Po b lecture 5 economic systems and csr students

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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व�म�नाना�गपू�र12/12- क:23°C,किक:18°C,पू�ऊस:2mm,शक् यतू�:2%13/12- क: 23°C, किक:18°C,पू�ऊस:2mm,शक् यतू�:2%

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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