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Assessing the effects of evolving consumer expectations of corporate philanthropy on the shareholder and stakeholder primacy models of CSR. A case study of Marks and Spencer

Essay Topic: ,

Introduction

The purpose of the current research is to ascertain and assess the changes in customer expectations with regard to corporate philanthropy on the stakeholder’s model of CSR. There are many driving factors, which has led to changes in the perspective of corporate philanthropy. The concept of corporate philanthropy entails the act of giving donations to non-profit organizations.

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In other words, it involves spending organization’s resources for the benefit of society. It is usually done directly or through a company’s foundation. In some cases, donations are in the form of an organization’s facilities, products and services. The areas covered under corporate philanthropy consist of education, health, art and environment (Council on Foundations, 1982). On the other hand, CSR or corporate social responsibility is an enterprise level program designed to bring positive change in society. The primary effect of the evolution of consumer expectation on CSR is the incorporation of this concept into corporate strategy of such organizations. Likewise, the effect on the shareholder’s model of CSR is also considerable. The incorporation of the CSR model within corporate strategy enables the shareholder to enjoy returns from the CSR program of the organization. The returns usually manifest in the form of increased sales and profits, which results from the goodwill created by the CSR program (Urip, 2010). One of the distinctive features of the CSR concept is the involvement and participation of all the stakeholders including shareholders, employees, customers, supply chain partners, community and government. This feature is the central point of the stakeholder’s primacy model of CSR. According to this model, the CSR incorporates the interests of the society at both the strategic and operational level. Furthermore, this concept also entails the interaction and relationship of all the key stakeholders in the context of CSR. This means that an integral aspect of CSR is the interaction of the organization with internal and external stakeholders. The internal stakeholders consist in the form of employees, top management and shareholders, whereas external stakeholders consist of government, non-government organization and community. The scope of issues that CSR covers ranges from the environment, economic and social faced by the community and society at large. The stakeholder’s primacy model on CSR also entails that CSR should be considered separate from the core operations and activities of the business. This means that CSR should be given similar importance compared to other core functions such as marketing, sales, finance and HR. However, according to this model, CSR is a voluntary concept. Nevertheless, it should be noted that changing a consumer’s expectations has made this concept more of an obligation. This is due to the fact that consumers increasingly hold the view that corporations are directly responsible for the well being of the society and, therefore, should play their due role (Fernando, 2011).

2.2. Aim: To assess the effects of evolving and changing consumer expectations of corporate philanthropy on the shareholder and stakeholder’s primacy models of CSR

2.2.1. Objectives:

To understand how the evolving consumer expectations has affected the CSR programs of Marks and Spencer.
To determine the changes in consumer expectations in regard to corporate philanthropy.

2.2.2. Research questions

For the purpose of attaining research objective, this study will make use of following research questions:

Is the CSR program of Marks and Spencer part of the organization’s corporate strategy
Is the CSR program of Marks and Spencer affected by the evolving consumer expectations of corporate philanthropy
What areas of society are covered by the Marks and Spencer CSR program
Does Marks and Spencer’s CSR program come under stakeholder’s primacy model of CSR
3.0 Literature Review

The literature reviews enable the understanding of the topic in the context of different theories. The theories, which are brought under discussion usually exists in academic journals, books and other research dissertations The literature review will enable the research to determine the effects of customers’ expectations of corporate philanthropic initiatives on an organization’s primary CSR model. However, before delineating these effects, it is imperative that a clear understanding of the meaning and scope of CSR is made. Usually CSR referred to all the activities, which are conducted by a private organization for the well-being of the general public or community. These activities can relate to different social and environmental issues. The CSR activities do not differ from each other regarding the amount spent on each activity but on the basis of the way in which an organization indulges in that CSR activity (Werther & Chandler, 2010). The importance of CSR and its implications are vital for any global or national business. As a result, the changes in the consumer expectations have assumed vital importance for the nature of organization’s CSR model. Business concern for society is not a new concept but can be traced backed many centuries.. Initially, the activities, which are now categorized as CSR, were seen as merely corporate or business philanthropy. The perception and expectation from the consumer that companies or businesses are an important part of society and, therefore, has responsibility towards society originated in last few years. This led to the development of formal concepts of CSR (Carroll, 1999). Likewise, academic and scholarly work on CSR and corporate philanthropy started in the last century, which led to the belief that CSR is an obligation of every corporate entity. Bowen, who is considered the father of the modern concept of CSR, classified CSR as those activities, which enables businesses and companies to achieve objectives, which are desirable for any society (Bowen, 1953). This definition is very simplistic in nature and does not cover the entire spectrum of CSR activities. Davis (1960) sees CSR as a responsibility on the part of a firm, which forces it to admit to duties, which are present in areas beyond the domain of commercial interest. Resultantly, firms will be engaging in politics, community welfare, education and health. Walton (1967) sees CSR as an activity, which will cost the organization without any material gain for the business. Therefore, such activity must be done on a voluntary basis. From this concept, it can be seen that CSR was seen as a matter of moral duty instead of something, which could generate material gain for the organization. However, this consideration has started to change as many firms expect intangible returns from their CSR initiatives. The intangible initiatives can be in the shape of goodwill and creation of a friendly image in the public eye (Louche et al., 2010). On the other hand, the prevalence of CSR in the modern world has made it necessary for the organization to perform CSR activities. In the case by which an organization decides not to participate in CSR initiatives, it risks losing its customer base. This can be attributed to constant expectations from the consumers for socially responsible behaviour from the companies. Such consumers have increasingly become socially and environmentally conscious and support only those firms, which are involved in CSR and in the provision of sustainable products. The importance of such customers for businesses can be gauged from the recent researches, which show consumer’s preferences for socially responsible firms (Lindgreen & Swaen, 2010). One such study showed that the market of those customers, who live their life according to the new concepts of health and environment, is expected to grow to 30% alone in the US (Forster, 2007). The customers are increasingly expecting a great amount of sustainability from the corporate entities. This is one of the new trends, which have originated in the customer’s way of thinking as far as corporate philanthropy. Initially, consumers’ view any activity, intended to bring positive in the society, as part of corporate philanthropic initiative. Such initiative was considered separate and discrete from organization’s core activities, where were the provision of products and services to customers. Now, such initiative, which comes under the domain of CSR, needs to be considered a core business activity and, hence, part of organizational corporate strategy. Therefore, the primary effect of the changing and evolving expectations of corporate philanthropy on the consumers is the incorporation of CSR model in the organization’s main strategy. This incorporation will enable the organization to provide products and services, which are up to the social and environmental standards. And at the same time, it will enable the organization to launch separate but related initiatives intended to bring positive change in the society. Any organization, which fails to perform this, can risk losing customer base within the market. Therefore, the CSR model has now become an integral part of corporate strategy of all large multinational organizations (Fernando, 2011).

The effects of changing consumer expectations has led to the development of the concept of ‘sustainable development’. According it is viewed as the responsibility of businesses to conduct their core activities in such manner, which will not affect the ability of the future generation to meet their basic needs (World Commission on Environment and Development, 1987). It can be seen from this concept that sustainability in the organization’s activities has now become an integral part of the customers. An organization can fulfil this expectation by integrating the economic, social and environmental consideration in its corporate strategy. This will enable it to achieve sustainability in all aspects of an organization’s operations ( (Visser et al., 2007). Another effect of evolving consumers’ expectation of corporate philanthropy on organization’s CSR model is the adoption of concept of “Triple Bottom Line” (TBL) by the organization. According to such, it is the obligation of the organization to put its focus on three main aspects. The first is related to the responsibility of economic success. Secondly, it is related to the responsibility to the environment and thirdly is related to the responsibility of the individuals and the community in general (Elkington, 1998). With this concept, the business organization has transformed itself from a primary economic entity to an organization, which is responsible for fulfilling social and environmental needs of the society alongside achieving their objective of profit generation. This change in the approach of conducting business is attributed to the evolving consumer’s expectation of corporate philanthropy. In the past, any activity on the part of the corporation for the well-being of the community was looked as an initiative taken on the part of shareholders and the high-management. However, with the emergence of CSR, such activities have come under the domain of institutions. Now all activities, taken for the improvement of society have assumed institutional shape (Gainer, 2010). It is equally important to understand the reasons, which led to the evolution of consumers’ expectations of business philanthropy. One pertinent factor responsible for the change is the increase in consumers’ awareness. Consumer awareness has gone a long way in changing the perception of business activities of the corporations. Consumers have now increasingly become aware of their rights. Moreover, this awareness is usually backed by legal and regulatory support , which increases the overall bargaining power of consumers in relation to the organizations. This has enabled the consumers to hold expectations from the corporate entities to perform their due share in the well-being of society. If any organizations fail to perform its obligations, it will not only face legal repercussions but also risk losing consumers in the market. In addition to this, high competition in the market is also one of the factors responsible in the shift of customers’ expectations. High forces of competition in the market have required the organization to look for new avenues to build and sustain their competitive advantage. One such technique is through the creation of goodwill within the general public. And the best method for creating such goodwill is through CSR. Furthermore, the effects of culture on CSR expectations are also considerable. For instance, according to Matten & Moon (2004), in Europe, the CSR is viewed more in terms of philanthropy than the US, where it is most likely viewed as institutional activity. This difference is primarily attributed to the dissimilarity in the institutional environment and cultural values of the regions. This is the reason, why organizations usually incorporate CSR initiatives in the corporate policies and programs. On the other hand, in Europe, it is mostly viewed as an informal business activity. This shows that customers’ expectations of corporate philanthropy have not matured in Europe as it has done in the US (Baden et al., 2011).

For the clear understanding of the problem, it is also important to allow comprehension of the stakeholders’ primacy model of CSR. It is not sufficient to only understand the activities but, it is necessary to have a clear understanding of all the stakeholders, who are directly and indirectly involved in it. Overall, the CSR model is focused on the improvement of society. Resultantly, it should incorporate all the values of society (Carroll, 1979). On the other hand, there is another school of thought, which views CSR as entirely aimed at addressing the issues of different stakeholders in place of the entire society. One proponent of this school of thought is Clarkson (1995). According to Clarkson (1995), the activities including CSR of any business entity are aimed at fulfilling the needs of stakeholders. According to this concept, corporations are free from any obligation concerning society. Instead, there are only responsible for the welfare of the community, which is directly affected by their activities. Likewise, (Maignan et al., 2005) also supports this assertion. According to (Maignan et al., 2005), businesses and corporations are responsible for satisfying economic and noneconomic needs of the stakeholders. However, it is difficult to ascertain the exact boundaries of stakeholders especially in the case of multinationals, whose activities spread to different dimensions and areas of society. Nevertheless, the stakeholder model of CSR provides a framework, which can be used to analyze the relationship of the business with the society in the context of CSR (Carroll & Shabana, 2010). This theory plays more a complementary role than conflict, when viewed in the milieu of CSR. This theory allows a better understanding of relationship between principal factors involved in the provision of CSR related initiative. According to this theory, corporate units can be better understood through the relationship of different actors, which have a stake in the operations of the business (Friedman, 1970). This means that the objectives of any CSR initiative taken by the organization are indirectly related to the primary goal of the organization, which is profit maximization. It means any CSR activity conducted by the organization will eventually increase the customer base for the organization and will subsequently translate in the form of higher returns for the organization. This approach creates a win-win situation for all stakeholders. The community gets the benefit from the CSR activities whereas shareholders and management of the organization receive benefits in the form of increased profits (Freeman, 1984). Theoretically, this model is very effective in transforming capitalism into serving the interest of different stakeholders, excluding shareholders. Within the framework of this theory, the implications of the evolving consumer’s expectations are considerable. The new set of consumer’s belief expects the organization to work for the wellbeing of actors who do not come under the category of stakeholders. As a result, it has become necessary for the organization to redefine the boundaries of stakeholders and include all those actors within society, who are not directly related to the activities of the organization. The primary implication of this for the organization is increased cost related to CSR initiatives without any translations of returns for the organization. In other words, the organization fails to achieve something tangible from such initiative. Moreover, such initiative has departed from pure CSR and has returned to the scope of corporate philanthropy. Previously, only stakeholder’s interest was considered in the CSR program, which is regarded as vital for the existence and success of the organization. This concept also takes into account the importance of power dependent relationships, which suggests that an organization customizes its CSR program according to the power enjoyed by certain stakeholder groups over the firm (Pirsch, 2007).

4.0 Methodology

4.1 Research approach:

The research approach adopted for this thesis is the case-based approach. The case study approach will provide profound understanding of the effects of changing consumer’s expectations on an organization’s CSR models. The case study approach is preferred because it allows the collection of in-depth information, which can be comprehensively analyzed in order to reach definite conclusions (Kumar, n.d.). This approach will also enable understanding of the problem in isolation, which is not possible with any other research approach (Bergh & Ketchen, 2009). As a result, a comprehensive study of the case will be conducted, which will enable identification and analysis of the factors affecting the consumer expectation of corporate philanthropy on the stakeholder primacy model of CSR. Due to the nature of the case study, the research approach will be primarily qualitative in nature. This approach is ideal because it allows clear comprehension of the all the dimensions of the topic under discussion (Maxwell, 2005). Therefore, the first stage of this research will consists of in-depth research and review of the relevant literature. The stage will also consist of the study of primacy models of CSR in the context of organizational strategy. This approach will enable the fulfilment of the objective of ascertaining the effects of fluctuating consumer’s expectations on the stakeholder primacy models of CSR.

4.2 Case selection

This research will study the case of Marks and Spencer as a model organization for understanding and concluding the effects of evolving customer’s expectation on organization’s dominant models of CSR. The case study approach is ideal in the present scenario because it will allow the research to investigate the problem while retaining the holistic point of view, which is necessary for accurate results (Henn, 2009). The reason Marks and Spencer is selected rests in its long history of corporate philanthropy in the shape of CSR. Likewise, it is a large organization, which makes it representative for all other organizations. This case is also appropriate as it will lead the research to accurate theory development. It should be noted here that the fact the each business unit of Mark and Spenser develops its own CSR strategy makes it relevant for this research. This case will also allow the understanding and identification of the issues concerning the CSR model of Marks and Spenser. CSR has an integral position in the organization of Marks and Spenser. This can be attributed to the founders of M&S who intended to build sustainable and mutually beneficial relationships with all stakeholders including the community and employees. This model of CSR was implemented with the belief that it will ensure long-term success for the organization. M&S launched a number of initiatives under its CSR model relating to education, health, environment and employability. This model has led to the creation of trustworthy images of the company in the general public and the community (Hallbauer, 2008).

4.3 Sample size

This research will use a sample of 25 to 40 respondents. This size is ideal to reach a representative conclusion and at the same time eliminates bias in the research. The information from the respondents from the sample will provide additional data and perspective to the information derived from literature and theory review.

4.4 Data collection

Primary data:

In order to ascertain the effects of evolving customer’s expectations of corporate philanthropy, a large chunk of data will be collected from comprehensive primary research. The case study approach will allow triangulation of data from multiple sources, which will further allow a balanced understating of the problem under discussion. The primary data will be collected from semi structured interviews, which will provide insight into the thought process of the respondents being interviewed. The respondents will include the customers alongside employees of the organization, which will permit an incorporation of the view points of both sides. The questions for the interview are divided according to the respondent type. The following tentative and semi structured questions will be presented the customers:

What areas should be targeted in the organization’s CSR strategy
Have you witnessed any changes in the the CSR activities of the organizations in last 5 years
Do you consider corporate philanthropy an integral responsibility of the organization

On the other hand, managerial staff of the organization will be asked to follow main questions:

How many changes have taken place in the scope of CSR activities of the organization
How much of this change reflects the changes in the customer expectations from the organization’s CSR model
How much organization’s philanthropy has been transformed into formalized CSR system

Using these questions, this study will collect the relevant data, which will later be used in collaboration with the literature review to address the concerned topic.

Secondary data:

This research study will also make use of a variety of sources of secondary data alongside primary data, collected from interviews. The secondary data will consist of the website and annual reports of the concerned organization. In addition to this, academic journals and books relating to the topic will also come under the purview of this research. The purpose of the secondary data collection is to determine the effects of evolving customers’ expectations of corporate philanthropy on the organization’s primary CSR model. In addition to this, external reports originating from third party sources, such as the government, will also be used to provide all-encompassing analysis of the topic. The secondary data will enable a balanced understanding of the organization’s CSR model in the wake of evolving customer expectations from corporate philanthropy.

4.5 Pilot study

The main objective of the pilot study was to ensure that the terminologies used in the research methodology are correct. As a result, the pilot study was conducted in the shape of interviews from a narrow range of respondents. The method used for the pilot study was a face-to-face to interview. This method enabled direct feedback from the respondents. In addition to this, the method also allowed the interviewer to ask relevant and pertinent questions, which were not present in the question guide, for the sole purpose of clarity.

4.6 Data analysis

The data collected from the interview will consist of qualitative data. Therefore, it will not be possible to apply statistical principles and techniques, which can be applied to quantitative data, to extract trends and patterns. As a result, the information collected from interviews will be analyzed to deduce normative patterns for further understanding. However, for the purpose of categorization, the data will be coded and compared according to the research questions. The purpose of this activity is to identify any gaps in the research. In the case of identification of certain gaps, extended data collection will be conducted to eliminate any deficiencies. Moreover, the comparisons will also lead to the elimination of discrepancies before the final stage, when this data will be used to derive concrete findings. The main objective of the data analysis is to find the different dimensions of the topic under discussion. As the data in question primarily consists of primary information, it will provide more realistic picture of all aspects of the problem. Furthermore, this data analysis could also be used with the literature review, which will allow an incorporation of primary data with the theory development in the research finding stage (Miles & Huberman, 1994).

5.0 Conclusion

The purpose of this research is to assess the effects of the evolving customer expectations in regard to corporate philanthropy on the stakeholder’s primacy model of CSR. For this purpose, the case of Marks and Spencer is selected. Marks and Spencer has a long history of CSR and, therefore, provides a representative model for research study. This research will make use of qualitative data for the purpose of analysis and deriving conclusions. The qualitative data will provide normative insight into the problem, which will enable accurate assessment of the problem under discussion. This research will make use of both primary and secondary data. The primary data will be collected from semi structured interview, which will be conducted from the sample of 25 to 40 respondents. The respondents are divided into two categories in the form of consumers and employees of the said discussion. The data collected will be used in collaboration with secondary data. The secondary data will consist of academic journals, books, websites and external reports. The secondary data will enable the analysis of primary data in a more comprehensive and balanced manner. With this research methodology, the research study intends to achieve its objective, which is to assess the effects of evolving and changing consumer expectations of corporate philanthropy on the shareholder and stakeholder primacy models of CSR.

6.0 References

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Assessing the effects of evolving consumer expectations of corporate philanthropy on the shareholder and stakeholder primacy models of CSR. A case study of Marks and Spencer. (2019, Mar 05). Retrieved June 25, 2019, from https://phdessay.com/assessing-the-effects-of-evolving-consumer-expectations-of-corporate-philanthropy-on-the-shareholder-and-stakeholder-primacy-models-of-csr-a-case-study-of-marks-and-spencer/.