Corporate Social Responsibility and Its Influence on Business - Essay Example

CSR and its Influence on Business

Description of concept

All businesses are engaged in some activities, which may be harmful for the environment, or can pursue own interests regardless of the customers’ wishes, all these activities undermine overall corporate image. To make it stable and to draw customers’ attention companies do just the opposite(Afzal, 2009). They keep their activities in the same way, however, they use all their departments to emphasize that they are different from other companies, which are harmful for society or even planet. All companies have their own benefits, which are measured in revenues and corporate growth. However, CSR is about the serving to the society and investing in customers’ satisfaction and social practices. Non-profit organizations serve society on the charity basis and they are the best in CSR, however, latter obtain unique character when it refers to the usual business, which mostly working for own benefits. CSR generally means that company is caring about the world it works with .It involves customers, environment, for instance, to prevent deforestation many companies, which need paper packages use plastic instead(Ismail,2009). This is the environmental realization of CSR. Companies can invest in local and even national charities, it can devote certain part of revenues on building of social projects that is philanthropy realization of CSR. Since all businesses use labor force for their production facilities and other business activities, labor practices are also affected(Pohl, 2010). Treating employees in unique and positive way, increasing salaries and hiring people in the regions with high unemployment is also example of the CSR(Aras,2009). It means that company wants to solve the social problem with unemployment. Generally non-profit organizations have not enough resources to solve substantial social issues, while pursuing own goals, investing in CSR commercial organizations do much more than non-profit one. The main reason why businesses use CSR in their business practices is recognition of customers and their opinion towards the brand. It means that it is the mean of promotion of the brand and company itself. Customers, who know that company is working for environment, or even for their well-being, will order something in company. That is why, many developed companies utilize benefits from such business activity to reach their corporate goals. CSR is also useful when company needs to show that it not only harm the environment but also interested in minimizing of this harm. For instance, fast-food companies, which work with suppliers, which kill animals in the cruel ways prefer to show customers that they would rather work with suppliers, which use technologically developed ways to kill animals than the above mentioned suppliers. That is why, it can help to decrease customers’ negative reaction after the devastating press disclosure of some points of the supply-chain of even some business activities. CSR is also powerful mean to restore the corporate image that was damaged by corporate misconducts.

CSR can provide multiple positive impacts on the customers and company. Furthermore, it can result in internal improvements, which can lead to the increasing of revenues and overall company’s performance.

Why companies use CSR

There are 5 important key features, which can show why CSR is useful for both customers and companies, which initiate it.

Innovation

This concept is important for the businesses, since it helps to keep up with the pace of the technological development. Furthermore, in the process of innovations some organizations add something new to the world. Innovation can be associated with the CSR, since to optimize processes and to make activities more sustainable facilities, companies need to innovate and to undertake organizational changes. Customers get the new types of products or more environment production facilities and company acquires more optimized production processes, which can even decrease prime cost of products. It is helpful for both company and customers and can provide further framework for development. One of examples of CSR innovation is decreasing of costs on the production by McDonalds. They just established production of new burgers with proven beef by the good suppliers. Using such innovation company reached the milestone of around 10% of higher customers’ interest to brand. it could be impossible to reach such changes without use of CSR.

Decreasing expenses

Using CSR it is important to emphasize that businesses can dramatically cut the expenses on specific business processes. CSR can be engaged in many business processes of company, that is why, business can be dramatically improved. Considering the example of decreasing of costs for the production one can underline cheaper packaging that can be done with plastic instead of paper, furthermore, using solar energy technologies and optimizing the energy consumption within the production company can invest in CSR and promotion of company along with cutting costs for utilities. That is the common way to use CSR concept for the sake of both corporate and environmental benefits(Drop, 2012).

Brand differentiation

There are many claims, which companies use unsustainable processes, that their products can cause some kinds of the diseases and harm the health of customers. That is the main reason why companies like McDonalds, Coca Cola are engaged in the CSR activities. These companies are trying to develop something that will decrease the negative reaction of customers to the products. Doing so, companies develop new kinds of products like sugar-free cola or special organic burgers, which are made with application of healthy products. Customers have now choice to use healthy products, which are the new products for the company that is selling them. This brand differentiation can help companies to get more revenues and customers get the choice. Amount of negative claims against the company is decreased and companies get more revenues that is also beneficial for both parties.

Long term perspective

All companies have predictions towards their activities, they make financial forecasts and make reports of the past quarters to define company’s performance. However, society becomes more engaged in business and its activities and can be negatively oriented on some companies, to think that they are offering bad products, regardless of their quality, the only reason to be against the brand can be sustainability. That is why companies should think how their currents decisions and business activities will result in the future social reaction on the brand. CSR can help to establish successful business plan that will consider sustainability in the long term perspective. Press becomes stronger and gets strong impact on the business, since it can deliver devastating message to customers that will undermine all measures, which company engaged in the development of brand. In the long term perspective, press influence might be even stronger(Joshi,2007).

Customers’ engagement

Most companies use the CSR to just utilize their strong points and to reduce the weak ones, however, why company should use CSR without making customers know about it? One of the examples of the successful application of CSR to gain corporate benefits belongs to the Walmart. This company investments dramatical resources in the CSR and environmental activities, so it became the main environmentally-friendly business. Walmart emphasizes their contribution to the environment almost in every advertisement block, since talking about something good can help to render the message about products and to draw more interest to the brand. Companies fails to use CSR for their corporate success like Walmart does and they misuse powerful mean to promote the brand and products.

Bigger picture

Porter’s forces

Porter’s forces have the main one that is dominant of other forces. This force can shape the company’s performance and can provide substantial benefits. Investing in bargaining power of customers can provide substantial benefits (Lenssen, Louche and Van Den Berghe, 2005). However, company can invest in its sustainability in the wise way to increase bargaining power of customers. Working for sustainability, company can invest in shareholder value that will increase company’s profitability through increasing interest of customers to the brand. There is sixth power, power of stakeholder opinion that should be confronted. Porter’s forces main concepts lie in the defenses for gaining opportunities (Lenssen, Louche and Van Den Berghe, 2005). Thus, companies should take specific measures to protect from the negative opinion of customers. It is possible through sustainable business processes and investing in CSR. That is the main link between CSR and Porter’s forces. Speaking about the Walmart example, one should underline that this company is the most successful in application of CSR for buyer’s force, since they invest enormous resources on CSR and advertising this fact to make customers believe that company is worthy (Stern and Ander, 2008).

Logistics

From the point of view of the logistics, CSR is important key factor, since it can make company sustainable. There are many links between CSR and logistics, we will study few of them. Firstly, all transportation means require some resources to consume. Production of them harms the environment, therefore, bad logistics and intricate ways is not sustainable way of organizing supply chain (Ayers and Odegaard, 2008). Unsustainable supply chain is always subject for criticism that can cause problems with corporate image (Ayers and Odegaard, 2008). There is also positive effect from effective, sustainable position of company in logistics (Lenssen, Louche and Van Den Berghe, 2005). Optimizing routes and destination points, company can save considerable resources on logistics. One more issue is associated with emissions, which all cars make, depends on their size, emission is higher or lower. Therefore, large companies contribute to the overall environmental problems that makes company unsustainable. Optimizing routes and using energy-efficient transports can reduce emission and help company to save valuable resources. Walmart, being the brilliant example of successful integration of CSR principles is leader in optimizing supply chain, it has processed routes, which make transportation of products easier (Ayers and Odegaard, 2008). Furthermore, it helps to keep products fresh (Werther and Chandler, 2014). To reduce amount of negative claims company try to work with suppliers, which supply also perishable products, which cannot take long transportation. Such products are offered for higher price to show that Walmart has the best and sustainable supply chain that allows it selling such products.

Marketing

Marketing is all about to persuade customers that company can provide superior products, which can solve all customers’ problems even better than competitors’ products. That is the primary goal for all marketing measures (Werther and Chandler, 2014). To achieve this goal, many companies invest in multiple strategies, however, investing in CSR like above-mentioned companies did can provide even stronger positive force for optimizing marketing efforts and to reach primary corporate goals. Marketing is important facet of all strategies and it based mostly on customers’ opinion towards brand and products (Werther and Chandler, 2014). To make this opinion positive, company can link marketing with CSR in the following ways:

1. Company can advertise its sustainable ways of production, which do not harm environment and do not contribute to the pollution of the world. Advertising of sustainable production facilities makes customers believe that they use environment-friendly products and sponsor company that cares about environment. Speaking about Walmart experience, it advertises its suppliers and their ways of production to transform it to the marketing measure (Stern and Ander, 2008).

Walmart advertising of products (Corporate.walmart.com, 2016)

2. CSR is essential when company need to emphasize some product or to make it popular. It can send the message to customers that specific product is made with the organic products and is delivered to the shelves in environment friendly way (Stern and Ander, 2008). It can increase profitability of company and increase overall corporate image. Walmart as one of the environment-friendly brands always tries to persuade customers that it uses only sustainable business processes to make and deliver products to the shelves. It increases overall performance of company. Walmart has specific range of products, which are supplied by proven and “organic” suppliers, who have CSR principles in foundation of business model. Therefore, customers believe that Walmart is sustainable company that can provide good products (Lenssen, Louche and Van Den Berghe, 2005).

3. To reach more customers, CSR can be used to optimize business processes to use cheaper resources, which are apparently environment-friendly. It can decrease price for products and help to invest in other spheres of brand to increase profitability. One of the specific examples of the effective application of CSR is use of cheap and reliable suppliers with CSR-oriented business models. They use optimized business processes and their products are much cheaper. Furthermore, decreasing costs for utilities and other services company can invest in marketing that will provide even more customers.

Conclusion

CSR is powerful business measure that has dramatic influence on customers, their loyalty and corporate image. Thus, developed companies invest in environment saving activities, they invest in charities, which persuade customers in the fact that company cares about the society and customers. Furthermore, having the developed CSR activities, company can be step ahead the competitors, since with CSR company gets more loyal customers, available customers willingly use products, since with CSR activities they are improved and healthy. All advertisings with (-free) concept are made to power customers brand awareness and to make them believe that company is caring about them and their health. There are many companies, which use gluten-,sugar-free products, it is the result of innovation of product and can result in positive effects for overall PR activities.