WEEK 10

Organizational purpose

This refers to the overall vision, goals as well as the objectives of a firm that defines the basic reason why a firm exists. It overall describes the main reason of the existence of an organization in one or two sentences that should always be clearly mentioned that should say how well the firm is fulfilling the basic needs for the human beings and how is the firm affecting the world.

For instance: The Merck; “Our business is preserving and improving human life. We also work to improve animal health.”  (ComboApp Ltd., 2013)

Corporate Social Responsibility

CSR refers to how well the corporates and businesses manages to operate the business processes by producing enough profit with a positive impact on the society at the same time. It is the responsibility that a firm has towards the society, nation and the world. 

According to the world business council for sustainable development in the publication named ‘making good business sense’ by Lord Holme and richer watts- corporate social responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large. (Baker, 2013)

 

SOURCE: IveyBusinessJournals.com

 It’s a well-known fact that there are huge arguments regarding shareholder satisfaction or stakeholder satisfaction. The argument in terms of economy says that the main motive of a company is to maximize profit and shareholder’s wealth without which the firm is not acting responsible. But again, there are arguments in terms of ethics that says that a firm is formed inorder to improve the society without which a firm is not acting responsible by not enhancing the social well-being.

However, the social programs come with economic costs and economic argument says, the firm should not engage in activities that doesn’t give possible positive outcomes. Similarly, the economic outcome always creates social costs that are also not good for the firm.

So, in my opinion, a firm should always consider responsibility towards their stakeholders and use ethical strategies for sustainable development and earn maximum profit.

Example:

Frank Dottori, the CEO of Tembec Inc., was concerned that Ontario was facing a confrontation similar to the one experienced in Clayquot Sound, British Columbia. Even if all parties agreed to the Lands for Life recommendations, the environmental issues would not be solved, the forestry industry would not remain viable for long, and the conflict would inevitably recur. So Dottori took a different approach — he staked out a position in the overlapping space. He met directly with environmentalists and together they uncovered a common set of objectives: setting aside some pristine forests for public recreation, protecting biodiversity, preserving certain unique ecological features, and maintaining a viable forestry industry. In focusing on the overlapping space, the two sides found the innovative solution they were looking for: the forestry companies would harvest treetops at reduced stumpage fees. In the end, almost all sides were satisfied: a greater percentage of forests were protected, Tembec remained profitable and secured greater certainty for its future operations, and the government appeared to have brokered an agreement. (Bansal, 2013)

Answers for the PepsiCo case-study 

I had a wonderful experience reading about PepsiCo as well as Indra Nooyi. It was great in terms of knowledge and this case-study has given me more ideas about the firm that I did not know before.

No.1

PepsiCo’s main strategic objectives are- sustainable growth, empowered people and social responsibility that is achieved through:

• -         Product reformations through the less unhealthy snack foods and beverages.
• -        Producing good for you and better for you products, achieve more growth opportunities.
• -         Diversification
• -         Achieving of synergies
• -         Good relationship with suppliers and distributors
• -         International expansion
• -         Store delivery

The main reason why the firm exists is to promote sustainable growth by investing in healthier lifestyle for people and the planet. Multi-year growth strategy: performance with purpose helps to focus on sustainable development and growth of the firm.

No.2

The possible strengths of this strategy are:

• ·        They have the largest portfolio edible food items as well as beverages.
• ·        They have a well balanced food portfolio and they serve in about 200 countries around the world.
• ·        They are even able to develop the market share as a strength for the company’s strategy.
• ·        They have different types of product for different countries with different flavors.

The benefits of the strategy are:

• ·        They can gain more customer preferences with the help of this strategy.
• ·        High consumer satisfaction is achieved through high nutritious products.
• ·        Competitive market and prices in Chinese market acts as a benefit because it results in the exposure to a large population.
• ·        High amount of funds and reserves can be acquired for further development.

      No.3

The possible weaknesses and disadvantages of the strategy are:

Weaknesses are:

§  Difficult to manage a huge portfolio will cause dissatisfaction in terms of shareholders as, this strategy is much more customer friendly rather than shareholder friendly.

§  The packaging of PepsiCo is not that attractive, causing a fall in demand of the product as looks also matter.

§  Investor’s dissatisfaction from Pepsi’s stagnant share price.

§  Compared to Coca-Cola, obviously PepsiCo has lower preference from consumer till date and this is one of PepsiCo biggest weakness.

§  Cutting jobs has led to a blur brand image for the company, psychologically.

Disadvantages are:

§  Coke has been kicking Pepsi’s can.

§  In 2004 U.S.A, PEPSI lost 3% of the market share that is 1% more than coke’s causing lower market share compared to Coca-Cola.

§  This strategy can cause higher risk for the company as well as the CEO as the decline in 1 product can also result in the failure of other related product.

               No.4

Yes, in my opinion, Ms Indra Nooyi, has developed a lot of effort and resources to transform the company into a maker of healthier drinks and snacks, and a better corporate citizen. The promotion of “good for you” product s in the past few years have been very effective. These, nutritious and healthy product make up to 20% of the sales giving socially responsible corporate image.

In 2010, Pepsi even skipped ads at super bowl just to support the worthy causes Pepsi might finance.

However, the sales were low. Overall, Pepsi has been able to fulfill its social responsibility but the sales are not boosting up. They have been trying their best to balance profitability and responsibility. The profit is also high and the responsibility also has been fulfilled to some extent. However, they still have a lot to work on to be perfectly balanced and to rise above all their competitors.

In my view, the CEO of PepsiCo is trying really hard to improve strategies by being socially responsible as well as by making strategies to maximize profit. She is keen to enhance the firm’s performance as well as enhance the social well-being as well.

References:

  http://www.mallenbaker.net/csr/definition.php, accessed on April 20, 2013

Bansal, T. (2005, Nvember/December). BUILDING SUSTAINABLE VALUE THROUGH FISCAL AND SOCIAL RESPONSIBILITY . Ivey Business Journal, 1.

ComboApp Ltd. (n.d.). Retrieved April 20, 2013, from world academy online (ComboApp Ltd.): http://worldacademyonline.com/article/34/475/defining_the_organization___s_purpose.html