According to Wikipedia, the free encyclopaedia

Milton Friedman takes a shareholder approach to social responsibility. This approach views shareholders as the economic engine of the organization and the only group to which the firm must be socially responsible. As such, the goal of the firm is to maximize profits and return a portion of those profits to shareholders as a reward for the risk they took in investing in the firm. He advocates that the shareholders can then decide for themselves what social initiatives to take part in rather than having their appointed executive, whom they appointed for business reasons, decide for them.

Friedman argued that a company should have no “social responsibility” to the public or society because its only concern is to increase profits for itself and for its shareholders and that the shareholders in their private capacity are the ones with the social responsibility. He wrote about this concept in his book Capitalism and Freedom. In it he states that when companies concern themselves with the community rather than focusing on profits, it leads to totalitarianism.

In the book, Friedman writes: “There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

The truth is that CSR-free businesses strive towards highest possible ROSF (return of shareholders’ funds). To do this they MUST focus on operational issues, ignore the implications and incidental costs of short-term returns over long terms position, and IF EMPOWERED, create win/lose relationships with trade partners (and even customers).

Friedman ignores two keys factors of the 8 P’s of Marketing – PEOPLE & POLITICS – the People who possess operational skills, don’t ‘get’ (or even understand) strategy. The politics of a Board of Management team that exercises OPERATIONAL strengths cannot embrace (or even grasp) STRATEGIC concepts, ideas, and approaches.

So Coles & WW have now commenced on their paths to self-destruction… two giants that DESERVE immortality, undermining their future. One is like a care with great power delivery to the rear wheels; just missing one of its front wheels… steering isn’t very good. The other is missing a rear wheel, it can only stay stable turning in a circular fashion on itself, in every widening and less efficient circles.

(If you doubt this at all, talk to Geoff Kennet, try and find a mission statement for Westfarmers or Coles, ask WW why they rejected a promotion to generate $400M p.a. in EBIT 8 years ago, because they were focused on ‘making’ Everyday rewards work, but now hang their hopes on squeezing more from suppliers, while taking more shelf space for private labels – the polices used by their abnormally high English executive team, who are applying the OPERATIONAL methods that have now damaged Sainsbury & Tesco.)

Both are building businesses for Aldi, and now Lidi… in the false race to short term ROSF while damning long term ROSF permanently. (See “Are WW & Coles sly Agents of Aldi”).

Mind you FMCG companies fell into the Corporate Arrogance trap decades ago (some are still there) and, had THEY had strategic insight and nous, they’d have control of the situation now, but alas… short term “Friedman” thinking undermined THEIR future, as well!

But CSR (Corporate Social Responsibility), or the lack of it, is NOT the issue, but only a symptom.

The REAL issue is strategic thinking vs operational thinking…. Strategic Management as opposed to operational Management… Panning for winning the war, not raining to win a single fight in a stand-alone battle.

Adopting the Hierarchies of Marketing, and embracing the need to create and maintain balance of power between OPERATIONAL and STRATEGIC thinking – mindful of the shareholder vs, stakeholder debate – is the reality that escaped Milton Friedman.

[Readers are invited to download my free e-book – “The Four Faces of Marketing – The Missing Link Between Marketing & Management” at http://j.mp/ALLmktg ]

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Too many marketing strategists believe their own BS! Pricing Strategy, Communications strategy, Online Strategy, branding strategy etc. isn’t genius… it is obvious, common sense that evolves out of the fact that perfect knowledge leads to perfect decisions.

I’ve had an extraordinary number of commercial successes in my career, record-breaking ones… NOT because I am one bit smarter, more intuitive, have more street cunning or am unusually lucky, but because I persevered long enough in learning my trade to be able to recognise the one, inalienable truth of business: If you genuinely know what the customer wants and can give it to them, they WILL buy!

The absolute secret, of all extraordinary business success, is knowing the customer.

Is it REALLY that simple?

Whether it is the individual or the segment – yes!

There are so many examples of this across the internet, in each of our careers, recorded, diagnosed, studied and reported by academics around the world, and demonstrable in every case study and high return annual report… so why do we complicate and confuse, cloud and cover this fact?

Think about it…

Pricing Strategy: In particular Value-Based pricing? Know the customer!

Communications strategy: In particular advertising & positioning? Know the customer!

Retailing: In particular store layout, ranging, staffing, location? Know the customer!

Manufacturing: Everything from branding, sizing, packaging, new product development, distribution strategy? Know the customer!

Why is the business community in denial?

When FMCG hummed a merry tune, the industry habitually committed to segmentation studies annually… but as operational executives with corporate political skills rose in a culture of corporate arrogance, costs were cut to carve out larger profits, ignorant to the fact they were really blunting competitive advantage and digesting brand equity.

In adequately training marketing personnel, briefing and sustaining market research of questionable quality, undermined the payback from segmentation studies and other market research.

Over the years, the team at my firm has written strategy for transport, banks, FMCG, commodities, utilities, government that has generated record-breaking results, unimagined sales growth, and extraordinary profits… why? Simply better understanding of the customer – EVERY time!

During my Feb 2012 presentation at the FMCG summit at MGSM in Sydney, I asked the group of about 60, “When did you do your last segmentation study?”.

I was appalled to find only 1 company had undertaken a segmentation study in the past seven years… SEVEN YEARS!!!!!!!! (Less frequent than 3 years is considered intolerable!)

There was once a time when FMCG marketers were recognised as leaders, gurus even, in the execution of marketing science: An FMCG marketer was the herald of super-normal profits, profit maximising decision making, and management leadership.

When segmentation is the most powerful tool in the arsenal of a marketer’s weaponry, and the professional standard slips to such a low, no wonder FMCG companies are crying poor!

But, are their marketing executives to blame? I wonder….

Could it be the declining quality of market research services in Australia has so declined as to undermine the anticipated value, insight or trend identification?

Could it be that senior management is so diluted in marketing training that those who control the purse strings – ignorant of how much they don’t know – simply are not allowing marketing departments sufficient budget for segmentation studies – denying resultant sustainable competitive advantage and brand equity investment?

Could it be that the pure-academic standards in the tertiary education of marketers has simply eroded the passing down of commercially important training and skills to the point where marketing graduates simply are not empowered with proper education in marketing anymore?

I sit, jaw agog, sometimes at the wasteful and poor marketing communications efforts in TV advertising spend and creative, at outdoor ads, online ads and other marketing communications execution that just denies justification, and I wonder… but with the revelation of such poor strategic marketing management helps me understand the woes of the industry and from where they come.