In 2012, HMV plc spent £25 million on social responsibility projects. In January 2013, HMV entered liquidation. With reference to HMV and/or other organisations that you know, to what extent is acting in a responsible manner important for sustained businesses success. (40 marks)
Acting in a responsible manner will always be an important part of a business’s success, as it links into a business’s reputation which is ultimately how the customers and potential customers view the business before decided whether to purchase their goods or services from them. If a business, for example The body shop is renowned for being socially responsible in relation to environmental factors and employee issues, then its reputation will be strong and customers will look highly upon the business, as opposed to a business, such as Nike, who was found out to be using sweat shops and abusing their workers not long ago, to which consumers responded badly. HMV for many years has been a very popular and well established business. So behaving in a responsible matter will have proved to be an evidently important factor in the success of their business, before they entered liquidation. In their 2008 social responsibility report, HMV stated that “HMV Group recognises that its businesses have social and environmental impacts and that we have a responsibility to manage these impacts effectively at a strategic and operational level”. Environmental factors, social responsibility and economic growth are all part of the triple bottom line aspect. This is a combination of factors which are believed to be essential for a business to be successful. The HMV group statement mentions 2 of these factors. HMV have made it clear that they are constantly aware of their environmental impact regarding energy usage, water usage and waste disposal and seek to make recyclable products such as the plastic covering the CD’s in their store. This will not only save money in the long term but will improve their reputation with the customers, and to potential investors of the business, before the business fell into liquidation in 2013. The likelihood is that in the previous years, HMV might have used the method of window dressing to disguise the failing figures in order to attract investors who could have potentially invested money to try and help the business. Towards the end of the year 2008, Carbon Trust commenced an environmental audit of HMV and Waterstone’s stores and distribution centres, which resulted in a new Energy Action Plan implemented from 2008-2009. Waterstone’s had an action plan to achieve four stars by 2010, and five stars by 2012. Waterstone’s carrier bags are 75% recycled material. Although improved efforts helped Waterstones in the short term, with the liquidation of HMV, Waterstones stores had to be sold in order to help HMV with cash flow as competitors such as Amazon and digital books to Kindles ultimately caught the attention of customers and as a result badly affected Waterstones’ sales. In addition, by making environmental factors and social responsibility an important part of their business strategy, this will aid in helping the success of HMV as being cautious of the environment and trying to protect your surroundings as well as ensuring the best interest of all stakeholders are accounted for, this will solely benefit all stakeholders. Furthermore, HMV have made it evident that it takes social responsibility very seriously. For example, HMV have ensured that it does not discriminate against anyone for any reason, by employing staff of all ethnic groups and abilities. Furthermore, the music, games and movies of which HMV sell are from all cultures and styles to ensure there is something to suit every customer’s needs. Additionally, HMV has maintained its support for Comic Relief by stocking copies of Sport Relief’s ‘Football Managers: Uncut’. In addition, HMV also has a strong connection with War Child, which raises awareness and funds for children affected by military conflicts around the world. HMV’s Guernsey store also helped to raise £1,000 in funds for BBC’s Children In Need. These are all examples of HMV showing they really care about social responsibility, by going out of their way to help fund charities in order to significantly help them. However, it is important to note that although this is a very generous act, from a financial perspective, and how successful HMV is, perhaps it’s not the wisest of moves, as HMV clearly had difficulties with money and perhaps by not donating so much money to charity, they could have invested their spare money back into the business in order to have avoided liquidation. A more ideal approach would have been to have got to a financial position where they could afford to donate money first.
Overall, a very important thing to take note of is how do you measure success? Different business and people may measure success differently to one another, meaning that there can never be a straight, simple answer. What HMV may consider to be successful, another business may not. Furthermore, this links into how HMV spent £25 million on social responsibility projects but still went into liquidation, meaning that although they were doing a good deed, this was not enough to keep them profitable, which was furthered by competitors selling the same products cheaper. Porter’s strategy is a good explanation as to why HMV have gone into liquidation, as Porter states that in order for a business to be successful, they either need to be the cheapest out of their competitors or have a USP in order to differentiate from the competition. HMV did not have either of these aspects and therefore did not succeed. Additionally, HMV went to the effort of purposefully not selling extremely violent video games to ensure that parents would be satisfied knowing that their children were purchasing and playing suitable games, which is a key component in social responsibility. However, this was not enough for HMV to be successful in the long term as this could mean that a large majority of games which could have sold loads of copies and generated a significant amount of profit were not being sold, which therefore means a loss of potential profit, resulting in liquidation. Consequently, this is a point which sways towards social responsibility not being significant for success. On the other hand, HMV also takes pride in signing on new, upcoming artists in order to give them the opportunity to become successful. This is a positive point for social responsibility aiding in the success of a business as by signing new artists regularly, this will most likely attract a large amount of customers and help profitability. Although this was not the case for HMV overall, it is still a significant factor. In conclusion, I do believe that social responsibility is a very important part of a business success, but I do admit that this depends upon the nature of the business and which market they are operating in. HMV and social responsibility did not have a definite positive correlation and therefore spending £25 million on projects for it was perhaps a little too much, and a significant amount of that money could have be put towards helping the business avoid liquidation.