TOMS shoes: Combining Social Consciousness and profit

MA0N0203 StanMA0N0226

Lyndon

Case 7.2

Index

IntroductionCreating a businessChallenge of mixing philanthropy and profitQuestion and discussion

Introduction

Blake Mycoskie Visiting Argentina Children without shoes How to help them? Charity? Asking

family or friends?

Introduction

TOMS shoes Founder – Blake Mycoskie Combining an entrepreneurial itch

with a social cause and making money doing it

Selling a pair, giving a pair to child in need One for one movement

Picture from website

Why Shoes?

Risk for children without shoes• Soil-transmitted diseases, penetrating the

skin through bare feet • Preventing feet from getting cuts and sores.

Not only injuries painful, but wounds becoming infected.

• Can't attend school barefoot shoes required part of their uniform

Elephantiasis

•

Creating a business

Shoes factory in USA Made out of organic canvas and

recycled plastic Lightweight and environmentally friendly

Humanitarian mission Strict fair-labor, fair trade practices

36 employees and 30 interns working in its home office with TOMS concept Falling in love with TOMS concept

Creating a business

Customers and volunteers Involving TOMS activity

Keeping message alive

TOMS activity 15 volunteers visiting different

countries/areas for Shoe Drop per 2 weeks

Co-operating with departments and other retailers Showing one for one movement

Challenge of mixing philanthropy and profit

Not reaching profitability in fall, 2008 Trouble in keeping up with a large

retailer’s demand

Tire of its shoes, no matter what concept you have Designing new style shoes(wrap boot for

woman), consistent with its mission

Challenge of mixing philanthropy and profit

Taking a toll on the bottom line Buying TOMS’s shoes because of one

for one movement (philanthropy)

Mycoskie admits TOMS will probably never be really

profitable

question 1

Based on what you know about TOMS, from the feature and company’s Web site, what ethical and legal issues, other than those that all firms grapple with, should TOMS be particularly attentive to? How can TOMS avoid ethical and / or legal mishaps in this area?

Answer 1Patent Hiring folks from Nike, Asics, Tommy Bahama for

making good shoes Avoiding patent of Nike, Asics and Tommy

Bahama

Humanitarian mission Strict fair-labor, fair trade practices

Promoting living wage for worker No child labor Food price meet the minimum

Using recycled plastic – including hazardous substance (ROHS in 2006)Routine check to avoid possible ethical and legal mishap Checked by 3rd party

question 2If TOMS initiated an ethics training program, which issues do you think it would focus on the most?Answer Humanitarian mission

Strict fair-labor, fair trade practices Promoting living wage for worker No child labor

Protect environment No pollution to water, air and waste

material handling

question 3

Do you think customers are willing to pay more for a product when they know that a portion of their purchase price will go to good cause? If so, how important is this sentiment to TOMS? How effectively does TOMS communicate its mission and socially conscious principle to its customers?

Answer 3

YesSpreading TOMS concept via mediums Youtube, facebook, mySpace

Customers and volunteers Involving TOMS activity 15 volunteers visiting different

countries/areas for Shoe Drop per 2 weeks Keeping message alive

Co-operating with departments and other retailers Showing one for one movement

question 4

What forms of business organization would be appropriate for TOMS? Explain your answer?Answer Setting up a non-profit organization

connecting to TOMS (for-profit) TOMS donating money to support non-profit

organization Reducing total amount of tax payment to

government Showing their concern to social responsibility as

charity

Application question 1

How should TOMS handle it if at some point becomes economically unfeasibility to give away a pair of shoes for every pair it sells? For instance, if TOMS decided to shift to a model of giving away one pair of shoes for every two pairs that it sells, how should it communicate that decision to its stakeholders?

Answer AQ 1Two steps for communication Showing accounting data to

stakeholders Break even point

Sustaining the original idea Philanthropy and profit

Application question 2

What can a business that wants to operate in a socially conscious manner, but doesn’t have the mission and business model that emphasizes social consciousness or philanthropy to the extent that TOMS does, learn from TOMS’s experiences?

Answer AQ 2

Air pollution industry Oil refining, garbage furnace

Offering job opportunity to local workers priority

Offering 24 hrs hot water for free to local community

Thank you