Toms Shoes is a company that is famous for pioneering social entrepreneurship. Their implementation of the one-for-one business model is hugely successful from a marketing perspective. Socially conscious consumers feel like they are making a difference when they buy a pair of Toms Shoes as for each pair sold, the company gives away a pair to someone in need. 

However, Toms and other one-for-one businesses have faced criticism for this strategy. Critics say that these donations are merely a band aid and ineffective in addressing the complex social issues causing poverty and may actually be an obstacle to sustainable long term solutions. When a foreign company intervenes with free products, it can have the unintentional effects of undermining local businesses, creating dependency and demoralizing the recipients of the charity and promote complacency among consumers about taking other initiatives to address these social problems.

In response to these criticisms, Toms has modified their model significantly to avoid these negative effects. It’s begun manufacturing locally in the countries where the shoes are given away, sustaining local jobs and empowering people to lift themselves out of poverty. I believe that Toms began with good intentions and was merely misguided in their attempts to alleviate poverty. They recognize their flaws and imperfections are doing their best to improve their business model.

References:

Davenport, Cheryl. “The Broken “Buy-One, Give-One” Model: 3 Ways To Save Toms Shoes.” Co.Exist. 10 Apr. 2012. Web. 16 Nov. 2015.

“The One-for-one Business Model: Avoiding Unintended Consequences.” KnowledgeWharton The Oneforone Business Model Avoiding Unintended Consequences Comments. Web. 15 Nov. 2015.

Poulos, James. “Toms Shoes: A Doomed Vanity Project?” Forbes. Forbes Magazine. Web. 17 Nov. 2015.

Unlike social enterprises and traditional companies that generate revenues and profit, non-profit organizations rely on donations and have a high focus on social returns. They strive to create meaningful changes in the world and to assist those who need help.  However, as Andi Grace writes on their blog, they can also be toxic work environments.

I was fascinated by their description of ‘activist burnout’ and the unreasonable expectations they faced throughout her experience working at non-profit organizations. Non-profit workers often compete for a small number of underpaid or unpaid positions and they are expected to work long hours and carry an excessive workload simply because of the nature of their work. Just because it is charitable work does not mean that employers should expect workers to accept a salary that does not allow them to cover their own basic needs.

They also bring up a case where “clueless upper management demand[ed] something happen in a way that [made] no sense, and [ignored] the very legitimate wisdom of front line workers”. Andi brings up an example where their supervisors were so focused on quantitative outputs and the bottom line that they neglected to consider the holistic effects of their efforts. When gathering signatures for a petition, their manager demanded that the time to gather each signature be reduced.

However, the cost of this perceived efficiency meant a lack of meaningful connection and education to adequately explain to people what the petition was about. The people on the ground are generally paid less yet they often have the best understanding of how the programs function and affect the people they are meant to assist. The complexities of this bureaucratic hierarchy and power structures stands in the way of progress and improving the social impact of their work.

**NOTE** I used “they” when referencing Andi since that is their preferred pronoun

References:

Cooper, Garrett. “Lessons on How Non-Profits Can Behave More Like For-Profits.” Bayer Centre for Non-Profit Management. Robert Morris University. Web. 28 Oct. 2015.

Grace, Andi. “I QUIT! Naming Toxicity in Non-profit Work Environments.” Andi Grace. Web. 29 Oct. 2015. <http://andigracewrites.com/2015/10/i-quit-naming-toxicity-in-non-profit-work-environments/>.

Last month, my classmate Alexander Wong shared his thoughts on the business ethics of Apple Inc.

Apple Inc. is one of the world’s largest and most profitable technology companies. It enjoys both high customer loyalty and a positive brand image. However, beneath the surface of this pristine image lies some ugly truths.

Alexander focussed on the health and safety concerns regarding the significant amounts of radiation emitted by Iphones. The current specific absorption rate radiation exposure levels are at practically the maximum that is deemed safe by the Federal Communications Commission.

Several people are killed and many more are injured after an explosion at a Chinese factory

In my opinion, the more pressing concern is the exploitation of the workers that create the products. Significant factors in Apple’s climb to the top were its mastery of global manufacturing and nearly unrivalled innovation. Yet their workers face harsh conditions such as excessive overtime, deadly safety hazards and illegal child labour.

In 2010, the appalling conditions of Chinese factories were highlighted after 14 employees committed suicide at Apple’s biggest supplier, Foxconn. Although Apple has standards to ensure the health and safety of their workers there is extremely lax enforcement resulting in these standards being routinely violated.

References:

Bilton, Richard. “Apple ‘failing to Protect Chinese Factory Workers'” BBC News. 18 Dec. 2014. Web. 26 Oct. 2015.  <http://www.bbc.com/news/business-30532463>.

Workers protest atrocious working conditions

My colleague, Anton Emmanuel, recently wrote about his thoughts on Mcdonald’s new marketing strategy.  

Fastfood incumbents such as McDonald’s Corporation have been struggling to compete with the growing popularity of ‘fast casual’ restaurants that offer convenient, affordable and sustainability produced food. In response to their declining revenues, McDonald’s has devoted $1 billion USD into completely redesigning their brand image and to change public perception of the company. 

Shiny new kiosks that allow customers to customize their orders with  gourmet ingredients, table service instead of the original counter service, and a revamped menu including the first vegetarian options in over a decade are just some of the changes that have been implemented. 

In my opinion, this venture will not be successful. Dismantling the iconic brand image that took decades to cultivate simply to attempt to chase a trend is foolish. In one of our lectures, Ann told us that successful managers are ones that understand the business that they are in and know the wants of their target customer segment. McDonald’s loyal consumers simply want the cheap and fast food they are used to and they are not looking for another fast casual restaurant. Radically changing their value proposition will confuse their customers and will not give McDonald’s the returns they are expecting.

References:

“McDonald’s Rebrand: Brilliant Strategy or Foolish Failure?” Caledon Virtual. 18 May 2011. Web. 20 Oct. 2015. <http://www.caledonvirtual.com/mcdonalds-rebrand-brilliant-strategy-or-foolish-failure/>.

http://www.smarteranalyst.com/2015/04/21/will-chipotle-mexican-grill-inc-continue-dominating-the-fast-casual-segment-cmg/

http://usatoday30.usatoday.com/money/industries/food/2011-05-06-mcdonalds-revamp_n.htm

Throughout high school, I’ve worked part time in small businesses to cover the expenses of tuition and school fees. My first job was at a beach-side restaurant. I worked at the Galley Patio and Grill for 3 years as a barista, cashier and line cook. The managers were constantly looking for ways to minimize costs and maximize efficiency. Every day something changed to make processes more efficient and employees more productive.

Some of my coworkers in the kitchen

Although I enjoyed the fast pace of restaurant work, the hours were inconsistent and I started working at a retail bakery franchise, Cupcakes, instead this September. Although there was still an emphasis on maximizing productivity, the work environment was much more relaxed.

This fall, I also worked for Elections Canada in a temporary position to carry out the federal elections. During my brief time as a Special Ballot Coordinator and Poll Clerk, I was appalled at the leadership and lack of organization from the company. For example, my coworkers would take half hour breaks, come back for 10 minutes and idly chitchat and then take another break. Vancouver Quadra and areas throughout Canada were extremely understaffed yet supervisors and management made very little effort to use resources efficiently. I heard that at some polling stations, 5 workers were assigned to check IDs when one would have been sufficient while they lacked employees to carry out other tasks that were more important.

I was surprised to learn that Elections Canada is a private company that holds a monopoly in this particular area but it explains this inefficiency. This company’s only ‘client’ is the federal government which funds the elections with taxpayer money. Unlike the other small businesses where I have been employed where the emphasis was on maximizing revenue, Elections Canada has a fixed budget with no pressure to minimize costs and maximize productivity. This resulted in supervisors allocating resources inefficiently and callously wasting taxpayer dollars.

References:

“Advance Poll Workers Decry ‘Absolutely Terrible’ Work Conditions.” Web. 19 Oct. 2015. <http://www.cbc.ca/news/politics/canada-election-2015-advance-polls-1.3270865>.

“The Role and Structure of Elections Canada.” Elections Canada On-line. Web. 19 Oct. 2015. <http://www.elections.ca/content.aspx?section=abo&dir=role&document=index&lang=e>.

As eager young adults and teenagers search for exciting opportunities to volunteer abroad, a multitude of companies have emerged to cater to this new market. These for-profit companies make a fortune providing placements and travel arrangements for volunteers. By exploiting the plight of endangered animals, orphaned children or whatever trending issue, companies can easily charge premiums for supplying opportunities for volunteers to feel good about themselves.

After attending WE Day several years ago (an event designed to encourage youth to promote social change) I felt inspired to make a meaningful difference in the global community. I was excited to sign up for my school’s annual trip to Kenya where volunteers built orphanages and schools for underprivileged children. But something stopped me. It felt wrong and I didn’t figure out why until recently.

“Voluntourism” is a disturbing trend that is booming in popularity. Some participants use it as a method to pad resumes, improve university applications or simply for the chance to show off to their peer while others genuinely hope to make a difference. However, in many cases even the most altruistic intentions can cause severe harm. The presence of unqualified international volunteers is not only an ineffective allocation of resources, it also slows progress and perpetuates the ‘white savior” complex which contributes to modern day colonialism.

It would be significantly more cost effective, stimulative of the local economy, and efficient for charities to directly receive the money that would otherwise be spent on travel expenses and hire locals to do the work.

References:

Biddle, Pippa. “The Problem With Little White Girls, Boys and Voluntourism.” The Huffington Post. TheHuffingtonPost.com. Web. 14 Oct. 2015. <http://www.huffingtonpost.com/pippa-biddle/little-white-girls-voluntourism_b_4834574.html>.

Kahn, Carrie. “As ‘Voluntourism’ Explodes In Popularity, Who’s It Helping Most?” NPR. NPR. Web. 13 Oct. 2015. <http://www.npr.org/sections/goatsandsoda/2014/07/31/336600290/as-volunteerism-explodes-in-popularity-whos-it-helping-most>.

Mohamud, Ossob. “Beware the ‘Voluntourists’ Doing Good.” The Guardian. Guardian Africa Network. Web. 13 Oct. 2015. <http://www.theguardian.com/world/2013/feb/13/beware-voluntourists-doing-good>.

Brandy Melville

Retailers such as Abercrombie & Fitch and Brandy Meville target their marketing to a highly specific segment of customers. Although both brands are extremely successful, they have also received backlash from the perceived discrimination for their refusal to offer larger sizes. As Mike Jeffies, the CEO of Abercrombie, infamously told Salon, “We go after the attractive all-American kid with a great attitude and a lot of friends. A lot of people don’t belong [in our clothes], and they can’t belong. Are we exclusionary? Absolutely.”By limiting their clothes to only a certain portion of the population with their “one size fits most” policies, the brands cultivate the exclusivity and desirability of their clothes.

Jeffries created a quality brand that caters to affluent youth and has a sense of exclusivity. Yet this exclusionary subculture still has a mass appeal, because people want to be a part of it.

He told Salon, “That’s why we hire good-looking people in our stores. Because good-looking people attract other good-looking people, and we want to market to cool, good-looking people. We don’t market to anyone other than that.”

In my opinion, these companies are simply responding to an increasingly niche capital market. Market fragmentation is the driving force as consumers want an experience tailor-made to their needs. Personally, I have always been smaller than average. My mother and I always had to shop in the children’s section to find clothing that would fit. Stores like Brandy Melville capitalize on this alienated demographic of smaller individuals. As specialization becomes more common; niche markets emerge as companies scramble to cater to specific audiences, and switch from a broad industry wide strategy to focusing on a narrow market segment.

Works Cited:

http://www.salon.com/2006/01/24/jeffries/

Greenwashing is the deceitful practice of falsely advertising the sustainability of a business in order to mislead consumers. With the increasing pressure from socially conscious consumers, businesses are striving to reduce their environmental impact. Due to lax enforcement of limited and vague regulations, businesses can easily intentionally manipulate consumer perception for ulterior motives or commit the sin of greenwashing through carelessness (Burbano). When businesses brand themselves as ‘green’, they improve their brand image and consumers are duped into supporting unethical environmental offenses.

The 7 Sins of Greenwashing

However, when it backfires the backlash can cause irreparable damage to the brand’s reputation and ultimately their sales (Kewalramani). For example, Volkswagen was recently exposed for their greenwashing tactics and corporate hypocrisy. Within days of the scandal, their share value plummeted an estimated $27.8-billion U.S. and there is the liability of billions more in fines for environmental damage and fraud (Lynes). The estimated number of vehicles affected and must be recalled is 11 million (Jennen).

These underhanded marketing tactics coupled with insincere claims of corporate social responsibility, creates skepticism and distrust as consumers are increasingly aware that many environmental claims may be self-serving (Hoffman). In many cases, sustainable business practices improve profitability. By scrutinizing existing methods and processes when they undergo an environmental initiative, businesses may discover creative solutions to minimize waste, increase efficiency and increase profits.

Works Cited:

Burbano, Vanessa Cuerel, and Magali A. Delmas. “The Drivers of Greenwashing.” California Management Review (2011): 64-87. Print.

Hoffman, Jane, and Michael Hoffman. “What Is Greenwashing?” Scientific American Global RSS. 1 Apr. 2009. Web. 27 Sept. 2015.

Jennen, Birgit. “Germany Said to Defend VW Car Owners on Recall, Repair Costs.” Bloomberg.com. Bloomberg. Web. 26 Sept. 2015.

Kewalramani, Devika, and Richard J. Sobelsohn. “”Greenwashing”: Deceptive Business Claims of “Eco-Friendliness”” Forbes. Forbes Magazine, 20 Mar. 2012. Web. 26 Sept. 2015.

Lynes, Jennifer. “Volkswagen Committed the Cardinal Sin of Greenwashing: Lying.” The Globe and Mail. 24 Sept. 2015. Web. 26 Sept. 2015.

Ikea is one of the world’s largest home furnishings retailer with 360 stores in 47 countries (Forbes). Surprisingly, this $11.8 billion empire is classified as a charity. Founded in Sweden in 1943 by Ingvar Kamprad, Ikea has achieved remarkable international success and faced few obstacles to its expansion (Forbes). The ingenuity of the brand’s unique retail formula extends to the company’s finances. By exploiting the obscure loopholes and quirks of different jurisdictions, Ikea is effectively able to minimize taxes and enjoy other benefits due to the complex fiscal maze of its business structure (Knaebel).

Ingka Holding, a private Dutch-registered company is Ikea’s parent company. In turn, Ingka Holding belongs to the Stichting Ingka Foundation which is a Dutch-registered, tax-exempt, non-profit legal entity founded by Kamprad in 1982 (Minute MBA). Although Kamprand is not currently the official owner of Ikea, he maintains a strict control through a five-person executive committee, chaired by Kamprad and his sons that oversee the Stichting Ingka foundation.

Stichting Ingka is the world’s wealthiest non profit but as it is not required to publish an annual report, its activities are shrouded in secrecy. According to their website, it aims “to own and govern Inter IKEA Group and to invest in Inter IKEA and thereby in the further expansion of the IKEA Concept, in order to secure the independence and the longevity of the Group and the IKEA Concept” (IKEA Foundation).

The complexity of the business’s organization and lack of transparency make it difficult for tax authorities to enforce and calculate the amount of tax that Ikea is obligated to pay. The creative accounting of Ikea brand including its foundations, multiple international holdings, and a host of subsidiaries allow it to effectively create a tax optimization financial arrangement.

References:

“Flat-pack Accounting.” The Economist. The Economist Newspaper, 13 May 2006. Web. 26 Sept. 2015. <http://www.economist.com/node/6919139>.

“IKEA Foundation.” IKEA Foundation. Web. 25 Sept. 2015. <http://www.ikeafoundation.org/>.

Knaebel, Rachel. “Money Flowing through Tax Havens and Shady Foundations, Thanks to IKEA.” Multinationals Observatory. Web. 28 Sept. 2015. <http://multinationales.org/Money-flowing-through-tax-havens>.

“Stichting INGKA Foundation – Funds for NGOs.” Funds for NGOs. 22 Sept. 2013. Web. 26 Sept. 2015. <http://www.fundsforngos.org/foundation-funds-for-ngos/stichting-ingka-foundation/>.

“The World’s Most Valuable Brands: #45 IKEA.” Forbes. Forbes Magazine, 1 May 2015. Web. 24 Sept. 2015. <http://www.forbes.com/companies/ikea/>.

Tregear, Hannah. “IKEA & The Socializers: Building Social into the Heart of a Global Business – Brandwatch.” Brandwatch. 9 Dec. 2014. Web. 25 Sept. 2015. <https://www.brandwatch.com/2014/12/ikea-assembling-a-listening-hub/>.

“Why Is Ikea a Non-Profit? | OnlineMBA.com.” OnlineMBA.com. Minute MBA. Web. 27 Sept. 2015. <http://www.onlinemba.com/blog/video-why-is-ikea-a-non-profit/>.

Earlier in 2015 Chipotle Mexican Grill, one of the fastest growing restaurants chains in the United States, made the decision to stop serving pork in hundreds of their restaurants. The company advertises a mission statement of “Food with integrity” and prides itself on their commitment to using organic produce and humanely raised livestock. During a routine audit, Chipotle discovered that one of their major pork suppliers had violated their standards of humane treatment of animals. The supplier was suspended and Chipotle “would rather not serve pork at all, than serve pork from animals that are raised in this way” said company spokesman Chris Arnold. Mr. Arnold also said that “[t]his is fundamentally an animal welfare decision, and is rooted in our unwillingness to compromise our standards where animal welfare is concerned”.

The company’s rapid expansion and incredible success proves that consumers are attracted by brand’s perceived quality of food and its high standards of humane animal welfare. While the company’s ideals are admirable, the sudden shortage of pork on its menu revealed a major flaw in the business. This shortage showed the intricacies and challenges of expanding a business while maintaining their fundamental sense of values and ethics.

Chipotle eventually found a new supplier to remedy the shortage in a way that did not force them to sacrifice its standards. Although the pork shortage Chipotle faced as they struggled to find responsibly sourced meat hurt sales temporarily, their impressive dedication to standing by their morals greatly improved the brand’s already overwhelmingly positive public image. The company continues to thrive and grow while promoting social responsibility.

References:

Drogen, Leigh. “Will Chipotle Mexican Grill, Inc. Continue Dominating the Fast Casual Segment? (CMG).” Smarter Analyst. 21 Apr. 2015. Web. 16 Sept. 2015. <http://www.smarteranalyst.com/2015/04/21/will-chipotle-mexican-grill-inc-continue-dominating-the-fast-casual-segment-cmg/>.

Lutz, Ashley. “Chipotle’s Carnitas Shortage Reveals a Major Problem with the Business.” Business Insider. Business Insider, Inc, 21 July 2015. Web. 15 Sept. 2015. <http://www.businessinsider.com/chipotles-pork-shortage-update-2015-1>.

Tuttle, Brad. “Chipotle Pulls Pulled Pork from 600 of Its Restaurants.” Time. Time. Web. 15 Sept. 2015. <http://time.com/money/3667333/chipotle-pork-carnitas-shortage/>.