Dimensions of Corporate Social Responsibility - Coursework Example

CORPORATE SOCIAL RESPONSIBILITY AND COMPETITIVE ADVANTAGE Name Course Tutor Date Introduction The concept of corporate social responsibility has been and continues to draw a lot of debates in the scholarly as well as professional domain. Abbreviated as CSR, corporate social responsibility emerged in the early eighties and has since been studied in business management. There are different views on CSR the two common views however, are the socioeconomic and classical views that are contrasting views (Kitzmueller& Shimshack, 2012). Most authors have been able to explore CSR in relation to the performance of most multinational corporations being that globalization has taken root of business. The perceptions that were initially there post CSR implementation have changed drastically and most companies and business organizations are slowly seeing the essence of embracing CSR practices (Kitzmueller& Shimshack, 2012). The society is also becoming more educated of their rights as well as surroundings leading to them being responsible customers when making purchases. There are three major stakeholders who benefit from effective CSR practices including the employees, the customers and the community. This paper will explore the concept of corporate social responsibility, the importance of ethical business practices and give two case examples of scenarios where CSR has worked successfully and where it has failed in real organizations. Corporate Social Responsibility Definition of Corporate Social Responsibility The definition of corporate social responsibility varies depending on the country in question, authors of literature and is also dynamic through time. Some authors indicate the concept to be abstract in nature. Corporate social responsibility refers to the voluntary commitment of a corporate organization to go beyond the implicit and explicit organizational goals and give back to the society and community that supports the organization in a variety as well. In this dorm both parties involved mutually benefit from the practice. CSR can also be defined as a business action or practice where an organization addresses ethical, legal, social, and economic obligations with the stakeholders in mind. CSR practices are basically ethical based on the fact that they have positive impacts on the stakeholders involved; society, community, investors, employees and customers among others. There are various forms of CSR in different organizations. It could take the form of advocacy groups, sustainable practices in business, corporate advocacy and philanthropy. CSR defines the legal and ethical commitment an organization delves in without affecting the economic, social and environmental wellbeing of the society. It is very different from ethics in that while ethics addresses wrong and right things, CSR heavily depends on the social demands of the aforementioned stakeholders in the organization. Dimensions of Corporate Social Responsibility The concept of CSR has mostly been explored at the level of multinational corporations as they are the ones that have exploited globalization of economies. It is noteworthy that both public and private organizations have equal chances of embracing CSR as they are meant for profit (Lee, 2008). There are various dimensions of CSR. The first dimension is the economic dimension that defines the economic value targeted by the organization (Saeed & Arshad, 2012). This dimension ensures that the organizations get return on investments (ROI) that is expected by the stakeholders of the organization and is the key aim of doing business (Lee, 2008). Through this dimension CSR is also seen as a practice that creates jobs for the population from the societies enabling diversification, motivation and thus economic stability of the employees. The second dimension or factor of CSR is the legal dimension that confers legal responsibility on organizations. Through this organizations re able to comply with all the legal requirements set by the governments (Lee, 2008). Through adhering to the regulations, organizations are able to meet the expectations of the stakeholders. The voluntary dimension allows the firm to embrace a variety of discretionary practices that are centered not only on the performance of the organization but also the wellness of the communities that support the organization (Saeed & Arshad, 2012). This has made organizations participate in processes such as education, provision of water and looking after orphans among others, to give back to the society (Lee, 2008). The other core dimension of CSR is the ethical dimension that guards the moral wellbeing of the organization through fair trade, fair HR activities, and advertising among others. There are also other dimensions of CSR apart from the already discussed for major ones. The is the equal employment and non-discrimination factor of CSR that is more inclined to the organizational culture and principles enabling the management to consider all potential employees as well as the employees equal and thus treat them fairly (Lee, 2008). This has been beneficial in the business world that is globalized, enabling the diversification of workforce and thus talent pool management in organizations (Lindgreen & Swaen, 2010). The other dimension of CSR involves issues of staff development so as to make them inclined with the CSR practices in the organization through involvement programs (Lee, 2008). The other important and widespread dimension of CSR is the protection of human rights. This mainly concerns the work environment of the employees. This enables organizations to create safe working environments that do not jeopardize the health of employees who are the most important stakeholders. The other dimension of corporate social responsibility is the management of environmental degradation brought by the exploitation of resources (Lindgreen & Swaen, 2010). This enables firms to make sure that they keep track of the environmental impacts that they are responsible of so as to keep a balance that will make the health of the community taken care of effectively. Importance of Corporate Social Responsibility There are many advantages of CSR at the level of organizations. This has further made even small enterprises to engage in some form of CSR practices even though on small scale (Lindgreen & Swaen, 2010). Corporate social responsibility broadens the market of an organization making it possible for organizations to have a better market share through increased sales. This mainly comes because the customers are aware and would like to be associated with companies that are socially responsible and thus have a good reputation (Brammer et al., 2012). This makes the customers to not only purchase but also influence others. Secondly, it raises the publicity of the organizations that uphold the practices. This creates a good reputation of the firm in the market thus increasing sales (Lindgreen & Swaen, 2010). Additionally, this also makes the organization an employer of choice thus winning the war of talents that has taken root in the contemporary job market. Good reputation also means that such organizations become the obvious choice for investors. CSR also reduces the risk of failure of business strategies as they are set with both parties that is the organizational stakeholders and the stakeholders from the society (Saeed & Arshad, 2012). The business is therefore assured of success and expansion to different parts of the world (Bortree, 2014). CSR also enables the creation of sustainable practices calling for innovative solutions and creativity that is solution based (Lindgreen & Swaen, 2010). CSR also ensures that there are alternative ways of utilizing resource in a way that the environment and other resources are not affected in any way. Internally, the organizations are able to create safe working conditions for the employees (Baron, 2007; Rupp, 2011). This goes a long way in creating job satisfaction that enables organizational commitment (Brammer et al., 2012). There is a positive relationship between job commitment and financial performance of organizations. This creates organization citizenship behavior (OCB) that is beneficial for the organization as shall be seen later in this paper. Corporate social responsibility also lowers the cost of production that is positive for the organization (Rupp, 2011). This is because the costs saved are used in production and marketing the products of the company (Lindgreen & Swaen, 2010). The organization is also able to attract good relationships with the countries and thus communities where resources are extracted from (Brammer et al., 2012). CSR also ensures that all the actions of the organization that impact the environment are accounted for in the best way possible. As can be seen therefore the concept of CSR is very wide and must be considered and planned effectively so as to adopt the best strategies for CSR. Brammer et al. (2012) note that for the realization of the benefits of CSR, the communities, the management of the organizations and the society in general, there must be communication so as to make the parties involved aware of their roles and what to expect. Demerits of CSR There are some disadvantages of CSR that it would be wise to consider in this paper so so as to completely understand the concept. First off, some big organizations support the society in different ways. However, the footprint of the overall destruction they induce on the planet is unaccounted for. Secondly, some companies also do not take care of the surrounding societies on account that the corporate interests come back and then the society (Baron, 2007). The other disadvantage of corporate social responsibility is the costs incurred by the corporation in rolling out the activities (Bortree, 2014). There is also the likelihood of shareholder resistance considering the risks taken when making such investments on the community (Lindgreen & Swaen, 2010). However, despite these few challenges that are outnumbered by the merits of CSR most corporations have leveraged on CSR for a number of benefits putting them ahead of their competitors (Baron, 2007). It is noteworthy at this point that SMEs are grounded on the classical view that discerns CSR from business practices. On the contrary, Multinational Corporations with good global representation, are more inclined to the socioeconomic view being that they have substantial effect and heavily depend on the society for resources both internal and external (Bortree, 2014). The Importance of Ethical Business Practices in an Organization Ethical business behavior ensures that moral and legal standards are adhered o when forming relationships between the business and the society. As have been seen in the previous sections it is one of the key dimensions of corporate social responsibility and beard the burden of making the business existent in the society that is currently filled with self-aware population. Ethical business behaviors are upheld so as to make the customers have positive attitude to the business. Organizations that have ethical behaviors in their structure and culture conduct business with fairness and transparency making them consumers and employees choice (Kim & Brymer, 2011). The beneficiaries of this are the stakeholders such as suppliers, employees, and other business associates. Organizations known to have ethical business behaviors have gone a long way to enjoy the resulting benefits. First off, good ethical behavior raises the reputation of the organization through transparency in all the actions from finances to production and marketing. This goes a long way in building trust in the relationships that businesses have with the stakeholders and the society. This attracts investors and consumers in the market through word of mouth and referrals by the loyal customers. Additionally, ethical behaviors also create good brand image on the consumers that have more or less the same effects as reputation. The second importance of business ethics is that it ensures that an organization retains the top talented pool of employees that is useful in succession planning (Kim & Brymer, 2011). The organization’s management is able to make sure there is transparency in all the remuneration, promotion and motivation practices to avoid negative publicity. Organizations benefit from the move in that they are able to create an environment that attract employees making them employers of choice thus winning the war of talents. Ethical behavior in business practices also builds the consumers trust and thus loyalty on the brand of the organization as well as its products. This reduces the costs that are used in marketing the product as the products themselves will be marketed by the loyal customers. Additionally, employees like being affiliated with ethical organizations. This will make the organization attract employees and retain them in the long run (Kim & Brymer, 2011). This goals a long way in reducing the costs of recruiting and selecting new employees that eats up a lot of resources of organizations. The organizational leadership is also strengthened to levels that make it perform well in the competitive markets. The employees are also able to form and nurture good interpersonal relationships with the management making it easier to address issues at work. There are also costs saved when the business adheres to all the legal requirements as there will be no court battles and associated costs to incur (Kim & Brymer, 2011). The management is able to consider all the laws of labor, consumer protection laws and fair competition laws as well as unbiased advertisement laws making them stand out from the rest of organizations. Consequently the costs that would have been incurred in fines and legal fee are avoided and saved (Kim & Brymer, 2011). These could be directed to innovation, expansion and research and development that assures the organization of stability. The adherence to the law itself confers an added advantage in exemplifying the reputation of the business that is a key source of competitive advantage. The organizations also receive awards and recognition globally making them have limitless boundaries of expansion due to positive publicity. Through ethical practices, people from diverse backgrounds are incorporated into the business workforce. This is a rich source of innovation and creativity in matters requiring diverse problem solving approaches. Additionally, this also makes the marketing of the product efficient as different languages and cultures are considered. The strong values and philosophies of ethically upright businesses, further make the employees uphold ethics at individual level thus productivity. Investors are more likely to invest in ethically sound organizations thus boosting the operating cash that is also directly proportional to market share of organizations. CSR and ethical behavior in business go hand in hand with each other. As previously observed ethical base is one of the key factors in corporate social responsibility. Furthermore all the importance discussed above are displayed through effective CSR practices leading to competitive advantages of firms as will be seen shortly in the next section. Businesses with unsound ethical practices will never make profits or expand in the contemporary marketplace where the consumer has to do some background checks prior to making decisions. CSR practices and Competitive Advantage in Organizations Competitive advantage refers to the favorable or superior position an organization seeks to be so as to stay ahead of its peers in terms of profitability (Carroll & Shabana, 2010; Ionescu, 2006). It is that superiority that organizations acquire through providing the consumers with similar value as that of the competitors at a fairly low cost and or high prices for high value goods that are differentiated (Saeed & Arshad, 2012). It involves communication of the greater perceived value to the target in the market head of the competitors (Carroll & Shabana, 2010). There are many avenues of achieving competitive advantage and usually they are the opportunities and competencies within the organization (Zadek, 2006). For the competitive advantage to thrive it has to be sustainable, meaning that the company must maintain it long-term (Porter and Kramer, 2006). The management must strategically place itself in the industry so that the customers are not able to reach it. There is a very fertile link between CSR and competitive advantage (Porter and Kramer, 2006). First off, sound CSR practices are linked directly to the reputation of the business organization (Siegel & Vitaliano, 2007). The reputation is also linked to good publicity and brand image. This forges trust between the investors, suppliers, employees and customers in the organization (Carroll & Shabana, 2010). The customers are able to enjoy the brands of the organization over that of the competitors. Good reputation also attracts diverse groups into the workforce thus increasing the talent pool of the organization. The organizational productivity is able to be unique based on the diverse innovative brains behind the product development (Porter and Kramer, 2006). New entrants in the market are not able to take off the reputation and even if they do the loyalty is difficult to snatch thus competitive advantage of the firm in the question (Saeed & Arshad, 2012). Good reputation also makes it possible to have god coordination in the production and marketing team thus the sustainability of the competitive advantage (Nan & Heo, 2007). The employees also work hard to be retained providing quality at the same time so as to get rewards (Siegel & Vitaliano, 2007). Such organizations become the center of attraction of investors who bring in money that is used in research and development as well as sustaining unique marketing strategies (Porter and Kramer, 2006). The organizations are more likely to exploit resources that were not explored due to financial constraints reducing costs and creating value to the customer (Nan & Heo, 2007). Most multinational as well as regional corporations have embraced the culture of CSR communication through CSR reporting initiatives. This has been done either in separate CSR or sustainability reports or incorporated within the annual reports generated by such organizations. Consequently, most organizations have been able to leverage on the accruing social capital nd good reputation that reflects a good image as well (Ionescu, 2006). This has been able to draw investors from far and wide than organizations that have less founded CSR practices. Managements also consider CSR as a strategic tool when making strategic goals of the organization (Ionescu, 2006). This goes a long way in making the ensuring effective utilization and maintenance of internal and external resources (Tracey et al. 2005). With this in place most businesses have been able to come up with sound expansion strategies that in the end work compared to CSR non-practicing companies (Carroll & Shabana, 2010). The expansion itself is a source of competitive advantage as the market representation will increase as time progresses. Additionally, this also leads in product development and differentiation based on the target markets (Nan & Heo, 2007). The organizations are also able to explore all the tenets of competitive advantage such as cost leadership strategies and differentiation among others and adopt the one that works best (Tracey et al. 2005). CSR enables organizations to undertake product development based on the research conclusions facilitated by good relationship, customer loyalty and trust (Bortree, 2014). These products will be able to perform well in the market than other brands being that consumers like brands that are associated with greatness which CSR is part of (Filho et al. 2010). The customers in this case will be proud of the products and be loyal to the organizations with sound CSR practices over the competitors that probably lack CSR in their plans (Bortree, 2014). The firms can leverage on this to either offer value at low prices due to low cost of production or offer higher value with higher prices due to high costs of production (Nan & Heo, 2007). Of course prior to indulgence in such strategic moves the stakeholders are involved so as to avoid resistance. Through corporate philanthropy firms are able to raise the awareness f their presence in the market. These social obligations and concerns have been associated with the firms’ performance and thus value (Filho et al. 2010). The firms are therefore able to gain good reputation across boundaries. This reduces the cost of acquiring resources such as human capital and raw materials since they are able to attract employees and good relations with suppliers in the supply chain (Saeed & Arshad, 2012). The employees of such organizations are also able to get motivated and work towards maintaining the prestige that comes with good reputation (Filho et al. 2010). This creates a hard work culture that ensures that there is good coordination among the employees in the manufacturing section. Lastly, CSR makes organizations have a plethora of chances for relationship building through franchising, acquisition, partnership, and thus reduction of costs of expansion that are shifted in other processes that make the company outstanding (Filho et al. 2010). Noteworthy is the fact that for such CSR practices to have competitive advantage they should be inimitable, not substitutable, unique and cost effective so as to make it work only for the organization and not the competitors (Nan & Heo, 2007). As such organizations must strive to deal with the challenges of CSR for them to realize competitive advantage. Cases of Corporate Social Responsibility in Real Situations The Case of Successful CSR in Google Google is the world known search engine and tech based International Corporation, has been on the list of the successful organizations using CSR (Google, 2015). First off Google treats employees fairly and equally as it recognizes that they are the most important stakeholder group. The customer services at Google are amazing making it an outstanding corporation. The score of organizational citizenship behavior of Google varies across countries being prevalent in Australia where the score is 80% (Google, 2015). Google engages in community based programs and also engages the veterans and the unemployed in getting education that can give them good livelihoods. Google Company has also been a participant in philanthropic activities using the amount of money accruing from cut costs of energy consumption in empowering the destitute and the less fortunate in the world (Google, 2015). This practices together with other internal and external has made Google perform better in the market compared to other similar companies (Google, 2015). The Case of Failed CSR in Canon Canon is the world largest known digital camera and assortment of products as well as office products is a perfect example of a failed CSR case (Torres et al. 2012). This is mainly based on the assessment and studies conducted by most researchers. The company has been accused of stress related illnesses that are common among the workforce all over the world. This has been due to increased workload on each employees (Torres et al. 2012). The employees are not also allowed time to rest causing them to develop stress and reduce their productivity (Torres et al. 2012). There has resultantly been a high number of turnover and low market share for the organization compared to its peers. Conclusion Corporate social responsibility has for a long time been existing in the global business arena. Its definitions vary across countries and organizations as stated. There are various dimensions and thus factors that institute sound CSR practices. The whole concept of corporate social responsibility has been explored in the paper. As can be seen there are many advantages compared to disadvantages of CSR in organizations. Noteworthy is that the tenets of the merits also build on competitive advantage of firms. The paper has also managed to cover the concept of ethical business behavior that is also part of good CSR practice, outlining lucidly its importance in organizations. Apparently, as can be seen in the paper the same purposes achieved by CSR are achievable through ethical business behavior. The paper has also achieved its purpose in linking the corporate social responsibility of firms to their competitive advantage. To further stress on this two organizations; Google and Canon have been chosen to elucidate the case of success and failure of CSR in organizations respectively. 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