Corporate Social Responsibility and Brand Equity amongst Foreign Sportswear Companies in China - Report Example

MID-TERM REPORT ON DISSERTATION PRELIMINARY FRAMEWORK Topic: Corporate Social Responsibility and Brand Equity amongst Foreign Sportswear Companies inChina INTRODUCTION This report provides preliminary studies and findings from the basic studies made towards the attainment and completion of the dissertation. This first section of the study will present a restatement of the framework of the research. Tot his end, the report will provide information about the important structures and features of the study and the stated research questions. Tentatively, this framework will provide guidance on how to convert the research proposal into an actual research and study. Also, this report will provide an inquest into the core concepts and ideas that will be examined in the research. The core of the findings will provide the framework for the definition of variables that will guide the formulation of the fieldwork. An insight into the variable definitions and other fieldwork elements and aspects will be presented in this report. This will tentatively present the route through which the research will be conducted and variable studied. The impact of the fieldworks framework will guide the study and provide important answers to the research questions. This report will provide the structure and tentative analysis of the research variables. The core components of this term report will be adapted and improved to form the foundation of the actual research. This will guide the actual study and its components. 1.1 Background of Study Corporate social responsibility is about how a firms decisions and activities affect the society (Lamb et al 95). Corporate social responsibility requires action and accountability in five main dimensions, economic, legal, ethical, environmental and philanthropic (Lamb et al 95). These are areas a firm will need to work on and develop systems and activities that enables it to attain the best and holistic results in all they do. Over the years, marketing has evolved from its traditional position fueled by the economic ends and expectations of the Industrial Revolution. In the 1960s, marketing was based on the 4Ps, namely product, price, place and promotion (Lindgreen et al 123). In that era, marketing was a tool for the improvement of sales and the increment of profitability. The focus was on transactional marketing where the end was to increase transactions by calling on more customers to become interested in the products of a company. Contemporary marketing on the other hand requires some degree of social marketing on the part of the corporate entity in order to enhance the value of the brands of the entity (Lindgreen et al 124). This is because most marketing drives involve some kind of social marketing to present a firm as a responsible entity that seeks the overall good of the society, not just their personal parochial interest as a profit-oriented entity. Social marketing involves “....concepts from commercial marketing to plan and implement programs designed to bring about behavior change that will benefit individuals and society” (Ihlen et al 114). Social marketing is distinguished from commercial marketing because it is not focused on products and profitability and has a mission that is completely different from commercial marketing (Ihlen et al 114). Instead, it involves behavior. It is steeped in influencing social behavior to benefit a target of the population and the wider society in general. Social marketing seeks to improve behavior and provide change in order to improve health, safety and the environment (Ihlen et al 115). There are two broad classes of corporate social responsibility marketing: marketing related and non-marketing related (Kotler and Lee 1990). Marketing related social marketing is related to cause promotion and cause-related marketing and corporate social marketing. This involves presenting the corporate social activities to members of the public. This creates a positive image for the entity and enhances interest in the firm. This adds up to the corporate image and influences the reputation and interest in the brands. Non-marketing related corporate social responsibility marketing is about things like employee volunteering, social responsiveness and ethical business practices. This might just be done in good faith to improve a firms image and activities. Cause-related marketing is about social marketing, charitable marketing, strategic philanthropy, responsibility marketing and cause branding (Crowther and Capaldi, 387). It is integrated into operations to enhance the corporate image and corporate identity. Generally, businesses need to adapt to the status quo in order to survive. This is to be done through the utilization of various tools to attain competitive advantage in order to capture and retain market share. 1.2 Research Problem China opened up to the rest of the world for active business at the turn of the 21st Century. Since then, countless business brands from Western economies have been allowed into the country and most of them have sought to benefit from the wide and large Chinese market. The Chinese business environment has become somewhat competitive. Thus, in order to survive and expand a firms operation, there is the need to maintain competitive advantage in order to acquire and hold on to market share. This ensures survivability and growth. Evidence suggests that corporate social responsibility marketing is the norm in most Western countries. But the extent to which China has accepted the practice as the norm is not clear. China has always been a Communist country and they carry out activities as large State Owned Entities (SOEs) and they seek the best interest of the society and members of the Peoples Republic. Hence, it is clear that the terrain is completely different from other Western markets and economies. It is therefore apparent that consumers might suspect big international entities as being too profit-oriented. And if this is the case, how do people see corporate social responsibility? Is it accepted as the norm? Aside the general terrain of corporate social responsibility, what exactly does corporate social marketing add to a normal firm in a country. Also, how does the spread of corporate social responsibility influence and affect a firm with its own brands? To what extent is this highlighted in the promotion of an international brand? And how do foreign firms in particular industries in China fare in leveraging their brands through CSR drives and activities. Is there a linkage between CSR practices and marketing and firm financial performance? 1.3 Research Aim and Objectives The fundamental aim of the research is to examine how foreign sports companies market their social responsibility activities and how this affects brand equity and firm performance. To this end, the following objectives will be explored: 1. A critical review of corporate social responsibility activities in two sportswear brands operating in China – Nike and Adidas; 2. An examination of the social marketing drives of these companies and how it helps in leveraging their brands; 3. An assessment of the perceptions of Chinese consumers and company stakeholders concerning their social responsibility activities and a convergence analysis with firm CSR targets; 4. An analysis of the linkage between corporate social responsibility and corporate social marketing activities of Nike and Adidas in China and its linkage to brand equity and firm performance. 1.4 Motivation for Research This research grants the writer the opportunity to apply the skills and concepts studied in the taught course of the program to a real-life situation. This will provide an avenue through which the writer will employ the various tools and skills acquired in the taught course to resolve an issue in society and provide solutions to problems. This study is also in partial fulfillment of the writers degree program. This will go towards the grading and assessment of the writer in order to attain his qualification. This will allow the writer to fulfill the mandatory requirements of the program in order to graduate from the course. 1.5 Theoretical Framework The core element and aspect of this study will be corporate social responsibility. This will focus on the way firms try to remain responsible to their society and produce in a sustainable an responsible way in society. Corporate social responsibility is linked to corporate brands through corporate social responsibility marketing. Corporate brand and corporate social responsibility connect to firms performance through the concept of brand equity. This provides the basis for the examination of how brands convert to profits and long-term operational interest. 1.6 Organization of Study This research is divided into five main parts. This section is the first part of the entire study and it outlines the scope of the study and its extent. The next chapter will be the literature review which will examine important and core concepts and ideas that will be relevant and significant in dealing with the analysis and evaluation of the study. Chapter 3 will lay out a system for the collection of data for further analysis. The details of the fieldwork and its implications will be identified in Chapter 3 and this will form the basis for empirical analysis and empirical evaluation. The fourth chapter will disclose the core findings and give room for discussions of the results in relation to the literature review and its component parts. Finally, the findings and core conclusions will be theorized and used to define the framework of how foreign companies market their social responsibility activities and its impacts on brand equity and the performance of firms. 1.7 Limitation of Study This study will be restricted to the major Chinese cities of Shanghai and Beijing. This is because of the large size of the country. Thus, corporate social responsibility will be focused on just these two cities and will seek to theorize on the basis of these two locations. The research will focus on the sportswear industry and this will primarily be centered on American sportswear brands and how they are affected by corporate social responsibility and its consequences. Another limitation relates to the availability of data and information that will be given. Due to the governance structures and systems in China, people do not like to divulge too much information. Hence, the quality of information could be varied due to concerns about leakage of information. In order to avoid this, the confidentiality of all the responses will be guaranteed to all respondents. CONCEPTUAL ANALYSIS In order to conduct a meaningful research, there is the need to define key concepts and theories that will be used as the basis for further analysis and evaluations. This section will lay the theoretical foundation for the rest of the research and provide the basis for further analysis. This chapter will include core definitions, groundbreaking explanations and other theories that describe the core elements and aspects of key concepts of the study. Elements of the theoretical framework will need to be examined critically in a way and manner that can aid their analysis and scientific measurement. In other words, this section will have to support the interpretation of ideas and concepts to aid factor analysis. This will center on the need to find the core components and targets within each concept and this will be used to build the foundation for the formulation of the research design. 2.1 Corporate Social Responsibility Evolution in China The concept of corporate social responsibility as a distinct aspect of a business is fairly new. “The practice of social and environmental considerations alongside the drive for profits is generally unfamiliar in most Chinese businesses” (Li para 2). This means that most businesses in China never really saw corporate social responsibility as an integral part of an organization. Chinas companies have been influenced by the pervasive Communist ideology that exists in the country. This ideology requires the development of the country through a system where people will get a fair share of the nations resources. Thus, development and growth are connected with the improvement of the living conditions of the Chinese people through state-owned entities. Corporate-state relationship is the name Tang and Li use to describe the closest forms of corporate social responsibility that existed in the previous generation of Communist rule (Tang and Li 202). Up till 1979, Chinese corporations were owned and controlled by the government. The government paid their employees salaries, housing, healthcare and other bills (Tang and Li 202). China was always skeptical about non-governmental organizations and pressure groups that sought to promote human rights, ethics and environmentalism. Chinas economic development has come with major sacrifices and issues. Chan identifies that there are poor labor conditions which affects over 30 million Chinese laborers who work in low class jobs (43). These workers work in tough and harsh conditions which involve the denial of basic rights and other processes that would have been absent in a society where stakeholder interests were valued and respected. Chinas drive for massive economic growth and economic development has yielded some degree of successes. The country sought to deal with the double-digit inflation and this came at the price of a major environmental damage (Chan 44). There is massive air pollution and this creates days where visibility is poor throughout some major cities. Due to the poor environmental conditions, there are over 300 million Chinese people who have no access to clean water (Chan 44). There is a general disregard for corporate social responsibility in business and intellectual discourses (Tang and Li 202).Although the Chinese government seeks to improve the lives of the people, there are some areas that are disregarded in the quest to provide a fair allocation of resources. This provides a case for some degree of awareness in corporate social responsibility in China. On the other hand, foreign businesses in China have the opportunity to implement some elements and aspects of corporate social responsibility in these countries in order to ensure that the country has a better life and people in China are of an improved social and environmental status. 2.2 Fundamental Approaches to CSR Communication in China The country of origin and culture as well as activities within a given country plays a significant role in the way corporate social responsibility is communicated (Haniffa and Cooke 392) . In countries like the United Kingdom, corporate social responsibility is steeped in the concept of charity as well as ethics and morality that dates back to the days of Charles Dickens and other humanists. In the Scandinavia, the history of corporate social responsibility as a concept and its communication is influenced significantly by the Lutheran traditions whilst in the Arab world, most communities have elements of Sadaqat which is steeped in the Islamic tradition of donations to the poor. These traditions and concepts play a role in how to communicate corporate social responsibility in contemporary settings in the respective countries. Godfrey and Hatch identify that modern corporate social responsibility in the modern world has deep roots in democracy, citizenship and liberty that can be traced to the days of Aristotle and Cicero (91). China on the other hand has a social system that was consolidated by Buddhist ideas of environmentalism, obedience and response to duty. However, the Communist system modified these structures and social development is currently very different. The Chinese Communist ideology of promoting welfare of the society tends to have a major influence on the way corporate social responsibility will be reviewed and examined in societies. Additionally, industry factors like stakeholder perspective and views create a system of corporate social responsibility reporting and communication (Haniffa and Cooke 399). These industry factors include power structures and systems and communication in the nation or community. All these are influenced by the rational and societys structure. China being a nation strongly ranked by the Communist Party has major influence on the structures of corporate social responsibility and its communication. In an empirical study of the 100 top companies in China (Fortune 100), the findings indicated that there are three fundamental approaches to corporate social responsibility in communication in China (Tang and Li 199): 1. CSR as an ad hoc public philanthropy: This involves a move to address a major public issue or matter with the view of correcting it and improving the society as a whole. These companies work to resolve an issue that affects the society in general. This makes the society a bit improved and much better in its operations and matters. This is a firefighting approach that addresses social issues through philanthropic efforts and giving. 2. CSR as strategic philanthropy: This is where corporate social responsibility is integrated into the agenda of the top level management. These top level management of the companies come up with policies that bind the entire organization over a long-term period. 3. CSR as ethical business practices: This involves a situation where an organization sets up a framework of ethics and practices that are carried out as a norm. These ethics and CSR practices are used as an approach and a method of doing things in the company. They help and guide the organization to reach its overall goal which is integrated into the standards of the organization. 2.3 Sectors of CSR in China and Motivations The Chinese corporate social responsibility system is gradually developing and improving. This is due to foreign pressures from other countries as well as local trends towards doing good for the advancement of the wider Chinese society. Gerson identifies that Chinese corporate social responsibility is understood in four primary dimensions (21 – 24): 1. Community outreach: This involves giving back to the society and helping members of the society to improve their lot through CSR drives. 2. Education: This involves the provision of education and enhancing the human resource capabilities of workers and members of the community they live in. 3. Occupational Health and Safety: This involves the maintenance of the health and safety standards of works and going beyond the norms required by law to improve conditions for workers. 4. Environmental protection: Undertaking various environmental matters and circumstances to reduce the environmental footprints of the society. A larger study was conducted by Wang and Chaudhri who studied three main variables, which included: 1. Drivers of CSR engagement in China; 2. Areas of CSR engagement; 3. CSR communication view and 4. Preferred details of CSR communication. The study involved two stages. The first stage analyzed CSR in Shanghai based businesses. These were national businesses with high net revenue. On the other hand, the second study examined regional businesses and mid-sized businesses to view their position. The findings indicated that CSR was mainly to improve corporate image and building corporate culture (Wang and Chaudhri 247). The second most popular reason for CSR was to meet CSR expectations of customers and this seem to have a profit motive. The top five areas that are used for CSR engagement involved the following: 1. Environmental protection; 2. Energy conservation; 3. Disaster relief 4. Occupational health and safety and 5. Consumer rights (Wang and Chaudhri 248). The research indicated that there is a non-mandatory reporting system for most businesses and entities, CSR reporting remains the base of corporate social responsibility communication (Wang and Chaudhri 249). Also, the communication is mainly based on internal audience whose cooperation was needed for the attainment of CSR targets. 2.4 Brand Equity and Corporate Social Responsibility Brand equity is “the commercial value that derives from consumer perception of the brand name of a particular product or service, rather than from the product or service itself.” (Aaker para 2). This means brand equity involves the amount of profitability that can be linked to some kind of connection consumers have with a firms products and services. Brand equity is perceptional in nature. It depends in the mindset and emotions a person connects with a given product or service. This presupposes that brand equity can be attained through the creation of some kind of link with the consumer. This is done when the firm does or presents something that resonates with the mindset and/or emotions of the consumers. This will cause them to be disposed towards the brand and the product. This means that if the firm does something of significance, it stays with the consumers and they consumers do not consider any other brand but the brand in question. The implication is that brand equity is a kind of emotion or sentiment that gets a consumer to build a habit and a will to continue purchasing from one producer. Due to this, brand equity is a form of goodwill that firms attain through their operations and affairs. “Brand equity provides key strategic assets that can maximize long-term performance” (Martos-Partal 701). Brand equity helps a brand to earn more income and more revenue from consumers through brand loyalty, premium prices and higher leverage (Martos-Partal 702). This means that brand equity causes consumers to be more loyal to the brand and also pay more for a firm. The logic of corporate social responsibility being a tool for brand equity lies in the fact that CSR can be used to convince a customer that their money is not only going to the pockets of shareholders. Rather, it indicates that the firm is providing more benefit and value to stakeholders in the wider society and the community. When a person knows that what he is paying goes to also assist the society, they will be more than willing to support the firm in their activities and in their bid. 2.5 Building Brand Equity through CSR There are various approaches through which a firm can build brand equity via corporate social responsibility. Different professionals and academics provide recommendations on how corporate social responsibility can be converted to brand equity. Nieto states that there will be the need to build a connection between the brand and the consumers who acquire the products. This is because in order to get consumers to get emotionally connected to a company, there has to be some kind of brands and communication system that is in personam. And the consumer has to have a degree of connection that will be sustained throughout the process. Also, the firm must be able to demonstrate a movable brand experience that the corporate social responsibility can present (Nieto para 16). This is because there is the need to present the commitment in a way and manner that consumers can get the best and the most appropriate methods and approaches to promote their brands and services. Melo and Galan identify that brand value is are highly sensitive to corporate social responsibility (437). Empirical studies indicate that where CSR marketing is carefully structured, it will provide a higher brand connection and brand equity (Melo and Galan 437). In order to do this, there are four recommendations for attaining brand value through CSR (George 321): 1. Awareness building 2. Enhancing brand image 3. Establish brand credibility and 4. Evoking brand feelings In order to carry out a strong brand equity through CSR and to use it to attain performance results and profitability, there is the need to build awareness of the projects and activities. This will come through the advertising of the corporate social responsibility acts and work n it to attain some degree of awareness and sensitivity. After that, there is the need for brand image to be linked with the CSR awareness processes. This is because the brand image must connect to the CSR drives and this will get consumers to feel a strong connection and linkage to the brand. Finally, when the merger is attained, there is the need for the provision of brand credibility. This will provide a system through which the brand will be connected to the CSR activities of the firm. This will help the brands to gain some kind of affinity and familiarity with consumers. Thus, brand equity-oriented activities will seek to unleash the desire and expectation of consumers. This will enable the consumers to get some degree of connection and identity. These promotion and marketing drive must mention the brand and also mention the CSR activities in the same advertising activity or event. The end will be to provide an optimization of the CSR activities and the consumer interests and sentiments. 2.6 Issues with CSR and Brand Equity in Luxury Firms According to a study by Torelhi et al (231) a luxury brand fails to attain the same level of brand equity through CSR marketing. This is because most people do not really identify with brand equity and brand satisfaction when it comes to CSR drives. Luxury products are sold to the rich and most of them do not appreciate elements of corporate social responsibility as they are carried out. Hence, there is no real change in sales when CSR is carried out in sch entities. Luxury products are seen as elements of self-service and self interest (Torelhi et al 232).This means that people see those brands as self transactional and self centered products. Hence their corporate social responsibility drives are seen as nothing more than giving back what they have taken from the poor. Thus, it is commendable for luxury product manufacturers to provide services in CSR that resonates directly with their consumers. This is somewhat different from ordinary everyday product sellers who provide services at the rate of ordinary entities and ordinary producers. Conclusion The study has established some important studies about CSR and its evolution in China. This provides a framework within which a study can be conducted for results to be attained. The main factors that are identified is that China is quite different from other countries in terms of CSR adoption. China is a new recipient of modern CSR policies and concepts. And the society reacts to CSR differently. Corporate social responsibility in China is mainly viewed as ad hoc philanthropy, strategic philanthropy and a framework of ethical business practices. This most popular approaches now that is pervasive in China include community outreach, education, occupational health and safety, and environmental protection. Other popular methods of CSR in China include energy conservatism, disaster relieve, consumer rights and occupational health and safety. Although China is a communist country, most CSR drives are aimed at pleasing consumers and hence, it can be logical said CSR has strong connections with profitability. Brand equity is about how a firm attains profitability by promoting its corporate social responsibility activities alongside the brands and products they sell. The end of brand equity is to create a psychological linkage with consumers to keep consumers loyal and satisfied. Brand equity has also been viewed by other scholars as a strategic asset and a form of goodwill. In order to attain brand equity through CSR, a company will need to build awareness of their CSR and enhance brand image independently. After that, they will need to establish brand credibility by linking the CSR activity with the brands image. This invokes brand feelings and connects consumers to the brand in a manner that enhance loyalty and the desire to pay more for a firms products. RESEARCH DESIGN This section provides a synopsis of the research and the process that will be employed in the analysis of the research and core findings. Kothari states that a research is a structured enquiry to a given research question (2). To this end, the research question revolves around the way foreign sportswear companies in China promote their CSR to enhance brand equity and improve performance. This will examine the ways these brands provide some degree of the sportswear companies in China work with the view of blending their CSR activities in their marketing activities and processes. In order to do this, there will be the need for a fieldwork to be conducted into the research question to gather information that will be analyzed to provide logical conclusions and inferences. 3.1 Data Collection There are many sportswear firms in China. A sample is a careful selection of members of a total population to be studied by a researcher who cannot study 100% of all the elements in the population (Barbie 92). The sample for this study will include two American sportswear companies that operate in China, Nike and Adidas. These two brands are established in China and they have be been involved in various CSR activities. The following stages of the data collection will be followed: Stage 1 A critical review of the CSR activities of the two sportswear brands. This review will be done by observation and a follow up. This will involve a critique of the Chinese websites of these companies. This will be followed up through various links and interviews will be conducted with a marketing executive in these two companies. This will be documented and summarized. Stage 2 A linkage of the social marketing drives undertaken to promote the CSR drives. This will be done by a critique of the various media houses and adverts to document popular trends and popular themes used. The way this links to brand equity will be documented and a further interview will be conducted to confirm how the CSR marketing links to brand equity and leverage the brands Stage 3 This will involve an external evaluation of corporate social responsibility by Nike and Adidas in China and how consumers view it. This will involve the distribution of over 1000 questionnaires who have had some kind of contact with Adidas CSR activities. The perceptions will be tested through a series of questionnaires that will be distributed electronically. Consumers response will show the effect of social marketing and its linkage to brand equity. 3.2 Data Analysis The findings will involve the collation of the findings will involve three main phases. The first phase will involve the presentation of the absolute ends that CSR sought to attain for the two companies. This will be evaluate in absolute terms. The second element will examine how CSR is marketed and the expectations for brand equity through CSR marketing. This will be done in relation to the targets and ends sought by the management of the two sportswear companies. Finally, the consumer views of social marketing and brand equity in CSR will show how consumers feel towards their CSR. 3.2 Inference With the findings from all the three components of the data collection, the research will try to evaluate the impact CSR marketing and social marketing has on brand equity and firm performance. This will show how consumers view the Nike and Adidas brand from a social marketing perspective. This will be done by making inferences from earnings and changes in profitability from different activities and their impacts on the firms performance. Works Cited Aaker, Dennis “Innovation: Brand It or Lose It” California Management Review 50 (1) Fall 2007. Journal. Barbie John. Research Methodology Mason, OH: Cengage. 2012. Print. Chan, Anita. “A “race to the bottom:” Globalization and China’s labor standards.” China Perspectives, 46, 41–49. 2003. Journal. Crowther David and Capaldi Nicholas. The Ashgate Research Companion to Corporate Social Responsibility. Surrey: Ashgate Publications. 2012. Print. George Timoty. “How Corporate Social Responsibility Influences Brand Equity” Management Accounting Quarterly Summer: Vol 13 No 4. 2012. Journal. Gerson, Brett “CSR best practices”. China Business Review, (May/June), 20–25. 2007. Journal. 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