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Case Analysis: Product red

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Case Analysis of Product Red A (Individual)

This assignment builds on the discussion of the case:
Harvard Business School. 2009. (Product) Red (A). HBS Case No. 9-509-013. Boston, MA: Harvard Business School Publishing.
This paper outlined the issues raised by using consumer power to promote socially and environmentally responsible business practice. What were the program’s goals? How was this program intended to achieve those goals? What does your knowledge of the ethical consumer movement suggest about the strengths and weaknesses of the Product Red strategy? What could be done to improve the strategy?

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Case Analysis: Product red

  1. 1. Case Analysis: (PRODUCT) REDShirley LiMGMT 566 Sustainability & International Corporate CitizenshipJune 2, 2013
  2. 2. Li-2ContentsINTRODUCTION ............................................................................................................................3GOALS & FUNCTIONALITY........................................................................................................3STRENGTH......................................................................................................................................3WEAKNESS.....................................................................................................................................4SUGGESTIONS:..............................................................................................................................5CONCLUSION:................................................................................................................................6BIBLIOGRAPHY.............................................................................................................................7
  3. 3. Li-3INTRODUCTION(Product) Red is a campaign claims to offer an innovative approach to raising funds forAIDS drugs in Africa(HBS 2009). Since its launch in 2006, supporters call itaninnovative and successful business model because it achieved significant economicbenefitin a very short period of time, while critics challenge the motivation of itspartner companies andits credibility because the limits of the business modelitself.This paper will describe thegoals and strategy of Product Red, which will be followedby an analysis of weighing the strength and weaknessbased on the ethical consumerismtrend and market governance mechanism. Finally suggestions for improvementswill begiven.GOALS & FUNCTIONALITYThe concept and purpose of Product Red is to engage private sector for the purpose ofgetting funds to help eliminate deadly disease AIDS in Africa. The way it functions isthat a brand licensed to companies such as existing partners like Nike, Apple, Converse,Gap, Emporio Armani and other global giants. Each partner companycreates a productwith the Product logo, in returna percentage of the profit gained by each partner isdonated to the Global Fund, a UN organization to fight AIDS, Tuberculosis andMalaria.100% of the funds generated by (RED) partners and events go to Global Fundwithout passing through Product Red organization and is only being used to providemedical care and support services for people affected byAIDS in Africa. No overhead istaken by either (RED) or the Global Fund. Giving more contribution than nationalgovernment or non government organizations, (RED)has become the largest privatesector donor to the Global Fund.STRENGTHBecause of the governmental inefficiencies in policy making and fund allocating,corporation especially global companies begin to function as politicalinstitutions.(Thexton 2013). Shareholders like customers have extended their interest tomarket and expect companies to perform political accountability.Instead of being
  4. 4. Li-4passive, consumers are actively and willingly to “vote with theirdollars” which issometimes stated as “buycotts”(as opposed to boycotts), so as to make a difference for abetter society.(Youde 2009)(RED)captured the growing trend of ethicalconsumerism.Partnership companies of (RED) voluntarily become the facilitator andprotector of citizen rights which well addressed the market request of sociallyresponsible segments.The essence of (RED) is market driven.Compare to the old charity model, partnercompanies don’t see (RED) as grantee but an equal business partner because the marketresponse generated financial profit from the association.This becomes the fundamentalforce for the partner companiesto devote their resources designing and producing (RED)products, promoting the concept to the society and continuously generate more benefit,which will simultaneously benefit the people in needs.(RED) doesn’t give pressure tocustomers either. Many ethical goods are more expensive than non-ethical equivalents,but (RED) product is different becauseconsumers don’t have to pay more than theoriginal price. (RED) is just giving them an ethical choice that through theirconsumption they can contribute goodness to the society without paying additionalmoney. This targeted the Drifter and Conventional group who are just minding theirown businesses.WEAKNESSMarket governance mechanism has been exploring a way that all the stakeholders likeconsumers, investor and civil organizationsget enough information about how acompany’s perform CSR. That’s when a certification comes into picture. (RED) doesnot regulatecompanies to meet certain standards in terms of sustainability and socialwellness. For example its partner company Apple’s supplier Foxconn has a poorreputation of labor standardin China but (RED) could not go as far to question orcontrol this. The same thing happens to GAP that it had history in using sweatshops inAfrica(McDougall 2007). At the same time these companies are using (RED) toshowcase it social responsibility which is a “red washing” similar to “green washing” toget good reputation in market.
  5. 5. Li-5Another weakness is lack of transparency. Market research shows that $100 million hasbeen invested in marketing and advertising but only $18 million is raised for TheGlobal Fund(Product Red 2013). From the perspective of organization, basically all theactivities should be profit driven, (RED) might turn to be just a part of its marketingstrategy rather than real corporate social responsibilitybecause (RED) itself benefitpartner companies much more than the benefit goes to charity causes.This also invitedthe criticism for its inefficiency and doubt for its credibility. People argue that insteadof buying (RED) product, customers should donate directly to the people who needhelp.More people argue that market based approach is vulnerable and actually does not havesustainability because customers usually do not have loyalty to it.Continuously helpingpeople in Africa need sustainable funds however buying (RED) is one time purchaseand on random. The uncertainty to the future might put the stakeholders in Africa atrisk.SUGGESTIONS:In order to overcome its lack of regulation to its partner companies without slowingdown its expansion and development speed, Product Red should continue pursuing newpartner companies but should also increase its capacity of screening, so as to choosecompanies with both good performance and CSR history. This is necessary becausecustomer trust is a valuable and vulnerable asset for it sustainable development.To tackle the problem of non transparency in partner companies, first Product Redshould get more access to partner company’s financial performance and report, to makesure the promised percentage of profit actuallywent to Global Fund; second it need toopen a direct donation channel for people who want to help the sufferers of AIDS inAfrica so as to eliminate the “middle cost” happens through partner companies.In order to keep its sustainability, (RED) needs to perfect its current operation model.One approach is to choose good partnerswho can make profitable and attractive stuff toattract customers, secondpossible approach is to explore service sectors where daily
  6. 6. Li-6consumption occurs. New technology could also be considered for instance open an online (RED) store as a window to increase its availability and visibility.(HBS 2009)CONCLUSION:From the above discussion, we can say that Product Red as an innovative and effectiveapproachprovidespositive efforts and assistance to international problem,and is a goodsupplement to government and traditional charity.However, too much rely on marketmechanism comes along with uncertainty and lack of regulation which mightundermine its future development. Critical analysis and mechanism improvement isnecessary forProduct Red going forward.
  7. 7. Li-7BIBLIOGRAPHYHBS. "(Product)Red(A)." HBS Case No., 2009: 9-509-013.McDougall, Dan. "Child sweatshop shame threatens Gaps ethical image." 2007.http://www.guardian.co.uk/business/2007/oct/28/ethicalbusiness.india (accessed June2, 2013)."Product Red." 2013. http://en.wikipedia.org/wiki/Product_Red (accessed June 2,2013).Thexton, Todd. "MGMT566 Lecture." 2013.Youde, Jeremy. "Product (RED) and Private Funding for Public Goods." 2009.http://www.tandfonline.com/doi/pdf/10.1080/07393140902872369 (accessed June 2,2013).

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