Profit and Shareholder Value

Profit and shareholder value are the two goals that organizations pursue. Exploiting an industry's resources and achieving and sustaining competitive advantage have always been the drivers to profitability. Traditionally being a corporate social responsible company meant sacrificing profitability and thus there was a trade off. Through specific examples and concrete reasoning Prahalad and Hammond suggest how companies can achieve both. I was impressed with the example about making a developing community the target of the investment, in particular; the internet-based kiosks. There are benefits and weaknesses of the program. It seems evident that one of the main needs of human beings -whether in the developing world or in the developed world- is communication. Setting-up kiosks that can serve more than 600 villages and allow them to communicate between each other and the rest of the world is indeed an achievement. From the point of view of the business, it is also a perfect strategy because of the wide array of customers that their service can serve (marketing channels for firms, learning for the population, communication, farmers). Therefore there is a huge growth potential and they would also benefit from a first-mover advantage. On the other hand, providing internet service to developing countries could pose a threat to western consumers. There have been many cases where people in developing countries see fraud opportunities on the net. Thus, they may begin sending fraud e-mails to consumers around the world offering amazing opportunities with fraud as the ultimate goal, therefore posing an ethical problem. There are several ethical principles that an NGO would have to keep in mind when dealing with a MNC. For instance, if the MNC were to expand in the area, the working conditions (eg: in call centers) would have to satisfy certain requirements. Child labor is a recurrent issue in the developing world and should not be allowed. Contract terms should be clear and a large proportion of profits should go into development and research and the education of workers. I personally believe that this article points out some facts and ideas that are barely present in the management literature. Businesses are simply blind sometimes and are unable to understand that real growth is only driven by big market opportunities.