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Essay: Impact of CSR on Consumer Behavior in India (Coca Cola Case Study)

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Corporate Social Responsibility (CSR) has become a critical component of modern business strategies, particularly in emerging markets like India. Similar to Milita’s (2012) study of using Carroll’s pyramid for consumer behavior with regards to CSR, Sharma & Shravani (2013) conducted a study of a similar vein in India. However, they added the dimension of ‘environmental responsibilities’. This essay expands on the findings of these studies and explores how CSR initiatives influence consumer behavior in India.

Historical Context of CSR in India

India arguably has one of the longest histories of implementing CSR strategies in businesses. Traditionally, CSR in India was characterized by philanthropy, with businesses engaging in charitable activities to support their communities. However, recent years have shown a swift change from traditional philanthropy techniques to direct engagement with business operations, aligning CSR with core business strategies.

Consumer Expectations and Behavior

According to a study by Sharma & Shravani (2013), Indian consumers value economic responsibility and the ethical dimension the most, followed by philanthropic activities. However, the legal and environmental dimensions have a mild impact on consumer behavior. Their findings showed that consumers prefer firms that indulge in philanthropic activities such as participating in community services and sponsoring education. This indicates that consumers want businesses to contribute to the welfare of the community.

Interestingly, the legal dimension was ranked as least important. This could be attributed to widespread corruption and the tendency of individuals to bend and ignore stipulated rules, often facilitated by bribery. Another study by Mishra (2012) found that Indian consumers expect companies to engage in CSR initiatives as it can impact their purchasing motives. These initiatives help companies build a good reputation, which in turn increases their consumer following, as shown by Smith (2003) and Bird et al. (2007).

Data on Consumer Behavior

A report by Cone Communications (2013) highlights the importance of CSR in consumer decision-making. The data indicates that:

  • 52% of consumers believe they can make significant change through their purchase decisions.
  • 88% of consumers are willing to buy products with a social/environmental benefit.
  • 77% of consumers would tell their family and friends about a company’s CSR initiatives (Word of Mouth).

This data underscores the significant role that CSR plays in shaping consumer behavior, not just in India but globally.

Case Study: Coca-Cola in India

As more multinational corporations (MNCs) started opening their operations in India due to globalization, they also brought in and deployed their own company CSR initiatives. Coca-Cola, one of the largest beverage companies in the world, is a prime example. Coca-Cola was awarded the Golden Peacock Award in 2008 for several community initiatives, especially in water conservation (Faheem, 2009). However, this wasn’t always the case. A report by the Center of Science and Environment argued that Coca-Cola had been selling drinks containing high levels of pesticides, causing illnesses such as birth defects and cancer. They were also accused of extracting large amounts of groundwater and polluting water sources (Hills & Welford, 2005).

This led to the banning of Coca-Cola’s products in a few Indian states, along with the company earning the brand of a ‘corporate villain’ (Pirson & Malhotra, 2008). Following this, sales dropped by 30-40% and so did the stock price. A survey among Delhi consumers found that they agreed with the banning of the drink and boycotting of the brand. Numerous protests and demonstrations were held against Coca-Cola across cities in India (Hills & Welford, 2005). According to Pirson & Malhotra (2008), the reason for the consumer backlash was Coca-Cola’s refusal to acknowledge the accusations, which led to feelings of betrayal among consumers.

Recovery and Strategic CSR Initiatives

To recover from this crisis, Coca-Cola became a member of the World Wide Fund for Nature (WWF) in 2007 and signed up for the CEO Water Mandate to improve water usage and develop frameworks to maintain water sources (Pirson & Malhotra, 2008). Coca-Cola also engaged in a mixture of implicit and explicit CSR activities that are preferred by Indian consumers, as indicated by Hofstede’s Individualism vs. Collectivism (IDV) values.

The company launched several rainwater harvesting projects to address water scarcity and depleting groundwater levels (implicit CSR) and joined WWF and the CEO Water Mandate (explicit CSR). These initiatives helped Coca-Cola rebuild its reputation and regain consumer trust.

Theoretical Perspectives on CSR

The studies and case of Coca-Cola in India can be analyzed through various academic theories:

  1. Carroll’s Pyramid of CSR: This model suggests that businesses have four levels of responsibility: economic, legal, ethical, and philanthropic. Indian consumers prioritize economic and ethical responsibilities, followed by philanthropic and legal aspects. This aligns with Carroll’s framework, highlighting the importance of balancing different CSR dimensions.
  2. Stakeholder Theory: This theory emphasizes the importance of addressing the needs and concerns of all stakeholders, not just shareholders. Coca-Cola’s experience in India demonstrates the necessity of engaging with and addressing the concerns of local communities to maintain a positive corporate reputation.
  3. Legitimacy Theory: This theory posits that companies must operate within the norms and values of the society in which they operate to maintain legitimacy. Coca-Cola’s efforts to align its CSR initiatives with the expectations of Indian consumers reflect this theory, demonstrating the importance of cultural and social alignment in CSR strategies.

Conclusion

In conclusion, CSR plays a crucial role in shaping consumer behavior in India. Studies by Sharma & Shravani (2013) and Mishra (2012) reveal that Indian consumers highly value economic and ethical responsibilities, and expect companies to engage in CSR initiatives. The case of Coca-Cola in India highlights the potential risks and rewards associated with CSR. By addressing consumer concerns and aligning their CSR strategies with local expectations, companies can build strong reputations and foster consumer loyalty. Understanding and implementing effective CSR practices is essential for businesses to succeed in the competitive and socially conscious market of India.

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