifted to the third world where smoking foreign-made cigarettes is considered opulent and the health message has not yet penetrated (Kelley, B. 1999, 119). Developing countries and third-world countries have been identified as the biggest emerging markets for tobacco and its related products. In low-income and middle-income countries, the increasing market for tobacco products offers the next frontier for profit making for tobacco companies; for instance, consumption per person has risen by 143% in China, 78% in Egypt, and 187% in Indonesia (Pampel, C. 2009, 50).

Their regulatory and policy framework is found to be less stringent than that found in developed countries (Quinn, J, Bahaudin G. and Cavico J. 2011, 107). Further, their governments weakened with a small revenue base, have an economic relationship with tobacco and a monetary stream that is replete with tobacco investments, excise tax collections, local tobacco industry purchases/payrolls among other revenue streams (Wander, N. and Malone R. 2007,  171).

What recent ethical, political and economic factors may impact on future foreign investment into tobacco based organizations? What will the extent of that impact be?

Tobacco companies are continually faced with the daunting task of being targeted by various interest groups who find issues in their business; this is more so on ethical, political and economical factors. The foreign investments by tobacco-based organizations will be negatively affected as their sales and profits will in the future face threatening challenges when the knowledge on the devastating impacts it has on the health of smokers become more widespread (Quinn, J, Bahaudin G. and Cavico J. 2011, 113). Further, the moral pressure to have tobacco manufacturers cut down on their activities is not new (Bolinder 1072)

For instance, in the United States, back in 1950s when the first medical study linked cigarette smoking with lung cancer, sales plunged for two years (Brownell, D. and Warner E. 2009,260) and now the same kind of consumer awareness is being made available elsewhere, especially in developing nations where such information had been muted. Therefore, it is expected that similar reactionary measures will be witnessed, the drop of consumption of tobacco and its products – where it has been perceived as addicting and exploiting the developing world (Brownell, D. and Warner E. 2009,261). Recent times has seen concerted efforts to spread anti-tobacco education worldwide and express disapproval of trade in tobacco as immoral and inform consumers of the inherent ills associated with smoking, in addition to dampen the utilization of tobacco and its derivatives (Quinn, J, Bahaudin G. and Cavico J. 2011, 109).

There has been increased amount of control and regulatory interference in tobacco consumption worldwide. Regulation has mostly embraced the form of controls on marketing; a limitation on advertising and sponsorship and in point of sale tobacco product displays (Edwards R. et al. 2011, 1). In addition, in various regions, regulations in form of restricting where smoking can be undertaken with public places, especially indoors, being entirely prohibited in many countries worldwide have been introduced (Edwards R. et al. 2011, 1).

Some countries overseas, for instance, Finland and New Zealand have started to legislate and adopt measures that will ensure their regions/territories become tobacco free (Edwards R. et al. 2011, 2). The idea has been to pass laws that will yield a framework that will enable these countries ultimately curtail the production, sale and  use of tobacco products thereby achieving ‘smoke-free’ status by 2025 and 2040 for New Zealand and Finland respectively (Edwards R. et al. 2011, 2). A successful case in point is Bhutan, who completely banned the trade in tobacco products back in 2004 (Edwards R. et al. 2011, 2).

This kind of legislation has not been restricted to overseas regions alone. Already in the United States of America there has been legislation to increase the minimum age by which a person is of age to buy and consume cigarettes (a tobacco product) from 18 years to 21 years of age (Winickoff, P., et al. 2014,18). This has been attributed to the efforts to reduce smoking as research has shown that up to 90% of adult smokers had started smoking before they were 21 years of age (Winickoff, P., et al. 2014,18). If such a  trend that has shown to reduce the ‘tobacco ills’ in society was to take effect and spread in other regions of the world, tobacco companies will face a reduced market as their customer base shrinks both in the short run and thereafter in the long run as fewer adults will be smokers (Winickoff, P., et al. 2014,18-20).

Arising from a lawsuit against the tobacco companies (between 2007 and 2009), several ethical issues were brought to the fore on the systematic approach the tobacco industry adopted to have policymakers and the public off its back (Cataldo, K. and Malone E. 2008,; Friedman, C. 2009). Similarly, Brownell and Warner document these practices as: public relations and framing; influencing governments and key organizations; disputing science; planting doubt; and creating conflict of interests; and marketing products (Brownell, D. and Warner E. 2009, 264) and this has exposed the tobacco industry to increased exposure and more information being disseminated against it. Some of the efforts towards achieving lessened tobacco demand are; support for smoking cessation, health education in schools and thorough mass media campaigns, and mandated warning on packaging (Edwards R. et al. 2011, 1).

All the above foregoing factors can be generally understood in the broad understanding that globally, interventions to diminish the consumption of tobacco and its derivatives has been initiated and encouraged incrementally over time with the sole aim of reducing demand (Edwards R. et al. 2011, 1). This will work to reduce the overall consumption in tobacco and its eventual decline as a profitable venture. Nevertheless, the optimism of the industry is captured in a traditional view held by the companies that investments in the tobacco industry should not be worried with issues political, moral or social and that economic forces should force their activities while the other issues are sorted out in their respective arenas (Wander, N. and Malone R. 2007,  170).

What economic principles and theories help to explain the ‘ethics and profits’ in the tobacco market?

Stakeholder theory – the better a company handles its interactions with the numerous parties that have a concern in the company, the more flourishing it will be over time (Barnett L. and Salomon M.2012, 1305). In the inherent failures of the tobacco companies to offer positive returns to some of its key partners (people who consume tobacco and its products), the companies have faced the ethical problem and its associated attack on its profitability margins.

Supply and demand – as with any other commodity in the market, the underlying economic principle here is that companies will undertake economic activities to satisfy gaps that have been identified in the marketplace, so long as they have been convinced that their efforts will meet with a gain. This will explain the profits that the tobacco companies seek through their ventures and initiatives.

Analysis of Literature used

The literature reviewed and used for this article came from two sources (media); journals and books. Journals were more than the books (3 journals and 1 book).

Accuracy: the accuracy of the journals was better than the books since the journals cover particular themes whereas books have more than one theme albeit of the same subject. For this reason, the journals were more precise than the books with both sources having almost similar information thus deemed correct.

Reliability: information derived from both journals and books was deemed reliable since they had similar information. Journals are mostly peer reviewed and have academic connection through their authors who are mostly active participants in their respective fields in academia. Some of the journals were quantitative researches with data analysis and reporting of findings, whereas others were of a qualitative nature. They cited other works as well. The books are considered as primary sources with acknowledged sources of information.

Currency: the sources varied in terms their dates of publication with the sources used having information that varied from 1997 to 2014. The timeframe was as such since the history of the topic under review was of importance to understand its future prospects.

Quality: the quality of the information was not affected since the information that was used from the sources; most of it was self explanatory with little use of jargon and other technical terms. Since course instructor and classmates will read this paper, the information gathered from the sources was used with little alteration of its intended meaning.

Usefulness: the information is useful getting information to offer answers to the topic under review. Most issues on ‘profits’ and ‘ethics’ within the tobacco industry were well covered especially in journals, which were more useful than the books. The journals, especially as suggested by their titles and enhanced by the abstract sections, were more informing with further help found within their literature review sections. In the journals too, discussion and conclusions sections were quite enlightening vis-à-vis the books that were more lengthy, with more information that was sometimes vague.

Conclusion

The research and writing on the topic “Tobacco industry – Ethics vs. Profits,” were aided by two media sources – books and journals. The journals were quite helpful because they covered specific topics and cited equivalent authoritative sources in their own theoretical discussions. There is an instance where a journal has both ethical and financial issues (profits) on tobacco use within its 16 pages (Quinn, J, Bahaudin G. and Cavico J. 2011) and this would require perusing through numerous book pages, sometimes more than one book, to get similar information. The slight problem was in the research journals that had some statistical tools that were advanced for audiences that are more knowledgeable and could not be fully comprehended by the researcher, albeit this was offset with discussion and conclusion sections within these journals.

The most preferable sources would be the journals as they are very succinct and direct to the point on the issue they sought to cover as opposed to the books that were lengthier. Journals were therefore more useful than the books and were preferred over the books. If undertaking another research in the future, journals will be more utilized and this is due to two primary factors; they are peer reviewed and have the support of academia, and they concisely address an issue without the unnecessary burden of becoming long-winded as opposed to other media, especially books.

References

Balachandran, V., 2008. Corporate Governance, Ethics And Social Responsibility. PHI Learning Pvt. Ltd.

Barnett, L. and Salomon M. 2012. “Does It Pay To Be Really Good? Addressing The Shape Of The Relationship Between Social And Financial Performance.” Strategic Management Journal 33.11: 1304-1320.

Bolinder, G. 1997. “Tobacco Research Funded By The Tobacco Industry–An Ethical Conflict.” Addiction 92.9: 1071-1075.

Brownell, D. and Warner E. 2009. “The Perils Of Ignoring History: Big Tobacco Played Dirty And Millions Died. How Similar Is Big Food?.” Milbank Quarterly 87.1: 259-294.

Cataldo, K. and Malone E. 2008. “False Promises: The Tobacco Industry, “Low Tar” Cigarettes, And Older Smokers.” Journal Of The American Geriatrics Society 56.9: 1716-1723.

Edwards R., et al. 2011. “Daring To Dream: Reactions To Tobacco Endgame Ideas Among Policy-Makers, Media And Public Health Practitioners.” BMC Public Health 11.1: 580-590.

Friedman, C. 2009. “Tobacco Industry Use Of Corporate Social Responsibility Tactics As A Sword And A Shield On Secondhand Smoke Issues.” Journal Of Law, Medicine & Ethics 37.4: 819-827. Academic Search Premier. Web. 20 Apr. 2015.

Kelley, B. 1999. Ethics at Work. Aldershot, Hants, England: Gower.

Pampel, C. 2009. Tobacco Industry and Smoking. New York, NY: Facts On File.

Quinn, J, Bahaudin G. and Cavico J. 2011..”Global Tobacco Sales Dilemmas: The Clash Of Freedom And Markets With Morality And Ethics.” Journal Of Business Studies Quarterly 2.2: 107-124.

Schwartz, S. 2003. “The “Ethics” Of Ethical Investing.” Journal Of Business Ethics 43.3 (2003): 195-213.

Wander, N. and Malone R. 2007 “Keeping Public Institutions Invested In Tobacco.” Journal Of Business Ethics 73.2: 161-176.

Winickoff, P., et al. 2014. “Retail Impact Of Raising Tobacco Sales Age To 21 Years.” American Journal Of Public Health 104.11: e18-e21. Professional Development Collection.