A business's only responsibility is to produce profits. To what extent do you agree with this statement?
For many successful companies, making profit is the fundamental objective to a company, this belief leads to a believed by all business that is, that the goal of all businesses are profit maximisation. However, Drucker (See Cohen, 2015) argues that, “Profit is not the purpose of business and that the concept of profit maximisation is not only meaningless, but dangerous”.
There is an increasing number of companies highlight trends and statistics support that the businesses are having an increasing focus on social responsibility rather than profit maximisation (Kotler and Lee, 2005). Friedman (See Cave, 2010) commends than, the purpose of a business no longer just make a profit in the business, but it is inevitable to consider the social responsibility to help business to make profits.
Corporate social responsibility to achieve competitive advantage
Corporate social responsibility is a commitment to improve community well-being with global corporations, governments, environment, the country and individual citizens through discretionary business practices with use of corporate resources (Kotler and Lee, 2005). Many companies are donating to charities to help poverty, those areas are not their target market nor will they gain any benefit to help those people. Although all those are not direct related to the profit but promoting CSR is a trend for business gaining competitive advantage, corporate social responsibilities are trended in the direction of building a long-term relationships with non-profit organisation to gain access to other department, by offering financial or skill support, the corporate gain the opportunities to strengthen the relationship with communities and enrich corporate reputation.
Although making profits is proven to make a company to be successful, it supplies more capital for the company for development in achieving sharper R&D competitive edge to gain stronger competitive advantage, cost leaders can only outperform on the basis of non-economic tricks as competitive advantage when the business uses cost strategies , however, Keinert (2008) argues that, company has higher competitive advantage in building up of reputational capital through superior social responsiveness; company with positive publicity, goodwill, political access and enhanced reputation create long-term benefits and higher level of core competencies are critical success for a business, and therefore generating of superior revenues.
To create more corporations acknowledgment
Companies connect to the link between non-financial areas such as environmental and social responsibility or worker relations gaining attention of businesses, it is potentially implied the corporate social responsibility to the business is the creation of new business opportunities by value added to products and services (Keinert, 2008) . Rather than just making profits, this strategy makes the audiences account for other aspects of their company's performance rather than just financial indicators, this action will increase awareness of the business and enhance reputation among investors, customers and employees (Sims, 2003).
Corporation acknowledgement also shows performance measurement that allow individual to evaluate the aspects of the company operation, for example when an employee considering whether to involve in the company; customer whether to purchase or investor whether to invest in a company, for each of these decision, individual can investigate the reliability of a company by looking at the contribution in social responsibility rather than using traditional reporting.
Increase awareness to attract more customers.
Corporate social responsibility helps business in non-financial matters by increasing social awareness. Like Creyer and Ross (1997) say, consumers seeing the commitment to corporate social responsibilities is important, consumers are willing to spend more to the product and services that are socially and environmental responsible. Successful company example such as Bodyshop, the company is taking a leading-edge approach by reporting strong environmental and social performance, these non-financial matters helps the company a continuous increasing market share as a result and retaining many environmental concerned customers. Arli and Tjiptono (2014) has done a research found that, there is a positive correlations between Corporate social responsibility and consumer behaviour, the corporate social responsibility activities of a company will attract more customers to induce purchase intentions, environment and social responsibility increase companies' image, contributing resources to the society through philanthropic activities and therefore gain trust from the community.
However, Arli and Tjiptono (2014) also found that in some developing countries such as China and Indonesia, consumers are emphasising more in legal and philanthropic responsibilities than economic and ethical responsibilities, due to the rampant corruption in those countries, most companies suffer from lacking of trust. Emphasising legal and philanthropic responsibilities has greater responds than social and ethical responsibilities in developing countries. The HSBC chairman, Mr Green (See Cave, 2010) also commends that companies should not use shareholder funds on philanthropic ventures, the company will bot success in social development unless the company have been trying from time to time.
The purpose for a business is to create customer, this is the foundation of a business and keep the business in existence no matter the economic condition. Profit is essential to keep a business running and supply financial resource for the business activities in the sense of product development and marketing actions, however, the business world is changing, people tend to change the old model of business – profit maximisation contributed to the meltdown, businesses are thinking that the society and individual is more important to achieve the success of the business. Therefore, profit is not the only purpose for a business, corporate social responsibility is as important as the profit to keep the business running and growing, and thus, businesses should avoid catastrophic loss in profit maximisation leading to failure.
Arli, D. and Tjiptono, F. (2014). “Does corporate social responsibility matter to consumers in Indonesia?. Social Responsibility Journal, Vol. 10 Iss: 3, pp.537 – 549
Cave, A (2010). “Milton Friedman got it wrong on profit being the only aim, HSBC chief Green argues”. http://www.telegraph.co.uk/finance/economics/7878097/Milton-Friedman-got-it-wrong-on-profit-being-the-only-aim-HSBC-chief-Green-argues.html. Accessed on 14/11/2015
Cohen, W (2015). “The purpose of business is not to make a profit”. http://www.humanresourcesiq.com/hr-management/columns/the-purpose-of-business-is-not-to-make-a-profi/. Accessed 14/11/2015
Creyer, E.H. and Ross, W.T. (1997), “The influence of firm behaviour on purchase intention: do consumers really care about business ethics”, Journal of Consumer Marketing, Vol. 14 No. 6, pp. 421-432
Keinert,C. (2008). “Corporate Social Responsibility as an international strategy”. German: Physica-Verlag Heidelberg
Kotler, P. and Lee, N. (2005). “Corporate social responsibility: Doing the most good for your company and your cause”. New Jersey: John Wiley & Sons Inc.
Sims, R.R. (2003). “Ethics and corporate social responsibility: why giants fall”. USA: Praeger Publishers.
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