ASSIGNMENT OF WEEK 10

1.   In your own words and using referenced quotes describe what is meant in strategy by “Organizational Purpose” and describe what is meant by “Corporate Social Responsibility”?

Organizational purpose can be the initial point for strategy of an organization. It simply shows why the firm has been established. In an organization there might be different groups having different views about the organizational purpose. An organizational purpose considers the stakeholders needs and the internal consideration such as code of ethics. An organizational purpose should consider the following four aspects:   

Corporate Governance

An organization should clearly decide whether it should more focus on profit

     Business ethics

     Stakeholders aspects

     Cultural Context

Organizational purpose of an organization can be expressed with the help of following variables:

·       The recipients or the  potential customer of the targeted products

·       The type of manpower involved in an organization

·       The ethical code of conduct of the organization

·       The competitive position and size of the organization

·       The range and product line of the organization

·       The structural position of the organization

·       Workers relationship with the organization

·       Quality and cost of the product of the organization

It consists of organizational beliefs, business definition and organizational values.  Inside organizational beliefs the strategists have to explore the ideas and assumptions of the organization. The business definition explains about where the firm operates. It tells you to operate in those markets in which a firm has a competitive advantage. An organizational value explores the important factors that a firm should hold.

Corporate Social Responsibility

“Corporate social responsibility (CSR) is the commitment by organizations to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as the local community and society at large” (World Business Council for Sustainable Development)

Corporate Social Responsibility can be viewed as a self regulation amalgamated to the organizations’ business model. It functions as a mechanism to regulate whether a business is practicing ethical behavior or not. It also ensures that whether the business is following rules and regulation, norms and ethical standards. It is a process where it encourages its activities with considering the customers, their employees, environment and the society. Corporate Social responsibility shows the mission and vision to an organization.

Most of the renowned organization uses the benchmarking strategy in order to compete with their rivals in terms of Corporate Social Responsibility, its implementation and regulations.

An organization should be very careful in functioning of Corporate Social Responsibility. It should focus on its shareholders, customers, employees, society, suppliers, activist groups, etc. Following a CSR is not important today; having the capabilities and skills to balance these stakeholders is the most crucial task. So an organization should be very careful in balancing CSR between its shareholders and stakeholders.

From the shareholders view, CSR might be the higher rate of return, for a customer qualitative and affordable goods and for employees a good salary and incentives may be considered as CSR.

2.    Should organizations focus more on profit and shareholder satisfaction or responsibility and stakeholder satisfaction? Discuss your own thoughts but try to support your ideas with theory or examples.

Any business organization is established with an objective to earn profit. In the initial phase of any business organization the capital is higher and also there is a high chance of risk. In the process of development stage it starts to earn more profit. And after this phase, the organization thinks about the stakeholders’ satisfaction. Because the primary focus of any business firm is to earn profit, we have seen that business firms focuses on the profit and stakeholders satisfaction.

Hence, an organization should have a positive balance in satisfying both the shareholders and stakeholders. We have seen many big organizations following corporate social responsibility. When you are more interested in fulfilling the satisfaction of stakeholders then your business will do good sale. When you offer qualitative goods with affordable price, customers will easily accept your products. And when you actively participate in social activities like donation and charity program it will make people assume, that is the right company. It helps a firm to add value to their brand. In Nepal, during the launch of NCELL it announces that customers can make call at 0.1 paisa per second which was the cheapest call in the world. Such activities really help a lot to add value to their brands.

Also, an organization should focus on their employee’s welfare. A business firm can only be developed when their employees are happy as they are the pillars of an organization. Firm should provide medical care and should provide assistant in financing their housing. For example, organization may provide education to the children of their workers. Also, they should be given proper trainings and guidelines for their development. Firm should establish a safe environment in which they can work easily. Firm should be able to respect their employees. When the employees will be satisfied the efficiency will increase and helps to increase the sales and revenue.

Activist groups are also the important part of stakeholders. They are those who help to preserve the rights of consumers. Firm should be able to satisfy these groups by complying with the basic laws, maintaining quality by which they can appreciate the product. Hence, again it will help an organization to maximize profit through stakeholders.

Organizations should be environmental friendly to show that they care for environment. They need to produce products that are consumer and environmental friendly.

While advertisement, firm should be very careful because the advertisement may satire or ignore the local culture and norms of certain localities. Also there should not be discrimination in the employment opportunities. Every person should have equal right to get employment. If such factors are considered, then a firm can achieve success. Also sponsoring the local events and activities shows that you care for the society hence it will help a firm to add values in their brands.

And last not the least; a firm should respect human right of each and every individual. Use of child labor, discrimination between male and female is very dangerous for an organization. For example, china is famous for its lower labor cost and it exports handicrafts to other country. In 2009, a survey showed that most of the handicrafts were made by children and they were being exploited. As a result, the demand for handicraft decreased. Hence, an organization should be very careful in such cases.

So, being responsible to the stakeholders and organization can achieve its primary goal (i.e. to achieve high rate of return). An organization cannot gain anything by ignoring its stakeholders. Hence, it should be capable to balance the satisfaction of its stakeholders and shareholders.

At first, we studied about the internal and external analysis. We discussed different types of analytical tool to study the external and internal environment of an organization. After studying that, we watched the interview of Indra Nooyi, the CEO and the chairman of PepsiCo on the video. After that we were given the case study about the PepsiCo. I really enjoy that case study. We discussed about the mission, vision and goals of PepsiCo. We also talked about the Corporate Social Responsibility of PepsiCo.

I answered the following questions:

·     What are PepsiCo’s strategic objectives? Why does the firm exist?

As every organization has only one objective- to capture the market and become the number one brand and same applies to PepsiCo. It is more focused on the young consumer so they are thinking of producing those products that are attractive to the young consumer. Also it aims to earn revenue of $30 Billion by 2020.  Hence, PepsiCo strategy seems to be emergent. They try what they feel is the best. As they are losing market in USA they are focusing in Asian market, which is a big market for beverage products. Also it is trying to increase the product line hence increasing the portfolio in business.  

They are trying to be a number one brand in convenient foods and beverages. Again, they are thinking of producing reward to their shareholders and investors by enriching their employees, customers and societies. And they aim to be honest with the shareholders and stakeholders by doing fair business. The vision of PepsiCo is to continually improve the aspects of the world in which they operate (environmental, social, economic) by which they can create a better future than the today.

PepsiCo’s main organizational purpose is to best serve the interest of its customers. It aims to provide services with affordable cost. It focuses to give education and incentives by advertising. Also, it focuses on strategic acquisition. In addition, it is also considering product reformation. For example, PepsiCo is considering making snacks food and beverage less healthy. It is also producing good for you or better for you that would help them to increase the market share. It is also intending to achieve synergies and international expansion. Also it is trying to maintain efficient distribution system. PepsiCo is committed for sustainable growth, empowering employees and acting with responsibility and trust.

·     What are the possible strengths and benefits of the strategy?

Followings are the possible strength and benefits of the strategy of PepsiCo:

• Growth in market share
•  Business in more than 200 countries
•  Employees empowerment
•  Employment opportunities to the local
•  Largest portfolio of food and beverage
•  Experienced and dedicated
•  Competitive price in Chinese market
•  Huge fund
•  Different flavor for different countries
•  Balanced food portfolio
•  High nutritious products
•  Being responsible for the society it may help to attract more customers.
•  Increase in product line means increase in market share.

·      What are the possible weaknesses and disadvantages of the strategy?

• Low preferences from customer
•  Packaging is not attractive
•  Not the number one player in beverage industry
•  Market share smaller than Coca-Cola
•  High risk
•  Excessive competition from Coca-Cola.
•  Failure in one product line may be dangerous.
•  Shareholders may not be satisfied.

3. Do you think the organization has the right balance between profitability and responsibility?

As we know every company is established for making money and it applies to PepsiCo. After the decrease of market share by 3% per annum in United States, it focused on the Asian market. But it should not be forgotten that it doing some good job as well. It has launched some products called GOOD FOR YOU which is a healthier product. But, it has to do a lot in order to maintain a right balance between profitability and responsibility.

Indra Nooyi, the CEO and Chairman of PepsiCo, is a charismatic business leader. The most attractive thing was that she aims to triple the revenue by 2020. She has also targeted to make PepsiCo a number one brand in beverage industry. She has considered the responsibility towards the customers, employees and other stakeholders. Really she is a great leader.

But, it seems that she was just focusing on young customer and ignoring other age groups. As each and every person is the possible customer she should be also focused on other by developing suitable beverage products for them.

References:

•  E.H. Bowman and C.E. Helfat, ‘Does corporate strategy matter?’, Strategic management Journal, vol. 22, no.1 (2001), pp.1-14.
•   R.P. Rumelt, ‘How much does industry matter?’ Strategic management Journal’, vol. 12, no. 2 (1991), pp. 167-185
•   www.msdn.microsoft.com/en/us/library/aa479076.aspx

       [MSDN, Accessed on 10^th January, 2013]

• http://www.pepsico.com/

         [Official website of Pepsico, Accessed on 8th January, 2013]