Tesco's Corporate Behavior as a Source of the Company's Competitive Advantage - Case Study Example

Organizational Behaviour Name Institution Date Organizational Behaviour Introduction Corporate behaviour refers to the manner in which an organization takes into consideration the environmental, social and financial impacts of actions and decisions it is engaged in. Corporate behavior is an increasingly significant matter in business, as employees, investors, managers and customers have started to have an understanding of the way economic growth is connected to environmental and social well-being. Corporate behavior is a major subject for any firm that aims for long term profitability and sustainability. While corporate governance is typically a voluntary concept, organizations have been under increased pressure to positively contribute to the society or to minimize their negative effects on the society. This paper looks at meaning of corporate behavior and its impact on the performance of Tesco Company. The meaning of Corporate Behavior The corporate behavior concept is one of the major moral and ethical setbacks which an organization’s decision making is surrounded. As a business model, corporate behavior has surfaced in the late 20th century, when numerous organizations began considering the effects of their corporate decisions on the environment and society. Generally, corporate behavior is defined as the obligations of organizations to the community, particularly obligations to the stakeholders and other individuals who influence corporate practices and policies. Corporate behavior comprises of four aspects which include philanthropic, legal, economic and social responsibility. Legal responsibility refers to the basic responsibility of a firm in terms of the firm’s profits via the gratification of the expectations and needs of the customers. Legal responsibility is based upon the obligation of the organization to abide by the law (Drucker, 2009). Social responsibility implies that a company undertakes its business activities in accord with the business moral standards or requirements. Philanthropic responsibility presumes that the firm acts as a good citizen through contributing to the society resources. Corporate behavior covers two major aspects; transparency and accountability. A part from the default obligation for its profitability and financial performance, organizations are also responsible to the stakeholders in the way they behave in regard to business ethics, human rights, corporate governance, environmental policies, job creation and community development (Drucker, 2009). Corporate behavior is beneficial in that it can results to increased retention and engagement of employees and customers, creates stronger interrelations with the society, enhances an organization’s brand image and reputation, increases competitive advantage and improves the profitability and financial performance of an organization. According to Porter and Kramer (2006) corporate behavior is a major scheme of attaining continuous competitive advantage within the turbulent international environment. Improved connectivity of corporate behavior with major business source permits employers to distinguish that it may become a source of competitive advantage, innovation and opportunities. Corporate behavior is connected to the integration of rational policies within corporate culture, strategy as well as every day decision making, so as to meet the expectations and needs of the stakeholders. This is also connected with the development of an organization strategy along with successful brands. Impacts of corporate behavior on the performance of a firm Creation of an excellent corporate reputation Good corporate behavior can improve the performance of a firm through creation of an excellent corporate reputation. Reputation is a major contributing factor to the success of a firm and is an important intangible asset. The span, in which a firm can be able to identify, balance, offer priority to and meet the expectations of various stakeholders is crucial for the development and conservation of reputation. Organizations might justify their corporate behavior plans based on the creation, sustenance and defense of their strong reputations and legitimacy. An organization is perceived as being legitimate when its business activities are in harmony with the values and goals of the community within which it operates. This implies that an organization is legitimate when it is able to meet the required social responsibilities. As organizations demonstrate their capability to fit within the cultures and communities in which they undertake their business activities, they are capable of building communally beneficial correlations with their stakeholders (Davis et al, 2007). Organizations direct their focus on creation of value by controlling gains in legitimacy and reputation attained by the alignment of the interests of stakeholders. Well built legitimacy and reputation allows an organization to operate within the society and corporate behavior activities promotes the capability of the organization to be viewed as legitimate by the customers, investors and employees. Over time, customers, investors and employees have demonstrated a distinctive preference for firms that take their corporate behavior seriously (Davis et al, 2007). Tesco is an associate of WWWF95+ group which is committed to looking for means of preserving the globe’s forests through sourcing from sustainable well managed forests. This has improved the Company’s reputation and performance. Additionally, the approach of Tesco to sustainability in building novel stores focuses on its construction techniques, processes and materials which are aimed at reducing the capital prices and ensuring the company develops through use of sustainable construction methods. Improved customer loyalty and increased sales Modern day customers seek safe and high quality products and services and also want to be safe in the knowhow that the procured products have been produced within an environmentally and socially responsible manner. Until recently, organizations held the belief that investors had minimal or no notice in the non-monetary elements of business operations. Nevertheless, it has now become evident that there is a positive link between good corporate behavior and financial performance. Good corporate behavior might improve an organization’s relationship and reputation with government officials, bankers and investors. These improved relationships may result to economic benefits. An organization’s good corporate behavior is a factor that directly influences banks along with other money lending institutions investment decisions. Therefore, a good corporate behavior profile has the possibility of enhancing an organization’s access to capital (Powell & Weaver, 2009). Corporate behavior has enabled Tesco to increase sales and improve customer loyalty. The company’s corporate behavior strategy is to earn customer trust through behaving responsibly in the societies it operates, through maximization of benefits it brings and working hard to minimize negative impacts (Macdonald, 2013). Improved motivation, morale and retention of staff Stakeholders possess the power to punish or commend organizations. A key stakeholder is the employee who is the user of corporate behavior policies and also the major player in the formulation and implementation of an organization’s policies. Workers who are contented with the commitment of the firm to the community are more loyal, productive, and productive and commitment to the organization Carroll and Buchholz (2010) note that c corporate behavior has become an irreversible and strong portion of corporate deeds. When effectively managed, corporate behavior projects and programs can generate considerable gains in terms of returns and reputation in addition to loyalty and motivation of employees. Corporate behavior can also result to strengthening of valuable partnerships. Strategies of corporate behavior can lead to creation of competitive advantage if properly utilized since there is a positive correlation amid strategic corporate behavior deeds and firm’s competitive advantage. Corporate behavior as a source of competitive advantage A firm can attain competitive behavior through good corporate behavior. According to Powell, and Weaver (2009) the connection amid competitive advantage and corporate behavior is usually seen as promising when environmental limits, corporate interests and societal needs are properly coordinated within corporate behavior. It offers a communal value for an organization as well as the community. Competitiveness and corporate behavior are connected via three main management procedures namely, responsibility, stakeholder and strategy. The adoption of corporate behavior strategy has a direct impact on organizational competitiveness since the latter promotes the sustainable creation of corporate vision via corporate strategy, increases the understanding of corporate behavior intricate surrounding and promotes en correlation with the key stakeholders via management of stakeholder. It also increases the transparency and accountability of a firm via responsibilities for the management of processes. Firms that are engaged in continuous transactions with their stakeholders on the basis of cooperation and trust are motivated to become ethical, honest and reliable since they yield much for this behavior. Activities of corporate behavior are a corporate type of differentiation that produces competitive advantage through in provision of capital for investment (Powell, & Weaver, 2009). Tesco’s corporate behavior has enabled it to become the leading company in the UK’s retail market. The company uses the corporate social responsibility group to set the yearly key performance indicators so as to propel improvement and help the company attain its goals. The group listens to stakeholders and considers their comments on the activities of the company. The company track civic attitudes and benchmarks its performance against that of the competitors. It actively seeks discussion with employees and customers via every day schedule of staff panels and client question times at the local shop level. The feedback assists the company to focus upon and offer what customers and employees need and to better understand their expectations (Macdonald, 2013). Companies that practice corporate behavior might not essentially be capable to gauge the positive effects their behaviors have on the way they perform in the competitive global market. Business sustainability at the present and in future is dependent on firms taking into consideration the environmental and social outcomes of their actions and decisions. Davis and Blomstrom (2008) note that in the earlier periods, several managers and businesses were mainly concern with expanding the value of shareholders. They were focus was directed towards medium to short term profits as well as driving up the share cost. Nevertheless, the focus of organizations and managers has been moved away from merely increasing shareholders returns to focus on expanding the business value on basis of both external and internal stakeholders who are influenced by the performance and actions of the organization. Organizations that demonstrate social corporate behavior aims at making decisions which consider interests of the numerous stakeholders. When an organization develops a proper understanding of corporate behavior and effectively implements it into business, it might assist it to remain competitive. It may be utilized to attain a competitive edge and offer the organization with the chance to offer benefits to a variety of the business stakeholders (Clarkson, 2010). Conclusion Corporate behavior is an important business concept that requires organizations to consider the financial, social and environmental effects of their actions and decisions. Corporate behavior can positively impact the performance of an organization. When effectively implemented, it can help an organization to improve its brand image and reputation, increase loyalty and retention of employees and customers and improve financial performance and profitability. It can also enhance a company to attain competitive advantage when it properly coordinates environmental limits, social needs and corporate interests. List of References Drucker, P, 2009, “The New Meaning of Corporate Social Responsibility.” California Management Review, 26, 53-63 Porter, M, &Kramer, R, 2006, “Strategy & society: the link between competitive advantage and corporate social responsibility.” Harvard Business Review, 84, pp. 78–92. Davis, S, Lukomnik, J, & Pitt-Watson, D., 2007, The New Capitalists: How Citizen Investors AreReshaping The Business Agenda, Harvard Business School Press. Powell, E, & Weaver, G, 2009, Do investors price social responsibility? Business &Professional Ethics Journal, 14(3), 61 Carroll, A. & A. Buchholtz (2010). Business and Society: Ethics and Stakeholder Management, Thomson/South-Western, Mason, OH. Davis, K, & Blomstrom, R, 2008, Business and Society: Environment and Responsibility, McGraw-Hill, New York. Clarkson, M, 2010, “A stakeholder framework for analyzing and evaluating corporate social performance". Academy of Management Review 20 (1): 92–117. Macdonald, R., 2013, Global corporate social responsibility of Tesco ( Grocery Retailer, UK), England, GRIN Verlag. Read More