Discuss about the Corporate Social Enterprises for Business Government & Society.
This project involves a case study on the corporate social responsibility of companies using the one-for-one business model structure. Corporate social enterprises such as TOMS Shoes have successfully been able to market their brand through cause-marketing. However, the impacts of their corporate social responsibility on the recipient countries have received sharp criticism and appraisal in equal measures. This study seeks to establish:
This study was undertaken by a group of university students by sampling opinions and literature by previous researchers and directly examining documented data regarding the corporate social responsibility aspect of companies employing the one-for-one business model structure. TOM Shoes Company was used in this case study.
TOMS Shoe is a social corporate enterprise that through a one-for-one business model structure seeks to address the rampant social problems in developing countries. The company donates a pair of shoe to a needy child for every single sale of a pair of shoe made while as well using the cause to market its brand. However, previous research has raised questions on the sustainability and tenability of the course. Adoption of this business model by more and more companies endangers the long-term viability of the corporate social responsibility aspect of the business (Marquis & Park, 2014).
The ability of the companies to attain their stipulated corporate social responsibility goals while also ensuring that local market industries are not hurt by their activities has also attracted divergent opinions. Methods used by the companies such as TOMS to keep its competitors at bay have also been criticized in equal measure (Boulouta & Pitelis, 2014). The undertaking of this case study was motivated by the numerous loopholes poked on the efficiency and effectiveness of corporate social responsibility function in companies using the one-for-one business model to address the social problems in imperfect economies.
In this study, we will analyze the positive and negative impacts of all the activities undertaken by corporate social enterprises such as TOMS Shoes. We will seek to establish whether the cause-marketing strategies settled for by TOMS Shoes meets its objectives without obstructing the economic progress of the countries they seek to help. The benefits accrued due to cause-marketing in the buy-one-give-one model will be contrasted with the benefits transferred to the donations recipient countries. From a rational and unbiased perspective, does TOMS Shoes one-for-one business model structure contribute towards attainment of their corporate social responsibility? Do the benefits accrued due too the cause marketing match the level of help and benefits to donation recipient countries?
The type of shoes given for donations by TOMS varies in quality compared to those supplied for sale in their market industry. The company has greatly tried to impact the social standards of recipient countries by ensuring that the children targeted by this initiative remain healthy and are able to pursue their studies with fewer distractions to worry about. However, local industries in the shoemaking business have been drawn out of business with some forced to fold up (Bartter, 2012). The number of a single pair of shoes sold by TOMS cannot match the number of shoes given for donation. The cost of producing a single pair of shoes for donation and the costs of donating the shoes have to be taken care of by the profit made from the overall sale.
TOMS shoe business employs the for-profit structure in the one-for-one social entrepreneurship model. Through the-one-for-one model, TOMS is able to identify a state of need in a country and come up with ways to address the need. The aforementioned need may vary from market failures to market needs. The type of need directs the company on what form of action to take. TOMS for-profit model seeks to address the market need in the recipient country (Talpalaru, 2014).
The consumer products industries have in the recent past witnessed a revolutionized success after adopting the buy-one-give-one model approach in their businesses structure. The customer’s choice of a company seems to be made with the expectation that their transaction can make an impact on a social cause (Mason et al, 2015). More success has been witnessed in the apparel industries as compared to other sectors. This can be accounted by the fact that clothes, jewelry, and shoes provide a free marketing tool for the company after the consumers put on the product. The choice of products a company deals in greatly influences the level of success of the one-for-one social entrepreneurship model. Products that are worn are easily able to market the company as well as trigger story telling. This in return creates publicity for the company (Marquis & Park, 2014).
However, the model might be a bit challenging to companies dealing with consumable products such as foods. It proves difficult for free marketing witnessed in the companies dealing with apparel to be achieved with companies handling consumable goods. Financial institutions have also picked on this model approach. For instance, CommonBond a for-profit social enterprise funding loans for students commit to funding the education program for a needy student for every domestic student loan transacted (Anderson, 2016).
The costs of donations relatively increase as the prices for commodities being sold by the company increases. This can be well explained by the fact that the items for donation have to be factored from the profit margins of the sales made. Critiques have always faulted the price of TOMS shoes compared to the quality of the product. If the critiques were to be true then this would mean that the company is charging high prices for their products to increase their profit margins. Companies such as Smile Squared sell their products at a premium price to reduce the costs involved in donations (Marquis & Park, 2014). Five years after the formation of TOMS shoes, one million shoes had been distributed in form of donations, two years later, the number of shoes distributed had doubled to two million(TOMS, 2013).
The increase in the number of shoes donated implies an increase in levels of profits taking into consideration that donations are drawn from profits made. However, in the TOMS for-profit business structure, the number of donations might not reflect the profit margins on the sales made. The quality of shoes placed for sale is not the same as the shoes made for donation purposes. The company has brought the products closer to the recipients by decentralizing their operations base and also relies on its partnering organizations to deliver the donated shoes to the recipients. This has the effect of eliminating the costs of donating the shoes. The partnering organizations must also identify recipients of the donated shoes. Assessing the level of need of the recipients should be done by the partnering organization to ensure that only the intended recipients’ benefits and to reduce the impacts of this process on the local industries (TOMS, 2013).
TOMS Shoes corporate social responsibility idea was conceived after the founder visited Argentina and observed that most children were not in shoes. From its inception in 2006, TOMS main mission has been to see to it that with every single sale of a pair of shoe, a child in need gets a pair for free (Brown, 2013). The founder, Blake Mycoskie has always affirmed the company’s commitment to eradicating poverty in the recipient countries each time he appears on media. By donating shoes to the needy school going kids, the founder argues that the health of the kids while at school is taken care of due to improved hygiene standards. From Blake Mycoskie perspective, this has a positive achievement given that it reduces rates of dropouts associated with health issues. The kids are therefore able to attain good grades at school (Lebowitz, 2016).
The one-for-one business model approach is meant to build sustainability by reciprocating each sale made with an act of kindness. Human capital compliments manufactured capital in imperfect economies. The human capital is measured in terms of the health conditions, knowledge and skills of citizens in an economy. TOMS Company under the corporate social responsibility program seeks to strengthen the human capital of developing countries economies (Pearce, Barbier & Markandya).
However, the intention has not always matched the impact when it comes to corporate social responsibility objective of TOMS shoes. Previous research indicates that local industries in the countries where the donations of shoes are made have suffered major blows to the extent of some local shoemaking companies being thrown out of business. This in return inflates the levels of unemployment in that country and slows the economic growth of the country due to reduced levels of manufactured capital. Shoe donation to the recipient country only meets the short-term needs of the nation while inflicting long-term injuries to the economy of that country. A kind gesture meant to lift a country from the jaws of poverty ends up drawing the country into tough economic times and thus entrenching the poverty levels even further (Jain, 2011).
In a bid to mitigate the economic sabotage brought about by local shoe-making industries by being driven out of the market, TOMS shoes have decentralized its shoemaking operations and supply chain. By moving the shoemaking plant to countries such as Ethiopia, Haiti, Argentina, and India, not only are job opportunities created for the locals but also savings in costs used to ship goods (TOMS, 2011). TOMS has also ventured into other social entrepreneurial practices by merchandising products such as coffee and sunglasses. It could also be argued that by TOMS leading the pace in the one-for-one business model and the emulation witnessed by other social entrepreneurs such as Bombas dealing with socks, Out Of Print that deals with books and Figs that produces clothes for healthcare workers, a concerted effort in fighting poverty in third world countries can end up bearing measurable results (Fritz, 2018).
References
Anderson, T. (2016, February 23). Social Promise: The Making of a Social Entrepreneur. Retrieved May 25, 2018, from CommonBond Social Promise: https://commonbond.co/post/the-making-of-a-social-entrepreneur
Bartter, J. (2012). A New Model of Corporate Social Responsibility: A Case Study of Toms Shop. emyliacahya999.
Boulouta, I., & Pitelis, C. (2014). Who Needs CSR? The Impact of Corporate Social Responsibility on National Competitiveness. Journal of Business Ethics: Springer Link, 349-364.
Brown, S. (2013, April 9). Momentum Telecom. Retrieved May 25, 2018, from Corporate Social Responsibility Model: TOMS Shoes: https://momentumtelecom.com/corporate-social-responsibility-model-toms-shoes/
Business Government & Society III . (2012, April 16). TOMS Shoes: Doing More Harm than Good? Retrieved May 27, 2018, from Business Government & Society III : https://bizgovsociii.wordpress.com/2012/04/16/toms-shoes-doing-more-harm-than-good/
Fritz, J. (2018, April 22). Lessons in Corporate Social Responsibility from TOMS (Shoes). Retrieved May 25, 2018, from the balance smb: https://www.thebalancesmb.com/lessons-from-toms-shoes-2502511
Inc. (Director). (2014). How TOMS Founder Blake Mycoskie Crafted an International Brand [Motion Picture].
Jain, N. (2011, April 27). Shoes for Business: The unintended consequences of doing good. Retrieved May 25, 2018, from The Harvard Crimson: https://www.thecrimson.com/article/2011/4/27/shoes-local-toms-pair/
Lebowitz, S. (2016, June 15). On the 10th anniversary of TOMS, its founder talks stepping down, bringing in private equity, and why giving away shoes provides a competitive advantage. Retrieved May 25, 2018, from Business Insider: https://www.businessinsider.com/toms-blake-mycoskie-talks-growing-a-business-while-balancing-profit-with-purpose-2016-6?IR=T
Marquis, C., & Park, A. (2014). Inside the Buy-One-Give-One Model. Stanford Social Innovation Review , 30-31.
Mason, H., David, M., Dumitrescu, D., & Luthy, M. (2015). Trend-Driven Innovation: Beat Accelerating Customer Expectations. New Jersey: John Wiley & Sons, 2015.
Mycoskie, B. (2016, June 15). On the 10th anniversary of TOMS, its founder talks stepping down, bringing in private equity, and why giving away shoes provides a competitive advantage. (S. Lebowitz, Interviewer)
PBS Interview with Blake Mycoskie. Travis Smiley. September 9, 2011, https://www.pbs.org/wnet/tavissmiley/interviews/toms-shoes-founder-blakemycoskie/
Pearce, D., Barbier, E., & Markandya, A. (2013). Economics and Environment in the Third World. In D. Pearce, E. Barbier, & A. Markandya, Sustainable Development (pp. 2-17). London: Routledge.
Stefano Ponte & Lisa Ann Richey (2014) Buying into development? Brand Aid forms of cause-related marketing, Third World Quarterly, 35:1, 65-87, DOI: 10.1080/01436597.2014.868985
Talpalaru, M. (2014). Blake Mycoskie, TOMS, and Life Narratives of Conspicuous Giving. Project Muse, 168-190.
TOMS. (2013). TOMS One for One Giving Report. TOMS.
TOMS. (2011). Toms Giving Report. TOMS.
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