04/06/2014 International Business Policy Àlex Solà Santiso

Seminar 8 - Fairphone

1) Is Fairphone really a different type of business? Why?

Yes, Fairphone is a different business model since they are not just maximizing profits, but also taking into account the impact that their production process has in the people and the environment involved. In addition, Fairphone is completely transparent about the production process, the price of each component etc

2) Why Apple and Samsung do not use the business model?

They are not applying this business model because they belong to millions of shareholders with diversified portfolios focused exclusively on maximizing short term profits in the short term. The only way for this type of companies to change the way their business model would be for the major shareholders of the company to reconsider their priorities and be more conscious about the ethical issues.

Would it be possible to just raise prices in order to be able to have the same profits and an ethical production process? I don’t think so. If only one company’s shareholders changed their priorities, in such a competitive market as the phones one, the other companies just would start a price war that they probably would end up wining. So the only way to be ethical is to reduce profits.

The next question is, there is scope for margin reduction in this extremely competitive market? The answer is yes (if you want). On the first quarter of 2014, Apple’s profit Margin was above 20%, about 13% for Samsung, so the shareholders have the possibility to keep making profits, and being ethical.

3) Can you think of any other items which could be produced in the same spirit? Which already are?

I think that being fair an ethical is a possibility to every business model, but talking about production goods, textile industry is a good example.

Many firms are selling their textile products produced n pour countries with inhuman conditions for their workers and a very contaminating profit. Undoubtedly there is a huge scope for these big firms to restructure their production process and their business model, but, again, the power in not in the managers but in the major shareholders hands.