Paper Jamia Animesh.docx

NATIONAL CONFERENCE ON EMERGING PARADIGMS IN MARKETING Wednesday, 10th October 2012

Organized by CENTRE FOR MANAGEMENT STUDIES JAMIA MILLIA ISLAMIA (CENTRAL UNIVERSITY) NEW DELHI- 110025

A Study on the Distributors’ Perception of the Ethical Sales Practices by FMCG Companies in National Capital Region

Authors: Dr. Rahela Farooqi. Associate Professor. Centre For Management Studies, Jamia Millia Islamia, Jamia Nagar, New Delhi. Email: [email protected] Animesh Singh, Assistant Professor, I.T.S – Institute of Management, 46 – Knowledge Park - iii, Greater Noida. Email: [email protected], Mo. Keywords: Business Ethics, Sales Ethics, FMCG, Distribution

Abstract: understanding the distributors’ perception of ethical sales practices by Fast Moving Consumer Goods Companies (FMCG) is the key to understand the areas of strengths and weaknesses of these companies. This will enable the companies understand what are rights and wrongs in the perception of distributors related to various sales practices. This in turn, shall help the FMCG Companies in developing a strong relationship with distributors enabling them to cover more market, a better feedback mechanism, better retailing and better sales. This study focuses on finding the distributors perception of ethical sales practices by FMCG companies in NCR.

Rationale for the study Ethics is a field of study that attempts to establish principles about what is right or wrong on the basis of research. Ethical decision making is influenced directly by Cognitive Moral Development (CMD) (Trevino and Youngblood 1990)1. The relationship between professional decision making and factors related to moral development is one that could provide unique insights into the area of ethical decision making. Yet, this area has remained relatively unexplored (Knouse and Giacalone 19922; Ford and Richardson 19943; Pennino, 20044). Jones (1991) defines ethical decision as one that is morally acceptable to the larger community. According to Kohlberg (1969, 1984) moral development5 (moral reasoning) is the thought process in which children develop proper attitudes and behaviours toward other people in society based on social and cultural norms, rules and laws. He believed that people progressed in their moral reasoning (i.e., in their bases for ethical behaviour) through a series of stages. Kohlberg described six identifiable stages of moral reasoning which could be more generally classified into three levels: pre-conventional, conventional, and post-conventional.

Business Ethics can also be described as a study of moral right and wrong that concentrates of moral standards as they apply to business institutions, organization and behavior. (Velasquez, Manuel G.) 6. In the present world of cut throat competition, the fight for survival has reached alarming proportions. In this competition era, it important for individuals and organizations to have an understanding of ethics. This is applicable for business organizations as well. Application of ethics in business decision making can be termed as the discipline of Business Ethics. In the contemporary business world, it is realized that the businesses should act in morally acceptable way, it should be socially responsible and accountable to stakeholders that are – customers, employees, suppliers and community as this will help businesses to be sustainable in the long run. Ethically correct businesses create a productive work environment and build motivation in employees. Employees’ turnover tends to be less in companies that are ethically sensitive. Ethical business organizations are conscientiously aware of their accountability to various stake holders. In turn, the stake holders are aware of this ethical sensitivity of the business organization and they develop a positive image

for it. This is increasingly becoming important as the world is narrowing and becoming a global village. Business organizations following the high ethical standards are also the profitable and successful in the long run as there share value consistently rises. (W.L. LaCroix, 1970, 71)7. Most companies operating for the long term choose an ethically sound business practices. Most have codes of moral conduct in place. This practice may cost them some earnings in the short term but allows for a strong reputation translating into a corresponding healthy long term business strategy. The financial reform processes in India were initiated in 1991 in form of liberalization, privatization and globalization. These initiatives were instrumental in de-licensing, bringing more businesses in private hands and increased FDI in different industries that led to an increased completion in India like never before. The markets and industries were unleashes and consumers in India had better choices of products and services. An open and free market evolves into a near perfect market, which theoretically takes care of ethics in business as an invisible hand of god.8 The concept of invisible hand implies the self regulating nature of business in case of increased competition where business become efficient in order to survive to satisfy the stakeholders and this hand (of god) benefits the society at large. In the real world however this invisible hand is debatable. Some economists like Stephen Leroy, professor emeritus at the University of California, Santa Barbara, and a visiting scholar at the Federal Reserve Bank of San Francisco, USA have criticized this theory citing the financial crisis and advocates strongly about the proper balance between markets and government control for business to flourish sustainably and ethically.9 The profit maximation objective of the business organizations that seeks to maximize the return to the shareholders in its nature sacrifices the other benefits to the society and can be questioned on ethical grounds. Some economists believe the term 'business ethics' is an oxymoron. The famous company Goldman Sachs was charged by the US government in not informing the customers about the lower grade of one of the mortgaged bonds as Goldman Sachs violated the law by putting customers into the risk deliberately in 2010.10 Examples of Worldcom, Arther Anderson, Enron in the USA and Satyam in India are evidences that the ethical practices in business have been neglected.11

Rationale for Research in FMCG Area The FMCG sector is the fourth largest sector in the India .It has a strong MNC presence and is characterized by a well established distribution network, intense competition between the organised and

unorganised segments and low operational cost. Availability of key raw materials, cheaper labour costs and presence across the entire value chain gives India a competitive advantage. FMCG sector can be broadly segmented into Household Care, Personal Care, Food & Beverages. In Household Care, Laundry is the largest whereas Personal Care has Personal wash, Hair wash, Oral care & Skin care. Tea/ Coffee, Biscuits & Soft drinks are the largest consumed packaged food products. Penetration level as well as consumption in product categories like MFDs, FemCare, Premium skin care in India is low indicating the untapped market potential. Increasing Indian population, particularly the middle class and the rural segments, presents an opportunity to FMGC players of branded products to shift consumers from unbranded to branded products. Growth is also likely to come from consumer 'upgrading’ in the matured product categories. 12 In India, the FMCG sector has seen continuous growth as the consumers’ disposable income has increased and consumer preferences and tastes have undergone a major shift. India is among the world's youngest nations, with a median age of 25 years as compared to 43 in Japan and 36 in the US. This, coupled with a large population and rapidly evolving consumer preferences, has translated into a large market opportunity for FMCG players. Indian cities are expected to add 379 million people to the consumer base for FMCG companies, as the urbanization rate is expected to increase from the current 30 to 45 per cent in the next 40 years. According to recent estimates, household income in the top 20 boom cities in India is projected to grow at 10 per cent annually over the next eight years.13, 14, 15

The Indian FMCG sector, with a market size of US$ 25 billion (2007–08 retail sales), constitutes 2.15 per cent of India’s GDP. The industry is poised to grow between 10 to 12 per cent annually. A wellestablished distribution network spread across six million retail outlets (including two million in 5,160 towns and four million in 627,000 villages) low penetration levels, low operating costs and intense competition between the organised and unorganised segments are key characteristics of this sector. The Indian retail market size is estimated at US$ 350.2 billion and is projected to grow at 13 per cent per annum to reach US$ 590 billion by 2011–12. The current share of organised retail is estimated to be 4 to 5 per cent and is expected to increase by 14 to18 per cent by 2015. Organised retail has created new channels for FMCG players through diverse retail formats such as departmental stores, hypermarkets, supermarkets and specialty stores. With organised retailing emerging in a major way across the country, the revenues of FMCG companies are expected to surge.16, 17, 18

India’s FMCG Business Environment Ratings India is ranked 10th in BMI’s Q1 2012 Asia Pacific Risk/Reward ratings, reflecting a poor balance between investment risks and rewards. India scores relatively high on investment rewards, with a reward score of 61, but this appeal is weighed down by its difficult operating environment. India receives an investment risks score of only 37.4, below the regional average score of 61.6. India’s investment appeal is underpinned by the relative immaturity of its food and drink (F&D) sectors, a massive population and its favourable demographic profile. With a massive and youthful population, India is perceived as one of the most exciting consumer growth stories in the world, as consumer goods investors would typically find a growing market among this demographic group. The relatively undeveloped and immature nature of the Indian F&D sectors means that foreign investors would face lesser competitive headwinds when expanding their presence in the country. Although existing low incomes mean that Indian consumers are still largely filling their shopping baskets with food staples and daily essentials, this also presents massive scope for growth in the mass market as an increasing number of Indian consumers, supported by rising purchasing power, trade up to higher value consumer goods.

The attractiveness of the Indian consumer growth story is, however, dimmed by the relatively inhospitable nature of its investment landscape. Although India holds massive untapped potential on the consumer side, this potential can be difficult to exploit given the business environment challenges of endemic corruption, poor infrastructure, restrictive regulatory environment and the lack of a well developed food retailing sector. In the mass grocery retail sector, for instance, India does not yet allow foreign investors to set up shop in the multi-brand retail sector and only permits up to 51% foreign direct investment in the single-brand retail sector.

Poor distribution infrastructure is another major issue of concern. Poor roads, ports and railways are commonly viewed as a key factor preventing the country from achieving the high growth rates seen in China and other East Asian nations over the past decades. This is further compounded by the lack of a formal food retailing sector, frustrating retailers’ efforts to distribute their products to the end-consumer market.19, 20

In the pursuit of fighting competition and gaining market share, the FMCG companies have become vulnerable to unethical sales practices. Also, the researcher in this study has worked in one of the leading FMCG companies in India and in his short one year experience; he found major lacunae in the sales practices in terms of the ethics in the handling of distribution channel. This has prompted the researcher to carry out research in the area of application of ethics sales practices.

Sales Ethics Literature Review. Author and philosophy professor David M. Holley in his research paper published in Business & Professional Ethics Journal, 1986 argues that a salesperson has a moral obligation to ensure that the person buying a product from him has the capacity to make rational judgments about the purchase and understands what he is giving up to obtain the product. Holley refers to these moral benchmarks as knowledge and rationality conditions in his essay, "A Moral Evaluation of Sales Practices." This ensures the transaction serves to benefit both parties and not just the salesperson and the company he is representing. Prof. Holley, in his paper Information Disclosure in Sales published in Journal of Business Ethics; Apr98 Part 2, Vol. 17 Issue 6, p631-641, 11p has established that there is a general obligation to disclose what a buyer would need to make a reasonable judgment about whether to purchase the product through an analysis of the social role of salesperson and ethical argument. In the article DECEPTION AND WITHHOLDING INFORMATION IN SALES published in Business Ethics Quarterly. Apr2001, Vol. 11 Issue 2, p275-306. , Author Thomas Carson argues that salespeople have important duties to warn customers of potential hazards, refrain from lying and deception, fully and honestly answer questions about what they are selling, and refrain from steering customers toward purchases they have reason to think will harm the customers. In the research paper titled “Ethics and Personal Selling: Death of a salesman as an ethical primer” published in Journal of Personal Selling & Sales Management. Aug 86, Vol. 6 Issue 2, p81. 8p authors Clarice L.Caywood and Gene R. Laczniak, has proposed that ethical conflicts and choices are inherent in personal selling and a sales person faces situations of ethical dilemma. Also, in the same research paper, the authors have mentioned that the ethical behavior transcends the boundary of law and that there is no single formula of defining one action to be ethically correct over the other. They have given the preposition that there are diverse and sometimes conflicting determinants of ethical action and that a strong code of ethics in sales is needed when the business environment is turbulent and uncertain.

In the article titled ”Sales Ethics” published in Electrical Wholesaling in July 2002, author John McCarthy mentions that sales people generally consider business ethics as an oxymoron that is, business and ethics are two different things, which is a blunder. McCarthy mentions that though this is a prevalent thought process, it is important for the sales people not to give ethics a miss as a sales person will be able to win customers only through trust and credibility. Thomas N Ingram, Raymond W LaForge, and Charles H. Schwepker, Jr., in their article title “Salesperson Ethical Decision Making: The Impact Of Sales Leadership and Sales Management Control Strategy” published in Journal of Personal Selling & Sales Management. Fall2007, Vol. 27 Issue 4, p301315. 15p. have mentioned that sales managers need to take a multifaceted approach in trying to enhance the moral judgment of salespeople. The authors also mention that sales organizations have traditionally focused on the development, communication, and enforcement of ethical codes and rules to increase the ethical behavior of salespeople and that these efforts need to be continued, but supplemented with attention to the interpersonal dimension of sales organization ethical climate and salesperson cognitive moral development. The research paper also focuses that correct moral judgment in complex sales situations very challenging for salespeople.

It is seen through the review of literature that there is a little research done in area of FMCG sales ethics and hence a strong need is felt to carry out a research in this area. This study focuses on the distributors’ perception

of

ethical

practices

in

the

selling

effort

of

FMCG

companies

in

NCR.

This study tries to find out the distributor’s perception of the extent to which FMCG companies are ethical is there sales practices. The study would further underline the importance of ethical consideration for all those who are involved and affected directly or indirectly while selling FMCG.

OBJECTIVES OF THE STUDY To conduct study on the distributors’ perception of the ethical sales practices of 10 identified FMCG companies in NCR. 1. To know where the FMCG companies fall in terms of the ethical sales practices in the perception of distributors. 2. To suggest, on the basis of distributors’ response, ways to improve ethical practices in the selling of FMCG products.

Research Design The first part of the research is exploratory where the researcher had taken opinions and thought in industry experts like sales managers, territory executives, distributors and conducted literature review. In order to fulfill the objective the propositions, a questionnaire was developed and administered to the distributors of the 10 selected FMCG companies in NCR.

1. Hindustan Unilever Ltd. 2. ITC Ltd. 3. Craft Foods India (Cadbury). 4. Colgate-Palmolive (India) Ltd. 5. Marico Ltd. 6. RECKITT BENCKISER INDIA Ltd. 7. Dabur India Ltd. 8. Nestlé India Ltd 9. Coca Cola Beverages 10. Pepsi Beverages

The questionnaire was administered through a one to one interview of researcher with distributors. This method facilitated collection of qualitative data along with the quantitative data as it gave the firsthand account of the day to day experience of distributors of a variety of FMCG companies. The personal approach also eliminated any non-response or low-response problems.

The questionnaire designed to test the propositions was based largely on the expert opinion by the sales managers of various FMCG companies, distributors of the FMCG companies and the personal experience of the author while he worked for a leading FMCG companies in India. The questions were asked indirectly to help reduce the incidence of forced responses.

The second part of the research is descriptive and cross-sectional and the method employed is collection of primary data from the respondents through a survey questionnaire.

Sampling Plan The study is conducted in the NCR, which is the universe for the study. The sample size is 50 distributors, where 5 distributors of each of the 10 FMCG companies are selected. The sampling design is Quota Sampling. The population for this study consisted of FMCG distributors who are active in the distribution in various areas in NCR. In order to ensure that sub-groups of the sample were large enough for meaningful analysis, a minimum sample size of 100 usable responses was targeted.

The sample consisted of the distributors of the select FMCG companies in NCR who could devote 30 minutes time with a view to complete the questionnaire and extracting secondary data. In order to facilitate industry comparisons, convenience sampling was used to select 5 distributors of 10 FMCG companies.

Questionnaire Design There are 4 major constructs (dependent variables) selected for the purpose of this study, which can be called as pillars of ethics6. These constructs are: 1. Overall Utility (Utilitarianism) 2. Justice and Fairness 3. Rights (of the distributors) 4. Ethics of Care (towards distributors) 6 Further, these constructs have been assigned to the different variables. The variables have been identified by meeting the experts from the industry, experiential learning and literature review. These variables are as follows: 1. Dependent variables a. Overall Dependent Variables: i. The company is ethically correct in its sales practices. X11 ii. You are overall satisfied with the Services of the FMCG supplier X44 b. Dependent variables related to the utilitarian principle of ethics X48 i. Company living up to its brand image. X8

ii. The company living up to distributor’s expectations in terms of the benefits to the distributor due to its large size X10 c. Dependent variable/s related to the principle of fairness in ethics i. Perception of distributors of overall fairness in treatment by the FMCG company X47 d. Dependent variable related to the principle of protection of rights in ethics i. Perception of distributors about the protection of their rights X46 e. Dependent variables related to the principle of Ethics of Care i. Perception of distributors about the FMCG company taking due care. X45 2. The overall dependent variables which are, distributors perception of the FMCG company being ethical and the overall satisfaction of distributors are linked to the four constructs as mentioned above, which in turn, are dependent on the independent variables as follows: a. Overall Utility (Utilitarianism) X48 i. Company’s Brand image as one of the reasons for the distributor to take the company’s distribution. X7 Independent ii. Company’s Big Size and Large operation was a reason for the distributor to choose the company’s distribution.X9 Independent iii. Timely communication of the new sales promotion schemes by the company / company’s sales person. X17 Independent iv. Timely delivery by the Company’s C&F agency of the goods ordered by distributors. X18 Independent v. Settlement of claims for damages promptly X 21 Independent vi. Settlement of claims for schemes promptly X22 –Independent vii. Sale of products nearing expiry by FMCG company. X25 Independent viii. Company’s sales person takes interest in guiding distributor to improve sales. X38 Independent ix. You are provided pamphlets, glow signs, danglers, posters, banners, pole kiosks, etc by the company. X40 Independent b. Justice and Fairness X47 i. The company and its sales person treat the distributor fairly vis-à-vis other distributors. X13 Independent ii. Sufficient distribution area to you vis-à-vis other distributors of same company. X15 Independent

iii. No infiltration in your distribution area from the adjoining distribution areas due to the differential in the sales incentives. X16 Independent iv. The company’s sales person’s fairness vis-à-vis sales person of other company whose distribution distributor has X34 Independent

c. Protection of Rights (of the distributors) X46 i. Force selling lines of products that do not sell much in the distributor’s territory. X14 Independent ii. Distributor’s rights to get the delivery as per order sent to C&F agent.X19 Independent iii. Use of official power & undue influence by the company sales person to overstock. X24 iv. Company’s adherence to the promised deadline of sales promotion schemes to distributors. X30 v. Company’s sales persons giving truthful and accurate information about competitors’ products? X31 vi. Company’s sales person wanting favors (extortion) from Distributors. X32 vii. Protection of the rights of the distribution to earn the official margin without the pressure to undercut for the purpose of sales target achievement. X35 a. Ethics of Care (towards distributors) X45 i. Sales person enjoying healthy relationship with distributor. X12 ii. Availability of the stock with the company’s C&F agent as per distributors order. X20 iii. Action taken by the company on retailer grievances. X 27 iv. Action taken by the company on consumer grievances X28 v. Action taken by the company on distributor grievances X29 vi. Sales departments promptness in fulfilling training requirements X36 vii. Frequency of the company sales person visits. X37 viii. The company’s sales person helping retailers in guiding ways to improve display and stacking for increased sales. X39 ix. Company providing the distributor with the past data in analyzing sales. X 41

Rating Scale. A five point rating scale is chosen to collect responses from the distributors where 1.

Reply of 5 is Strongly Agree with the statement,

2. Reply of 4 is Agree, 3. Reply of 3 is Neither Agree or Disagree 4. Reply of 2 is Disagree 5. Reply of 1 is Strongly Disagree

Analysis of Data * = .000 Significance, **=.05 Significance, *** = .10 Significance Table No. 1: Interrelationship between the Independent variables of the Utility

X7

X9

X7

X9

X17

X18

X21

X22

X25

X38

X40

1

0.093

-0.085

0.087

0.173

-0.219

0.16

-0.109

0.104

0.52

(-0.247)

(.719)

(0.083)

0.056

-0.184

0.145

0.057

-0.115

0.096

1

(-0.173)

-0.104

(-0.152) X17

1

(-0.216)

(-0.179)

(0.293)

(-0.289) (-0.262) X18

1

-0.009

0.123

(0.042) (0.066)

-0.148

0.331 X21

1

X22

0.067 1

X25 X38

0.012 (0.019)

-0.182

-0.064

0.19

-0.082

1

0.011

0.014

1

0.051

X40

1

Explanation of the table 1. There appears to be a positive relationship between “settlement of distributor’s claims for damage promptly” (X21) and “company’s big size and large operation as one of the reasons for the distributor to choose the company’s distribution (X9). The inference here is that the companies with large operations are prompt in settling the claims for damages of their distributors.

2. There is a negative relationship between “Sale of products nearing expiry by FMCG Company” (X25) and “timely delivery of the goods ordered by the distributors” (X18). It implies that in order to timely deliver the goods; the companies are selling goods nearing the expiry period. This further implies that the companies are not managing their inventory properly or there is a problem in correctly identifying the demand different products that leads to high production of the goods that are less in demand. 3. There is a negative relationship between “company sales person taking interest in guiding distributor to improve sales” (X38) and “timely delivery of the goods ordered by the distributors” (X18). This shows that the company sales person takes interest in guiding the distributors when there is untimely delivery, which reflects that the sales persons try to compensate for untimely delivery by meeting, building relations and guiding distributors to improve sales. 4. There is a positive relationship between “company sales person taking interest in guiding distributor to improve sales” (X38) and “Settlement of claims of damages promptly”. This shows that in most of the cases when the sales person takes the interest in guiding the distributor to improve sales, the claims are settled promptly.

Table 2. Interrelationship between Independent variables of the Fairness

X13 X15

X13

X15

X16

X34

1

-0.156

0.165

-0.172

1

-0.046

-0.197

1

0.067

X16 X34

1

Explanation of the table 1. There is no relationship between “company’s fair treatment of distributor with other distributors of the same company” (X13) and “no infiltration in the distributor area due to the differential in sales incentives” (X16)” as per the analysis. For all logical reason, these should be a relationship because the fair treatment of all distributors will not lead to leakages and infiltration in the adjoining territories. This reflects that there is possibility of infiltration and that the fair allocation of sales incentives / schemes is questionable. 2. There should ideally be a relationship between “company’s fair treatment of distributor with other distributors of the same company” (X13) and “sufficient distribution area as compared to other

distributors of the same company (X15)”. The logic is that the fair treatment should be related to the fairness in allocation of area for distributors. But there is no such relationship. This puts question marks on the fair treatment of distributors by the FMCG companies as most of the distributors have replied positively to the factor X15. Table 3. Interrelationship between Independent variables of the Rights

X14 X19

X14

X19

X24

X30

X31

X32

X35

1

-0.087

0.076

0.036

0.094

0.22

-0.179

1

0.127

-0.159

-0.141

0.055

-0.012 (-0.223)

X24

1

X30 X31 X32 X35

-0.15

-0.056

-0.06

(0.120)

1

0.122

-0.074

-0.123

1

0.002

0.01

1

0.07 1

Explanation of the table 1. Logically there should be relationship between “Force selling of the lines of products that do not sell much in the distributor’s area” X14 and “Use of official power and undue influence by the company sales persons to overstock the distributors” X24. The analysis is not showing any such relation. The replies of distributors on the variable X24 give the negative result with most of the distributors responding that they are overloaded. Hence, the inference is that the distributors are forcibly oversold only those products those sell more in the territory. 2. The variables “company’s adherence to the promised deadlines of sales promotions schemes to the distributors” (X30) and “company’s sales persons wanting favors” X 32 are not positively related, which shows that overall the sales persons are ethical and do not extort.

Table 4. X12 X20 X12

1

X27

-0.056

x28

-0.092

x29

0.135

X36

-0.105

X37

0.164

X39

0.006

X41

0.087

(-0.233) X20

1

-0.056 (0.103)

-0.1 (-.237)

0.141

0.007

0.115

0.095

0.04

0.099

0.18 (.098***)

(-0.354) X27

1 (0.012)

0.171

0.197

(.067***)

0.091

-0.144

0.112

-0.062

0.104

0.073

1

-0.078

-0.205

-0.128

(-.297) X28

1

X29

-0.15 (.037) 1

X36

(-.261)

(-0.301) X37

1

0.222 (0.035)

X39

1

X41

0.024 1

Explanation of the table 1. There is a negative relation between “action taken by the company on retailers’ grievance” (X27) and “action taken by the company on consumer grievance” (X28). This shows that the company is not able to solve the grievances of consumers as well as retailers simultaneously. The distributors who have replied that the consumer grievances have been handled properly say that the retailers’ grievances have been relatively neglected and vice – versa. 2.

There is a negative relationship between “Sales department’s promptness in fulfilling distributor’s training needs” (X36) and “action taken by the company on consumer grievance” (X28). This reflects that when the companies train the distributers, they do not take action on consumer grievance and when the companies do not train the distributers, they handle the consumer grievances well. It can be inferred that the companies expect the distributers to assist consumer grievances redressal.

3. “Frequency of sales persons visit” (X37) and “company providing past data to the distributors in analyzing sales pattern” (X41) are negatively related. This shows that when the frequency of sales persons visits is more to the distributors where the company is not able to provide company sales data.

Table 5. : Relationship between Dependent Variables and Independent Variables under Utility X7

X9

2.757

3.08

-0.052

-0.082

X17

X18

X21

X22

X25

X38

X40

10.02 19.43**

5.003

9.175

3.097

-0.105

0.121

0.231

Chi X8

Square

13.071 20.582**

R Square

0.299

-0.389

-0.214

-0.392

T (Z Test)

1.346 5.58*

8.192*

11.926*

4.83*

3.428**

2.52**

10.88*

(0.135) 12.641*

X7

X9

X17

X18

X21

X22

X25

X38

X40

9.914

5.997

13.989

3.685

12.215

6.33

10.562

10.64

4.345

-0.186

0.006

0.134

0.034

0.035

0.033

-0.127

0.074

0.176

6.861*

9.007*

11.123*

6.640*

4.881*

Chi X10

Square R Square T (Z Test)

4.200* 10.701* 2.516** 11.906*

Explanation of the table 1. The factor that seems to be alone effecting “Company living up to its brand image” X8 is “company sales person taking interest in guiding distributor to improve sale”. This shows that personal touch and contribution of the company’s sales person is the most important factor that makes the distributor feel that the company is living up to its brand image. Table 6. : Relationship between Dependent Variables and Independent Variables under Rights X14

X19

X24

X30

X31

X32

X35

6.46 18.263**

10.734

4.159

5.018

9.694

3.642

0.087

-0.152

0.272

(-0.028)

0.035

(-2.107)** 2.759** 8.162*

3.455*

3.454*

Chi X46

Square R Square

0.32

0.197

(-8.077)*

4.185*

T (Z Test)

Explanation of the table 1. There appears to be a relation between “Overstocking the line lines of products that do not sell in the distributor’s territory” (X14) and the overall perception of distributor’s right protection by the company (X46) in the minds of distributors. This means that the companies not overstocking low sale products are able to show that they are concerned about the rights of distributors being protected. 2. Another factor that appears to have relation with the protection of distributor’s rights is “the sales persons giving accurate and truthful information about the competitors products” (X31) Table 7: Relationship between Dependent Variables and Independent Variables under Fairness X13

X15

X16

X34

8.958

2.316

3.99

0.543

Square

(-.0294)

0.015

0.043

0.037

T (Z

(-

Chi X47

Square R

Test) 1.635)***

(1.549***

11.188)*

1.385

Explanation of the table It is observed earlier that the independent factors under Fairness are not related to one another and also the responses that show that the companies are not fair in the perception of distributers. Hence, no relationship between dependent variables is getting established. Table 8: Relationship between Dependent Variables and Independent Variables under Ethics of Care X12

X20

X27

X28

X29

X36

X37

X39

8.159***

4.536

3.131

4.832

0.142

2.783

0.217 (-0.213)

(-0.168)

0.275

0.024

0.008

X

Chi

45

Square

7.94

3.667

R Square

0.2

-0.173

T (Z Test)

(-0.860) -0.494

9.333*

(-2.48)** 10.477*

9.092* 11.389* 3.510**

(.394)

1. The key factor related to the overall perception of ethics of care being practiced by the company (X45) in the minds of the distributers is “Company’s promptness in fulfilling training requirements of the distributor” X36 2. There also appears to be a relationship between the overall perception of ethics of care being practiced by the company (X45) in the minds of the distributers and “the action taken by the company on the retailer grievances.

The scatter plots X 48. The distributors’ perception of overall utility in terms of profit and gain

Overall Utility to Distributor 6 5 4 3

X48

2 1 0 0

10

20

30

40

50

60

Explanation The scatter plot of the variable X48 shows that majority of the responses regarding the overall utility to the distributor are agreeing to the statement that they are benefitted. X47. The distributors’ perception of fair treatment by the companies

Fairness shown by the Company 5 4 3 X47

2 1

0 0

10

20

30

40

50

60

Explanation The majority of the respondents have replied they neither agree nor disagree to the statement that the companies have been fair to them. This is an area that the companies have to improve change the perception of distributors in their favor.

X46. The distributors’ perception of protection of their rights by the companies

Rights of Distributors 6 5 4 3

X46

2 1 0 0

10

20

30

40

50

60

Explanation The majority of distributors have replied that they neither agree nor disagree when asked questions on their perception of the protection of their rights as distributors. Relatively less number of respondents has said that rights have been protected.

X45. The distributors’ perception of Ethics of Care shown by the companies towards

Ethics of care shown by companies 5 4 3

X45

2 1 0 0

10

20

30

40

50

60

Explanation The majority of responses are again neither agree nor disagree in case of perception of ethics of care. The next set of response suggests that distributors disagree that companies take good care of them.

Major Findings and Implications 1. The study shows that the FMCG companies that have large operations, keep the distributors happy by promptly settling their claims for damages. Also, it can be logically inferred that these companies have better understanding of the demand conditions in the markets so the claim for damages in minimal. The companies must have better understanding of demand conditions and markets. 2. There is a startling finding that the companies may be selling the products nearing expiry. This could be because of poor inventory management or wrong production planning due to wrong sales estimation. Again, better understanding of demand responsiveness is desired. . 3. The company sales persons resort to the relationship building in case of delay in delivery of goods. The correct thing would be finding out the lacunae in the delivery of goods. 4. In most of the cases when the sales person takes the interest in guiding the distributor to improve sales, the claims are settled promptly. This means that the distributors who have been able to build relationship with the sales person are able to get their claims passed easily. 5. It is found in this study that there is a problem of infiltration of goods from other distribution areas due to differential in the sales incentives/ budget and schemes, which must be curtailed to provide more benefits to the distributors and protect his right to exclusively sell in his area. Also, this would enable company to have better understanding for the sales potential in different markers for efficient future planning. 6. The distributors have an overall perception that the companies are not fair with them and follow discriminatory policies. This issues should be addressed promptly and the companies should try to remove all kinds for discrimination. 7. The analysis suggests that the overstocking of goods with the distributors is commonly followed and should be reduced in order to ease the pressure on the distributor so that he can focus more on selling to retailers. 8. The study also shows that the sales persons do not extort from the distributors in order to get the distributors’ work done. 9. The companies must be prompt in handling grievances of distributers

10. It can be inferred that the companies expect the distributers to assist consumer grievances redressal. Hence, the frequent training should be imparted to the distributors. 11. frequency of sales persons visits is more to the distributors, where the company is not connected through the internet and where the company is not able to provide company sales data. This shows that the use of information technology helps the distributor know his market and the help of a sales person is less needed in managing the market. 12. The personal relationship building of the Company sales person is the biggest factor that contributes to the utility to the distributors and they develop a positive image for the organization. 13. The personal touch and contribution of the company’s sales person is the most important factor that makes the distributor feel that the company is living up to its brand image. 14. The key factor related to the overall perception of ethics of care being practiced by the company in the minds of the distributers is “Company’s promptness in fulfilling training requirements of the distributor”. The distributor has a strong need to be educated on the latest offering, products, incentives, schemes, and methods of sales, and the used of merchandising material. 15. There also appears to be a relationship between the overall perception of ethics of care being practiced by the company (X45) in the minds of the distributers and “the action taken by the company on the retailer grievances.

Key References 1. Trevino, Linda-Klebe & Youngblood, Stuart A. (1990), “Bad apples in bad barrels: a causal analysis of ethical decision-making behavior”, Journal of Applied Psychology [JAP], 378 – 85, 103-360-849

2. Stephen B. Knouse & Robert A. Giacalone (1992). “Ethical Decision-Making in Business: Behavioral Issues and Concerns.” Journal of Business Ethics 11 (5-6):369 - 377.

3. Ford, R.C. & Richardson, W.D. (1994), “Ethical decision making: A review of the empirical literature”, Journal of Busniess Ethics, 13, 207-224, 103-368-341

4. Clare M. Pennino & Norman E. Bowie (2004). “Business Ethics, a Kantian perspective”. Journal of Business Ethics 50 (4)

5. W.C. Crain. (1985). Theories of Development. Prentice-Hall. pp. 118-136 6. Velasquez Manuel G., (2007), “Business Ethics”, Prentice Hall of India, Delhi, (2007), pages 67115

7. W. L. LaCroix (1970/1971). Patterns, Values, and Horizon: An Ethic. New York,Corpus Books.

8. Sullivan, Arthur; Steven M. Sheffrin (2003). Economics: Principles in action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. pp. 32. ISBN 0-13-063085-3.

9. http://www.frbsf.org/publications/economics/letter/2010/el2010-14.html 10. http://www.huffingtonpost.com/bill-donius/profit-maximization---eth_b_553605.html and http://www.business-standard.com/india/news/what-goldman-sachs-didthe-justice-deptdidnt/483030/

11. The Corporate Scandal Sheet. Forbes. August 26, 2002. Robert Bryce, Pipe Dreams: Greed, Ego, and the Death of Enron (PublicAffairs, 2002) ISBN 1-58648-138-X

12. http://imrbint.com/index.php?option=com_content&view=category&layout=blog&id=3&Itemid= 6

13. P.N. Mari Bhat (June 2001), “Indian demographic scenario 2025,” Population Research Centre, Institute of Economic Growth, Delhi.

14. http://populationcommission.nic.in/facts1.html 15. Shailesh Dobhal (January 06, 2010), 'The Next Urban Frontier: Twenty Cities To Watch' The Economic Times.

16. “GST, FDI can quadruple FMCG turnover in 10 yrs: Survey,” Business Standard, July 9, 2009; Economic Survey 2009–2010

17. An appetite for growth-Opportunities in the Indian food industry, Ernst & Young, 2009 18. Amritanshu Mohanty (2009), “Challenges before the Indian FMCG sector and designing the blue print for future”; Dabur India Ltd, 5th Motilal Oswal Global Investor Conference, August

19. Business Monitor International, December 2011 20. A.N. Nielsen Report 24th Nov 2010, “INDIA’S RURAL FMCG MARKET TO GROW TO 100 BILLION USD BY 2025”.

21. Nargundkar, Rajendra (2008), “Marketing Research”, Tata McGraw Hill, Pages 19-47