po b lecture 5 economic systems and csr students
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B415 Lecture 5TRANSCRIPT
Principles of Business
Economic Systems & CSR – Part 1
2
Overview
• Describe the various economic systems that exist and go over the advantages and disadvantages of each
• Describe the major differences between a free-market and planned system
• Compare different countries economic and political differences
• Describe the relationship between business and society
• Describe and illustrate what is CSR • Explain the differences between philanthropy vs
strategic CSR• Describe the four perspectives of CSR e.g.
minimalist vs proactive with examples
3
Learning Outcomes
• Determine and evaluate the different economic systems
• Identify the national differences in economic and political systems
• Define CSR and explain the difference between philanthropy and strategic CSR
• Be able to distinguish between the four perspectives of CSR
Re-thinking CSR
Responsibility is the price of greatness
Winston Churchill
Importance of economic environment assessment
Countries differ in different ways
Economic & political changes
alter market circumstances
It is important to understand connections, change and
consequences
The challenges of the comeback
Choices of citizens,
policymakers and institutions
Concept of Economic Freedom
Economic Freedom by Region, with Population
People have the right to work, produce, consume, save, and invest the way they prefer
Source: Daniels et al, 2013
Global Distribution of Economic Freedom
Source: Daniels et al, 2013
Value of Economic Freedom
• Economic freedom affects– Growth rates– Productivity– Income levels– Inflation– Employment– Life expectancy– Literacy– Political openness– Environmental sustainability
Source: Daniels et al, 2013
Context of economic systems
Communist Countries between 1979-1983
China, Columbia, Korea, Peru, Poland, Vietnam
Types of Economic Systems
• An economic system refers to the mechanism that deals with the production, distribution, and consumption of goods and services
• Three Types:
Market
Economy
CommandEconomy
Mixed
Economy
Types of Economic Systems
Source: Daniels et al, 2013
Market Economy
• In a market economy individuals rather than governments make most economic decisions– Capitalism• private ownership of capital
– Laissez-faire• governmental noninterference in economic
affairs
Command Economy
• In a command economy the visible hand of the state supersedes the invisible hand of individuals– Government • owns and controls resources• determines prices
• Communism
Mixed Economy
• Most economies are mixed economies– fall between market and command economies
• Socialism – regulate economic activity with a focus on
social equality and a fair distribution of wealth
Different Political Ideology
• A political ideology stipulates how society ought to function and outlines the methods by which it will do so
• Most modern societies are pluralistic– different groups champion competing
political ideologies• Democrats vs. Republicans in the United
States• Democratic Party vs. Liberal Party in
Japan
Political Spectrum Analysis
Source: Daniels et al, 2013
Democracy
• In a democracy – all citizens are politically
and legally equal– all are equally entitled to
freedom of thought, opinion, belief, speech, and association
– all equally command sovereign power over public officials
• Prominent types of democracy include – Representative– Multiparty– Parliamentary– Social
“Summer of 2014 was the greatest for modern democracy”
Bobby Ghosh, Time
Contrasting India and Indonesia’s Election
View video: http://time.com/50062/elections-india-indonesia-video-guide/
Totalitarianism
• A totalitarian system subordinates the individual to the interests of the collective– dissent is eliminated
through indoctrination, persecution, surveillance, propaganda, censorship, and violence
• Prominent types of totalitarianism include– Authoritarianism– Fascism– Secular– Theocratic
What is CSR?
“Corporate social responsibility (CSR) refers to companies
taking responsibility for their impact on society. As evidence suggests, CSR is increasingly
important to the competitiveness of
enterprises. It can bring benefits in terms of risk
management, cost savings, access to capital, customer
relationships, human resource management, and innovation
capacity.”
Issues in CSR
Many firms’ corporate social responsibility efforts are
counterproductive, for two reasons: They put business
against society, when the two are actually interdependent.
And they pressure companies to think of CSR in generic
ways, instead of crafting social initiatives appropriate to their
individual strategies
Creating shared value
View video: https://www.youtube.com/watch?v=0iIh5YYDR2o
The Relationship between Business and Society
• Consumers in contemporary societies enjoy and expect a wide range of benefits, from education and health care to credit and products that are safe to use
• Profit-seeking companies are the economic engine that powers modern society; they generate the vast majority of the money in a nation’s economy
• Much of what we consider when assessing a society’s standard of living involves goods and services created by profit-seeking companies
• Companies cannot hope to operate profitably without the many benefits provided by a stable, functioning society
Philanthropy versus Strategic CSR
Philanthropy The donation of money, time, goods, or services
to charitable, humanitarian, or
educational institutions
Strategic CSR Social contributions that are directly aligned with
a company’s overall business strategy
Strategic CSR? Tata and the Nano
Source:http://www.examiner.com/road-driver-in-national/world-s-cheapest-car-the-tata-nano
Stage of CSR
4 Perspectives on CSR
Source: Bovee et al, 2013
The CSR Evolution
Source: www.corporatesocialreality.net
Reuters Market Light: Transforming Agriculture
• Reuters Market Light brings Reuters traditional strengths of price discovery, price transparency and decision support - the power of information - to a new customer segment.
• Source: Omkar Joshi, Reuters
“Heavy rains decayed my coffee berries. Had I known this in advance, I would have harvested early and reduced my heavy financial loss.”
“If I had known timely and accurate information about the price of mustard in Latur market, I would have made 40% more money.”
“I get a very poor price for my crop. I do not trust my buyer. I take my produce to the market and have to accept his money. I am not treated with respect.”
Reuters Market Light: The Pain
Source: Omkar Joshi, Reuters
RML provides accurate, relevant and customized information that impacts customers livelihood and
productivity through mobile phones
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Local Spot Prices Local Weather Crop related news
Reuters Market Light: The Solution
Source: Omkar Joshi, Reuters
“sold 100 bags of onion after following the prices and
realised a benefit of Rs. 50 per bag. i.e. total of Rs. 5,000”.
10% higher profit. 5% of annual income.
“I did not engage field labour whenever there was a rainfall alert. I saved Rs. 70 per head for 3 labourers in 3 instances totalling to Rs. 630. Saving of
£8 a day. Return on investment of 100% in 3 days”
“I have instructed my labourers to sow the seeds 3 inches into the soil,
earlier this method was not scientific, they would sow the seeds
5-7 inches.”
Source: Representative Feedback 7000 farmers
Manikrao Gawade held back 70 quintals of onions following RML news. In the next 20 days, realised a 70% gain, made extra profit of £350, or nearly 33% of annual
income.
Source: Omkar Joshi, Reuters
Reuters Market Light: The Result
33
Essential work for next week
• Please consult the OLE for details of:– Essential readings*– Seminar/workshop preparation work*– Recommended further readings– Any additional learning
* Essential readings and preparation work must always be completed in time for the next session
Appendix – Sources for illustrations
Slide 4:www.wikipedia.org
Slide 13, 14 & 15:www.wikipedia.org
Slide 19www.sdcclothesline.com
Slide 20:www.wikipedia.org
Slide 21:www.harvard.edu
Slide 24:www.wikipedia.org
End of presentation
© Pearson College 2013