Stimulus for the Economic Agents, Essay Example

Classic economic school argues that the only stimulus for the economic agents is profit. This is actually true, as maximization of profit is the key goal for any business. However, the times of “cruel” cynical capitalism are long gone. Any business is generating its revenues from the society and is consequently expected to give something back. This is simple logic and makes the entire process fairer. The concept of social responsibility has evolved long ago, as rich people were supposed to pay greater taxes (progressive taxation), additional taxes for the luxury goods are also implied. Most corporations in the USA are a subject to double taxation. This ways of forcing the business to contribute to the community are usually negatively viewed by the business owners. Social responsibility was considered nothing more than a factor that reduces the profit margin and causes extra costs. Such approach was criticized over 35 years ago by Milton Friedman, a brilliant economists and a Nobel Prize laureate. Friedman claims that any business has responsibility in front of all the stakeholders, including customers and employees. Friedman claims that this is not simple hostility to profit, but a mean to increase the long-term profits through building mutual trust and respect with all of the stakeholders. Such assets as customer loyalty and positive brand image are much more valuable as the short-term benefits (Reasononline, 2005).

The company described in the case certainly does not bother much about the social responsibility. It does little or nothing to contribute to the benefit of the community it operates in. From the first point of view it may seem that the steps taken by the enterprise are logical and aimed for the profit maximization: shops in the unsecured areas are harder to operate, narrow choice of the goods, which are more expensive, is easier to arrange from the point of view of logistics; trying to avoid frauds is also a reasonable step from the managers. Such views are wrong from the point of view of social responsibility – sooner or later the members of the community will be displeased with this local grocery store’s operations and the revenues will decline. One may argue that only large corporations have the real power to change something and consequently bear greater liability. This is partly true, as the resources are much more significant, but the business does not have to be large to make a difference (Slawski, B. 2008).

Several areas of social responsibility of the company can be improved. First of all, instead of closing the stores in criminogenic areas is not the solution. The business should strive to improve the situation – imply extra security or simply improve the street lighting in the area. This should reduce the level of crime in the area and the local community members will surely appreciate the positive changes. Secondly, the range of products should be broadened. Not everyone can afford shopping in the more expensive local groceries and choose to visit large supermarkets. A local store should consider customers with the different income level and expand the variety of choice as much as possible. This will attract a greater number of clients and increase the volume of sales. And finally, it will certainly not hurt the enterprise to donate the goods that are about to be thrown out any way. Frauds may occur of course, but the staff will experience the feeling of contributing to the greater good and trust from the management and will not likely steal too much to affect the profits of the company.

Such simple steps do not require much funds or efforts, but will form a positive image and increase the potential number of clients, as well as their loyalty. I suppose that Milton Friedman was right – social responsibility is profitable and stimulates the long-term profits.

References

Slawski, B. (2008). Social Responsibility And The Small Business. Retrieved March 31, 2009 from: http://searchengineland.com/social-responsibility-and-the-small-business-14397

Rethinking the Social Responsibility of Business. – A Reason debate featuring Milton Friedman, Whole Foods’ John Mackey, and Cypress Semiconductor’s T.J. Rodgers. Retrieved March 31, 2009 from: http://www.reason.com/news/show/32239.html