This bachelor thesis evaluates the very purpose of the existence of business in society. Starting with the conventional motives of profit maximisation and shareholder value for its destined owners, the argument expands towards a broad perspective of business arguing that profit maximisation is not the (sole) purpose of business existence.
The argument is made by looking in conjunction at stakeholder theory and sustainable operations of the firm, stressing that business operations not only out of instrumental, but also normative reasons should incorporate a broad perspective. Evaluating the two different perspectives it is argued that they can be integrated into a concept not compromising each other, but complementing one another and generating shared value for business and society at large.
Taking recent scandals aside, it is fairly surprising that business is seen overly negative in public opinion. Businesses have communicated strongly that profit maximisation is not their sole purpose of operations. Nevertheless, the negative notion towards business persists, stressing the concern that there might be a deeper alienation between business and society at play. This is the starting point for the following analysis. The thesis puts the corporation at its very centre of argumentation intending to shift away from reactionary behaviour created by external pressure, but focusing on the core of business operations, evaluating, how business can deliver superior value for society without compromising the bottom line.
Table of Contents
1. Introduction
1.1 Perception of business in society
1.2 Methodology and structure of the thesis
2. Reflections on the purpose of business
2.1 Assessments about the purpose of business
2.2 Narrow and broad perspective of business
2.3 Arguments for a narrow perspective of business
2.3.1 Relevance of profit maximisation for business
2.3.2 Relationship between business and shareholders
2.4 Arguments for a broad perspective of business
2.4.1 Responsibility of business towards stakeholders
2.4.2 Sustainable operations of business and triple-bottom line
2.5 Discussion of both perspectives and their synergic relationship
3. Concepts for a broad perspective of business
3.1 Overview of concepts
3.2 Focus on the concept of Creating Shared Value
3.3 Evaluation of Creating Shared Value
3.3.1 Evaluation criteria
3.3.2 Business examples for evaluation of Creating Shared Value
3.3.3 Competitive advantage on the basis of Creating Shared Value
4. Conclusion
4.1 Summary
4.2 Recommendations for future research
Objectives and Research Themes
This thesis examines the fundamental purpose of business in society, moving from the traditional focus on profit maximization and shareholder value toward a broader perspective. The primary research goal is to determine how corporations can integrate social responsibility into their core operations to deliver superior value to society without compromising financial performance.
- The evolution of business purpose, contrasting narrow and broad perspectives.
- Theoretical foundations of stakeholder management and sustainable operations.
- Evaluation of "Creating Shared Value" as a strategic framework for modern firms.
- Practical analysis of business initiatives by Nestlé and General Electric.
Excerpt from the Book
1.1 Perception of business in society
Since Adam Smith’s ground breaking work “An Inquiry into the nature and Causes of the Wealth of Nations”, published in 1776, business and its linkage to value creation has always been controversial. In the last decades, the negative notion towards business has intensified and popularity of business and trust evaporated. In Gallup’s 2010 annual poll on confidence in institutions “big business” ranks at 19 percent confidence rating, slightly above US congress at 11 percent (Saad, 2010). Gallup is not the only ranking indicating that business has seen its more popular days. US Roper Poll revealed in 2005 that “72 percent of respondents believe wrongdoing was widespread in the industry” (Garner, 2007, p. 1). Another study conducted in 2013 by McKinsey & Company, a consulting firm, states that levels of trust in business are below 55 percent in most countries (Browne & Nuttall, 2013, p. 2). Grassroots movements such as Occupy Wall Street, a movement founded in 2011 criticising income inequality in the United States, only further emphasise the plunge in trust, business has experienced in recent years (Gautney, 2011). Agreeably, not unjustified due to the outcome of the financial crisis and a wide array of corporate scandals, beginning with Enron and continuing with Lehman Brothers. The Edelman Trust Barometer, one of the major German pollsters on trust and credibility of governments, NGOs, business and the media further exemplifies the negative perception of business among the public. Only 28 percent of respondents ranked corporate CEOs as trustworthy in 2015 (Edelman Deutschland, 2015, p. 11).
Summary of Chapters
1. Introduction: This chapter introduces the growing public mistrust toward big business and defines the thesis's core hypothesis regarding the necessity of a broader purpose for corporate existence.
2. Reflections on the purpose of business: This section categorizes arguments into narrow (shareholder-focused) and broad (stakeholder-inclusive) perspectives, exploring the theoretical foundation for corporate social responsibility.
3. Concepts for a broad perspective of business: This chapter reviews various conceptual frameworks and selects "Creating Shared Value" for an in-depth strategic evaluation using examples from the private sector.
4. Conclusion: The final chapter synthesizes the findings, arguing that business success and societal contribution can be synergistic, and provides suggestions for further academic inquiry.
Keywords
Business Purpose, Stakeholder Theory, Profit Maximisation, Shareholder Value, Corporate Social Responsibility, Creating Shared Value, Triple Bottom Line, Sustainable Development, Competitive Advantage, Value Chain, Conscious Capitalism, Nestlé, General Electric, Strategic Management, Social Responsibility
Frequently Asked Questions
What is the core focus of this thesis?
The work focuses on the changing role and purpose of business in society, arguing that firms must evolve beyond narrow profit maximization to address broader societal needs.
What are the primary themes discussed?
Central themes include shareholder versus stakeholder theory, corporate social responsibility (CSR), sustainable business operations, and the integration of social progress into competitive strategy.
What is the research question driving this study?
The thesis explores why businesses exist and whom they serve, specifically questioning how they can create superior value for society without sacrificing financial viability.
Which methodology is applied?
The thesis utilizes extensive desk research, analyzing peer-reviewed journals, books, and reports to evaluate academic perspectives and practical business models.
What is covered in the main body of the work?
The main body examines the tension between profit-focused and stakeholder-focused business paradigms, evaluates the "Creating Shared Value" concept, and analyzes practical applications by Nestlé and GE.
Which keywords define the research?
Key terms include Corporate Social Responsibility, Creating Shared Value, Stakeholder Theory, and Sustainable Operations.
How is the concept of "Creating Shared Value" (CSV) evaluated in this thesis?
CSV is evaluated based on three specific criteria: performance measurement, successful implementation potential, and its capacity to act as a source of competitive advantage.
Why are Nestlé and General Electric used as examples?
These corporations serve as practical case studies to illustrate how large multinational firms can implement broad-perspective strategies like the "Cocoa Plan" or "Ecoimagination" to align social and economic outcomes.
What is the author’s conclusion regarding competitive advantage?
The author concludes that while CSV initiatives can provide temporary competitive differentiation, they often risk becoming industry standards, shifting the focus from individual firm advantage to broader industry-wide societal improvements.
- Quote paper
- Patrick Alex (Author), 2015, Business and Society. Initial Reflections on the Purpose of Business and Concepts For a Broad Perspective, Munich, GRIN Verlag, https://www.grin.com/document/448608
