Literature Review: How customer behaviors affects business ethical practices in United Kingdom

Table of Contents
Introduction 3
Why ethical business practices 4
Principles of ethical behaviors 7
Customer behaviors influencing ethical practices in the UK 9
Consumer behavior model 9
Customer behaviors and ethical business practices 12
Summary 16
References 18

Literature Review: How customer behaviors affects business ethical practices in United Kingdom
Introduction
Globalization, a term that was coined in the last 2 decades has dominated the world of business. Ideally, globalization, which is characterized with advancement in technology changes, which has enhanced, free movement of people, goods, services and capital has turned the world into a global village. People are now able to interact with others despite the huge geographical distances between them. With regards to business, globalization has offered an unexpected opportunity for entrepreneurs. It is now a common practice for a business to operate in different countries due to a number of issues. With such opportunity, businesses have been faced with stiff competition forcing them to develop a set of attributes or strategies that are unique to them that are used as a competitive advantage (Story & Hess, 2010).
In literature, scholars have tried to link how business ethical behaviors impact on customer behavior. Results indicated that businesses that acted ethically, provided affordable and high quality products or services, adopted new technology were more likely to remain competitive and profitable in the long run. However, there is no study that has looked into how customer behavior affect or influences a business to act ethically. Although the whole concept of customer behavior is complex, successful businesses have mastered the art and science of consumer behavior. For the purpose of this paper, consumer behavior is thought of as a process of gaining data and understanding from individuals, groups or organizations on how they do the selection, utilizing as well as disposing products, services, experiences and or ideas while satisfying their needs and the outcome of these processes on both the consumer and the society (Trudel & Cotte, 2009). This apart from helping them decide on their purchasing behavior, has other impacts more so to the businesses (Anisimova, 2007).
On the other hand, business ethics refers to a set of principles that give direction to how businesses should behave. The moral or ethical principles apply to the entire business operations, including individuals and the entire business or organization. While it is the responsibility of businesses and individuals leading such businesses to make profit and realize a return to investors, there is need to conform to basic rules of the society, both those embodied in law and those embodied in ethical custom (Ferdous & Aziz, 2014). There are a number of businesses and big firms that have closed their operations, simply for failing to conform to certain moral or ethical principles. This, has resulted in negative consequences such as loss of jobs, destruction of careers among others. While there are ways that are used to make organization behave ethically, little has been done to understand how consumer behavior affects ethical business behavior particularly in the United Kingdom. This section will critically look at literature in relation to how customer behaviors affect business ethical practices in the United Kingdom. In doing so, issues to be addressed include the principle of ethical business, the benefits of ethical business practices.
Why ethical business practices
Research has shown that doing business with loyal and repeat customer is relatively cheaper and sustainable in the long run. However, the big question in the minds of business manager and owners is with regards to how best to create a crop of loyal and satisfied customers. Scholars in marketing and business ethics point out to building a long lasting trustworthy relationship between the customers and the business itself. The conclusion of many scholars has been that businesses that fail to meet the criteria of being trustworthy are less likely to establish a loyal customer. This eventually hampers the desires of a business to grow. Even if a business does it best in terms of leadership, marketing, promotion, employee respect and customer relationship, when nothing is done to uphold a high level of morality and integrity, everyone in the equation suffers including businesses, shareholders and the customers. Therefore, having credibility, which is largely earned by being ethical in doing business is a competitive advantage. The assumptions all along has been that the business dictates customer behavior, however, the reality is that customer behavior largely influences how a business operates starting from its strategies to the mission of the business (Anisimova, 2007).
One of the benefits of business ethics is that businesses will higher profit margins. On the other hand, business that a business that is acting unethically even if the behavior is not technically against the law, the reputation and image of the organization is destroyed, resulting in other issues such as decrease in employee morale, higher employee turnover rates and customer dissatisfaction.
Similarly, it has been shown that when companies add value, cultivate an environment where transparency is the foundation of everything as well as offer consistent principles the consumer becomes more loyal and supports the growth of the company. They also develop a sense of belonging and a shared concern for your success. This has great implication for the business since such customers will continue buying from the company, invest in the company in terms of buying shares, and refers new customers among other things (Ferdous & Aziz, 2014).
Another advantage or benefit linked to ethical business practices is with regards to avoiding legal battles that are disastrous to all stakeholders. There are instances where businesses have been tempted to go against the normal, norm or legal provisions in the quest of pursuing more profit. Examples of such action may include non-compliance with environmental laws and regulations, failure to adhere to labor laws such as providing employees with minimum wages, good working condition, and personal protective equipment among others. It is worth noting that such violation will when taken to court results in heavy punishment. For instance, there are hefty fines that are supposed to be paid by the company in some cases to the government, community or individuals affected. There are instances where the government gives sanction or even suspension or revocation of business permits. Usually, the result is negative publicity which negatively impact on the brand as well as the company. On the other hand, firms that maintain exceptional ethical practices while conducting business has in place a plan for ensuring that all employees act ethically and new ones are properly trained to be ethical. Such actions translates to a workforce that is always conscious of acting within the expected norms, thereby reducing cases or instances of fine (Anisimova, 2007).
Additionally, businesses strive and invest a lot of resources in building or enhancing its public. As noted previously, organizations that run their businesses while upholding a high level of ethical behavior are more likely to be considered as having a strong public relation. The customers, shareholders, suppliers and the general public usually consider such organizations as valuing people more than profit, especially when they put all their efforts and resources to operate with utmost integrity, accountability, transparency and honor. One of the Chief Executive Officer stated that “Ethical values consistently applied, are the cornerstones in building a commercially successful and socially responsible business” (Anisimova, 2007)
Interestingly, the world has evolved over time and businesses just like individuals are expected to make the society and the world a better place. With proper ethical business practice, a business significantly contributes to a better world. For instance, it is totally wrong to employ individuals who are considered children, similarly, employees should be paid a minimum wage, which conforms to the government regulations, and employees should not be harassed but given an opportunity to air their grievances and promoted accordingly. All these actions among other led to the formulation of new laws and regulations aimed at ensuring that the world is a better place for the present and future generations (Story & Hess, 2010).
Ethical business practices ensure that a business encourages a strong teamwork as well as offering employees opportunities for growth and development. Ongoing attention and dialogue regarding values in the workplace builds openness, integrity and community. This is a crucial ingredient to cultivating a strong team in a work environment. Employees feel strong alignment between their values and those of the organization. They react with strong motivation and performance. This then translates to a workforce that are happy to remain working with the business since they are guaranteed of proper development and advancement in their career. Such kind of career retention is crucial since it helps the business retain the right talent and experience while at the same time cutting cost associated with the process of recruiting and hiring of new employees (Ferdous & Aziz, 2014).
Principles of ethical behaviors
As noted elsewhere in this paper, acting ethically brings with it financial and non-financial benefit. It is necessary therefore to understand the basic or key principles of ethical business.
One of the principles of ethical business is honesty and respect. It is important to act in a fair manner and honestly with people or stakeholders who are impacted by the actions of a business. Similarly, it is necessary to respect and value people a firm does business with. This is achieved by respecting and treating stakeholders in a manner or a way that one would want to be treated (Carrigan & Attalla, 2001). The company should provide the customers with factual information with regards to the product or service being offered. Information that should be presented with honesty include the ingredient used for the product, the benefits of the product to consumers among others. Other examples include factual presentation of financial information to the relevant authorities and shareholders. On the same note treat employees and customers with respect regardless of differences, positions, titles, ages, or diversity. Always treat others with respect and courtesy even if you agree to disagree (Ferdous & Aziz, 2014).
Additionally, complying with relevant laws, regulations, guidelines and focusing on quality is another principle. Businesses should at always strive to abide by not only the applicable laws, guidelines or regulations but also with the spirit of the law and other socially acceptable norms. Additionally, firms should do everything in their power to keep commitments and obligations to employees, customers and the nation (Tsalikis & Lassar, 2009). An incredible amount of trust is built when an organization honors its commitments and obligation to the law. In a situation where a business foresees events that may hinder her to meet certain obligations, there is a need to communicate the challenges and craft away or strategy together with the relevant authorities to find resolution. For instance, with regards to complying with the environmental laws related to environment, businesses can invest in cutting edge technology (Anisimova, 2007).
Another principle of ethical business practices is business responsibility and teamwork. Businesses should act and adhere to the highest ethical standards of conduct in all of their operations. Similarly, they should act in ways that encourages human standings as a corporate citizen and ethical competitor in the world of business (Story & Hess, 2010). There will be no time that the business will pursue business opportunities that forces them to violate the principles. Ideally, the ability to share information in an open way, placing customers’ needs in the forefront as well as acting accordingly to human values is central to adopting an ethical practice to business (Tsalikis & Lassar, 2009).
Lastly, businesses have the responsibility or obligation to report violations. Ideally, it is the responsibility of a business usually through its employees to report suspected violation of laid down regulations, dishonest or unethical behavior, conflicts of interest, fraud, misappropriation of funds, suspect accounting and internal controls, criminal misconduct among others. This is usually done after all the internal process to deal with the situation have been exhausted (Ferdous & Aziz, 2014).
Customer behaviors influencing ethical practices in the UK
Consumer behavior model
From history, there are incidences where the actions of consumers and consumer behaviors impacted heavily on how businesses operate. Before delving on these impacts or influences, the paper will briefly look at the theory explaining customer behavior and decision making.
Research has shown that customer behavior considers a number of factors which influence their intentions as well as consumption activities. These activities or factors that impact on consumer behavior are need recognition, information search, evaluation of alternatives, the building of purchase intention, the real act of buying, consumption and finally disposal (Sethi, 1994). Although there are numerous theories that tries to explain the concept of consumer behavior, this paper will look at the cognitive approach as the most recent and more acceptable explanation of consumer behavior. This approach or theory ascribes behavior to interpersonal cognition. As a result, a person is seen as capable of critically processing information (Story & Hess, 2010). While doing this, the influences of the external environment as ascribed by behavioral approaches is appreciated; this is seen when consumers actively seek and receive stimuli from both the environment and society as information which is vital in helping their internal decision making mechanisms. This theory posits that there are stimuli which, depending on the mental structure creates responses (Mintel, 2011). Present cognitive psychology has come up with various factors deemed fundamental to the intrapersonal processes and they include; perception, learning, memory, thinking, emotion and motivation. It is currently acknowledged by researchers that the processing of information is done by an active organism whose previous experience, influences in addition to the processing of such information but also how the information is searched and received. This, according to Sethi, 1994 and Carrigan & Attalla, 2001, led to the consideration of consumer behavior as a continuous circle of events.
This theory is also suitable in explaining consumer behavior since it is capable of explaining complex behaviors which is and was a weakness of behavioral theories where it was not possible to ascertain the contingencies controlling responses. Similarly, the cognitive theory assumes that consumers are lucid, judicious, reasonable and active in arriving at a decision. Generally speaking, this theory is more suitable in the investigation of ethical purchasing behavior. Firstly, the complexity of such actions cannot be accommodated through behavioral models and secondly, the benefits of ethical consumption are largely vicarious in nature, requiring extensive intrapersonal evaluation (Carrigan & Attalla, 2001).

Fig. 1 Cognitive consumer behavior model.
From figure 1 above, the analytical model gives a framework of the major elements or factors that are deemed important in explaining and intimating the wider link with consumer behaviors. This model traditionally follows the major five classes, including problem reognition, searching for information, examining the alternatives, making the choice and evaluating the results (Story & Hess, 2010). The other model is prescriptive; which offers steps or guidelines organize the structure of consumer behavior. This model typically encompasses the order in which the factors or elements appear as well as prescribing the effects or outcomes that are expected given specific causal factors or elements (Mintel, 2009). This kind of model is deemed important in helping experts and marketers in particualr to measure the stimuli to be modified in order to positively enhance consumer behavior. Through the concept of ‘subjective norm’ the theory acknowledges the power of other people in influencing behaviour (Solomon, et al. 2006); explicitly, it accounts for the thoughts of others toward the certain behaviour, and is moderated by the extent to which the consumer is motivated to comply with these views (Nicholls, 2002).
From the model, it is evident that the consumption in most instances is very complex and impacted by a host of factors that are conscious and sub-conscious. It is the assumption of the model that the consumer undertakes comprehensive cognitive processing, emotion, habit, craving or spontaneity prior to making a purchse decision (Anisimova, 2007).
With the understanding that the concept of intention in consumer behavior is dynamic in nature, characterized with constant re-examination by customers as situations changes or more information becomes available, it is necessary to look at how this affects ethical business practices (Ferdous & Aziz, 2014).
Customer behaviors and ethical business practices
As noted by various researchers, the present time is an era of ethic and ethical practices. For this reason, every action undertaken by individuals or businesses has ethical implication. Based on this fact, it has emerged that consumer behaviors has in the past and in the present time dictated how businesses should operate. For instance, a MORI poll commissioned by the Co-operative Bank in the United Kingdom back in 2000 established that a third of consumers are seriously concerned with ethical issues. In the past one year, those taking part in the poll had bought a product or recommended a firm based on its ability to act ethically. Other studies echoed similar views. For instance, consumers were found to be increasingly buying from a business based on its role in the society (Klein et al., 2002). Additionally, consumers tend to have a more positive image of a company that support activities that consumer care about. For instance, the majority of consumers cares about a clean environment. Additionally, such individuals noted that they are more likely to pay more and continue buying a service or product associated with a cause important to them (Sethi, 1994).
For these reasons, many UK companies have shifted their focus from solemnly making profit to ensuring that they act within the moral expectations not only of the law and regulations but also from the citizens (Carrigan & Attalla, 2001).
Traditionally, many United Kingdom companies in the previous centuries adopted strategies with the aim of maximizing profits at the expense of the consumer and other stakeholders. For instance, to achieve this, companies resorted to using labor from slaves, invested little or nothing in improving the work environment such as buying personal protective equipment for employees among others. This ensured that these companies made huge profits since nothing or very little of the revenue generated was being ploughed back to address the issues previously mentioned. For instance, companies such as those that were in the textile sector, agriculture, and industrial in nature took advantage of slave trade and immigrants. These groups of people were made to work for no pay (Sethi, 1994). Things later changed where they were paid lower wages than the Britons. Things continued this way for a long time. However, upon activism, things started changing. Consumers started boycotting services and products that were being offered by companies they considered unethical in terms of treating their employees. This usually happened only to those companies that produced goods and services that had alternatives (Anisimova, 2007). The consequences of the same were deeply felt by these companies as the profit margins dropped drastically. For those companies that sought to establish the reason behind their decline, the outcomes were astonishing (Story &Hess, 2010). They realized that consumers were shying away from their products and services because of how the company acted. Corrective measures were taken for instance by improving the working environment, increasing the minimum wage as well as allowing formulation of labor unions which struggled fighting for the rights of employees. This gave rise to a new beginning in the world of business, since companies were aware that their actions would have a profound impact on the survival and profit generation (Carrigan & Attalla, 2001).
Examples of companies that were dragged into issues surrounding using slaves to generate profit include Lloyds of London, Barclays as well as sugar giant Tate & Lyle. There were allegations that the sugar company made huge profits from slavery. This has been met with litigation. Similarly, Barclays were taken to court on the claims that two of their family members actively engaged in the slave trade, this was refuted by the family arguing that David Barclay was a Quaker and he was a stronger crusader against the slave trade (Nicholls, 2002). Nonetheless, when such information’s goes into the public domain, it negatively impacts on the reputation of the company in question. This can be seen in the efforts put by these companies through their lawyers and other resources they have to show their innocence. Based on this fact, businesses or companies of the present time do not wish to find themselves in similar situations partly because fighting to refute the claim in most cases, shifts the attention of the company from engaging in strategies that would improve the services and products they generate meeting the expectations and needs of their customers (Anisimova, 2007).
Another example where consumer behavior re-shaped how businesses operate is with regards to fair trade. Ideally, it is expected that services and products when being promoted should be done in a way that consumers are provided with factual information. For instance, it is very critical for firms, especially involved in food and related products to provide consumers with the right kind of information. This also goes to companies that deal with cosmetic and beauty products as well as pharmaceutical companies. These products are very sensitive and providing consumers with false information will greatly result in negative outcome that may lead to serious injuries, permanent disability or even death (Sethi, 1994).
A case in point is the Nestle, a Swiss company that is a giant in production of infant supplements. The company was deemed responsible for the deaths of infants, particularly in developing countries due to its marketing strategy. The company promoted their product as a total replacement to breastfeeding (Klein et al., 2002). Considering the fact that less developed countries lacked access to clean water, many infants died. In supporting the less developed countries, nations in Europe and the United States begun a boycott against the corporation back in 1977. In 1988, a lobby group in the UK launched a new boycott against the company. It is worth noting that the consequences of this action cannot be ignored as the corporation lost almost $40 million. It is worth noting that it is from such actions that the company was forced to come up with a policy drawing from the World Health Organization code, consultations with United Nations Children’s Funds and other civil organizations (Anisimova, 2007).
Interestingly, the force of the people, organizations and governments can dictate ethical business practice from companies. From the corporation’s website, with regards to the case above, they clearly indicate that “We strive to continuously improve our practices and we have revised and reinforced our policy a number of times since its adoption, based on practical experience and developments in WHO recommendations.” The company in addition has provided a link where any issue related to their products can be raised directly with the company.
With regards to pharmaceutical company, there are evidences in the recent time that companies such as GlaxoSmithKline voluntarily recalled some of their products. For instance, the UK based company which operates globally recalled all their alli® weight loss product on the suspicion that the contents might have been tempered with. This is a quick remedy for companies to act ethically since if any flaws of the drugs are identified by the consumers, the consequences of the same might have been dire (The Ethical Company Organization Report, 2011).
There are consumers who are careful or will totally avoid products associated with animals. For instance, there are some consumers who will not buy products or services tested using animals. On the same line of thinking, some consumers will not buy products that are made from certain animals (Nicholls, 2002). For instance, Adidas has found themselves in problems when a boycott was launched protesting use of Kangaroo skin to in making some types of football boots. As a result, the company embarked on a strategy that will see them phasing out the use of the endemic animal leather by approximately 98.0%.
Last but not least, there are various organizations and research firm that carried out polls and surveys. In the United Kingdom, various surveys have been conducted with the aim of ranking businesses under the same category in terms of ethical business practice. This has been largely done by the consumers. It emerged from the finding that the top performers scored highly in several aspects of ethical business practices. When compared to their counterparts, the companies are making huge profit margins, retain their employees for longer, have more satisfied and loyal customers among others. Other companies, for instance ASDA, Lidl, and Tesco which are popular retailers in UK desire to emulate the best performing companies such as Co-op, Waitrose, Morrisons, Budgens, and Marks & Spencer. In doing so, they end up adopting practices that will paint them as ethically responsible businesses (Anisimova, 2007).
Little research has been done to critically look at how consumer behavior influences ethical marketing. Marketers and sales experts are employed by organizations to ensure that the sales volume steady increase thereby ensuring that the organization realizes profits. One areas that marketers have used to influence consumer purchase behavior is through psychological tactics. It is worth noting that marketers considered to be smart, skillful, honest utilize psychology legally, ethically, and respectfully approaches to attract and engage consumers, and compel them to buy. Despite, this little has been done to look at how these tactics have changed towards what is deemed ethical approaches in marketing. For instance, it has been established that when adverts that are run are deemed emotional ideas, they tend to have more influence. For instance, computer companies have tailored their message for instance with regards to a new computer on how it can improve the life and work experience of a potential user. Additionally, companies have mastered the art of capitalizing on the flaws or weaknesses of a rival product or service. There is always a need to be careful so that businesses do not engage in unfair competition. Little is known however, of how consumer behavior has impacted on ethical marketing practices.
Summary
This section was a literature review on how customer behaviors affects business ethical practices in the United Kingdom. In doing so, a brief introduction touching on globalization and the need to conquer foreign markets and challenges of the same have been presented. Similarly, the paper briefly looked at the benefits associated with ethical business practices. This was followed by a brief description of cognitive theory of consumer ethical behavior. A justification of doing the same was offered. It was also of interested to address some of the principles of ethical behavior which included acted responsibly, being honest, accountable transparent, reporting violation of laws among others. Lastly, the paper succinctly covered scenarios in which consumer behavior directly or indirectly impacted on a business desire to engage in ethical practices.

References
Anisimova, T. (2007). ‘The Effects of Corporate Brand Attributes on Attitudinal and Behavioral Consumer Loyalty’, Journal of Consumer Marketing, 24(7): 395-405.
Carrigan, M. & Attalla, A. (2001). “The myth of the ethical consumer – do ethics matter in purchase behaviour?”Journal of Consumer Marketing, 18(7):560-578.
Sethi, S. (1994). “Multinational Corporations and the Impact of Public Advocacy on Corporate Strategy: Nestlé and the Infant Formula Controversy”. Journal of International Business Studies, 25 (3): 658–660.
Ferdous, J. & Aziz, M. (2014). Consumer Perception, Behavior Gap, and Response to Ethical Business: The UK Perspective. Journal of International Buisness Ethics, 7(2): 46-65.
Story, J., & Hess, J. (2010). Ethical brand management: Customer relationships and ethical duties. Journal of Product & Brand Management, 19(4): 240-249.
The Ethical Company Organization Report. (2011). An exploration of values in ethical consumer decision-making. London: Ethical Marketing Group.
Trudel, R., & Cotte, J. (2009). Does it pay to be Good? MIT Sloan Management Review, 50(2), 61–69.
Tsalikis, J. & Lassar, W. (2009). Measuring Consumer Perceptions of Business Ethical Behaviorin two Muslim Countries. Journal of Business Ethics, 89, 91-98.
Mintel, (2011). The consumer- The key factors for choosing a store. The Mintel International Group Ltd, London.
Mintel, (2009). The consumer- important factors considered when buying food and drink. The Mintel International Group Ltd, London.
Nicholls, A. (2002). Strategic options in fair trade retailing. International Journal of Retail & Distribution Management, 30(1), 6-17.
Klein, J. et al. (2002). Why we boycott: Consumer motivations for boycott participation and marketer responses, working paper, London Business School, Centre for Marketing.