1. The MBA oath says in part, “My decisions affect the well-being of individuals
ID: 426589 • Letter: 1
Question
1. The MBA oath says in part, “My decisions affect the well-being of individuals inside and outside my enterprise, today and tomorrow.” This echoes what John Mackey of Whole Foods has in recent years called conscious capitalism.
One example of a large firm reorienting toward this approach is PepsiCo. In the last few years, PepsiCo has been contracting directly with small farmers in impoverished areas (for example, in Mexico). What started as a pilot project in PepsiCo’s Sabritas snack food division has now spread to over 1,000 farmers providing potatoes, corn, and sunflower oil to the firm. Pepsi provides a price guarantee for farmers’ crops that is higher and much more consistent than the previous system of using intermediaries. The farmers report that since they have a firm market, they are planting more crops. Output is up about 160 percent, and farm incomes have tripled in the last three years. The program has benefits for Pepsi as well. A shift to sunflower oil for its Mexican products will replace the 80,000 tons of palm oil it currently imports to Mexico from Asia and Africa, thus slashing transportation and storage costs.
Questions
c. If you were a PepsiCo shareholder, would you support this program? Why or why not?
Explanation / Answer
As a PepsiCo shareholder I would definitely support this program.
The reason for supporting this program is that I believe that the job of companies is not only to earn profit from the market but also to serve the society it operates in. PepsiCo by directly reaching to the small and medium farmers in Mexico is doing its duty towards the growth and development of society. The farmers will be benefited to a large extent by selling their produce directly to a large firm like PepsiCo and this will also create a more positive image of PepsiCo in the minds of citizens of Mexico.
By directly purchasing from the farmers PepsiCo will eliminate the intermediaries which will reduce the raw material cost as well as PepsiCo can guide the farmers that what type of product it needs. This can also reduce the cost of production and thereby increasing the profits earned by the company.
As a shareholder of the company I do not see any loss which the company will face by implementing this program and thus I will support it.
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