Academic Year

Transcript

1 Master in Business Administration MBA 50 European Business Academic Year Written Assignment 4 Question 1. Research Topic: Debt Crisis and the Welfare State in Europe In the middle of a very severe financial crisis, European countries are struggling to control their deficits and take measures to stabilize their economies. In this conjuncture, the size and productivity of the public sector has concentrated a lot of blame and is considered one of the main sectors which needs transformation. On the other hand, the stability and welfare of the so called Nordic model applied by Sweden, Norway Finland and Denmark, consists a strong argument for those who claim that the public sector itself should not be considered a cause of the current crisis. The Nordic social model is based on the fundamental values of social security, equal opportunities for all and equal access to health services and education. Moreover, easily one can recognize that the Nordic countries are ranked in the top of league tables of almost every global index model and perform exceptionally high in economic competitiveness, innovation, social health and other very important aspects. These countries have managed to avoid, not only southern Europe s economic difficulties, but also the extreme inequality model of the US. One of the most important things that someone could learn from the Nordics is how to reform the public sector making it efficient and effective (World Economic Forum, 2011; Christiansen et al, 2006; Jedid-Jah, 2012). Only some decades ago the Nordic countries were characterized by very high tax rates and increasing public spending. In 1993 Sweden s public spending reached the 67% of GDP. This approach did not prove effective, since Sweden fell 10 positions to the richest countries in the world ranking from 1970 to 1993 (from the 4 th to the 14 th position). Today, although the top taxation rate in Sweden is still very high (56%) compared for example to Britain s 40% and public spending is 60% of GDP

2 compared to Britain s 44%, Government s share of GDP in Sweden is not that high compared to France. Moreover, corporate taxes have been cut down to 22%, far less compared to that of the US, while at the same time Sweden has managed to reform its pension system timely and effectively and its budget deficit is currently 0.3% of GDP compared to the 7% of the US (Christiansen et al, 2006; World Economic Forum, 2011; Jedid-Jah, 2012). Especially on the public services the Nordics did not put any restrictions on who should provide them, i.e. public or private sector. For example, in Norway and Denmark private companies have the responsibility to run public hospitals, while in Sweden there is an effective mix of public and private schools operating under a healthy competition. The performance of all hospitals and schools is measured and monitored; in Sweden, access to performance reports is open to anyone who wants to check. More than that, technology has been leveraged to facilitate interaction with the public, foe example tax payments can be made with an SMS (Torben, et al., 2007; Jedid-Jah, 2012). The Nordic model is a great example of combining competitive capitalism with a large and effective public sector that cares for its citizens; about 30% of the Nordic employees belong to the public sector, an almost double percentage compared to the OECD average of 15%. On the other hand the healthy entrepreneurship is promoted, while problematic companies like Saab, or Volvo were let to go bankrupt or sold; obviously the Nordic model emphasizes on how to temper the harsh effects of capitalism. Of course the Nordic model has disadvantages as well; taxation is high enough to encourage entrepreneurs to immigrate, while many people, mainly immigrants, make their livings from public benefits (World Economic Forum, 2011; Jedid-Jah, 2012; Carson, 2004). One could claim that the Nordic model might become an example for the other European countries to follow. The most important lesson to be learnt is actually not ideological, but practical. The Nordic welfare model is strongly based on innovation and flexibility. Reforms have been made on time with minimum cost, while the public sector is big but at the same time effective. The welfare system of the Nordic countries is funded to a large extent by taxes, but citizens are willing to pay more

3 taxes as they get back value, having for example good schools and effective health care. Concluding, we could claim that at least, the Nordic model has proven that economic success and welfare are not mutually exclusive. References 1. Carson, M (2004). A Paradigm Shift?, in Nanna Kildal and Stein Kuhnle (eds.) Normative Foundations of the Welfare State: The Nordic Experience. London: Routledge. 2. Christiansen, Niels Finn, Klaus Petersen, Nils Edling, and Per Have (eds.) (2006). The Nordic Model of Welfare: A Historical Reappraisal. Copenhagen, Museum Tusculanum Press. 3. Jedid-Jah Jonker (ed.) (2012). Countries compared on public performance, A study of public sector performance in 28 countries, The Netherlands Institute for Social Research. 4. Torben M. Andersen, Bengt Holmström, Seppo Honkapohja, Sixten Korkman, Hans Tson Söderström, Juhana Vartiainen (2007). The Nordic Model, Embracing globalization and sharing risks, The Research Institute of the Finnish Economy. 5. World Economic Forum (2011). The Global Competitiveness Report : Country Profile Highlights.

4 Question 2. Research Topic: Corporate Social Responsibility in Europe Business The selected company for the case study is Nestle, a Swiss company from the food sector. Nestle has developed specific performance indicators to focus on measuring and reporting sustainability and compliance. The Corporate Social Responsibility (CSR) strategy of Nestle focuses on three focus areas, i.e. (1) the nutrition approach itself (2) activities to improve water consumption and rural development and (3) actions regarding environmental sustainability and compliance (Nestle, 2012). Nestle believes that it can make an important contribution to the society, by going a step beyond conventional CSR, creating value for its shareholders and the society at the same time. Nestle has prioritized the areas of its CSR strategy to work with them more effectively. Nestle s concept of Creating Shared Value has been built upon fundamental commitments to society, to achieve the highest standards of internal and external compliance as well as to protect the environment for future generations. The Nestle Society Pyramid (see Figure 1 below) presents graphically the CSR strategy of the company (Nestle, 2012).

5 Figure 1: The Nestle Society Pyramid Source: Nestle (2012) The main actions that Nestle has been committed to implement up to 2015 are the following (Nestle, 2012): 1. Nutrition a. Improving the nutrition profile of products i. Provide nutritionally sound products designed for children ii. Help reduce risk of under nutrition through micronutrient fortification iii. Reduce salt in products iv. Reduce sugars in products v. Reduce saturated fats in products vi. Reduce trans fats in products vii. Help increase consumption of whole grains and vegetables, including via healthier home cooking

6 b. Information i. Deliver nutrition information and advice on all labels c. Services i. Provide portion guidance ii. Promote healthy diets and lifestyles/physical activity iii. Promote healthy hydration 2. Rural development and responsible sourcing a. Roll out Rural Development Framework b. Roll-out Nestlé Cocoa Plan c. Roll out Nescafé Plan d. Implement responsible sourcing and traceability 3. Water a. Improve water efficiency Improve water stewardship outside factories 4. Environmental sustainability Improve resource efficiency a. Improve environmental impact of packaging b. Assess and optimise the environmental impact of products c. Provide climate change leadership d. Preserve natural capital e. No deforestation 5. Human rights and compliance a. Assess and address human rights impacts b. Eliminate child labour Taking into consideration the CSR strategy of Nestle that was presented above, the corporate advantages that a company might potentially gain by adopting a coherent CSR program can be summarized as follows (Carpenter, et al., 2009; Cedillo Torres, 2012; Nurn and Tan, 2010): 1. Improve reputation of the company and visibility of the brand 2. Reduce business risks and satisfy expectations of stakeholders 3. Improve relationship with stakeholders and regulators

7 4. Increase motivation, productivity and loyalty of existing employees and attract new talented employees 5. Reduce overall costs of doing business 6. Gain competitive advantage on access to resources 7. Increase visibility and access in new markets 8. Trigger innovation and generation of new ideas It should be noted that companies often get involved in CSR programs for their own reasons. CSR is not panacea and will definitely not solve the major world s problems by itself, but it is a start to transform the current business model to a new more sustainable and healthy in the long term. References 1. Carpenter, M., Bauer, T., & Erdogan, B. (2009). Integrating Goals and Objectives with Corporate Social Responsibility, in Principles of Management, Chapter 6, Section 5, Flat World Knowledge, Inc. 2. Cedillo Torres, C. A., Garcia-French, M., Hordijk, R., Nguyen, K., Olup, L. (2012). Four Case Studies on Corporate Social Responsibility: Do Conflicts Affect a Company s Corporate Social Responsibility Policy?, Utrecht Law Review, Volume 8, Issue 3 (November). 3. Nestle (2012). Nestle in Society: Creating Shared Value and meeting our commitments 2012, available in: e-csv-summary-report-2012-en.pdf 4. Nurn, C. W. and Tan, G. (2010). Obtaining Intangible and Tangible Benefits From Corporate Social Responsibility, International Review of Business Research Papers, Volume 6, Number 4, pp