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Please Grade My AWA or Even Take a Look!


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Today, more so than ever, corporate transparency is a necessity for a well functioning society.  After the financial calamity of the 2008 recession more focus than ever has been cast upon the corporation, both domestically in the US and abroad.  In light of this, the idea of corporations acting on high moral standing and contributing to society, also known as corporate social responsibly (CSR) has been juxtaposed with anachronism idea that the sole drive for a corporation is to turn profit.   While corporations must create profit and foster optimism from the investors, there is also something to be said about a corporation that creates profit and does with the utmost of moral duty. 


To begin, most figures that go into assessing value of a company are profit, loss, and costs of doing business.  While these numbers may leave investors with a seemingly keen idea of how the business is being conducted, there may be value outside that books that can prove profitable as well.  I am referring to CSR.  It has been proven time and time again that corporations that involve themselves in CSR have been able to foster confidence in investors and have been able to create lasting community partnerships due to their high moral standing and how they are perceived by society.  With support in the community and throughout society, a corporation can reap massive financial gain.  Being seen as the “nice guy” can lead to increased sales and investment due to trust in the corporation.  Therefore a corporation that participaites in acts of good CSR can increase business, which can lead to signifigant financial gain.


Secondly, corporations that act only on the grounds of turning a profit and ignore CSR can indeed make lots of money, albeit not in the most savory of ways.  Corporations that do not participate in any forms of CSR appear alienating to members of society and consequently prove caustic to society as a whole.  This often leads to lack of trust from investors and a general unpopularity.  While they may be making lots of money, it is proven that after a length of time, due to unpopularity and lack of trust, they will see a declination of profit.  Using, arguably the most prolific hedge fund today, Berkshire Hathaway, as a case study we see that when large donations are made to various philanthropic groups, their stock rises due to increased admiration from the public.  If they were only on track to make money and not practice and CSR there is high probability that they would not have the impact in the market place they currently have.


Therefore, I believe that there is a sublime balance that a corporation can have to maximize profit and also be cast as a noble corporation.  A corporation like McDonalds for example is a near perfect case study for a corporation that maximizes profit and also redeems themselves through huge acts of CSR.  McDonalds is one of the largest food corporations on the market today, making profit hand-over-fist and in the meantime, alienating a large part of society by their rather aggressive marketing and pricing.  Consequently they are seen by many as a company that, if not due to their charity, the Ronald McDonald fund, would be out right evil.  They make money, often and the cost of health and safety standards, but due to their massive philanthropic arm and redeemed in the eyes of investors and large parts of the investment community.


In conclusion, for a company to be successful both financially and in the eyes of the investing public they have to be both profitably and advantages as well as acting members of the CSR community.  If a corporation were to only follow one path, either totally socially responsible or totally advantages, they would find themselves in fincaial straights.




Currently the Movies Galore movie rental chain is in the midst of a financial down swing.  The leaders of Movies Galore see the only way to save the chain is to reduce operating costs, which is a simply way to raise profits.  The company leaders use one of their stores as a case study in which they see that by eliminating older movies (5 years or older) and closing at 6PM (previously 9PM) the store was able to significantly lower their operating costs and thus, raise profits.  They idea at first may seem easy to execute and a sure fire way to raise profits but to me, there are some glaring holes in the logic.  They claim that one of their market advantages is their reputation in having great movies, yet they plan on taking all movies older than 5 years off the shelf, many great movies were made more than 5 years ago.  Secondly they plan on closing the store earlier in the evening, which yes, will lower operating costs but will no doubt restrict the possibility in making money.  I believe that between those two points they are a track to losing their market share to other video outlets, at the hand of lowering operating costs.


To begin, the store they use as a case study for lowering operating costs was able to do so by eliminating movies older than 5 years off their shelves.  To me this seems like a totally arbitrary method in removing movies.  Say for example there is a movie that was made 6 years ago that is rented out almost every weekend, they movie is making them money, but because they are eliminating moves based on date not popularity, that movie will no longer be able to be rented.  If they want to take movies out of inventory they should first conduct a study and see which movies on their shelves rarely, if ever, get rented.  Those movies should be taken out first.  I am sure there are movies that were produced in the last 5 years and gather dust that will stay due to this arbitrary method of clearing inventory.  If they take away a movie that is very popular, based on the date is was produced, this may upset customers who in turn will have to turn to another video rental outlet to find it.  So yes, this would lower operating costs but it would restrict rental opportunities in a very arbitrary way.


Secondly, they propose closing early as a way to save money.  We having the lights off and not paying any wages will save money, but it also wont make any money.  Rather that close earlier in the evening, when most people watch movies, I would like to know at which hour they open.  Say for example they are opening at 7AM.  I doubt there are many people rushing to video store to rent a movie at that hour, but I am sure that at 9 PM people are speeding in their cars trying to get that nights movie while they still can.  Thus I think it would make much more sense to lower the operating costs by opening later in the day and staying open to their normally 9 PM.  Again, if customers want to rent a movie at 8:30, while they previously could have gone to Movies Galore, they would now have to turn to another outlet to satisfy their needs.  Again, closing earlier would lower their costs, but at the risk of not making any rentals. 


Thirdly, the managements idea that the only way to turn around their loss in profits is by lowering operating costs is very pedestrian.  Lowering operating costs does have an effect of profit but before the management starts implementing these changes there needs to be a full understanding of how their profits and operating costs.  Lowering operating costs can also be done in less intrusive ways.  Say for example they reduce their number of staff, or are closed on Wednesday and open later on Friday and Saturday. 


In conclusion the management of Movies Galore, if they do intend of lowering operating costs, need to first take a study of how their stores operate.  Which movies are being rented and when?  Movies more than five years old can also be good and popular and moves that were made just one year ago can be a total flop.  To simply remove inventory in an arbitrary manor and shortening hours in the evening will in turn lead to distrust from the consumer and consequently less rentals and customers, furthering their financial woes.   

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