Minicase: What is the Social Responsibility of Business? Pricing Blood
You are the CEO of a publicly held company in the business of selling human blood. When you go to sleep tonight, your price for selling blood to Central American countries is $50/unit.
In the middle of the night. you get a phone call from the distraught President of a developing Central American nation. where there has been a devastating earthquake. Thousands of people desperately need blood. The President has tapped every other source. and you are the last hope.
Specifically. 100,000 people are at risk of dying. Each person needs one unit of blood to live. Unfortunately, the country is poor and has only $1 million to spend. Assume that debt financing would not be worth the paper it is written on, given the nation’s present disastrous economy.
Market studies show that future demand for blood will be based entirely upon three factors: (1) service—i.e., reliability and timeliness of shipments, (2) price, and (3) purity of blood. Being perceived as a nice person may make you feel good, but it won’t translate into improved long-term sales.
If you were to provide the country with 100,000 units of blood, it would leave you with sufficient inventories to meet local demand for blood.
You need to tell the President of the country how much you will charge per unit of blood. The following chart will help you analyze the situation:
Price Charged Lives Saved Financial Impact Vote Here $10 per unit 100,000/100,000 Short-term loss $25 per unit 40,000/100,000 Break-even $50 per unit 20,000/100,000 Usual good profit $100 per unit 10.000/100,000 Great profit What price will you charge?
How much did you recommend charging for the blood? Why? What does your decision say or suggest about your own personal philosophy about the question, ‘What is the social responsibility of business’?”