Corporate Social Responsibility And Competitive Advantage Theories Management Essay

Corporate social responsibility (CSR), also known as corporate responsibility, corporate citizenship, responsible business, sustainable responsible business (SRB), or corporate social performance, is a form of corporate self-regulation integrated into a business model.¼ˆWood, D. 1991¼‰

Kotler and Lee (2005) thought CSR is a commitment to community well-being through discretionary business practices and contributions of corporate resources.

Ccorporate social responsibility includes human rights, employee rights, stakeholder rights, environmental protection, community relations, transparency and corruption. (Frynas, 2005)

Competitive Advantage

Competitive advantage is generally believed that the company holds the trumps in resources, capacity, and value created for customers, profit levels and market share and so on.

Barney (1991) said a firm is said to have a competitive advantage when it is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors.

The basis of a competitive advantage comprises low costs for raw materials and energy, efficient production technologies and locational advantages.(Torsten Frohwein, Bernd Hansjurgens,2005).

The opportunities for competitive advantages derive from the following implications: regulation and information.(A. B. Jaffe, R. G. Newell, R. N. Stavins,2001)

The relationship of CSR & CA

Porte (1995) identifies the objectives of environmental improvements and enhanced competitiveness can be combined in a win-win situation.

There is no consensus that the relationship of Corporate Social Responsibility and Competitive Advantage. In this paper, the relationship between CSR & stakeholders is analyzed. A model of CSR contribution to competitive advantage was built so as to study the relationship between CSR & CA.

CSR is divided into the main stakeholders – investors, employees, consumers, business partners, natural environment, community and government responsibility, using the description of corporate social responsibility and stakeholder theory framework. The essay described the competitive advantage from three dimensions: strategic resources, enterprise core competencies and business environment according to the comprehensive theory of competitive advantage.

Main body

CSR & Enterprise Strategic Resources

Barney (1991) analyzed competitive advantages from point of view of resources: Valuable, Rare, Imperfectly Imitable and Non-Substitutable.

This essay selected two closely related resources with CSR to analyze: corporate reputation and corporate personnel.

CSR& Corporate Reputation

Olins (1990) said that corporate reputation might be extended to a large range of product brands.

Balmer (1998) Pointed out that corporate reputation finally is able to bring competitive advantage for enterprises and it is an important strategic resource.

Corporate reputation comes from stakeholders; therefore, companies must be responsible to its stakeholders. That means CSR could effect corporate reputation, thus affecting t competitive advantage.

Conversely, good reputation will also help companies to promote corporate social responsibility. Since the reputation determines attitude of the public and generates more favorable effect.

Some multinational companies with high reputation, such as Wal-Mart, Starbucks, Nike and McDonald’s fulfilled corporate social responsibility in brand-building to rebuild corporate reputation, image and corporate culture, thus enhanced the influence of brand.

From a long-term perspective, corporate social responsibility is more conducive to enhance the long-term development and public image.

CSR & corporate personnel

From the point of human resources, human capital is the basis for competitiveness. Staffs including employees and employers are makers, implementers, innovators and evaluators of core competitiveness of enterprises. Business survival and development depends on initiative and creativity of staff.

Staff is the driving force for the development. Staff is a powerful competitive advantage to obtain protection. An enterprise survival depends on staff. Therefore, how to retain staff and how to develop staff’s contribution of core competitiveness is the core issue.

Companies must not only provide employees with reasonable salary and benefits, but also need to create equality, non-discrimination, safety and health, continuing training, working environment. All these are responsibility that enterprises must bear to employees.

Staff loyalty and satisfaction result in competitively in the market. The enterprises fulfill their social responsibilities to their staff, such as attracting staff, retaining staff and stimulating creativity, which would have a positive impact.

CSR & Core Competencies

CSR & risk control capabilities

Risk control is that managers have taken various measures and methods to eliminate or reduce various possibilities of risk, or to reduce losses caused by the incident.

CSR that enterprise lead to its stakeholders could reduce the possibility and losses of risk, while appropriate penalties could be subject to ignoring the social responsibility.

CSR & business innovation

Business innovation means such new methods or procedures that an enterprise uses its skills and resources to build new technology and products so that customer requirements can be changed or provide in better response.

Business innovation includes product innovation, production process innovation and management innovation.

Enterprises create new products and services by innovation to access to excess profits rather than average profit and win in the competition. Therefore, enhancing business innovation can obtain competitive advantage.

In 2007, the British consulting firm Account Ability and CSR Network conducted “Corporate Social Responsibility Assessment”, and British Petroleum was ranking first. BP has also invested $20 million to reduce carbon dioxide emissions to resolve the problem in order to mitigate global warming. The result of carbon dioxide emissions was reduced by 10%in 2001 compared to 1990. And it also received $560 million of value-added returns. Therefore, CSR will stimulate innovation and bring benefits for enterprises.

CSR & the corporate environment

A good relationship with stakeholders helps enterprises to expand market, win opportunities so as to form competitive advantage.

CSR & Consumer

CSR & the Natural Environment

CSR & Business Partners

CSR & Community

CSR & Government

model

Competitive Advantages

Business partner

Community

Government

Consumer

Natural Environment

Staff

Corporate Environment

Competencies environment

mpetencies

Transformation and Influence between CSR & CA

CSR can be transformed into competitive advantages.

First, corporate social responsibility is good for optimizing the living environment.

Corporate social responsibility can help corporations avoid condemnation, punishment and restrictions from government, community and the public so that decision-making and management are flexibility and autonomy. Maybe they enjoy preferential policies and incentives by government.

Second, enterprises carry out their social responsibility to improve the public image, advance enterprise’s visibility, reputation, enhance social harmony, to attract consumers. All these can create a broader market and better development.

Third, corporate social responsibility can cross international barriers. At present, corporate social responsibility has become accepted indicators of “high standards and strict requirements”.

In an increasing economic globalization, corporate social responsibility would help enterprises to international markets, reduce the impact of social responsibility and enhance and upgrade competitiveness in the international market.

Fourth, corporate social responsibility will help to attract talent. Corporations regularly involved in social responsibility are more well-known to easily recruit and retain talent.

Fifth, corporate social responsibility will help improve financial performance, because Investors are always interested in responsible corporation.