Concept of Corporate Social Responsibility - Coursework Example

CORPORATE SOCIAL RESPONSIBILITY AND COMPETITIVE ADVANTAGE Name Course Tutor Date Introduction Corporate Social Responsibility (CSR) has for a long time since the eighties been an important topic of discussion and debate in business management both at the scholarly and professional domain levels. There are various views on CSR such as classical and socioeconomic views that champion against and for CSR respectively (Ochoti et al., 2013). CSR plays an integral role in organizational development as has been shown by most studies. Organizations that have embraced CSR have had a myriad of benefits including customer and employee loyalty, positive brand perceptions, client trust, financial success and positive public image. Most importantly CSR has been seen to increase customer and employee satisfaction thus building competitive advantage (Ochoti et al., 2013). Most multinationals have expanded as a result of globalization making it essential for them to embrace CSR practices in order to benefit the society while at the same time get return on investments made (Nan & Heo, 2007). The society where resources are gotten from have benefited as a result of sound CSR measures that not only look at the environmental well being but also the social well being. When talking about CSR there are many stakeholders that are involved. Most authors have linked CSR to the success of most organizations (Nan & Heo, 2007). The aim of this paper is to explore the concept of CSR making clear the link there is between it and the competitive advantage of the firm. The essay will expound on the concept of CSR and give two case examples where CSR have either failed or been attributed for the success of an organization. Concept of Corporate Social Responsibility Most authors have long agreed that the succinct definition of CSR is not in place being that the concept is multifaceted and different angle of views that one might approach it (Ochoti et al., 2013). CSR can be defined as a set of duties and legal as well as ethical commitments an organization gets into with the stakeholders, arising from the impacts of the operations and activities of the organization that have social, economical and environmental impacts as well as human rights concerns (Brammer et al., 2012). It is common for most people to confuse CSR to ethics; however, CSR mainly depends on the social demands of the stakeholders (Rupp, 2011). CSR could also be defined as the legal, economic, ethical and discretionary expectations of the society of an organization at a given point in time (Jamali & Sidani, 2008). With this approach, the organizations have to be moral, ethical and philanthropic in addition to the normal responsibilities for such organizations to comply with the law and get return on investments (Jamali & Sidani, 2008). The last best definition of CSR could be the commitment of an organization to improve the well-being of the community through a range of discretionary business practices and contributions of corporate resources (Carroll & Shabana, 2010). The key term here is discretionary as it reflects the voluntary commitment of the organization in choosing and implementing practices as well as making contributions. Through CSR businesses are able to go beyond compliance and thus engaging in actions meant to create some social good, beyond the normal interests of the firm as well as what the law demands of such businesses (Brammer et al., 2012). All activities that fall under the CSR domain fall in three broad categories, which include ecological balance, social progress and economic growth. From a resource based perspective, CSR is very important for business organizations for a variety of reasons that will be addressed later in this paper. There are very many dimensions of corporate Social Responsibility. First off, adopting CSR would mean that there is the target of economic value which assures an organization a good return on investments for both the owners and the shareholders (Ochoti et al., 2013). Through this dimension, CSR practices are able to create jobs, fair pay and make developments of the business for economic gain (Rupp, 2011). The second dimension of CSR is that it confers legal responsibility (Brammer et al., 2012). This means that organizations are able to obey rules guiding the business as well as the legislations set by the government. The third dimension of CSR is that is portrays an ethical face of the organization making it be moral and uphold fair practices in its undertakings (Ochoti et al., 2013). This responsibility is more than rooted in the humanitarian foundations (Carroll & Shabana, 2010). The other is the voluntary dimension where the firm has to provide a conglomerate of discretionary behaviors through performance of activities that are community wellness oriented (Rupp, 2011). With relevance to strategic HR literature, there are also some more CSR dimensions that have evolved and are regarded as internal dimensions of corporate social responsibility (Kitzmueller & Shimshack, 2012). The first one is non-discrimination and equal employment opportunities that is more concerned with the organizational principles that ensures fair treatment of all employees no matter their perceived backgrounds (Brammer et al., 2012). This has been the source of diversity and talent promotion in most organizations. The other dimension defines the process of staff development and training to meet organizational needs. The other internal dimension protection of human rights of the employees through offering safe and suitable working environments. This also entails provision of protective gear where need be. The last dimension of CSR is management of environmental impacts that are brought about by resource utilization processes (Nan & Heo, 2007). This ensures mitigation of environmental damaging through environmental friendly initiatives (Servaes & Tamayo, 2013). There are many advantages that CSR confers to businesses that initiate and implement it in their organizational practices. First off, it provides the business organization with the favor of the society thus lowering the risk that is usually encountered in all business operations (Nan & Heo, 2007). Secondly, it forms the image of the corporation thus making the reputation of such organizations good in the public domain (Saeed & Arshad, 2012). CSR also stimulates the innovation and creative framework within organizations. Fourthly, it also aids in finding alternative ways of extracting resources effectively thus the ability of organizations to find sponsors. CSR also broadens the market making good situations for boosting sales. CSR also aids in attracting and retaining of motivated employees thus the performance of the organization. CSR has also been shown to have positive influence on organizational culture (Ochoti et al., 2013). Lastly, CSR also lowers the costs of production thus stimulating production that increases the income of organizations and enhances the efficiency of work (Torres et al., 2012). For CSR to work effectively there should be its communication to the public so as to develop strong relationships with the public, achieve legitimacy, and confer positive attitudes among the stakeholders (Kitzmueller & Shimshack, 2012). This means that the success of CSR activities within the society depend on the communication of CSR objectives to the community and the stakeholders so as to avoid corporate accountability that renders the practice of CSR invalid in some instances (Saeed & Arshad, 2012). CSR could be based on three levels including, the employee based level CSR, corporate philanthropy and Customer oriented or centered CSR (Dhaliwal et al., 2011). As shall be seen later, each of the levels has their own contribution to competitive advantage of a firm. CSR ensures that the overall productivity processes of the organization that results in direct or indirect degradation of the environment are compensated for by the organization. CSR is often considered in the globalization arena and therefore when discussing the issue, of reference are the private and public multinational corporations (Dhaliwal et al., 2011). This means that different branches of the same multinational corporation will achieve CSR in different ways depending on the laws and legal implications that also differ across countries (Ochoti et al., 2013). CSR activities have negligible impacts on the firm value for firms that have low expenditure and small market share simply because such initiatives are normally costly compared to the plans of such firms (Saeed & Arshad, 2012). For that matter, small firms and businesses always conform to the classical view that is against CSR and champion for the ability of the firm to make profits alone and no more. Importance of Ethical Behavior in Business Most corporations have fallen trap of ethical issues and have thus found themselves nursing the wounds of scandals that negatively impact business. However, many organizations have realized the importance of ethical behavior when conducting business. Through ethical behaviors firms are capable of upholding fairness and transparency in their relationships with and employees, who are seen as the most important stakeholders in business. There are a number of benefits that accrue from ethical business behavior especially if it is combined with corporate social responsibility (Nan & Heo, 2007). Firstly, the organizations are able to create and sustain customer loyalty which in the long run is significant in the success of the business since the existing customers are served effectively. This makes it possible to evade the costs of marketing involved in the process of acquiring new employees. The reputation of the business organization based on ethical practices through lucid CSR makes the organization have more positive image in the marketplace and thus acquisition of new customers through referrals via word of mouth (Nan & Heo, 2007). Secondly, good ethical behavior in business makes the retention of talented employees possible. This mainly aids in the process of selecting potential employees who are able and competent for succession planning (Kim & Brymer, 2011). Companies that have transparency in their motivation and promotion systems are more likely to retain employees than those that are favoritism inclined in motivating and developing of employees (Kim & Brymer, 2011). Thirdly, this also creates a positive work environment where the employees have to be ethical enough from the first time in the job. The ethical employees are able to open chances for training and development so as to meet the skill gap in the job place thus job satisfaction (Kim & Brymer, 2011). Such employees are able to have good interpersonal relationships with both the management and the coworkers. This also builds the trust the supervisors confer on the employees in terms of the company secrets and confidential information and thus given more freedom (Nan & Heo, 2007). Most management bodies in organizations are promoting ethical behaviors through training the employees, mentoring and coaching as well. This is because of the accruing benefits that are realized (Kim & Brymer, 2011). Ethical business undertakings also reduce the chances of violating legal obligations and set regulations. This is because the management is tempted to adhere to all the labor laws, fair competition regulations, advertising laws, safety at workplace issues and the quality of products through adherence to customer rights (Torres et al., 2012). The companies are able to avoid hefty fines and loss of time in fighting court battles for non-compliance with the laws and legislation. The adherence to legal requirements further boosts the image of the organization being that the organization meets all the requirements (Kim & Brymer, 2011). Ethical practices also allow for the integration of people from diverse backgrounds in an organization thus creation of a diversified workforce (Servaes & Tamayo, 2013). Equal treatment and equality in every action in organizations make it become the employer of choice thus succeeding in the war of talents that is so robust and real (Kim & Brymer, 2011). Ethical organizations also have strong philosophies and values that shape the workforce in place. This ensures that the top down approach in communication is very lucid and the organization trickles with ethics (Servaes & Tamayo, 2013). Additionally, ethical business behaviors also attract investors in the organization thus protecting the future of the business as well as increasing its share price. There is therefore a link between CSR and ethical business behavior (Kim & Brymer, 2011). However, the two are different concepts being that ethical dimension is one of the key factors in corporate social responsibility. Put simply, where there lacks ethical business undertakings there also lacks corporate social responsibility since ethics drives all the other perspectives of CSR. The Link between CSR and Competitive Advantage Organizations that perform better compared to their peers that act as competitors in the same industry are said to be having competitive advantage (Lindgreen & Swaen, 2010). Competitive advantage can therefore be defined as the superiority an organization gains through its ability to provide the same value as its competitors at a lower price or through provision of higher prices and high value goods and services through effective differentiation (Bortree, 2014). The core source of competitive advantage is the fusion of opportunities to core competencies. Therefore, for organizations to outperform the competitors in the industry, the management must choose a suitable position within the industry that is least reached by the competitors (Juščius & Snieška, 2008). Additionally, the firm must also maintain the position for sustainable competitive favor. There are many sources of competitive advantage and can either be hard factors such as production plans, technology and human capital or soft factors such as organizational culture, knowledge and management experience within the organization among others (Bortree, 2014). There is an avenue for integration of CSR into business activities in order to have competitive advantage over the competitors in the industry (Du et al., 2010). For the CSR practices through resource utilization to bring competitive advantage, the resources must be valuable, rare, inimitable and non-substitutable (Lindgreen & Swaen, 2010). This will make the firm that is practicing CSR to have an upper hand in nearly everything in the market. For profit dependent organizations to be successful in the global competitive marketplace, they must be in a position to form good long term relationships with the clients so as to achieve customer commitment (Juščius & Snieška, 2008). The customers build this commitment when they are satisfied by the goods of such organizations. The loyalty of the customers has long been linked with the success of organizations businesswise (Lindgreen & Swaen, 2010). CSR contributes to the reputation of the organization thus good performance in the market. Good reputation of the organization is able to create customer loyalty as most customers are able to purchase the products so that they are part of a successful organization (Bortree, 2014). Good corporate reputation also increases the confidence and trust the customers have in the products being produced by the company which in turn affect their decisions (Du et al., 2010). Any new company is not able to meet the value provided by a company that uses CSR being that its reputation on part of the customers is expanse (Lindgreen & Swaen, 2010). Additionally, the good reputation will make an organization the employer of choice thus winning the war of talents in attracting and retaining of employees (Bortree, 2014). This ensures sustainability of the talent stream as well as leadership, all which are inclined towards productivity of the organization (Rupp, 2011). The employees will work harder so as to be retained in the organization coming up with innovative solutions where need be (Juščius & Snieška, 2008). Consequently, such organizations are likely to attract investors, thus integrating resources that are demanded for production. Corporate Philanthropy and social initiatives of an organization form the core business of such organization (Filho et al., 2010). The social endeavors are always in line with the operational objectives of the organization thus expressing the firm’s value (Torres et al., 2012). Through corporate philanthropy a firm is able to choose how to allocate resources voluntarily to social service initiatives so as to reach the marketing and other business oriented objectives of the organization (Filho et al., 2010). Filho et al. (2010) that, the move also boosts the face of the organization in the public and makes the employees have morale to do work as well as remain loyal to enjoy the prestige of the organization (Juščius & Snieška, 2008). The organization also generates good-will making the society have more inclination towards the products of the organization compared to others that do not have CSR practices (Lindgreen & Swaen, 2010). This CSR practice also creates a channel for forming partnerships with some organizations that have been known to serve the community, further creating a good publicity of the business (Zadek, 2006). The corporate credibility issues are also solved by way of good reputation and image among the customers (Servaes & Tamayo, 2013). Through CSR the employees are able to have organizational citizenship behaviors. Some of the factors that predict OCB include leadership support, professional development, organizational commitment, and job satisfaction (Rupp, 2011). All these factors are attributed to by CSR making the employees in an organization more inclined to matters of productivity rather than other issues that might be negative to the success of the organization. Organizational Citizen Behavior can thus be linked to a company’s competitive advantage being that it is unique and inimitable by other firms in the market. CSR reporting has grown to be an important component of multinational companies as well as most large national based corporations (Zadek, 2006). Through this such firms are able to capitalize on social capital as well as the good reputation that accrues from such practices. As a result, investors are able to plough their investments into such organizations over others that do not have CSR practices (Ionescu, 2006). When formulating the firm’s strategy through consideration of CSR a firm is able to address both external and internal resource utilization issues. This helps such organizations make profits that could be used in expanding the business as well as product development (Servaes & Tamayo, 2013). CSR practicing organizations are able to get customer feedback through a variety of means (Ionescu, 2006). This helps in strategic planning as well as the development of products with the customer in mind (Filho et al., 2010). As a result the firm is able to come up with superior quality products that are associated with greatness in the firm (Ionescu, 2006). Additionally, the customers are also able to identify themselves with brands from CSR practicing firms than those firms that do not practice CSR (Zadek, 2006). When the firms have good reputation among customers the pricing of the products is at the firms’ own discretions. Consequently, the organizations may decide to charge the goods at a higher price based on the value that they receive (Zadek, 2006). On the contrary the organization may also price low so as to get the society to enjoy the products being that the resources used are extracted from the society (Servaes & Tamayo, 2013). Engaging in CSR also helps a firm develop novel capabilities and resources that concern corporate culture and knowledge (Filho et al., 2010). The organizations are able to be innovative and creative being that the best is needed for both the society and the firm’s profitability. Case Scenarios of CSR and Competitive advantage in Organizations Successful CSR practices at Microsoft Microsoft the world tech giant known for its wide production of software and devices of late has been ranked the best company in terms of CSR practices scoring high on the list of different bodies that evaluate CSR in multinational corporations. The most important organizational culture at Microsoft is the Corporate Citizenship program that was launched a decade ago (Project CSR, 2011). This program has ensured that set of activities in the company with business value address a plethora of social issues in the society. These activities have been built and integrated into the structure of the organization so as to ensure its stability (Project CSR, 2011). The company has a globalized memo that asked citizenship leagues in its branches globally so that even at local levels such as schools and families. On the list of human rights the company ranks second based on its wide philanthropically oriented initiatives and corporate governance. In 2012 alone the company gave $900 million that accrued from the software to not for profit organizations globally. The company also ensured that employee compensation was well invested on being that it values employees as the most important asset. In terms of environmental responsibility, Microsoft is within the top ten through a variety of initiatives (Project CSR, 2011). The company has been able to reduce its carbon footprint track by 30% per unit of revenue through energy solution designs and practices. The center of all businesses in the company is driven with equality, ethical consideration, and openness making all the undertakings of the organization transparent. Additionally, the company also works with the unemployed and veterans in making sure there is a balance in the society (Project CSR, 2011). As a result of the sound CSR practices in the company as stated and many more, the company has been able to increase its market share and perform better in the market. Failed Case of CSR Coca cola is a worldwide multinational company that has the widest market share in the foods and beverage industry (Torres et al., 2012). However, the company has at some points engaged in battles over unsuccessful CSR practices. There has been evidence associating the company of unethical practices in its supply and manufacturing operations. There were claims that Coca-colas beverage had high levels of pesticides v. The company has also been shown to cause water shortages as it extracts ground water that it uses in the manufacture of beverages. These ethical issues have dented the face of Coca-cola in the Asian continent reducing its success in the market in Asia especially India (Torres et al., 2012). This has reduced its competitive advantage that has been positive for Pepsi which performs better in the region. Conclusion Globalization has arguably changed the face of the business world making most multinational corporations to turn to CSR as the only best way to capture higher sales in the market. The concept of CSR has various dimensions as have been outlined in the paper. There is a link between corporate social responsibility and the competitive advantage of an organization. However, as noted in the paper, for the CSR to achieve competitive advantage it should be non-substitutable, inimitable, and unique. Microsoft has been used as a model of the most successful multinational company that has sound CSR practices and thus competitive advantage. On the other hand, lack of clear CSR practices for Coca-Cola in India has made its market share in the region reduce. The paper has also achieved its purpose in exploring the importance of ethical business behavior with the globalization of business operations in mind. There is a close link in the objectives of ethical behaviors in business and CSR. This is justifiable since CSR has one of its dimensions as ethical consideration. As such any upcoming multinational corporation should make sure it is on the high end of coining sound CSR practices to build on its public image, reputation and financial as well as organizational performance. Bibliography Bortree, D. S. 2014, “The State of CSR Communication Research: A Summary and Future Direction”. Public Relations Journal, 8(3), 1-8. Brammer, S., Jackson, G., & Matten, D. 2012, “Corporate Social Responsibility and institutional theory: new perspectives on private governance”. 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