TOMS shoes: Combining Social Consciousness and profit Case 7.2 TOMS shoes: Combining Social Consciousness and profit MA0N0203 Stan MA0N0226 Lyndon

Index Introduction Creating a business Challenge of mixing philanthropy and profit Question 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 Humanitarian mission 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 TOMS activity 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 Oe

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 1 Patent Humanitarian mission 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 What are fair trade practices? Fair trade boils down to promoting sustainable, fair price trading at all levels of business. Most efforts focus on individual or small group producers in third world countries. The practices of fair trade involve promoting living wages for workers in their local communities. In agricultural communities, food prices must meet a minimum regardless of what the rest of the world pays. The minimum insures that local farmers have the ability to make a decent living. Practices also look at the type of labour. Forced labour is not allowed and neither is exploitive child labour

question 2 If 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 Yes Spreading 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 1 Two 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