Oftentimes CEOs become fixated on the bottom line. How profitable is the firm an

Question

Oftentimes CEOs become fixated on the bottom line. How profitable is the firm and how can we make it more profitable. Depending on the firm’s strategy (e.g., providing a product that costs less or a product that has features different from other products on the market) the attention paid to the bottom level of the Pyramid of Corporate Social Responsibility (p. 54 of text) overwhelms considerations of the top two levels of that pyramid. There are several situations mentioned in Chapter Two (e.g., Facebook’s fake news and BPs oil spills in the Gulf of Mexico) that can sidetrack a firm’s efforts to gain a sustainable competitive advantage. The text discusses ways to ensure other considerations, beyond profit alone, can influence the strategy making process. However, there may also be situations in which the bottom level is not given enough consideration. For example, when a firm devotes some of its profits to support a charity that operates contrary to the will of some stakeholders in the firm causing the firm to lose customers or sales. Identify at least two examples of firms that may have paid too much attention to the top three levels of the pyramid to the detriment of the “economic responsibilities” level of the pyramid. What are the implications of this for strategic management of the firm?

Explanation / Answer

The companies that have given more priority to top three levels of pyramid the to economic responsibilities are of the view that if you put profits before the law then this may give rise to illegal and/or unethical business practices. In order to avoid unethical practices by business, the companies are refocusing from prioritizing shareholder wealth or maximizing earnings per share, to realizing their ethical responsibilities. Once the ethical proration is built it will cater to all shareholders need. These companies do not want to sacrifice social welfare for economic ends. One example is of coca cola which is engaged in generating environmental and social value which would ultimately create an economic return for the corporation. The company always come up with strategic philanthropy helping it create brand awaremess.the company believes that sustainability of business depends on health of communities. Thus such types of companies increase its profit by making good social strategies building its reputation and goodwill. The company has helped to raise the standard of living wherever it operated and made its shareholders satisfied with the performance of the company. another example is of a car manufacturing company that decided that its cars would not poisoned the planet by emitting 40 times the legal limit of nitrogen oxide for the sake of becoming the world’s leading car maker as now a day’s millions of cars continue belching out dangerous gases so long as their vehicle runs faster and better. The company is paying the price for a cleaner environment.

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