Corporate social responsibility at TOMS shoes

Essay , 2017 , 6 Pages

Business economics - Offline Marketing and Online Marketing

This essay deals with corporate social responsibility at the company TOMS shoes and contains a SWOT analysis. TOMS is an American for-profit organisation based in California. The company primary business is the design of shoes, branded TOMS shoes, based on a design called apargata from Argentina. In addition, the company sells eyewear, coffee, branded TOMS Roasting Co. and bags, branded TOMS Bags. The company was started in 2006 by Blake Mycoskie after he witnessed the hardships that children underwent growing up without shoes.

The company has garnered a lot of controversy over the years due to its business model. According to the founder, the company was founded to help the children in need yet it is a for-profit company. To achieve this, the company donates a pair of shoes for every pair of shoe that is bought. This is true with all of the company’s other ventures. For every pair of glasses that a consumer purchases from TOMS, the company donates some money to help people with eye problem. Consequently, for every purchase of TOMS Roasting, the company donates so amount of money to provide clean water to people in need all over the world. The TOMS bag collection earnings help provide safe births and skilled birth attendants to women around the world.

TOMS SHOES

TOMS is an American for-profit organisation based in California. The company primary business is the design of shoes, branded TOMS shoes, based on a design called apargata from Argentina. In addition, the company sells eyewear, coffee, branded TOMS Roasting Co. and bags, branded TOMS Bags. The company was started in 2006 by Blake Mycoskie after he witnessed the hardships that children underwent growing up without shoes.

The company has garnered a lot of controversy over the years due to its business model. According to the founder, the company was founded to help the children in need yet it is a for-profit company. To achieve this, the company donates a pair of shoes for every pair of shoe that is bought. This is true with all of the company’s other ventures. For every pair of glasses that a consumer purchases from TOMS, the company donates some money to help people with eye problem. Consequently, for every purchase of TOMS Roasting, the company donates so amount of money to provide clean water to people in need all over the world. The TOMS bag collection earnings help provide safe births and skilled birth attendants to women around the world.

TOMS refers its business model as the one for one concept. This refers to the company’s promise to donate free pair of new shoes to a child in need for every purchase of the TOMS shoes. Though the company has added more products to its portfolio, the original model still remains. The company donates the free products in Ethiopia, Rwanda, Argentina, Guatemala, Haiti, Mexico, United States and South Africa. TOMS barely does any form of marketing, instead it focuses on corporate social responsibility. The company employs a word of mouth method of advocacy.

TOMS is a privately owned company. The company is designed as a for-profit social enterprise. This design means that TOMS neither has a corporate responsibility division nor does it have any employee specialised in the same. The CEO of the company refers to himself as the “Chief Shoe Giver” to indicate their prioritization of social responsibility practices (Watkins, 2011).

The company has chosen not to register as either no-profit organization or a benefit organisation. This is despite their claim to commitment to social mission. TOMS operates with about a hundred employees. Shoes sold for profit are produced in china and sold in the United states for between $50 to $100 a pair while the cost is estimated at $4 per pair.

The growth of the company has been phenomenal. From its inception to 2010, four years later, TOMS has donated one million shoes to people in need across 23 countries. In the next two years, between 2011 and 2012, TOMS distributed one million shoes to show a 50% growth rate in its sale for the period compared to the period between 2006 and 2010. Since the company is privately owned, there is no financial data available. The conclusion on growth pf sales discussed above is based the shoes distributed and the one for one model employed by TOMS shoes. Distribution of donated shoes from the company is done through partner organizations and “shoe drops”, drop points directed by TOMS. However, strategic partners distribute majority of the shoes.

It is undisputable that TOM has achieved tremendous success since its inception in 2006. The company has gained a cult-like following over the course of their existence. This is kind of ironic for a company that lacks an advertising department and has never been involved in traditional advertising such as television and print media. TOMS advertising is rather unconventional. Instead of concentrating in traditional models of advertising, the company concentrates with involvement in social and charity events. In turn the events generate conversation on the company which gives TOMS media coverage. TOMS has leveraged on social media platforms such as Facebook, Twitter and YouTube to push conversation and consequently created a community of loyal fans. An example of conversational stories is the One Day without shoes movement, founded in 2010 by TOMS founder and CEO. The movement challenged participants to spend 24 hours without shoes. It was able to garner over 300,000 participants in 24hrs. the company has also created campus groups that help popularise and coordinate the one for one movements.

Once the company has created such a huge level of social engagement, turning fans into customers and consequently repeat customers is the easy part. The company’s campaign makes the customers feel part to be part of something. People who buy TOMS products do not buy them because they have the best products but the feeling of getting something good and alternatively doing something good to someone in need elicits a feeling of buying for the cause.

TOMS reliance on corporate social responsibility is absurd let alone unconventional, yet it has yield great success. TOMS products are primarily targeted to the millennials. According to Fallon (2014), “People want to feel good about what their dollar is doing.” Young people are leveraging on the power of technology to influence the actions of the companies whose products they are consuming. Companies do not only need to create great products or good loyalty programs. The consumers need to feel good about the money they spend beyond getting a good product. As the global social issues awareness rises, an unconscious feeling of doing good while buying a product decides what product we choose to buy.

TOMS SHOES SWOT ANALYSIS

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Fallon (2014) goes ahead to outline three forms of corporate social responsibility. These are the environment, philanthropy and ethical labour practices. The environment has been a recurring topic in recent times especially when it comes to pollution. Leonard (2006) argues that many organizations, especially manufacturing companies, have been responsible for environmental degradation through emitting of harmful pollutants into the environment. This has painted the manufacturing and allied organizations in a bad picture. Corporate social responsibility in environmental based activities can help change this negative attitude.

TOMS shoes has understanding of the impact of environmental based corporate social responsibility has seen them manufacture shoes from recycled materials. TOMS Roast Co., which deal in coffee, funds water projects in areas where coffee is grown, where climate change has affected the amount of rainfall. This paints TOMS as a company that apart from selling people products, it provides solutions to environmental problems.

Philanthropy involves donating to charity and social groups in need. Donations can be given in form of money time or products. The one for one business model is arguably TOMS best competition asset. For the consumers, for every pair of shoe they buy they donate a person in need of the same. Philanthropic actions are not only for TOMS shoes but for the customers whose simple actions such as purchasing a shoe can become philanthropic.

While the company’s business model has translated to numerous success, it has also drawn a lot of criticism from experts and consumers alike. The company’s refusal to enlist as a non-profit organization has sparked some controversy. Given their private ownership, financial information, such as profits and staff compensation are not publicly available. In addition, the company’s shareholders are private. Critics argue that the company lack transparency. Others have accused the company of using social course as a stunt to enhance financial gain. Despite the company’s massive profit margin per item, it does not disclose how much it donates from the gains.

Cases of unethical treatment of workers rocked TOMS. A report by Foltyln (2014) accused an Ethiopian Chinese owned manufacturer of mistreating workers producing footwear for TOMS amongst other brand. The workers are paid as low as $14 per month. Mistreating workers who manufacture products is violation of ethical treatment of workers which is a fundamental corporate social responsibility practice.

Despite stating that it remains nonpartisan in religion and politics, the company found itself being the topic of discussion when the CEO attended and gave a speech during an event organized by the Focus on the Family organization. The organization is a conservative Christian group opposed to gay and abortion.

The charitable action of giving out free shoes has been found to have a negative impact on the society. Davenport (2012) argues that the charitable donations given by TOMS undercut the local producers such as cobblers in the third world countries. This leaves people without job for a period before the shoes needs fixing again taking the people back to the original problem. Davenport describes TOMS as a company that makes the west feel good about what they are doing instead of providing real solutions to problems.

One for one model, employed by TOMS has both critics and supporters alike. It is a relatively new and disruptive model and from the look of the progress that TOMS has achieved it might become a de facto to profit organizations. The supporters of TOMS business model have a genuine argument that corporates need to do more than just provide good products, they need to give back more. This is echoed by more than 76% millennials who think that organizations are not doing enough on social responsibility. (Deloitte, 2017).

Arguments against the model have valid points too. TOMS donations are more of temporary fixes than solutions. The company ought to create solutions rather than give free aid. The aid helps people temporary in addition to ruining businesses. The model, however is working very well currently. Adapting the model to bring solutions to the world problems in the future might improve its results.

References

Qingwei, D. L. Rachel Crumpler Business and its Publics: Section 29 May 12, 2013 TOMS Shoes and the Effective Creation of Shared Value.

Fallon, N. (2014). What is corporate social responsibility. Business News Daily, 1.

Boulouta, I., & Pitelis, C. N. (2014). Who needs CSR? The impact of corporate social responsibility on national competitiveness. Journal of Business Ethics, 119 (3), 349-364.

Foltyn, S. (2014). Ethiopia: Booming business, underpaid workers: Low wages have attracted foreign players to the poor African country, but labourers are hoping for better salaries. Retrieved from: http://www.aljazeera.com/indepth/features/2014/12/ethiopia-booming-business-underpaid-workers-20141228732485264.html?utm=from_old_mobile

Montgomery, M. (2015). What Entrepreneurs Can Learn From The Philanthropic Struggles Of TOMS Shoes. Retrieved from:https://www.forbes.com/sites/mikemontgomery/2015/04/28/how-entrepreneurs-can-avoid-the-philanthropy-pitfalls/#1968f5e81c38

Deloitte. (2017) The 2017 Deloitte Millennial Survey: Apprehensive millennials: seeking stability and opportunities in an uncertain world. Deloitte. Retrieved from:http://www2.deloitte.com/global/en/pages/about-deloitte/articles/millennialsurvey.html.

Davenport, C. (2012). The Broken Buy-One, Give-One" Model: 3 Ways To Save Toms Shoes. Fast Company. Retrieved from “https://www.fastcoexist.com/1679628/the-broken-buy-one-give-one-model-three-ways-to-save-toms-shoes”

• Author: Denis Mugendi (Author)
• Publication Year: 2017
• Pages: 6
• Catalog Number: V355636
• ISBN (eBook): 9783668443082
• ISBN (Book): 9783668443099
• Language: English
• Tags: Corporate social responsibility, TOMS shoes