How Can an Emphasis on Ethics and Social Responsibility Improve Profits and Benefit a Business?

PepsiCo April 3, 2013 HOW CAN AN EMPHASIS ON ETHICS AND SOCIAL RESPONSIBILITY IMPROVE PROFITS AND BENEFIT A BUSINESS? Introduction Until a few years ago, most companies had not cared so much about ethics and social responsibility. They only focused on cost and margin to increase their profits. However, nowadays, many successful companies and businessmen have their own foundation and do some good things, for example, the Ford Foundation has allocated millions of dollars for cancer research and the Bill & Melinda Gates Foundation has allocated millions of dollars for the poor’s health.

They have contributed society with their wealth. Why are they doing that? Are they doing that for their self-contentment? This paper will take PepsiCo as an example to show how the company overcame its struggles and the association between profits and ethics and social responsibility in a business. Summary of Case Study in the Text Book The case study in the text book describes how Indra Nooyi, one of the most famous women CEO, provided PepsiCo with big success by focusing on ethics and social responsibility. PepsiCo needed a new strategy to overcome its critical situation, so it hired Indra Nooyi as a chief strategist.

She recognized how important ethics and social responsibility was to improve brand image and a good brand image could lead to high revenue. Based on the knowledge and communication skills learned from Yale University, she persuaded the management of PepsiCo to change the following three areas of the company: The first area was a product. Nooyi insisted that the company needed to dispose fast-food holdings and acquire several companies that were famous for making healthy food such as orange juice and oat meal.

The change of product line improved the company’s brand value by creating an image that PepsiCo put a premium on good nutrition for customers. The second area was the environment. She believed that PepsiCo had an obligation to protect the environment as a representative sample of global company. PepsiCo changed its operation to the echo-friendly way to meet the obligation. The last area was an employee. In order to procure and cultivate talented personnel, PepsiCo valued ethnic and cultural diversity at work. She wanted to make the company to be the place where everyone wanted to work regardless of their ationalities and races. These efforts to enhance brand value by emphasizing ethics and social responsibility resulted in PepsiCo becoming one of the most successful companies in the food and beverage industry. PepsiCo extended its business to more than 200 countries and retained 193,000 employees with $43 billion earnings. Course Concepts The reason why she had the idea to improve the profit of PepsiCo was the importance of communication. In order to know how to let the enterprise have more effective results, Indra Nooyi had developed an effective and ethical communication style at work.

Through the communication with the members of PepsiCo, she was able to create successful business environment. The first thing to do was to improve the product. During the marketing research and analysis, she discovered that the ingredient of Pepsi could lead to obesity. Thus, she communicated with other employees to solve the problem. The second thing was protecting the environment. Indra Nooyi realized that it was necessary for PepsiCo to decrease the consumption of natural resources and protect the environment. She had made a plan to change the situation for protecting the environment.

The last but not the least point was developing employees. It also meant how the employees engaged in the workplace. According to the process and communication, it was important to “Analyze ethics in the workplace, understand the goals of ethical business communicators, recognize and avoid ethical traps, and apply tools for doing the right thing. ” Indra Nooyi recognized that she should encourage the employees and communicate with them effectively. At the same time, she could avoid those obstacles and make a specific strategy by cooperating with the employees. Research

According to University of New Mexico’s report, “PepsiCo has recognized the importance of social responsibility to its reputation. As such, PepsiCo continually emphasizes its commitment to sustainable growth and its focus on generating healthy financial returns, while giving back to those communities that it serves. ” As a controversial company, PepsiCo used to be criticized by the customers about its unhealthy food. For that reason, PepsiCo stopped marketing their products to reduce more harm at that time. PepsiCo established a series of measures to reduce its negative effects and develop ts reputation. PepsiCo made a “Performance with Purpose” plan which included three parts: product, environment and employees. “Performance with Purpose” was not only made for being a socially responsible company, but also for making profits to PepsiCo itself. PepsiCo committed itself to produce healthier food and reduce unnecessary additives. In this way, PepsiCo balanced the conveniences and healthy desires of customers. Meeting these desires of customers would gain their interests and trust so that the company’s product could be widely accepted.

Meanwhile, PepsiCo strongly proceeded with its activities of “going green” which was the effort to make a favorable environment. By using clean energy sources such as wind energy in India; developing water cycles; reducing packaging pollution, PepsiCo reduced its carbon footprint and contributed to make a green environment. Making less impact on the environment was not only for benefiting the public, but also reducing some costs and saving capital in useless input. Besides, PepsiCo drew up six guiding principles for its employees because it found that employees were a significant point to reflect the value of PepsiCo in customers’ views.

Employees were the representatives of corporate culture. PepsiCo supported employees and made employees love their companies so that employees would achieve their personal value which contribute to the company’s fortune. These steps made customers believe that PepsiCo was a socially responsible and ethical company. This customers’ trust contributed PepsiCo to achieve a big success subsequently and also provided the best interest to the PepsiCo’s stakeholders. PepsiCo was a clear example to show how important it is to develop ethics and social responsibility for making profits in a company.

Conclusion As learned from the PepsiCo’s case, in order to increase profits, it is very important that a company gains customers’ trust, which can be achieved by fulfilling its ethics and social responsibility. It is not limited to make high quality products but expanded its social roles to contribute to the environment and communities that the company belongs to. This perception has forced many companies to invest a great deal of resources in performing good activities for customers, societies and the earth.

Sources Guffey, Mary Ellen Guffey & Loewy, Dana. “Business Communication Product & Process 7th Edition. ” (2011): 31-3. Raudenbush, Janna Lee. “An exploration of publics’ understandings of corporate social responsibility shared values, and the Pepsi refresh campaign. ” (2011): 14-9 University of New Mexico. “PepsiCo’s Journey toward an Ethical and Socially Responsible Culture. ” Accessed March 29, 2013. http://danielsethics. mgt. unm. edu. ——————————————– [ 1 ].

Mary Ellen Guffey & Dana Loewy, “Business Communication Product & Process 7th Edition,” (2011): 3-23. [ 2 ]. Guffey & Loewy, “Business Communication Product & Process 7th Edition,” 31. [ 3 ]. Ibid. [ 4 ]. “PepsiCo’s Journey toward an Ethical and Socially Responsible Culture,” University of New Mexico, accessed March 29, 2013, http://danielsethics. mgt. unm. edu. [ 5 ]. Janna Lee Raudenbush, “An exploration of publics’ understandings of corporate social responsibility shared values, and the Pepsi refresh campaign,” (2011): 9-14.