TOMS: Social Objectives vs. Cost Efficiency PDF

**The Trade off between Social Objectives and Cost Efficiency** Cost efficiency aims to minimise the costs of producing goods and services. TOMS is experiencing increasing costs and low profit margins. Social objectives are a company\'s goals and commitment to manage the impact of its operations o...

**The Trade off between Social Objectives and Cost Efficiency** Cost efficiency aims to minimise the costs of producing goods and services. TOMS is experiencing increasing costs and low profit margins. Social objectives are a company\'s goals and commitment to manage the impact of its operations on others. This is also referred to as corporate social responsibility. Due to financial problems in 2014 it was given a \$313m investment from a private company but growth and profit margins remain lower than expected. Reducing its costs may be important to increase its profit margins. Profits are important to TOMS to enable it to reinvest into the growth of the company and develop its portfolio. Reducing costs and increasing profit margins are also necessary to keep its investors satisfied. TOMS may fail to attract further private investors if returns are low. Reducing material costs of the shoes may help the company to sell at a lower price and compete with companies such as Skechers that are selling a similar style shoe at half the price. However, reducing the costs may impact the quality of the shoes. lf TOMS use an inferior quality of material or less responsible suppliers it may lose its brand identity. TOMS donate a pair of shoes for every pair it sells. For some customers, the social goals and practices of a company are important which may increase sales and encourage repeat purchase for TOMS. Helping to improve eyesight should help to improve the public image of the company. This shows consumers that the business is going above and beyond to help the society in which it operates and may lead to higher levels of revenue for TOMS. Pursuing social objectives may lead to increased media coverage for TOMS and increased demand. A benefit of focussing on social goals is the possibility of attracting new investors. If the social goals align with an investor\'s view, they may be more inclined to invest in a company. Likewise, employees who share the same social goals of the company will be more motivated at work when they know the company is working toward the same objectives. However, social objectives can increase the costs for the company. The one-for-one policy and helping improve eyesight is an expensive commitment. Also using sustainable and re-cyclable materials pushes up costs and prices of goods. If price is an important factor for consumers, they are likely to buy from rivals such as Skechers. Other factors may also be important to its survival such as widening its portfolio. The portfolio of products is small and since it was founded in 2006, the company has done little to expand beyond its basic style of shoe. Overall it is likely that cost efficiency is important to TOMS in order to survive financially. It may need to reduce costs and increase its profitability if it is to survive long term. However, the USP of TOMS is its ethical behaviour and its pursuit of social objectives. If this is compromised, then TOMS may lose its means of differentiation and not survive in the long term.