Market Behaviour During the Holy Month

Market
Behaviour During the Holy Month of Ramadan

Religion
constitutes one way ethical issues relate directly to business. In
many countries in which Islam is practiced by the majority, clear
ethical issues arise during key religious festivals and perhaps none
more so than during the Holy Month of Ramadan. For the faithful, the
month is a time of challenge as lifestyles are adjusted to the
requirement to fast. Eating habits change for this month and yet must
fit into other daily routines such as those connected to work and
attending school.

One
purpose of fasting is to help followers develop self-restraint and
put aside greed; Muslims are also encouraged to reflect upon and
prepare for the remaining months of the year. Fasting tests
individuals’ tolerance and develops their character, integrity, and
self-discipline. However, some individuals find such challenges more
difficult than others, and others may choose to exploit the situation
to their own advantage. For businesses in Islamic countries, the Holy
Month provides both opportunities and temptations and raises
important questions about social responsibility and ethics.

Many
Muslims attempt to adapt their lifestyles to conform to the
requirements of Ramadan. Doing so likely includes the suhoor (the
pre-dawn meal) and the iftar (the fast-breaking meal after
dusk). Nutritionists are keen to point out that healthy eating during
the month is essential to maintain both one’s spiritual and physical
health. Nutritionists suggest that a healthy, fibre-rich,
slow-release meal at suhoor is beneficial to getting
through the day and a light glucose rich snack at iftar followed
by a more substantial dinner later is an appropriate way to maintain
health during Ramadan.

According
to nutritionist Rana Decker Sawaf of the Emirates Hospital, “There
are two types of fast-breaking habits. One group breaks its fast by
satisfying their appetites and filling their stomachs completely upon
breaking their fast, and others break their fast with something light
like water and dates, then have dinner later on … It’s very
important to follow the true purpose of Ramadan. We should remember
that it’s not an eating festival. Instead of eating more, we should
concentrate on feeding those who don’t have much food.” 1

However,
for some businesses, the opportunity to take advantage of those who
fall into the category of “satisfying their appetite” is
irresistible. Doing so constitutes giving in to the temptation to
operate on the boundary of ethical behaviour.

Many
food manufacturers and retailers have mixed feelings about the way in
which Ramadan affects them. For some it represents high season and a
spike in demand for their products. It has been reported that sweet
makers, for example, rely on Ramadan for almost one-third of their
yearly income and that sellers of basic foodstuffs see a rise in
sales of around one-fourth during the Holy Month. 2

Many
people in Islamic countries recognise and complain about the practice
of price gouging prior to and during the Holy Month. Price gouging
occurs when sellers set prices above the level at which products
would normally be sold and which are considered fair and reasonable
by consumers. Such price increases are likely to occur on occasions
when demand increases and when consumers have few opportunities for
substitution. The Tunisian Office of Statistics states that monthly
consumption for the average Tunisian family increases by almost 25
percent during Ramadan from around 9.8 kilograms [21.6 pounds] per
month. 3 In
effect, producers and retailers may recognise that they have a
temporary increase in monopoly power and can exploit this power to
their advantage.

Complaints
over price gouging are widespread in Islamic countries. There are
reports of the practice in State of Kuwait, Palestine, Sultanate of
Oman, Tunisian Republic (commonly called Tunisia), Dubai, Jordan, and
Kingdom of Saudi Arabia, according to Arab News, the Palestine
News Network (PNN) and the Muslim Media Network. In Palestine, for
example, few residents can afford to pay higher prices for basic food
stuffs given the high levels of unemployment and the ongoing
political problems, which already mean many essential items are in
short supply.

In
Jordan there have been reports of prices rising by as much as 50
percent; in Dubai by 15 to 30 percent. Iran saw the price of meat and
fruit rise by 30 percent during Ramadan, and in Kuwait, prices are
reported to have risen by 15 to 20 percent. 4 The
Tunisian Office of Statistics has reported that food expenses, which
generally make up around 38 percent of individuals’ monthly income,
rise to around 51 percent during the Holy Month. Efforts to control
price gouging take place in response. For example, in Jordan, the
Market Surveillance Department attempts to visit stores to check on
cases where price increases seem unwarranted. However, the sheer size
of the task and lack of resources mean that many price-gougers escape
punishment.

Another
price control approach is educational advertisements, in which people
are encouraged to buy only what they need rather than stockpiling and
thus fuelling the rise in demand and creating an environment for
inflated prices. However, many Muslims find this suggestion hard to
follow, given the celebratory nature of the iftar and how
families and friends like to get together and socialise.

It
is not only price gouging, however, that has ethical and social
responsibility implications. The rise in demand for food means that
many shops and supermarkets aim to increase stock to accommodate the
spike in buying. Some businesses will exploit this situation by
supplying food that would not normally find its way to shelves. In
Egypt, a Business Today report highlighted an instance in
which food unfit for human consumption found its way onto supermarket
shelves and was confiscated. 5 Thousands
of kilos of meat, chicken, dairy products, and vegetables were
removed from supermarkets by police and health officials.

The
price to consumers of sugar, a globally traded commodity, is often
determined by local conditions. During Ramadan families often make
traditional sweet meals and demand for sugar rises significantly. In
Pakistan, for example, the price of sugar rose from PKR 47.2 per
kilogram in late July 2009 to PKR 52.5 per kilogram in early August,
a rise of more than 11 percent. 6 In
Egypt there were similar reports of sugar prices rising, prompting
state-owned Nubareya Sugar to increase production to increase supply
in the market. However, critics point to that given sugar prices rise
every year, and they wonder why the sugar business does not increase
supply in anticipation of Ramadan to close the annual supply-demand
deficit.

Granted,
many businesses in Islamic countries operate normally during Ramadan
and act both responsibly and within the law. For those that choose to
exploit the situation and behave in a way that the public finds
unacceptable, the consequences may be considerable. Their customers
are put off by such business practices, and they are inclined to see
those businesses as unethical and socially irresponsible.

For
those businesses that do engage in price gouging, the rise in demand
means that they are in a position to exploit market conditions and
garner additional revenue. The price elasticity of demand for food
products in the period prior to, during, and after Ramadan is likely
to be lower than at other times of the year. As a result, suppliers
know that increasing prices means that demand will fall by only a
small amount or not at all in some cases, which means that, all else
being equal, revenue will rise as sales hold up at higher prices.

Some
would argue that companies face increased competition for supplies
during the lead up to Ramadan and as a result have to pay a higher
cost for securing supplies, hence the higher prices. For fresh food
products, it may be that the demand for such goods increases at a
rate that is faster than the ability of growers to supply the market,
and as a result, prices will rise during periods when demand is high.
Food preparers argue that they have to pay higher prices of major
ingredients such as spices and soya bean oil in the preparation of
iftari products and as a result have to pass along these increased
costs in their prices to consumers.

The
problem for many businesses is communicating to customers the
difference between a genuine need for price increases because of
changed market circumstances and actual price gouging. Many customers
might simply interpret any price rise before or during the Holy Month
as price gouging. Ethical marketing is complicated by
people’s subjectivity. Price gouging occurs when customers consider
price rises to be above those they think are fair and reasonable.

Of
course, for consumers, a price rise might be considered unfair and
unreasonable, given the fact that they have to pay higher prices. If
consumers regard most price rises during Ramadan as price gouging,
then retailers face problems in countering the accusations when in
some cases the reasons for increasing price may be legitimate and
largely out of their control. If price increases are made because of
legitimate reasons, even if consumers do not fully understand these
reasons, then are retailers behaving unethically?

A
report in Arab News by Muhammad Al-Othaim in August 2009
suggested there was no justification for rising prices during
Ramadan, but it acknowledged that some retailers might try to use the
Holy Month as an opportunity of grabbing back some of the losses
suffered during the global recession. 7 However,
such increase is at the expense of consumers and thus hard to
justify. It is also argued that store owners know when Ramadan will
begin and so can stock up prior to the Holy Month to meet demand and
thus not have to increase prices because of shortages.

Another
explanation for price gouging is greed, a vice whose control is one
of the main principles of the Holy Month, and a number of Islamic
countries have government agencies that attempt to monitor it, as in
the case of Jordan. However, the widespread complaints suggest
monitoring is not altogether successful. Those businesses that do
succumb to the temptation, without sound economic reasons for doing
so, face the prospect that their marketing tactics are
noticed by customers and that their reputation will suffer as a
result. Customers may avoid those companies that practice price
gouging. The short-term gains of exploiting the market situation
during Ramadan might then be offset by the longer term effects on the
business as a whole.

Perhaps
a better approach is to put in place a major education programme
focusing on the pyramid of corporate social responsibility. Most
people understand that a business must be profitable in order to
survive; the vast majority would certainly agree that obeying the
rule of law (and the spirit of the law) is essential but the next
stage of the pyramid might be the crucial factor. Business owners can
be educated to understand that they have an obligation, especially at
a time of particular religious observance, to behave in a manner that
is seen by customers (and this is very important given the subjective
nature of ethical marketing) as ethically correct, that is,
avoid harming those who celebrate this holy time of year. In so doing
these business owners can take comfort in the fact that they are
contributing resources to their communities and improving the quality
of life for their customers. Doing so is a gain that is surely deemed
more important than increasing profits. There is a great deal of
similarity, therefore, between the fundamental principles of Ramadan
and the tip of the social responsibility pyramid, being a good
corporate citizen.

Writing
Guidelines:

  • Avoid
    plagiarism, similarity should not exceed 20% for the essay to be
    graded

  • Stick
    to pages’ limits as indicated in the guidelines

  • Use
    12 Font for text and 14 for the headlines.

  • Deadline
    for Tunitin submission is 25/04/2020.

Authenticated
academic resources means Textbooks,
articles
& papers published in academic ranking Journals; and governmental
sources ending in .gov or .org.

Up
to date means not older than 5 years.

Essay
Writing Guidelines

Introduction:

Using
up to date resources (not older than 2015),
briefly discuss Business ethics importance from marketing
perspective. Why marketers need to conduct or maintain ethical
business practices (not
more
than 1-2 pages)

Discussion:

Based
on the given case, answer the following (without writing the
questions).
(4-6
pages max.)

  • What
    ill practices reported in the case from a marketing perspective?
    Elaborate on these issues referring in your discussion to the
    assigned reading (Ethical
    Issues in the Marketing Program).

  • Examine
    the relevance of price elasticity of demand to the issue of rising
    prices during the Holy Month of Ramadan.

  • What
    remedies were suggested in the case for solving the ill practices in
    Ramadan shopping behaviour context for both parties, sellers and
    buyers?

Under
the current situation in UAE, the lock down due to Coronavirus. What
is expected in the coming Holy month (draw a picture and give
supportive argument here). Use
up-to-date external authenticated academic resources not older than
2015)

Conclusion:

(2
– 4 pages, max.
Use
up-to-date external authenticated academic resources not older than
2015)

  • To
    what extent do you think the ill practices during Ramadan is just a
    consequence of changing market conditions rather than unethical
    behaviour by businesses owners? Discuss in light of the current
    pandemic situation around the Globe.

  • Can
    ethical conduct be enforced by authority/governments alone? Discuss

References:

Use
Harvard style for in text citation and referencing
http://www.citethisforme.com/harvard-referencing>

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