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In: Business and Management

Submitted By kinley321
Words 2248
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David Lew Qingwei
Rachel Crumpler
Business and its Publics: Section 29 May 12, 2013
TOMS Shoes and the Effective Creation of Shared Value
Over the last 30 years, absolute poverty worldwide has fallen 20%, yet poverty levels in Africa have remained static, hovering around 40% of the continent’s population over the same time period (“Poverty”). Poverty is endemic to many developing nations in Africa, and many attempts have been made to ameliorate the socio-economic toll that it wreaks on the region. However, the continued predominance of poverty in the region today makes it clear that previous attempts at traditional poverty eradication have failed. More recently, the rise of social entrepreneurship has revitalized the discussion about poverty alleviation, with companies committing themselves to creating transformational benefit for the disadvantaged segments of society (Martin 151). TOMS Shoes is such a company that has made a commitment to social responsibility. Unfortunately, TOMS and its footwear draws a great deal of criticism, and there is mounting evidence that creating shared value, as seen in Oliberté Footwear’s business model, is a more effective route to poverty alleviation. Ultimately, we must carefully consider the advantages of Oliberté’s shared value over TOMS’ social responsibility, and call for future social business models to take note of what both of these social enterprises do right and wrong to create the best solution for bringing upward social mobility to destitute Africans.
To bring about upward social mobility, let us first define it and consider why it is so crucial for Africa’s economic development. Upward social mobility is a change in an individual’s social status that causes that person to rise to a higher position within their status system (Gerber 224-225). Status is often dictated by property and income. Thus, upward social mobility is defined as a gain in either. With 40% of Africans living in absolute poverty, characterized as living on less than US$2.50 a day, finding ways to afford food, clean water, clothing, shelter, and medicine becomes difficult (“Poverty”). Without the stability in their lives promised by social mobility, poor Africans devote too much time to securing basic necessities and sacrifice opportunities to contribute to Africa’s economic development. This in turn causes Africa’s economy to stagnate.
Why should the world be invested in Africa’s economic growth? While it is obvious why Africans who live in abject poverty would like to see their own living standards rise, it may not be quite as clear what the rest of the world has to gain. To put it simply, Africa is a nation of over 1 billion people ("World Population Prospects”), and bringing upward social mobility to Africa primes this resource rich continent for an enormous economic explosion that could rival that seen in China in recent decades. Seeing Africa reach economic maturity and its middle-class grow will open an enormous consumer market to the rest of the world. If our moral responsibility to help the less fortunate should fail to galvanize us, the potential profits ought to be motivation enough to want to bring Africa out of economic stagnation.
TOMS Shoes is one company that aims to bring upward social mobility to Africa through corporate social responsibility. Founded in 2006, TOMS is a for-profit corporation that gives away a free pair of shoes to a child in need every time a pair is purchased (Wong). Blake Mycoskie, the founder of TOMS Shoes, has integrated in his company’s business model the mission of eliminating “unnecessary human suffering through the distribution of new shoes” (Mycoskie). Mycoskie believes that giving shoes to poor children can have long-lasting benefits on both children and their communities. By protecting “children’s feet from cuts, infections and diseases, children stay healthy and are able to attend school and fight minor illnesses” (“Our Movement”). Shoes are also often a mandatory component of school uniforms, and TOMS aims to remove that barrier to entry for some prospective students. Finally, TOMS believes that shoes instill confidence in children and make them more likely to contribute to their community (“Our Movement”). Through these steps, Mycoskie and TOMS hope to increase the literacy rate and bring social mobility to Africa. However, despite good intentions, TOMS’ business model is deeply flawed.
Critics frequently question how effectively TOMS’ business model combats poverty. Far from benefiting poor regions, some argue that charitable gifts, such as TOMS’ free shoes, negatively impact these regions. Local businesses simply cannot compete with a good that is given for free; these free goods undercut local prices, rob local businesses of sales, allow the local economy to further stagnate, and contradict TOMS’ mission of bringing upward social mobility (Davenport). Some claim that TOMS has transformed poor children into a marketing tool to sell its shoes, having created a business model dependent on the continued existence of poverty and not designed to flourish in tandem with the prosperity of the poor (Herrera). Ultimately, charitable giving itself is deeply flawed. Some estimate that total aid to Africa over the past 50 years has exceeded US$1 trillion (Westhead), yet the gross domestic products of many African countries have stagnated over the same time period (Poverty…). With such fundamental flaws in TOMS’ culture of giving away shoes for free, other social enterprises have risen up to the challenge by aiming to create shared value.
Oliberté Footwear is a for-profit social enterprise that has made attempts to remedy the glaring flaws in TOMS’ business model, intending to bring upward social mobility to Africa by creating shared value. Tal Dehtiar founded Oliberté in 2009 on the principle that upward social mobility can be brought to Africa through the creation of a solid manufacturing base (Schomer). Oliberté has brought manufacturing to sub-Saharan Africa by building its first shoe factory in Ethiopia, and offers relatively high wages and generous benefits to its workers while giving equal opportunity employment to both men and women (Watkins). Oliberté matches Roger Martin’s definition of a social enterprise that creates shared value. First, Dehtiar identified destitute Africans as a marginalized segment of humanity who cannot achieve transformative benefit on their own. Next, he identified an opportunity to bring shared value through introducing shoe manufacturing to Africa. Finally, he released the trapped potential of this disadvantaged group to alleviate their suffering by employing their underutilized skills to manufacture shoes (Martin 151-152). Additionally, Dehtiar’s insistence on locally sourcing rubber and leather results in local cluster development, with Oliberté’s manufacturing positively impacting other local industries (Porter 135). Oliberté’s focus on creating shared value injects money into the local economy, bringing Ethiopia and the surrounding region out of poverty.
Oliberté’s decision to create shared value ultimately makes it a more effective social enterprise than TOMS’ corporate social responsibility. Martin Porter writes that creating shared value should “supersede corporate social responsibility,” as the latter focuses on maintaining a reputation and becomes impossible to justify in the long run (Porter 141). The truth of this is clear when we consider that TOMS’ marketing is unsustainably dependent on the existence of poverty. In contrast, the success of Oliberté’s impoverished African craftsmen is intertwined with Oliberté’s success as a business, meeting Porter’s expectations of an effective social enterprise whose creation of shared value is integral to its profitability and competitive position (Porter 141). The success of Oliberté is evident, with Dehtiar citing incidences of neighboring African countries asking him to bring manufacturing to their nations and African craftsman in his factory expressing gratitude for being given well-paying jobs rather than aid (Poverty…). Oliberté has also drawn the patronage of socially-conscious celebrities such as Edward Norton and Snoop Dog, further signaling the company’s success (Poverty…). Yet, despite its success, Oliberté still attracts some criticism. The primary concerns surrounding Oliberté’s success lies in Dehtiar’s decision to manufacture in Africa. Dehtiar himself admits that the road to building Oliberté’s first factory in Ethiopia was arduous and bureaucratic (Westhead). Many critics of Oliberté insist that Africa lacks in manufacturing capacity, but Dehtiar rebuts by explaining that although Africa’s infrastructure cannot compare to that found in first-world countries, it is more than adequate to manufacture shoes (Poverty…). Additionally, Africa can never become the manufacturing powerhouse it has the potential to be if everyone shuns producing on the continent for its supposed lack of manufacturing capacity; by bringing shoe-making equipment and expertise into the region, Dehtiar is creating a self-sustaining economy with more opportunities for Africans to manufacture. Others believe that Africa is too corrupt for an honest business to prosper; yet Transparency International ranks some parts of sub-Saharan Africa as less corrupt than Italy or Greece (Westhead). Additionally, Leonce Ndikumana, a former executive with the African Development Bank, insists “it’s a myth that you have to be corrupt to do business in Africa now” (Westhead). For all of the perceived disadvantages of manufacturing in Africa, Dehtiar believes that working in Africa presents an enormous advantage because it allows him to create shoes with a distinctly African design language, allowing Oliberté to sell unique shoes that differentiate themselves from the existing market. Although manufacturing in Africa is by no means easy, Dehtiar has shown that it is far from impossible and, in fact, can be advantageous for both Oliberté and local African craftsmen. The mantle of social change will eventually be passed off to young social entrepreneurs, and those who intend to bring social change through shoe manufacturing must take note of the strengths and weaknesses of the business models created by Mycoskie and Dehtiar. While the flaws in TOMS’ business model are clear, budding social entrepreneurs should not mistakenly believe that Oliberté’s model cannot be improved upon. By showing that Africa has sufficient manufacturing capacity, Oliberté has created the potential for other corporations to bring to Africa the same exploitative, low-wage manufacturing that has robbed parts of Asia of upward social mobility (“Africa…”). Worse still, Oliberté has no plan to counter the inevitability of multinational corporations exploiting the people of Africa. It becomes the responsibility of up-and-coming social entrepreneurs to take into account this downfall in Oliberté’s business model. Forward-thinking social entrepreneurs should expand on Oliberté’s model by helping local laborers form unions to protect their own interests, both in the present and the future. This will prevent large corporations from exploiting Africa for its human capital, ensuring that the individuals of the continent have the bargaining power to maintain generous wages that allow for upward social mobility. By helping to create unions, young social entrepreneurs can expand upon Oliberté’s business model and make upward social mobility an even more concrete reality for destitute Africans.
Although Blake Mycoskie no doubt started TOMS with good intentions, his company’s socially responsible business model is a flawed and inefficient method of bringing upward social mobility to an economically depressed region. Oliberté’s focus on shared value addresses many of these flaws. Although Dehtiar is unafraid to admit that bringing manufacturing to Africa has been difficult, Oliberté’s continued success and the positive response it has received from both the region it manufactures in and socially-conscious celebrities speaks volumes about the efficacy of Oliberté’s business model. However, we cannot become complacent. We must continue to learn from the strengths and weaknesses of both TOMS and Oliberté and apply these lessons to future social enterprises that aim to bring change to Africa and other poverty-stricken regions. At the very least, Oliberté’s and TOMS’ business models will be the spark that ignites the discussion about whether it is more effective to give aid or offer the poor the tools to help themselves. As the proverb goes, “give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime.”

Works Cited

"Africa, A Manufacturing Powerhouse Like China, The Oliberte Way." Ventures Africa. N.p., 5 June 2012. Web. 12 May 2013.

Davenport, Cheryl. "The Broken "Buy-One, Give-One" Model: 3 Ways To Save Toms Shoes." Co.Exist. N.p., 04 Apr. 2012. Web. 20 Apr. 2013.

Gerber, Linda M. Sociology. Seventh ed. Toronto: Pearson Canada, 2010. 224-225. Print. Canadian Edition.

Herrera, Adriana. "Questioning the TOMS Shoes Model for Social Enterprise." The New York Times. N.p., 19 Mar. 2013. Web. 20 Apr. 2013.

Martin, Roger L., and Sally Osberg. "Social Entrepreneurship: The Case for Definition." Business & Its Publics. N.p.: McGraw-Hill Companies, 2013. 145-157. Print.

Mycoskie, Blake. "Fulfilling My Life's Mission Through the TOMS Shoes Movement." The Huffington Post., 18 Nov. 2009. Web. 27 Apr. 2013.

"Our Movement." TOMS Shoes. N.p., n.d. Web. 20 Apr. 2013.

Porter, Martin E., and Mark R. Kramer “The Big Idea: Creating Shared Value.” Business & Its Publics. N.p.: McGraw-Hill Companies, 2013. 123-143. Print.

"Poverty." Our Africa. N.p., n.d. Web. 01 May 2013.

Poverty | Tal Dehtiar | Oliberte Footwear. YouTube. YouTube, 19 May 2011. Web. 27 Apr. 2013.

Schomer, Stephanie. "Tal Dehtiar." Fast Company. N.p., June 2012. Web. 20 Apr. 2013.

Watkins, Tate. "How Oliberté, the Anti-TOMS, Makes Shoes and Jobs in Africa."GOOD. N.p., 17 Jan. 2012. Web. 04 May 2013.

Westhead, Rick. "Oakville Businessman Invests in Africa’s Industrial Revolution." N.p., 14 Apr. 2012. Web. 03 May 2013.

Wong, Grace. "Blake Mycoskie: Sole Ambition." CNN. Cable News Network, 26 Sept. 2008. Web. 02 May 2013.

"World Population Prospects, the 2010 Revision." World Population Prospects, the 2010 Revision. N.p., n.d. Web. 20 Apr. 2013.

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