Business reputation goes a long way towards creating how large a company’s customer base is going to be, and giving the appearance of not caring about the community can lead to a loss of customers and a loss of additional revenue in the long run. Focusing purely on the current bottom line may provide a short term boost to profits, but as a poor reputation spreads, the loss can only continue to compound. According to Ferrell (2013), four levels of social responsibility exist, these being economic, legal, ethical, and philanthropic (p. 39).
Any business must focus on the bottom line in part to succeed, but ethical practices and philanthropic attitudes can help make one business stand out among a litany of businesses all offering similar, or even identical, products. ? ? Company Q is an example of a company focusing largely on the current bottom line, while ignoring the long term potential of practicing social responsibility and philanthropic work. Two stores were closed due to losing money from operating in high crime areas, while other stores began to sell high margin items.
These are products that fit a certain niche in certain markets, no doubt helping to boost local revenue in the more high class areas, but without appeal in lower income neighborhoods. A worry over lost revenue and fraud lead to the decision to not donate day-old products to the local food bank. Employees could potentially steal food, claiming to be taking those products with them to donate. All of these practices are sound ideas when focusing on a pure economic market free from social influence or swings from changes in reputation.
In the real world, however, even giving up a small portion of revenue can boost a company’s reputation and lead to greater spending on the part of the consumer, bringing in the long term profits that benefit not just the shareholders, but all stakeholders involved in the company. ? ? One of the first issues the company should analyze is the decision to close down stores in high crime areas. While theft and low income consumers bring the possibility of providing only moderate revenue gains, if not a loss, operating in impoverished areas can also be a source of growing potential for the business.
Many companies advertise philanthropic missions, such as donating to charities every year or helping to provide for the families of their employees. While these are messages that consumers hear, a more powerful message can be the one that the consumers themselves see. Rather than closing down those stores, Company Q should focus on the reasons for the high crime, and offer ways to reduce that crime rate. Offering work programs that help prepare young people for management or skilled positions is a good way to take crime off of the streets while showing to the community that the business cares about the welfare of the population.
This can help bring in a group of potential profit earners for the company while at the same time reducing crime in the stores and the surrounding neighborhood. The improved reputation could only serve to bring in shoppers who are more prone to visit the larger and cheaper chains such as Walmart. While this will incur immediate liability costs as the plan is enacted, the end result benefiting the shareholders is a cheaply trained future leadership staff, an improved reputation for the company as a whole, and a long term boost in the number of shoppers who visit their stores.
The choice to focus on high margin items in all of their stores is another area that should be addressed. Consumer demand influences the products that businesses choose to sell, but demand is variable based on location and the income levels of the surrounding area. Poorer neighborhoods will not show an appreciation for shelves stocked with high priced items, while wealthier areas can be more interested in upper-value products.
Meeting the demands of a specific area, rather than adding those high-margin items to every store, is a way to show the community that the business is there to cater to their needs. Part of demonstrating social responsibility within a business is to show that the business is really listening to the consumer and the needs of the neighborhood. Finding low priced alternatives for brand name items and selling those in the lower neighborhood markets can give the appearance of being an affordable, caring chain.
Similarly, stocking shelves with brand names and items that fit the expensive tastes of more upper class neighborhoods shows that the business is ready to meet the demands and cater to the upper income spenders as well. What remains important is to differentiate the company’s product lineup based on location and needs of the local consumers. ? ? One of the easiest ways to show that a business cares about social responsibility and the community is to be willing to provide for that community, even at a loss to revenue.
While it may appear that revenue is being sacrificed for the greater good, the reality is that the increased reputation can lead to greater consumer spending, turning a revenue expenditure into a profit. An educated shareholder will understand that a short term expense is oftentimes necessary for long term gains. Company Q’s decision to throw away day old product shows a lack of understanding regarding short term cost versus long term gain. Day old product is written off as a loss for the company.
Should an employee take it for themselves under the guise of donating to charity, there’s the possibility of that employee then not spending money on goods the business sells that he or she might have otherwise purchased. The loss for this would be extremely minimal, barely a fraction of the company’s needed revenue to justify that store’s location. Recognizing the potential for minimal loss through fraud but choosing to donate to charity anyway shows an act of social responsibility that can greatly boost a company’s reputation.
The community is most likely to see a company that is willing to throw away profit if it means helping those in need, not everyone recognizing that the food is already chalked up as a loss. The perception of a company that is looking out for the community can not only boost consumer spending, but also has the potential to reduce crime within the company as those who steal may see those locations as places that should be protected within the community for the charitable work being done.
Any loss from a minimal percentage of employee fraud should be allowed for the sake of actively engaging in the welfare of the community. The poor will know where the donated food comes from, and those who can afford to shop at the store are more likely to over choosing another company. ? ? Company Q stands to benefit from a strong reputation and a varied product line. To see these benefits, the focus needs to remain on benefiting the community at large and meeting the needs of each individual location.
Crime can be reduced within the store by helping provide for the community and offering opportunities to help people work their way off the streets. Consumer spending can be increased by meeting the demands of the area while helping those who cannot afford to spend money on the goods the company sells. Any company would be wise to remember that quite often it is the poor who succeed later in life and become a company’s biggest investors. A focus on those in need is something that helps a company’s reputation for years to come, boosting profits in both the poorest neighborhoods and the wealthiest.
Company Q benefits from having multiple active locations in place in varying income locations. Should the focus be on meeting the economic, legal, ethical, and philanthropic requirements of social responsibility, the company stands to be a responsible, reputable, and very profitable company. References Ferrell, O. C. Business Ethics 2009 Update: Ethical Decision Making and Cases. 7th Edition. South-Western, 2013. VitalBook file. Bookshelf. 17 March 2014