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  • Published on: 14th September 2019
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TABLE OF CONTENTS

Introduction______________________________________________________________________________________________________________________Page 2

Articles__________________________________________________________________________________________________________________________Page 2

Review of Articles__________________________________________________________________________________________________________________________Page 7

Research Methodology____________________________________________________________________________________________________________________Page 9

Research Limitations______________________________________________________________________________________________________________________Page 10

Conclusion_____________________________________________________________________________________________________________________Page 10

References______________________________________________________________________________________________________________________Page11

1 INTRODUCTION

In today's economic and social environment, issues related to social responsibility and sustainability are gaining more and more importance, especially in the business sector. Today's consumers hold companies to a higher standard. They are seeking for more than just material products or quality services when choosing a company to purchase from or work with. Many companies promote their CSR campaign as a way of trying to shape public perceptions therefore attracting customers and building good-will with stakeholders. Social responsibility can be defined as a business firm's obligation, beyond that required by the law and economics, to pursue long term goals that are good for society.

2 ARTICLES

Corporate Social Responsibility is important in building a competitive advantage, making long run profits and improving companies' relationship with consumers. The most referenced typology distinguishes four different nature of responsibility: Economic, Legal, Ethic and Philanthropic (Diallo & Lambey-Checchin, 2016). Corporate Social Responsibility involves environmental friendliness, community support and fair treatment of employees. It has been argued that consumers' perceptions of Corporate Social Responsibility policy lead to loyalty to the retail company. Store or brand loyalty has become an important challenge for retailers in the context of price war because of its positive effects to a chain of stores for the long term. Consumers are more inclined to become loyal to the retailer outlet if they judge them favourably on both monetary and non-monetary aspects (Diallo & Lambey-Checchin, 2016).  Corporate Social Responsibility activities such as environmental programs, ethical products or social actions contribute to a better evaluation of companies.

Trust is an important element of relationship marketing to ensure long term interactions with customers (Diallo & Lambey-Checchin, 2016). Perceptions of Corporate Social Responsibility activities have a positive and significant influence on consumer trust because when retailers adopt a good behaviour, especially in respect with laws and societal values, they also send good signals, which reduce doubt/risk and gain trust from customers. Consumers who develop specific trust in a food retailer will be more committed to this store and more loyal (Diallo & Lambey-Checchin, 2016).

The environmental friendliness, donations, sale of local or ethical products lead consumers to assign positive associations, a higher quality of products or services or additional social value and therefore it builds positive outcomes such as consumer attitudes and corporate image.

Marketing, considered like a form of Corporate Social Responsibility action, is a well-known strategy which allows for companies to pursue their economic goals and satisfy the needs of society, especially for basic human needs and desires (Diallo & Lambey-Checchin, 2016).

It has been said that three outcomes of Corporate Social Responsibility would be customer satisfaction, competitive advantage and the reputation of the firm. The driving force behind the upsurge in Corporate Social Responsibility is due to environmentally sensitive consumers who are demanding sustainable and more environmentally friendly products and service.

Customer satisfaction on financial performance, as satisfied customers are likely to buy more frequently and in greater volume. In addition, satisfied customers will be more likely to purchase other goods and services offered by the firm, thereby becoming increasingly loyal to the firm's products and services (Saeisi, et al., 2014).  

When customers are faced with a parity in product, price and quality, they would prefer to choose products from companies that contribute to environmental management practices such as Corporate Social Responsibility (Saeisi, et al., 2014). Improvement in the quality of a product as a socially responsible practice enhances the levels of consumer satisfaction. Corporate Social Responsibility has a positive impact on Consumer satisfaction. Therefore, improved consumer satisfaction will increase the financial benefit through lower consumer defection rates and more repeat businesses because it reduces costs, generates more sales and increases returns.

In the mediated relationship between Corporate Social Responsibility and firm performance, competitive advantage and reputation act as the mediating factors via improving customer satisfaction (Saeisi, et al., 2014).

Corporate Social Responsibility associations do not only affect consumer identification with the business, but also product evaluation, trust and consumer satisfaction. Consumers are more likely to believe that more responsible businesses operate honestly in their activities and reflect the interest of both parties in the relationship when making decisions, which have a contribution to the honesty and trustworthiness of these businesses and their consumers. In addition, consumers are more willing to support businesses carrying out socially responsible initiatives, as part of self-enhancement. Essentially, companies who are focussed on corporate social responsibility provides an effective path for increasing trust between businesses and their consumers.

Corporate Social Responsibility facilitates the development of relationships that are formed based on belief and honesty on other's actions and promises, something beyond legalities and contractual arrangements (Martinez & del Bosque, 2013).

It is furthermore quite important that managers, who when are designing programs that are aimed at reinforcing consumer loyalty, besides offering additional benefits and showing trustworthiness, should try and communicate to the consumers not only corporate identity but also try and create the notion of identification amongst consumers.

Communication that makes Corporate Social Responsibility programs look more credible, distinct and authentic from other competitors will considerably improve the businesses' attractiveness (Martinez & del Bosque, 2013).

The modern-day market place is increasingly dynamic, competitive and vibrant. The customers are more informed about the products and services, are smarter and have more access to many channels and choices which they take not much time to exercise and consumers can easily choose to support competitors who promise better products and services at lower prices.

In an ever expanding and rapidly changing environment, businesses have realised that they cannot maintain attitudes characterised by attracting consumers or expanding in new markets (Alrubaiee, et al., 2017). The key to survive and reach success in these mature markets is to rely on maintaining or sustaining long-term relationships with stakeholders. The main challenge that every marketer must face in to today's society is finding a way to increase consumer loyalty and retention. Transforming many consumers into loyal consumers and establishing a long-term relationship is key to achieve organisational success.

Corporate Social Responsibility has been acknowledged as one of the most important factors in determining corporate reputation and an antecedent corporate image (Alrubaiee, et al., 2017). Although, from the view many stakeholders, corporate social responsibility can be seen as a way of supporting worthy causes, but from a businessman's point of view it is mainly seen as a marketing activity with purpose of increasing awareness of the business rather than creating a social impact.

Corporate Social Responsibility can provide many benefits to a business such as maximising sales and market share, attract and retain talented employees, strengthen the business' image, creating a competitive advantage and improved consumer loyalty (Alrubaiee, et al., 2017).

3. Review of Articles__________________________________________________

Business Performance was initially an issue that managers of large companies paid a good amount of attention t, because it gives vital information about the state of the company, its development, outlook and future success. All business procedures eventually centre around the goal of contributing to the success of the business in one way or another.

With regards to financial performance, Corporate Social Responsibility is shown to minimize conflicts between businesses and society.  It does this by bring into line the private costs of business with the cost to society of its procedures.  The benefits of good Corporate Social Responsibility programmes contain of the following:

• Risk Reduction: Businesses with good Corporate Social Responsibility policies in place are seldom the target of criticism from environmental and social non-governmental organisations.  They border themselves to harmless and comprehensive environmental practices, have good employer and employee relationships and are not involved in unpolished human rights violations.  This shields their incomes and share prices as well as their market share.

• Waste Reduction: Businesses that participate in active waste reduction strategies are less likely to find themselves as marks of governing bodies.  The negative attention drawn to those businesses often prevents potential investments and the consequent lawsuits and ultimate civil legal action.  As such, Corporate Social Responsibility gives the business a protective layer over its assets and earnings.

• Regulatory Protection: Much in the same way that Corporate Social Responsibility generates a valuable relationship with governing firms by reducing risk of legal action, so it also allows businesses entree to operating rights in potentially environmentally sensitive areas.  For example, oil businesses with good environmental track histories may be given mining rights on the basis of their solid reputation for being socially responsible.

• Brand Equity: In numerous different economic sectors, there is very little to choose between competitors.  In these cases, consumers' decisions are often influenced by a business's image or branding.  A case in point is the drop off in Nike sales after the revelations of poor worker compensation in some of their Third World operations.

• Employee Productivity: Firms with good employer and employee relations retain staffs who tend to be more productive at work, as they are in an aiding environment.  Their staff do not feel the need to frequently explain their employment at the firm to loved ones, they are always motivated and increase the productivity of the business as a whole.  They work harder according to what economists call the “efficiency wage theory,” which states that employees work harder when they are paid more.  In this way, overall productivity is improved more than the costs acquired in raising salary packages.

• Cost of Capital: Corporate Social Responsibility can reduce a business's cost of capital through socially responsible investing (SRI). Briefly put, restrictions are placed on the elements of an SRI portfolio and if a substantial amount of money is invested in businesses with good Corporate Social Responsibility records, then their cost of capital will be reduced.

With regards to Corporate Social Responsibility and capital markets, there is more evidence that not only is there a relationship between Corporate Social Responsibility and Corporate Financial Performance, but the trend points towards a favourable association.

The financial framework necessary for the broader business community in South Africa to embrace Corporate Social Responsibility is growing steadily, being supported well by one of the drivers of Corporate Social Responsibility, the financial institutions.

A company's Corporate Financial Position as evidenced by increased revenue, can be improved by its Corporate Social Responsibility through better access to certain markets and product diversity.

Better environmental performance may ease access to niche markets whereas product differentiation can be used to exploit environmentally aware market segments (Alrubaiee, et al., 2017). Even if ‘green' products are more expensive to produce, the extra cost can be shifted to consumers prepared to pay extra for environmentally friendly products. Environmental performance lets a business to forestall and decrease the risks associated with future legislation, thus impacting positively on their financial position.

Corporate Social Responsibility can lead to a stronger brand and greater pricing power.

4. Research Methodology_____________________________________________

The objective of the project was to determine whether Corporate Social Responsibility has an impact on the Corporate Financial Performance. Two variables were established, specifically Corporate Social Responsibility and Corporate Financial Performance, where Corporate Social Responsibility was the independent variable and Corporate Financial Performance the dependent variable.

The research methodology took a quantitative, descriptive approach, examining the relationship between CSR and the financial performance of businesses. For the purpose of this project, it would be necessary to establish that there was indeed a correlation between the two variables.

5. Research Limitations_______________________________________________

The research did not take into account the presence of other operational or market factors that may have an effect on a business's Corporate Financial Performance regardless of Corporate Social Responsibility.

The global economy, including South Africa's, is still slightly recovering from the effects of the global financial crisis that took place from 2007 – 2010. The task cannot indicate the impact of Corporate Social Responsibility on Corporate Financial Performance under normal economic conditions.

6. Conclusion_______________________________________________________

The influence of Corporate Social Responsibility on Corporate Financial Performance has long been an important issue for managers. Manager's attitudes, perceptions and values play a significant role in a business's environmental response, especially now that the environmental concerns of stakeholders have increased. My findings suggest that a role for corporate social responsibility in promoting business performance indirectly through enhancing consumer satisfaction, competitive advantage and reputation. Corporate Social Responsibility acts as  a very important role in attracting stakeholders and stakeholder confidence to businesses.   

 

3 REFERENCES

Alrubaiee, L. et al., 2017. Relationship Between Corporate Social Responsibility and Marketing Performance: The Mediating Effect of Customer Value and Corporate Image. International Business Research, 10(2), pp. 104-123.

Brashear-Alejandro, T., Kang, J. & Groza, M., 2016. Leveraging Loyalty Programs to Build Customer-Company Identification. Journal of Business Research, Issue 69, pp. 1190-1198.

Buchholtz, A. & Carroll, A., 2012. Business and Society: Ethics and Stakeholder Management. 8th ed. USA: Cengage Learning.

Diallo, M. & Lambey-Checchin, C., 2016. Relationship between CSR and Customer Loyalty: What Lessons for Retailers, Saint Etienne: RIODD.

Grewal, D. & Levy, M., 2010. Marketing. 2nd ed. New York: McGraw-Hill/Irwin.

Martinez, P. & del Bosque, I., 2013. CSR and Customer Loyalty: The Roles of Trust, Customer Identification with the Company and Satisfaction. International Journal of Hospitality Management, Issue 35, pp. 89-99.

McDonald, L. & Rundle-Thiele, S., 2008. Corporate Social Responsibility and Bank Customer Satisfaction. International Journal of Bank Marketing, 26(3), pp. 170-182.

Saeisi, S. et al., 2014. How Does Corporate Social Responsibility Contribute to Firm Financial Performance? The Mediating Role of Competitive Advantage, Reputation, and Customer Satisfaction. Journal of Business Research, Issue 08124, pp. 1-10.

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