DR. YANGA’S COLLEGES, INC.

COLLEGE OF BUSINESS ADMINISTRATION

TOMS’ One-for-One Business Model: Is it Sustainable for the Future?

In fulfilment of the subject requirements in

Submitted to
MS. GENA D.G. CRISOLOGO

Submitted by:
CASTRO, ARIELLE ROSE M.
COLCOL, DONNA MAE D.C.
DELA CRUZ, JULIAN PAUL YEOJ M.
GAMAZON, KATHLEEN S.
NICOLAS, FINE FAITH R.
RAYMUNDO, JHIEL J.
TANDIAMA, ROCELLE S.
BSBA 1A – P.A.C.E.D.

Bachelor of Science in Business Administration

TOMS, a company known for its socially-conscious approach to selling shoes and accessories,

was established by Blake Mycoskie in 2005. Since its inception, TOMS has not only gained recognition

in the fashion industry but has also become a trailblazer with its unique business model. Delving into the

story of TOMS, tracing its growth from a small startup to a globally acknowledged brand. It sheds light

on the significant challenges that TOMS currently grapples with and encapsulating the suggested

solutions to these challenges and offers an overall evaluation of the case.

TOMS' "one-for-one" model has attracted criticism on several fronts. Firstly, critics contend that

this philanthropic approach may inadvertently foster dependency on aid in impoverished regions, rather

than fostering self-sufficiency through education, job opportunities, and trade. Additionally, TOMS'

manufacturing practices have been scrutinized for producing products in countries with known human

rights violations, resulting in ethical concerns regarding its supply chain. Furthermore, the model's well-

intentioned product donations may unintentionally impede local entrepreneurship and displace local

businesses, potentially affecting job creation in these communities.

While TOMS has experienced remarkable success with its "one-for-one" business model, it

grapples with criticisms related to dependency, ethical manufacturing practices, and the effects on local

economies. To ensure the sustainability of its mission, TOMS must address these concerns while

remaining adaptable to the evolving landscape of social entrepreneurship.

II. Background

TOMS, a renowned footwear and lifestyle brand, was founded in 2005 by Blake Mycoskie, a

serial entrepreneur with a penchant for social impact. The inception of TOMS was inspired during

Mycoskie's travels to Argentina, where he observed children in impoverished villages lacking proper

footwear, leading to various foot-related health issues. Struck by this poignant reality, Mycoskie sought to

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make a meaningful difference. The company's initial focus was on alpargata shoes, an inexpensive,

traditional Argentine shoe. It was during these formative years that the concept of the "one-for-one"

model was born – for every pair of shoes sold, TOMS pledged to donate a pair to a child in need.

TOMS' innovative approach to social entrepreneurship aimed to provide sustainable support

through commerce rather than charity. With this vision, Mycoskie returned to the United States and

established TOMS in Santa Monica, California. TOMS' first breakthrough came when an article in the

Los Angeles Times garnered $88,000 in orders over a single weekend, underscoring the potential of this

unique model. Since then, TOMS has expanded far beyond its initial offering, diversifying its product

range to include eyewear, coffee, and bags.

As of early 2017, TOMS had distributed over 60 million pairs of shoes to children in 75

countries, restored sight for 400,000 individuals in 13 countries, and provided more than 335,000 weeks'

worth of safe water in six countries. The one-for-one model, which was initially exclusive to shoes, was

extended to other product lines, demonstrating the company's evolution towards a broader range of

philanthropic endeavors. TOMS' mission transcends mere philanthropy, encompassing a deep

commitment to making a tangible impact on various global challenges while simultaneously maintaining

a viable and profitable business model.

However, this unique approach has not been without its critics and challenges. TOMS' one-for-

one model has faced scrutiny for potentially perpetuating dependency on aid in underprivileged regions,

rather than promoting self-sufficiency through education, job creation, and trade. Furthermore, ethical

concerns emerged regarding the manufacturing practices of TOMS products in countries known for

human rights violations. Lastly, questions have been raised about whether TOMS' product donations may

hinder local entrepreneurship and displace local businesses, thereby impacting job creation in these

communities. Amid these issues, TOMS has undergone significant growth, continuing to make a

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substantial impact through its products and initiatives. The sustainability of this distinctive business

model remains a subject of discussion and scrutiny.

III. Evaluation

Dependency on Aid

TOMS' one-for-one model, despite its philanthropic intentions, has received criticism for creating

dependency on aid in impoverished regions. Critics argue that this approach may perpetuate reliance on

external assistance rather than empowering communities through sustainable solutions like education, job

creation, and trade. This criticism is well-founded and is supported by the theory of sustainable

development. Sustainable development emphasizes fostering self-sufficiency and self-reliance within

communities, which is not achieved when aid perpetuates dependency. As suggested by Min, Kim, and

Kim (2012), aid should focus on building local capacity, fostering entrepreneurship, and facilitating self-

reliance, rather than creating dependency. While TOMS does provide a short-term solution to immediate

needs, it falls short in addressing the root causes of poverty, reflecting an aspect of the case that is not

working effectively.

Manufacturing Practices

Another key point of criticism is TOMS' manufacturing practices in countries with documented

human rights violations. This raises ethical concerns and threatens the integrity of TOMS' mission. The

case does not fully address the complexities and nuances of international business ethics. The case could

benefit from a comprehensive evaluation of TOMS' manufacturing practices and how they align with

principles from various ethical theories, such as deontology or utilitarianism. Analyzing these practices in

light of ethical theories would reveal that TOMS may need to be more diligent in ensuring ethical

standards are met in all facets of their global supply chain. As illustrated by Arnold and Hartman (2003),

ethical theories like deontology emphasize moral duties and obligations, while utilitarianism underscores

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the greatest good for the greatest number. Ensuring ethical manufacturing practices align with these

principles is essential.

Cultural and Economic Factors

The argument that TOMS' donations of free products could hinder local entrepreneurship and

potentially displace local businesses is another point that deserves attention. While TOMS' intentions are

commendable, a deeper evaluation of their impact on local economies is necessary. One relevant theory to

consider is economic development theories, such as the "crowding-out" effect. According to Acemoglu

and Robinson (2012), an influx of free goods can indeed harm local businesses and economic growth,

particularly in regions with fragile economies. The case study should have delved deeper into this aspect,

acknowledging that TOMS' approach may have unintended consequences on local entrepreneurship and

job creation.

TOMS highlights that while the one-for-one model has achieved remarkable philanthropic

outcomes, it is not without significant issues. The success of this case is rooted in its alignment with

theories and research related to sustainable development, international business ethics, and economic

development, by doing so, it becomes evident that the model has some shortcomings that need to be

addressed to make it a more effective and sustainable practice. However, the company must continuously

innovate and adapt to remain competitive in the evolving needs of its customers. This will require

ongoing research and development to stay ahead in the ever-changing industry.

IV. Proposed Solution/Changes

To address the key problems and issues identified in the TOMS case study, several specific and

realistic solutions or changes are needed to enhance the effectiveness and sustainability of TOMS' one-

for-one model.

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Transition from "One-for-One" to "Aid for Empowerment" Model

TOMS should transition from the one-for-one model to an "Aid for Empowerment" model. Under

this revised approach, TOMS would allocate a portion of its proceeds to sustainable development projects

in the regions it serves. This could include funding education, vocational training, and microfinance

initiatives. By adopting this model, TOMS can move beyond providing temporary aid and start

addressing the root causes of poverty, aligning with the principles of sustainable development. This

transition could help empower local communities to become self-reliant and break the cycle of

dependency on external assistance. As noted by Banerjee and Duflo (2019), interventions that empower

individuals and communities through education and economic opportunities lead to sustainable poverty

reduction.

Enhance Ethical Sourcing and Transparency

TOMS should strengthen its commitment to ethical manufacturing practices. This entails

conducting thorough due diligence on the working conditions in its partner manufacturing facilities and

ensuring they meet international labor standards. Transparency is key in this process, and TOMS should

openly communicate its efforts to adhere to ethical sourcing practices. This change is essential as it aligns

with the ethical theories of deontology and utilitarianism, which emphasize moral duties and maximizing

overall well-being. Upholding ethical manufacturing practices is a moral duty and contributes to the

greater good.

Support Local Businesses and Entrepreneurship

To mitigate the potential negative impact on local entrepreneurship, TOMS should work

collaboratively with local businesses and entrepreneurs. Instead of solely providing free products, TOMS

can source a portion of its products from local producers in the regions it serves. This approach would

stimulate the local economy, create jobs, and support entrepreneurship. TOMS can partner with local

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artisans and entrepreneurs to incorporate their products into TOMS' offerings. This change aligns with the

concept of inclusive business models, as discussed by London and Hart (2004), which promote

collaboration between corporations and local enterprises to create shared value and sustainable

development.

By implementing these changes, TOMS can evolve its model to be more sustainable and

responsive to the needs of the communities it aims to serve. This proposed solution incorporates elements

of various theories and principles, including sustainable development, ethical sourcing, and inclusive

business practices, which provide a strong theoretical foundation for the recommended changes.

V. Recommendation

Table 1. Recommendations for Embrace Infant Warmer

Strategy Specific Actions People Responsible

Enhance the Sustainability of TOMS should collaborate TOMS' executive team and

One-for-One Model with experts in international corporate social

development to design responsibility experts.

programs that promote Collaboration with local

education, job creation, and organizations, academic

entrepreneurship in the institutions, and development

regions where they operate. experts will be essential.

This will help address the

criticism of fostering

dependency on aid.

Additionally, they should

invest in assessing the long-

term impact of their

donations, tracking the

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 educational and economic

progress of recipients.

Ethical Supply Chain Continue to uphold stringent TOMS' supply chain

Management standards for labor practices management team, in

in all manufacturing collaboration with experts in

locations. Conduct regular ethical supply chain

audits and engage in practices.

partnerships with

organizations that specialize

in ethical supply chain

management. Publish

transparent reports on their

efforts and results in ensuring

fair labor practices.

Local Manufacturing and Job Expand the practice of local TOMS' operations and supply

Creation manufacturing for their chain teams, in coordination

donated products, where with local business

feasible. This can be achieved development agencies and

through partnerships with NGOs.

local businesses and

entrepreneurs, helping to

bolster local economies.

Collaborate with local

chambers of commerce and

business development

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 organizations.

Additional recommendations also include, maintain and expand their community engagement

initiatives like campus clubs and events such as One Day Without Shoes. Encouraging active

participation by employees, customers, volunteers, and campus club members will foster a robust culture

of social responsibility. Additionally, leveraging social media to share real stories of the impact of their

programs can inspire and engage their community. To ensure ongoing progress, TOMS should establish a

dedicated team to actively seek feedback from critics and stakeholders, addressing concerns proactively.

Furthermore, they should invest in research and monitoring to assess the long-term effectiveness of their

initiatives. Close collaboration with corporate social responsibility (CSR) experts and development

researchers will be essential for data-driven improvements. These strategies fall under the purview of

TOMS' community engagement and marketing teams, with active involvement and support from

dedicated employees, volunteers, and campus club members, as well as a dedicated team collaborating

with CSR and development research experts for feedback collection and analysis.

By implementing these recommendations, TOMS can strengthen its one-for-one model's

effectiveness, enhance ethical practices, promote local entrepreneurship and self-sufficiency, and continue

to build a passionate and involved community of supporters. This approach aligns with theories on

corporate social responsibility, ethical business practices, and sustainable international development.

Through these strategies, TOMS can navigate the challenges it faces while maintaining its commitment to

positive social impact.

VI. Conclusion

In conclusion, TOMS, a pioneering socially-conscious brand founded by Blake Mycoskie in

2005, has achieved significant recognition and growth, but it has not been without its challenges. The

"one-for-one" model that lies at the core of TOMS' mission has garnered criticism for fostering

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dependency on aid, ethical concerns regarding manufacturing practices, and the unintended consequences

on local entrepreneurship and job creation. To ensure the sustainability of its mission, TOMS must adapt

its model to address these issues while staying attuned to the evolving landscape of social

entrepreneurship.

The critique of dependency on aid is grounded in the theory of sustainable development,

emphasizing the need to foster self-sufficiency. TOMS' current model falls short of this by not addressing

the root causes of poverty, showcasing an area where it can improve. Ethical concerns about

manufacturing practices can be analyzed through ethical theories like deontology and utilitarianism,

highlighting the need for TOMS to maintain ethical standards across its supply chain. Additionally, the

impact on local entrepreneurship and economies calls for an evaluation of economic development

theories, such as the "crowding-out" effect. A deeper exploration of these aspects is warranted.

Proposed solutions for TOMS include transitioning to an "Aid for Empowerment" model,

reinforcing ethical sourcing, and actively supporting local businesses and entrepreneurship. These

recommendations are rooted in various theories, such as sustainable development, ethical sourcing, and

inclusive business practices, providing a strong theoretical foundation for the suggested changes.

The transition to an "Aid for Empowerment" model, which focuses on addressing the root causes

of poverty through sustainable development, is in line with the theories advocating for self-sufficiency.

Ethical sourcing practices align with ethical theories, emphasizing moral duties and the greater good.

Lastly, supporting local businesses and entrepreneurship is a practical application of inclusive business

models that create shared value.

To implement these changes effectively, TOMS needs to collaborate with experts in international

development, engage in ethical supply chain management, and partner with local businesses and

development agencies. This strategic shift will not only address existing criticisms but also ensure that

TOMS continues to fulfill its mission and adapt to the evolving needs of its customers.

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 In addition to these changes, maintaining and expanding community engagement initiatives and

establishing a dedicated team for feedback collection and data-driven improvements are essential. TOMS

can achieve these through the involvement of community engagement and marketing teams, dedicated

employees, volunteers, and campus club members.

By embracing these recommendations, TOMS can enhance the effectiveness of its one-for-one

model, promote ethical practices, stimulate local entrepreneurship, and build a more vibrant and involved

community of supporters. These strategies align with theories related to corporate social responsibility,

ethical business practices, and sustainable international development, reinforcing TOMS' commitment to

positive social impact.

References:

Min, B., Kim, D. H., & Kim, J. (2012). Towards the next paradigm: The sustainable development goals.
In Sustainability science (pp. 59-85). Springer.

Arnold, D. G., & Hartman, L. P. (2003). Moral imagination and the future of sweatshops. Business Ethics
Quarterly, 13(2), 221-242.

Acemoglu, D., & Robinson, J. A. (2012). Why nations fail: The origins of power, prosperity, and poverty.
Crown Publishing.

Banerjee, A., & Duflo, E. (2019). Good Economics for Hard Times. PublicAffairs.

London, T., & Hart, S. L. (2004). Reinventing strategies for emerging markets: Beyond the transnational
model. Journal of International Business Studies, 35(5), 350-370.

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