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Corporate Responsibility as a Business Strategy Analytical Essay

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Updated: Jan 6th, 2020

Introduction

Corporate social responsibility is one of the modern tools used by corporations to promote their inimitable characteristics and brand name. As a result, the firm’s sales, customer dependability, and profitability are improved. In addition, CSR has been applied in the human resources management as well as in enhancing business operations (Cavett-Goodwin, 2007).

Thus, CSR as a management tool remains to be a crucial tool that corporations use to enhance their competencies. The increased capabilities will ensure sustained growth in terms of profitability as well as value creation. This research report critically examines business strategies particularly, CSR and how it influences value creation.

Besides, the paper ascertains whether Banyan Tree’s CSR initiatives, which are part of its global expansion strategy, will be helpful in value creation as well as profit maximization.

Banyan Tree Hotels’ entry mode strategies

Based on study literature, firms seeking to enter into the foreign market should choose the most suitable entry mode for that particular market. International expansion requires firms to make critical decisions pertaining to entry mode strategies (Anders, 2008). The reason is that the verdicts on the selections of the entrance approach have enduring repercussions on businesses like Banyan tree that yearn to globalize operations.

In other words, entry mode strategies in most cases are huge, irreversible and affect the firm’s performance in the end (Root, 1994). For services, business entities such as Banyan tree hotels have assorted preferences on the entrance approach plans to pick from for instance licensing, turnkey ventures, chartering, mutual speculation, and utterly held auxiliaries.

Nonetheless, the entrance approaches into fresh souks are subjected to countless dynamics including the domestic and peripheral factors. In fact, such imperative dynamics are habitually unusual in all business aspects. Moreover, the level of influence each factor has also depended on the country the firm targets (Root, 1994).

Therefore, managers should critically analyze these factors and come up with the most suitable entry mode strategy that will ensure maximum benefit to the firm. For services enterprises such as Banyan tree resorts, the expansion strategies into the international market should be low risk. As Root (1994) indicated, involvement into the foreign markets comes with increased risks. Therefore companies particularly services firms should consider low risk entry modes in order to survive.

Franchising

Banyan tree hotels can utilize the business knowledge of other resorts acting as a franchisee in host countries to expand the company’s business activities. Banyan tree hotels and resorts provide capital, technical skills, and business expertise. The firm can use this mode in countries where there is uncertainty in political and economic conditions (Chen & Mujtaba, 2007).

The uncertainty in the foreign markets makes this mode of entry more suitable for hotels and resorts. The major advantage of this mode is that the company does not need to bear the costs and risks related to development and entry into the new market (Chen & Mujtaba, 2007). The cutback in overheads and threats allied to charters enlarges the corporation’s efficacy in searching for the fresh bazaars.

However, the corporations hardly have any power over the trade dealings mostly where the bylaws call for the businesses to observe the eminence ideals. Moreover, in the circumstances that the franchisee does not strictly obey the agreed rules and regulations, the firm can easily collapse.

Joint ventures

This is the most commonly used entry mode by firms including hotels and resorts all over the world (Blomstermo et al., 2006). The entry mode requires that the Banyan tree hotels and resorts form an alliance with similar firm in the foreign country in order to attain the greater position in the market. In most cases, the joint venture involves equal share of costs and benefits (Arregle et al., 2006).

Nevertheless, the businesses functions of corporations are regularly detached bar the supervisory tasks are analogous and mutual by each corporation. In order to achieve stringent direction and have superior allocation entitlements, Banyan Tree must devote additional finance to the mutual schemes.

The advantage with this entry mode is that risks and costs are shared (Aulakh & Kotabe, 1997). In addition, Banyan tree hotels would gain market knowledge from the joint venture firm as well as explore the foreign market with the help of the other firm with political and economic issues put into consideration.

With little regard to the conflicts that might arise from the joint venture, Banyan tree can easily take advantage of the local firm’s capability of influencing the local government to allow the company to enter, establish, and dominate global markets.

Utterly held auxiliaries

From Arregle et al., (2006) report, these subsidiaries imply that Banyan Tree will have to cuddle a hundred percent allotment of the far-off units. For the firm to own a subsidiary, Banyan must establish a new entity with full operations into this market or fully acquire an existing firm (Arregle et al., 2006). The acquired firm must be well built within the industry.

Banyan tree stand to gain a lot from this mode as the company can easily promote the products and services. The reason is that the firm has tight control over business operations because of full ownership. In addition, compared with other modes, the firm can make and easily implement the own strategic plans and does not risk losing the competitive advantage as well as technical skills to other firms.

Apart from full control and reduced risks, the firm also enjoys full benefits of internationalization. However, there are increased costs associated with this mode of entry (Arregle et al., 2006). Compared with all other modes, fully owned subsidiary is the best entry mode for banyan hotels and resorts. This entry mode is in line with the company goals and ambition particularly as concerned with the conservation of the environment.

As indicated, the fully owned subsidiaries in the international markets will make the firm have control of enshrined competencies, pro-environment initiatives that forms the core of the business strategies. This mode of entry is in line with the expansion strategies of doubling resorts and spa worldwide. In addition, the strategy increases Banyan’s geographical diversity while reducing both political and economic risks associated with this expansion.

Cultural Influences on Management’s Decisions

Doing business in a different culture particularly using the fully owned subsidiaries could be challenging to the firms expanding into the foreign markets. The diversity and variety of the foreign business practice or country culture is always an important issue for firms considering operating in foreign markets (Hofstede, 1980).

As the company plans to double the resorts, worldwide cultural diversity is a critical consideration in the management decisions. The reason is that the company resorts will be operating in diverse cultures and environments hence must be in a position to understand the significance of cultural diversity in the realization of the business goals and objectives.

Merging cultural diversity and environmental sustainability is key aspect of the firm’s social responsibility. Most important is how the culture in which the firm operates keeps and sustains environment, which is Banyan’s core corporate social responsibility. In essence, understanding cross-cultural issues is very important in the realization of the firm’s goals (Belin & Pham, 2007).

For instance, the manager of the firm should understand that the host country local employees require different organization structure as well as human resource management policies and procedures. In this case, however, where acquisitions of fully owned subsidiaries are recommended, attaining the expected synergies will depend on well-established structures that will encompass both cultures in a more balanced manner.

In other words, operating in foreign countries needs cultural compromise. Therefore, for the firm to sell the products and services to foreign customers, Banyan needs cultural sensitivity and adaptations concerning the products and services, marketing strategies, and operations (Brouthers, 2002).

The firm will also tend to have diverse organizational as well as decision-making practices according to the way Banyan has evolved and what kind of cultures and subcultures the company intends to encompass (Hofstede, 1980). This consideration will enable the firm to succeed in the expansion strategies particularly on attaining corporate social responsibilities initiatives.

Furthermore, for the firm to build successful partnerships, alliances and to be successful through this entry mode strategy, the managers must understand the organizational differences that exist (Belin & Pham, 2007). This will include all elements of the corporate strategies from the structures of decision-making, systems, and labor management relationships to the individual employee’s behaviors and attitudes particularly towards work.

Banyan tree management must consider the fact that culture influences the preferences and behaviors of the clients. For Banyan to sell successfully in the foreign country, the company needs to adapt these services and products to meet the cultural needs of the diverse group of clients.

Further, the company should not forget to put into consideration the core competency aligned to the corporate social responsibility (Hofstede, 1983). The corporate social responsibility strategies should be incorporated in the marketing, services and product features. These should also be partly guided by the cultural differences.

Analysis of CSR as a business strategy and the impact on profit maximization

Corporate social responsibility in any organization emerges to be amongst the topics, which consistently hit the corporate headlines in the modern competitive industrial world. In fact, the symbiotic correlation amid trade and humanity gives rise to the approval of CSR strategies adopted by every accomplice in the fiscal world.

Studies show that ample confirmations exists depicting that consumerist actions implemented by Banyan Tree Hotel and Resort could possibly endure market competition when there is sustenance and approval from societal members.

Besides, the marketplace triumph determinants for the company shareholders and communal approaches appear to be manipulated by various collective requests that have intimate correlations with such aspects (Warwick, 2008). In fact, factors having direct impacts on the hotel and resort souks that is, societal, ecological and money matters depict the vital pose of the main shareholders in the strategic CSR plans deadlock.

CSR strategies incorporate the organizational invariable compulsion to operate honorably in order to persistently advance cost-effectively whilst enhancing the welfare of various Banyan staffs, relatives and the surrounding communities. McWilliams et al. (2005) suggested that corporations ought to assume philanthropic initiatives found in the neighborhood where such organizations carrying out their business to be triumphant and lucrative.

Further imperative commitments that uphold Banyan Tree Hotel and Resort CSR strategies incorporate profitable, legitimate, and ethical liabilities (Eliza & Pauline, 2003). The useful errands in line with the corporate social responsibility strategies incorporate the ecological concerns that have connections with the natural ambiance, financial, and public matters that will ultimately head for the progress of the neighborhood and the administration.

Via approving a range of corporate social responsibility projects, Banyan Tree Hotel and Resort might influence the varying civic outlook, corporation icon, industrial assets, and permissible rules. To remain competitive and profitable in the current highly competitive market, companies must initiate and implement appropriate corporate social responsibility.

Many scholars have argued that the relationship the business has with its stakeholders depend on its output in all aspects whether social or economical. in addition, decisions normally being made by various stakeholders are majorly being influenced by CSR programs initiated by the company and how such programs contributes to the well being of the society (The Economist, 2005).

According to Warwick (2008), CSR remains to be critical ethical obligations in all aspects the societies expect in any business organization. CSR practices mirrors the relationship the corporation has with the societies. Further, better CSR practices enables the company to succeed in the global competitive market. In other words, good CSR practices enhance the firm’s globalized activities.

Firms have realized that CSR remains critical to their growth and sustainability. International corporations such as Banyan Tree Hotel and Resort have realized that they can only sustain substantial growth through the provision of morally oriented services. In other words, all its operations must be based on ethical considerations as well as initiatives that are beneficial to the society.

Regardless of the resources needed to attain such initiatives, corporations’ must thrive to put in place practices that satisfy all its stakeholders including clients and shareholders. In addition, CSR activities must be geared towards enhancing the company reputation, brand image and competitive advantage (Ethical Corporation magazine, 2005).

CSR provides a framework through which companies build their reputation and image. The reason is that most of the consumers will tend to identify themselves with such companies. Better ethical practices will enable the firm integrate good cultural values that will ensure increased and sustained customer growth and alignment to the company products.

Moreover, good reputation built on moral values will enable the firm recruit and retain quality employees that are critical in the development of the company products and services (Ludescher, 2009). Banyan Tree Hotel and Resort can only create products and services that are competitive in the market only if it adopts CSR practices that are acceptable to all stakeholders.

CSR practices that are environment oriented will enable the firm become a market leader in the industry. The reason is that such practices are acceptable by all stakeholders across the board. Such CSR also enables the firms to create effective and sustained supply chain management with other companies that are of similar ideologies. The result is the reduction in the production cost.

CSR should be programmed in such a way that it enables free information flow. Free information is critical for the improvement of the company. Through acceptable CSR programs, companies are capable of reaching areas that has not been exploited by other companies thus expanding its market (Hohnen, 2007).

Warwick (2008) argues that CSR initiatives are founded on five basic elements. These includes value addition, the improvement of the products, projections that are long-term, public awareness as well as being sensitive to the goals and strategies that have been put in place.

An initiative that enhances continuous introduction of new products in the market increases the customers’ satisfaction and at the same time enable, the company remains competitive. The company activities must also be legitimate, that is remaining sensitive to the needs of all stakeholders including consumers. That is product and services must be created in accordance with the societal expectations.

Adding value remains critical element of CSR. Adding value to the product increases, the company merit and trust among the company clients thereby enabling the company expand its place in the market. However, this trust is not limited to the clients but also to other stakeholders including suppliers, investors, customers, and employees (McWilliams et al., 2005).

Taking these elements into consideration, business organizations like Banyan Tree Hotel and Resort should generate value through incorporating CSR initiatives in various global operations. Indeed, this corporation is working more willingly to deliver community services and this will enable it generate maximum profit that will enhance global competitive advantage.

This is essential in determining Banyan global market endurance (Porter & Kramer, 2006). As indicated, business development and growth depends on Effective CSR programs. Since many corporations are going global, they need a strong foundation on which they can anchor their growth. Adoption and integrating appropriate CSR practices will enable sustained development in businesses.

This includes continuous production and sales that will ensure continuous profitability. In the contrary, firms that ignore incorporate CSR particularly while making decision-making will likely be faced with problems that can take them out of business (Hohnen, 2007). The current increasing risks involved in business activities can easily be managed by putting into consideration those programs and activities that take into consideration all the stakeholders views.

All businesses organizations including Banyan Tree Hotel and Resort must have control measures that guard them against any external and internal risks. The control measures must be in line with guiding principles set by the regulating bodies. Additionally, businesses are supposed adopt practices that take into consideration the needs and expectations and interest of all the stakeholders (Gray et al., 1987).

Recommendations

From the study, it can be observed that firms in all sectors are adopting and implementing CSR strategies in order to remain competitive in the current world market. Therefore, banyan tree should come up with sustainable CSR strategies that will enable it remain viable within the highly competitive global market. These strategies should be aimed at building good relationship with the communities as well as clients.

That is, the company should adopt practices that will enhance sustained value to its stakeholders. As the company continue to grow it should implement those practices that not only add value to the customers but also provide it with a rare competitive advantage. In essence, the company should adopt CSR practices and enhance competencies that will ensure sustained profitability.

Conclusion

Currently, CSR plays critical role in the business management. As indicated in the Banyan Tree Hotel and Resort, CSR becomes an important business management tool in spite of the firm magnitude. The reason is that CSR is responsible for benefit of the company products, which in turn increases the company brand image and profitability.

Therefore, larger corporations such as Banyan Tree Hotel and Resort should compensate the societies in which they operate through initiatives that add value to the lives of people in the societies. These include pro-environment initiatives. It is also true that corporations and societies in which they operate are interlinked. Therefore, strategies that are initiated by corporations must be beneficial to both the company and the societies.

References

Anders, P. (2008). Strategy antecedents of modes of entry into foreign markets. Journal of Business Research, 61(2), 132-137.

Arregle J. Hebert, L., & Beamish P. (2006). Mode of international entry: the advantages of multilevel methods. Management International Review, 46(5), 597-611.

Aulakh, P. & Kotabe, M. (1997). Antecedents and performance implications of channel integration in foreign markets. Journal of International Business Studies, 18(2), 145-175.

Belin, J. & Pham, C. (2007). Global expansion: Balancing a uniform performance culture with local conditions. Strategy & leadership, 35(6), 44-73.

Blomstermo, A., Sharma, D. & Sallis, J. (2006). Choice of foreign market entry mode in service firms. International Marketing Review, 23(2), 211-213.

Brouthers, K. (2002). Institutional, cultural and transaction cost influences on entry mode choices and performance. Journal of International Business Studies, 33(1), 203 -206.

Cavett-Goodwin, D. (2007). Making the case for corporate social responsibility. Web.

Chen, L. & Mujtaba, B. (2007). The choice of entry mode strategies and decisions for international market expansion. Journal of American Academy of Business, 10(2), 322-344.

Eliza, T. S., & Pauline, N. (2003). Banyan tree hotels & resorts: Gauging investors views on corporate social responsibility. China: The University of Hong-Kong.

Ethical Corporation magazine, (2005). Business briefs. Web.

Gray, R. H., Owen, D. L. and Maunders, K. T. (1987). Corporate social reporting: Accounting and accountability. New Jersey, NJ: Prentice Hall.

Hofstede, G. (1980). Cultures consequences: International differences in work-related values. Newbury Park, CA: Sage.

Hofstede, G. (1983). The cultural relativity of organizational practices and theories. Journal of International Business Studies, 28(5), 92-99.

Hohnen, P. (2007). Corporate social responsibility: An implementation guide for business. Manitoba, Canada: International Institute for Sustainable Development.

Ludescher, J. (2009). Corporate social responsibility: From corporate strategy to global justice. Web.

McWilliams, A., Siegel, D. & Wright, P. M. (2005). . Web.

Porter, M. & Kramer, M. (2006). Strategy and society: The link between competitive advantage and corporate social responsibility. Web.

Root, F. (1994). Entry strategies for international market. San Francisco: Jossy Bass, Inc.

The Economist, (2005). The importance of corporate responsibility. Web.

Warwick, M. (2008). The five dimensions of CSR. Web.

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