The main aim of an organization is to get enjoy profits from the society it is operating in. To achieve this, there are activities that an organization needs to do so as to attract more consumers, as well as maintain the established consumer base.
Application of strategic management concepts and corporate social responsibility are some of the activities that an organization may get involved in that give it a competitive advantage. Using Porter’s criteria, the paper will evaluate the mentioned activities and their relationship with the competitiveness of the organization.
Corporate Social Responsibility (CSR) deals with an organization taking more responsibility on social aspects than the financial one, and involving itself in matters of the society and the community. CSR activities are guided by both global and national guidelines, which aim at ensuring that environmental, sustainable development and human resources issues are dealt with. CSR aims at improving the lives of the people in the community.
However, also inclusive, is the quality of life of the employees, their families as well as the community in general (Wadham 2007). One of the main aims of CSR is to make sure that there exist sustainable developments in the whole society. Growth of CSR has been greatly influenced by the public organization, which demands that an organization should take the responsibility of giving back to the society.
CSR activities in an organization have many benefits to the organization in many ways. One of such benefits is that organizations practicing CSR have a higher financial success that their counterparts who have a low CSR commitment. In fact, the difference is so big that, as reported in a survey carried out of 175 companies, the financial success was found to be 19 times more (Tuodolo 2009).
When it comes to shareholders’ return on investment, in a survey carried out between 2007 and 2009, organizations without CSR that incurred a loss were 11 percent more than those undertaking CSR activities. Every organization’s reputation or brand is largely affected by the organization’s perception by the public. CSR is important to the success of the organizations reputational success. An organization’s involvement in the environmental, economic and social issues affects the reputation of its product both directly and indirectly.
The public perceives organizations practicing CBR activities as important and as having favorable products compared to others. Simply put, organizations that campaign for CSR activities are favored more by the public as opposed to the ones that do not consider CSR as relevant. CSR is also related to the organizations success through the reporting of the organizations books of accounts (Johnson et al. 2011).
Regular and reliable reporting of an organization’s activities and outcomes is part of the CSR. The public is usually more impressed and interested with an organization that is transparent in reporting of their books of accounts. An organization that puts in mind true and fair reporting is desirable to stake holders as well as the public.
ExxonMobil is a US-based petroleum company. The company is much involved in CSR activities in various sectors of the economy. Among them is the field of education and research. It is notable that the organization contributes about 80% of its donations to the field of education. The company is also a big contributor to women empowerment in developing countries in a bid to ensure that they achieve economic goals.
Though the company has been involved in initiatives that promote CRS, there have always been various criticisms by environmentalists who tend to feel that the company is not doing enough when it comes to controlling of carbon dioxide. Each year the company contributes about more than 35 million US Dollars to promote CSR activities. However, it is also evident that the organization does not enjoy much financial success as much as they practice CSR activities (O’Brien 2001).
There are several reasons which may have led financial failure. The organization’s CSR activities are not directly linked with the company’s strategic and general mission. For ExxonMobil the 35 million dollars donation is usually to charitable organizations, these organizations are not directly linked with the company’s business objectives and the organizations strategy or its main competencies (Bergman 2009).
According to Porter, an organization needs to consider four for strategies that give the organization a competitive advantage. Differentiation is one of the strategies that Porter was keen to point out. The strategy entails an organization adding a premium cost on the product and still ensuring that consumers prefer the product that other available products. It entails the organization been in a position to meet criteria that consumers desire in the organization.
The other strategy is the cost leadership strategy; cost leadership is aimed at ensuring that the organization produces products at the lowest cost price. If incase the organization is able to achieve this objective, it is able to establish a competitive price that makes it have a competitive advantage in the market. Due to application of this strategy, ExxonMobil has always maintained its competitiveness in the market due to its competitive prices.
The reasons why CSR programs fail to work at time is because CSR managers give a huge portion of their contribution to charity. The amount of contribution given out to these charitable leads to, at the long run, the contributions been cut into several pieces for goodwill to be spread to many beneficially.
Ultimately, the contribution given out is diluted and its effect is not much felt. The other thing that leads to a company failure to enjoy high financial performance is allocation of its cash resources to social projects without considering its non-financial assets. In other words, the organizations fail to observe their business objectives and relate them to the social project they undertake. Another way that leads to financial failure is the managers’ incompetence in matters revolving around CSR activities.
The way to go in ensuring that ExxonMobil experiences financial success, because of its involvement in CSR activities is that it needs to link these activities with the core objectives. Such linkage would ensure that the business strategies and CSR strategies are cohesive. The other way that the organization may be able to have a competitive advantage, is ensuring that the managers involved in CSR activities and those involved in business activities are competent-ability to relate the two is desirable.
The importance of this is to ensure that these two parties get to share their thoughts and come up with the most desirable strategies that are beneficial to the organization. Innovation is also encouraged in the organization. Innovation in this case means that, with time some of these CSR activities become obsolete.
When such a time comes, it is the responsibility of the managers to ensure that they come up with new CSR activities, which are in line with the new business strategies, and the organization adopts with time. Otherwise, the organization may be continuously involving itself with donations that do not bring any sort of competitive advantage to them.
The organization may also transform its business to such a way that it achieves a multi-dimensional approach (Johnson et al. 2011). This means that the organization may expand their interests, not only to specialize with petroleum but may even venture into the gas industry. A good example of such an organization is Enron which was once voted as the most innovative organization due to its multi-dimension approach which ensures that their CSR activities provides them with a competitive advantage over other organizations.
It is also notable that there has been a question as how to measure the CSR activities. A survey carried out in 40 countries revealed that there is an obstacle in measurement of financial performance indicators and metrics that may easily be quantified (Lockwood 2004). It was also evident that there are some organizations, which are not committed to engage in CSR activities.
In that particular research, it was found that only about a third of all the CEOs interviewed, said that they had taken the initiative to increase their business investment in the previous year. Such is a clear indication of the way some organizations lack knowledge of the importance of involving themselves with CSR (Lockwood 2004).
To summarize, giving back to the society is important for business organization. The reasoning behind this is backed by the fact that the organization benefits from the society around them and it is only fair that they provide some of the proceeds they get to these people. Since most organizations target increasing their control over the market, involvement in CSR activities may also be used as a way of ensuring that they achieve this.
Therefore, the responsibility of the managers involved in formulation of policies and derivation of strategies to adopt those strategies that are cohesive with CSR strategies. Such an action will lead to the company also benefiting from CSR. It would therefore be the obligation of the managers to ensure that they keep innovating and changing their CSR strategies with time.
In conclusion, an organization’s activities that relate to the society should always be maintained by the organization. The reasoning behind this is backed by the fact that they may be of much benefit to the organization as mentioned earlier. However, there is the need to review them when changes are made to the mission statement of the organization. Failure to do this may lead to inability of the organization to achieve the benefits that they bring to the organization.
List of References
Bergman, C 2009, September 24. ExxonMobil Honored for Commitment to Education and Corporate Social Responsibility. [Online] Available from https://www.businesswire.com/news/home/20090924005186/en/ExxonMobil-Honored-Commitment-Education-Corporate-Social-Responsibility .
Johnson, G Whittington, R., & Scholes, K., 2011. Exploring Strategy: Text & Cases. 9th ed. Essex: Pearson Education Limited.
Lockwood, NR 2004, December. Corporate social responsibility: HR’s leadership role. Web. Web.
O’Brien, D 2001, ‘Integrating corporate social responsibility with competitive strategy’, paper presented to the 2001 Best MBA Paper in Corporate Citizenship competition, The Center for Corporate Citizenship at Boston College 2001.
Tuodolo, F 2009, ‘Corporate social responsibility: between civil society and the oil industryin the developing world’, ACME: An International E-Journal for Critical. Geographies, vol. 8, no. 3, pp. 530-541.
Wadham, H 2009, ‘An exploration of business and NGO perspectives on CSR, sustainable development and partnership’, Journal of Corporate Citizenship, pp. 57-68.