Question:
Discuss about CSR on International Business.
This paper mainly discusses about the impact of CSR on International business. It also talks about the several trends in the history of emergence of CSR. There is also the discussion of the pros and cons of the corporate and social responsibility of the well known International companies. The paper also goes on towards the discussion of the legal obligations that the companies must always take into consideration while adopting the CSR activities. There is also the example of many well known companies that have been often highly criticized because of the unethical and illegal activities that were taken up by hose companies. It also talks about the newest adaptations that have been made in UAE as a part of the joint effort towards taking up of the CSR activities.
CSR or the corporate social responsibility is a very important aspect of any and every business organization in the present day business scenario. In this modern day the needs and demands of people have underwent a sea change (Boulouta and Pitelis 2014). The business organizations have also realized that in order to flourish in the long run they need to take up several over additional responsibilities apart from just satisfying their customers. As a result of this the companies have started this new approach called the CSR or the corporate social responsibility. This is basically a new and innovative business model that enables the business organizations to promote sustainable development for all their stakeholders. This can be done by generating several social, economic and environmental benefits for each and every stakeholder. It is also very important for the multinational companies to be able to utilize their corporate social responsibility as a part of their overall business. This will not only benefit the society but also will be quite helpful towards the business organization itself. It is also very much essential for the Multinational companies to make sure that they are very much capable in taking up their responsibility towards the environment and also towards all their stakeholders (Boulouta and Pitelis 2014). This paper will be dealing with the influence of corporate social responsibility over the International Business.
Qualitative analysis method has been used in order to get an overview of the emergence of CSR in the historical framework. Different aspects of CSR of the international companies have been described. This analysis has also dealt with the kinds of CSR that the global companies can deal. The results also show what can be the pros and cons of adopting the CSR activities.
Brands loyalty is one of the most important aspects of the present market scenario. In order to survive in the long run, the companies will have to provide their customers with something that is beyond the reach of their competitors (Brammer and Mellahi 2015).
In order to carry on the CSR, the companies will need extra fund that will ultimately be gathered from the customers itself. This will make some additions in the usual price of the products. As the area of operation of internal companies is large they deal with many different customers. Each of them has a different mindset (Soeberg and van Zandwijk 2016). As a result of this, many customers may refuse to pay the extra additional price and switch over to alternatives.
Customers will not be reluctant to pay a bit more for purchasing the products of the company if they see a noble cause behind it like the company’s effort to help the poor children for education, or compensating the customer losses, or donating for some social service (Tai and Chuang 2014).
The corporate social responsibility is a new kind of business approach that has been used up by different business organizations. However in the recent years, all the different business organizations are demanding for raising the matter of the corporate social responsibility and making it compulsory for all the companies. All the companies usually play a very important role in the society. In other words, it is the different business organizations which are responsible for making the lives of people easy by providing them with all the necessary components of day to day life. It is therefore essential for the business organizations to contribute more towards the society. The companies must therefore try to play a very vital role in the society. However this must be noted at the same time that the corporate and social responsibility is not really a very new concept. It is something that has been present since time in memoriam.
The concept of the corporate and social responsibility is basically aimed at using the environmental resources in a very sensitive way. In other words the business organizations that are mainly engrossed in the manufacturing of several goods and services must also know how to take up their responsibility towards the nature. The business organizations must not give priority only to money making but they must also keep in mind that they have some responsibility towards their environment as well. However the very origin of the corporate and social responsibility can be traced back into time of Bible and the holy Christian scriptures where God created The Earth and also man (Brammer and Mellahi 2015). This is a common fact that is known to all. However the most important connection that we can derive from here and relate it with the concept of Corporate and social responsibility is evident from the fact that man was instructed by God to fill the Earth and to govern it. Same is the case with business organizations. They must make sure that none of their activities are harming the environment in any way. They must also keep aside a certain portion of their profit for being donated in several social developmental works.
As far as the Multinational companies are concerned, taking up the usage of the corporate social responsibility has become all the very essential. As they International business is usually carried on a very large scale, it is natural that they have to deal with a large number of stakeholders and also have to look after a large number of transactions taking place across several different countries. The main concept main concept of the CSR is a particular set of conducts that the companies must abide by while treating their customers. CSR comprises of several rules that the company will have to keep in mind while carrying on its day to day activity. CSR of the multinational companies will mainly be evaluated on the basis of the company’s attitude towards the community. In other words, the CSR of the company will mainly be conducted through the waste management, elimination of wastes, efficient and productive use of resources of the company (Tai and Chuang 2014). However it must be taken into account that corporate social responsibility is not always the same thing for all the organizations. Many think that it is just related to legal considerations, while others may often consider it as a charitable means. As the multinational companies usually operate in many different countries, they often face many different kinds of problems and have to face many new kinds of social, ethical and environmental problems.
The business organizations must be able to understand and take up their responsibility towards the society and must always try to do something good for the welfare of all the people of society. This can include activities like supporting the poor and the underprivileged people, or some contributions for the remote village areas by contributing a good amount of donations for street lightning and several other such activities (Brammer and Mellahi 2015).Corporate and social responsibility is also of great importance in teaching the companies about the unethical practices that they often continue like that of appointment of child labor, keeping the employees in general and specially the minor children as the bonded labor. As the CSR of the company is very much associated with the legal obligations as well, it is also very essential for the companies to pay very much importance to it. There are innumerable examples where the renowned and the well known companies have often neglected this legal obligation, Some good examples can be Nike, Nestle, James Hardie and several other such companies. This is really very much unfortunate that such well known companies which are very much involved in the global or the international business have been involved in such unethical and harmful activities. These activities were adopted and followed by these international companies only in order to satisfy their own personal benefits.
Nike is a very well known universally establish company that was highly criticized for having overlooked its legal and ethical consideration by appointing and employing the young and minor children as labor In this way they were promoting or rather taking the help of child labor which is an universal crime. As a well known responsible company they must have contributed towards supporting the poor and the unprivileged children. Same was the case with Nestle as well. Though it is one of the most well known and u universally recognized company. Nestle has also been criticized on a large scale to have ignored the legal considerations and have used several unethical means. They have also made use of bonded child labor in order to utilize the supply chain for their products.
Another such example can be that of James Hardie Company. One of the most important aspects of the corporate and social responsibility of the multinational companies must be to make sure that none of their activities are causing any harm to their consumers (Soeberg and van Zandwijk 2016). The central idea of the corporate and social activity of the companies is to contribute towards the well being of the society. However James Hardie products were harming the customers a great deal by creating asbestos related diseases. It was from the building materials of this company that the consumers were rapidly getting affected from the asbestos related disease. In such cases it was the prior responsibility of the company to have helped the consumers by providing them with ample compensations or by taking up the entire responsibility of bearing the treatment of the affected consumers. However nothing such was seen in this case. The company made up efforts from its own end to help those people.
Another such example is that of Ford Pinto that went to such a great extent of risking up the lives of their customers by allowing a certain flawed car design to pass on (Tai and Chuang 2014). Though it was known to the company that this kind of a design will have fatal results, they allowed this model to be designed only because it would have been cheaper for them to pay off the law suits very easily. This flawed model of the car had resulted into the accidents and death of many customers.
Hence, it is very much evident that the legal considerations are very much a part of the corporate and social responsibility of the companies which they must always adhere to. There are several pros and cons of the corporate and social responsibility that is taken up by the companies.
In the present day scenario all the multinational companies have to maintain a very good customer relationship in order to maintain their image worldwide. This is very much related to the trust, consistency and the credibility. Maintaining a good CSR is likely to enhance the relationship between the company and the consumers. The increased consumer attachment is likely to bring many financial benefits for the company (Wood 2015).
The multinational companies will be able to use the CSR as a very good opportunity of increasing their innovation. CSR usually acts as the opportunity identifier for the companies because many stakeholders will be sharing their valuable feedbacks that the companies can use for their betterment (Hadfield and Measham 2015).
It is needless to state that in the modern day business scenario needs to pay huge attention on its publicity so that they can enjoy a very good reputation across all the regions of their operation. A good CSR will always help in increasing the publicity of the company. This is because the consumers will never mind to pay a little extra for buying the products of a company if they see a noble cause behind it (Brammer and Mellahi 2015). A very good example can be the advertisement of many companies that are often telecast on television in order to make the customers aware about the CSR of the companies. The advertisements show that buying several products of that company will help in contributing towards the education of the poor children or for the medical treatment of the poor who cannot afford it on their own. This will make more customers interested in buying the products of the company and the reputation of the company will also be enhanced.
Shift from profit making objective
Though it is said that CSR always helps in making the company have a long lasting and good reputation but at the same time it also makes the company shift its attention from the profit making objective (Wood 2015). In the attempt of promoting the welfare for the community, the companies start keeping aside their funds and other resources. This however makes the company pay much less attention on its shareholders. The companies often forget that they have to work for their stakeholders and also make profits for them.
Company reputation takes a hit
As per the policies of the CSR, the companies need to disclose all their errors to the customers regarding their products. Often this creates a negative impact on the customers when the companies have to declare their already sold out products as flawed and call them back. This takes away the customer base from the hands of the company and also earns them a very negative ratio.
Increase in the cost of production
The companies will naturally have to bear a huge amount of expenditure in order to adopt and carry on with the CSR activities. If the companies want to keep aside and use a certain amount of their profit for some of the welfare activities of the company, then this extra fund has to be somehow raised by the company (Hadfield and Measham 2015). This can only be arranged if the company takes extra amount of money from their customers. However the customers might feel reluctant in paying more prices for the products. This is because of the fact that not every customer is of the same type. Particularly in case of the multinational companies this is very much visible because these companies have to operate over a large number of areas and the economy of all the different regions is also different. Hence, the customers operating in such large area of operation will not be of the same mindset. So, some of the customers will be reluctant to pay extra amount of money for the same products. At the same time there will be some customers who will have no problem in paying the extra additional price of the product if the company is having a noble case behind it.
Legislations and provisions related to CSR
As the multinational companies are the ones that usually operate over a large area they often have to face many different kinds of legal obligations as well. Different countries have different kinds of legal system. Often the legal system of many countries are too much complicated a d the companies have to suffer through a lot of difficulties in order to get the legal formalities done (He and Lai 2014). However if the companies are to carry on with their CSR properly, then they will have to undergo with all these difficulties and the legal formalities done. They will have to keep this in and that they cannot ignore the legal considerations of they are o promote the welfare of the community in the long run. Companies like Nestle have been highly criticized to have been involved in many unethical and illegal practices thus having overlooked the legal consideration of their corporate and social responsibility.
Hence, it can be stated that in the modern day scenario it is very essential for the MNCS to take up the CSR activities. Though the companies will have to undergo several difficulties in this process, but they will have to overcome it. However they companies will have to keep pace with the 21st century scenario and they have to emphasize on a multidimensional aspect. They have to take in consideration the area of their operation, the demographic and the psychographic aspects of the consumers, the geographical location of their outlets and several other such factors (He and Lai 2014).. The companies will have to realize the fact that they can and must take an active participation in the pro motion of the social welfare. Particularly, the MNCs have a huge scope for this. Taking up the CSR activities will also enable the firms to maintain a good reputation all over their areas of operation. Many important companies all over the world have started taking up many important steps towards the economic and social development.
There are many important companies that have taken up many important CSR activities in order to serve for the welfare of the community and also for creating a good brand image for themselves. Some of the important and well known companies that are known for best CSR activities are Google, The Walt Disney Company, Microsoft and many others. One of the important influences that CSR has over the international business is the rand loyalty. It is a known fact that the present market scenario is a very competitive one and the companies need to work hard in order to survive in the long run. One of the most important moves that can be taken by the companies to establish the brand loyalty is by taking up the CSR very seriously. Consumer loyalty is however very tough to earn. The company has to make proper research and development in order to know the expectation of the customers. The companies have to keep in mind that they need to do something that is very unique and that makes them different from their competitors. They have to satisfy the customers to such an extent that is beyond the reach of their competitive firms. Only then the consumers will consider buying the same product from the same market even in future and under any kind of circumstances. Companies based in all the countries have started taking up many different kinds of CSR activities in order to sustain in the long run. Countries like UK, Australia have already made several improvements in order to expand their CSR activities.
A major change has also been seen in UAE in terms of the CSR. They have adhered to the Global Compact which is the World’s largest sustainability initiative. Many stakeholders from all over the world have joined hands in this initiative and launched this UN global network in Dubai. As a part of their CSR activity they have started focusing on new projects like setting up solar street power. This is an effort to reduce the energy consumption. They have also started working on women empowerment. As a part of this, the HeForShe campaign has also been launched.
Conclusion
Hence, it can be concluded that CSR activities have influenced the global business a great deal and has also helped it in many different ways. CSR will help the company to create a deep relationship with the customers. It will enable to enhance the brand loyalty of the company. This in turn will be influencing the profit maximization of the company. This will be beneficial to the company on both parts. It will not be harming the profit maximizing objective of the company and will also enable the companies to carry on with their CSR activities. Hence, establishing and using the CSR guidelines for any industry is of utmost importance.
References
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Hadfield, P. and Measham, F., 2015. The outsourcing of control: Alcohol law enforcement, private-sector governance and the evening and night-time economy. Urban studies, 52(3), pp.517-537.
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Okoye, A., 2015. The UK Social Action, Responsibility and Heroism (SARAH) Act 2015 and corporate social responsibility (CSR): potential connections. International Company and Commercial Law Review, 26(12), pp.373-376.
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