Introduction to Management

Assignment 2: Case Study

Name: Nguyen Hai Dang

Student ID: s3748841

Table of Contents
I. Introduction..............................................2
II. Case Analysis..........................................2
III. Applications...........................................3
IV. Solutions................................................4
V. Conclusion..............................................5
VI. References..............................................6

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I. Introduction
According to the case study, the Steel Company is a very profitable factory in a Southern
province in Vietnam. This company is a steel manufacturing corporation whose headquarter is in
Japan, and has paid an enormous amount of tax to the local government. In addition, a large
number of employments were possessed by local residents at 1600 jobs. Although the
government has received a large tax income, and plenty of occupations have been created by the
corporation, it is facing some serious problems because of causing major controversy in the local
area. In particular, the company was accused of having contaminated the air and the water source
of residential area and received strong pressures from its stakeholders including European and
Japanese major customers, foreign NGOs and shareholders. In this case study analysis, the major
problems that the Steel Company is facing will be analysed and some solutions will be listed in
order to handle those problems.

II. Case analysis:

Despite a large tax income generated and 1600 jobs created for the local people, the Steel
Company still has to faces some major problems:

II.1. The company was accused of having badly damaged the air and the water source of
the residential area by the publics:
Although M. Sumimoto - CEO of the Steel Company stated that “very concerned about local
residents wellbeing and the environment, and always strives to adopt the most environmentally-
friendly processes and best practices” and a thorough investigation by the environmental
administration of the province shown that minor water and air pollution had been released into
the environment, that result was contradict with those of investigations conducted by foreign
NGOs and local residents.

An investigation by local residents and environmentalists concluded that very harmful chemicals
had been discharged to the local river; and according to their water testing results, toxic
chemicals levels are 50 times higher than regional and international authorised standards.

Meanwhile, environmentalists from 2 foreign NGOs have anonymously announced to online

media sources that over 2000 households were directly exposed to toxic air wastes and the
consequences of intoxicated watercourses may affect many residents downstream. This may
have long-term impact to farmers downstream, who frequently pump water directly from the
river for irrigation.

II.2. The company had received pressured by its stakeholders especially shareholders. In
addition, several major customer have already expressed their concerns on the firm
Shareholders wanted local management of the factory to continue the implementation of the
work, since relocating the factory and pausing operations for ages could lead to significant loss
of revenue to the company and dangerously affect the relationships with its client, especially
major customers from Europe and Japan.
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According to internal information, local management of the factory has received strong pressure
from shareholders to pursue activities, as relocating the factory and pausing operations for many
months would cause major losses for the company and would dangerously affect customer
relationships.

Several major customers in Europe and Japan have already expressed their concerns on the
negative externalities of their supplier and this may affect the profit of the Steel Company since
“consumers are making purchases based on companies’ social and environmental reputation”
(Tai & Chuang 2014).

III. Applications
From the case analysis, the problems that the Steel Company has to face can be linked with two
theories related to management, which are Corporate Social Responsibility and Stakeholder
Theory.

III.1. Corporate Social Responsibility

Although the idea of Corporate Social Responsibility has been actively applied in modern
business practice (Cho, Furey & Mohr 2017) and many have tried to define CSR over the years
(Schwartz & Carroll 2014), “there is no consensus on a definition of the term “socially
responsible” (Makower 2011). It can be seen that Carroll’s four dimensions of Corporate Social
Responsibility has been widely applied to “explore corporate socially responsible activities”
(Cho, Furey & Mohr 2017). According to Carroll (1991), there are four components of Corporate
Social Responsibility, which are: Economic Responsibilities, Legal Responsibilities, Ethical
Responsibilities and Philanthropic Responsibilities. In the case study, the Steel Company takes
most of their attention to the most basic one - Economic Responsibilities as a firm which is
continuously developing and generating higher profit is regarded as a successful firm (Carroll
1991) and it is also receiving strong pressure to pursue activities so as to avoid a major loss for
the company since “it is important to maintain a high level of operating efficiency” (Carroll
1991). Moreover, the firm also goes against the Ethical Responsibilities, which “embodies the
full scope of norms, standards, values and expectations that reflect what consumers, employees,
shareholders and other stakeholders regard as fair, just and consistent with respect for protection
of stakeholders’ moral rights” (Carroll 2015). Though CEO M. Sumimoto stated that the firm
“always strives to adopt the most environmentally-friendly processes and best practices”, it had
still been accused of having contaminated the environment of the local area by foreign NGOs
and local residents. This had contradicted with the Corporate Social Responsibility, which
implied that a company “not only to maximize profits, but also to protect the environment and to
contribute to the well-being of society” (Hieu 2011).

III.2. Stakeholder Theory

The term "stakeholder theory" was first used in defining the objectives of the firm by Ansoff
(Roberts 1992). On the other hand, one of the most common and general definitions is provided
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by Freeman, “who describes stakeholders as those groups and individuals who can affect or be
affected” by the actions connected to value creation and trade” (Hörisch, Freeman & Schaltegger
2014). Stakeholders can be customers, employees, suppliers, shareholders, and the community
(Tantalo & Priem 2016) but governmental bodies, political groups, trade associations, trade
unions, communities, associated corporations, prospective employees, prospective customers,
and the public at large are also parties that can be regarded as stakeholders (Hieu 2011).
According to the case study, groups and individuals who can impact or be impacted by the acts
and decisions of the firm are the public at large – local residents, online media sources and
environmentalists; customers – some major clients overseas, shareholders and political group -
local authorities. On the one hand, the company can affect the public as there are 1600 jobs
raised by local dwellers and the incomes of a lot of local residents might be negatively affected
by the closure of the factory. Moreover, the living conditions and the environment of the
residential area will be badly damaged if the company is reluctant to apply cleaner methods to
produce steel. On the other hand, the company can be affected by the pressure from the
shareholders, the public at large, customers and the local authorities.

Based on the case study, shareholders send the message the local management to pursue
activities since pausing operations for many months may cause a major loss in the revenue.
Meanwhile, the firm has also suffered from a strong pressure from local residents and
environmentalists from 2 foreign NGOs as these two groups have accused the firm of having
caused severe air and water pollution in the area and this lead to the consequence that major
customers have concerned on the controversy of the firm. As a result, they will clearly examine
the steel production when choosing their suppliers and other firms might be selected. Therefore,
this may affect the profit of the Steel Company and the image of the firm will also be damaged..

IV. Solutions
According to the analysis and application, there are some possible solutions that can be applied
by the Steel Company and they can be divided into two different groups of solutions: Short-term
recommendations and Long-term recommendations.

IV.1. Short-term recommendations

First of all, the company needs to convince the media and local residents that the company will
improve the quality of environment in the local area in the long run and the firm will also
minimise the toxic chemicals levels in the area. Moreover, the Steel Company needs to inform its
shareholders and customers about the current differences between Vietnamese authorised
standards and regional, international authorised standards. Meanwhile, the firm should promise
that they will manage to minimise the level of toxic chemicals so that it can meet the
requirements of regional and international authorised standard. Secondly, all of procedures in
manufacturing steel should be checked up clearly by the Steel Company so that the company can
identify the causes of the contaminated waste released to the area and the possibilities to prevent

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the local area from toxic chemicals and waste from the factory. Moreover, the firm has to
educate and provide training to all employees and consider offering staff incentives for helping
to conserve and improve efficiency (Dubai Electricity & Water Authority n.d. p. 10).Some other
solutions can also be applied by the firm. First of all, tree plantation can be done by the company
as trees play an important role in “purifying the air, as natural resources, maintaining the
ecological balance” (Shanmugam 2013). There is a high percentage of the study units rate this
method as “highly effective‟, which is 84% (Shanmugam 2013). Moreover, recycling pollutants
or waste is also an effective way since it is “the key to providing a livable environment for the
future” (Shanmugam 2013) and it provides a factory with three benefits: “reduce the demand
upon new resources; cut down on transport and production energy costs and use waste which
would otherwise be lost to landfill sites” (Tam & Tam 2006).

IV.2. Long-term recommendations

The R&D components of the firm should research, apply the system to control the pollution
index and improve the machinery, equipment components and find a cleaner method to produce
steel. In particular, the firm can equip new technology and production lines which are more
environment-friendly. In particular, direct reduction of iron can reduce the amount of CO2
emitted to the air, “because coke is substituted with natural gas” (Serrenho et al. 2016). In
particular, this is “a process for the direct reduction of metal oxides containing iron to obtain a
direct reduced iron” and “heavy hydrocarbon oil is atomized with top gas recycle” (Bueno C. et
al. 1992).

V. Conclusion
In conclusion, this report shows the problems that the Steel Company has to face and point out
the theories that the firm has applied. In addition, this report also gives some recommendations
which help the company to solve the problems, satisfy the publics and continue operating in
Vietnam. In general, the CEO of the Steel Company has to identify the major problems of the
firm then find some solutions which can help the firm to become more profitable while it can
also witness a stable develop, meet the regional and international environmental requirements
and meet the expectations of the publics and local people.

VI. References

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Carroll, AB 2015, 'Corporate social responsibility', Organizational dynamics, vol. 44, no. 2, pp.
87-96., viewed 7 December 2018,
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_Responsibility/links/59db781c0f7e9b2f587ff0d4/Corporate-Social-Responsibility.pdf>

Cho, M, Furey, LD & Mohr, T 2017, 'Communicating corporate social responsibility on social
media: Strategies, stakeholders, and public engagement on corporate Facebook', Business and
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Hieu, PD 2011, 'Corporate social responsibility: A study on awareness of managers and

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Hörisch, J, Freeman, RE & Schaltegger, S 2014, 'Applying stakeholder theory in sustainability

management: Links, similarities, dissimilarities, and a conceptual framework', Organization &
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Makower, J 2011, Beyond the bottom line: Putting social responsibility to work for your
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Roberts, RW 1992, 'Determinants of corporate social responsibility disclosure: An application of

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