Ethics and Corporate Social Responsibility - Case Study Example

Ethics and Corporate Social Responsibility Contents Executive Summary 3 Introduction 3 Main Discussion 5 Q1. Why do you think Best Buy has been able to gain competitive advantage in the retail electronics market while also driving many initiatives to support sustainability? 5 Q2. Do you think the resources that Best Buy is investing to help consumers recycle their old electronic devices is a good investment for Best Buy? 6 Q3. How does Best Buy’s social responsibility effort impact key stakeholders such as employees, shareholders, consumers, and suppliers? 7 Conclusion 8 Reference List 10 Executive Summary Best Buy is a retail multinational that is based in the US. The company was started under the name of “Sound of Music” and dealt with high value electronic items. In the course of time, the store transformed its image into a large scale discount chain. In the study, policies for corporate social responsibilities have been critically analyzed. The company has made serious efforts to implement a comprehensive strategy for sustainable development of the society. The study has tried to examine various strategies implemented by the company in relation to reduction of e-waste and ways in which this has contributed towards the brand’s growth. The study also aims to assess the impact of these strategies on stakeholders of the company, namely customers, employees and promoters of the brand. The paper tries to establish that the strategy of sustainable development has led to growth of customer base, increased customer retention and has been an overall benefitting investment for the company. Best Buy, through low prices and big discounts, has been attracting several customers, but its policies on sustainable development has also garnered goodwill and increased brand equity. The company uses the policy of recycling of e-waste to increase chances of return sales as well as helps in conserving the environment through sustainable strategies (Luo and Bhattacharya, 2006). Hence, in the study, the effort of Best Buy to implement its sustainable development policies and their impact on the brand has been critically examined. Introduction In 1966, Richard Shulze had opened a very small business at St. Paul in Minnesota, called Sound of Music. In the next 17 years, the small store of Shulze had gradually grown into a multi-million dollar firm. By 1983, Sound of Music had changed its name to Best Buy Corporation, Inc. The first superstore opened up in Burnsville, Minnesota, under the new name. The store began selling more brands and appliances. It also started offering central service as well as warehouse distribution. In the nineties, Best Buy was the pioneers to offer newest technology such as, DVDs and HD TVs. By 1999, Best Buy and Microsoft had collaborated for mutual promotion. This has also led them to offer a two for one stock split. Best Buy operates through two business segments, Domestic and International. The financial security of Best Buy relies on its stores, Magnolia Audio Visual Stores and the Geek Squad. Between the year 2005 and 2008, Best Buy wanted to achieve a higher income rate than earlier. Four strategies that they had planned to use in order to meet such a financial goal were Customer Centricity, Efficient Enterprise, Service, and Entertainment (Sen and Bhattacharya, 2001). Some of the ways in which Best Buy saves money is that of improving human resources, reducing fixed headcount, lowering health care costs, increasing productivity and reducing the production cost of constructing new stores. Best Buy had undergone rapid growth in sales and moved into new services and businesses. All the stakeholders, including the Best Buy executives, external sustainability experts and other shareholders, have designed corporate social responsibility activities of the company. Best Buy uses this strategy of sustainable development through corporate social responsibility policy for determining business direction, management perspectives regarding sustainability as well as for bridging gaps present in activities related to company’s sustainability. The company has mapped the near term trends that affect the consumer electronics industry, which include new regulations and increasing costs of input materials. Best Buy also conducts regular review concerning outsiders’ perspectives on the company’s role in developing more sustainable products and the opportunities associated with company’s desire to shift from products to solutions. While designing the sustainability policy of Best Buy, the company considered various factors and issues for materiality. This was achieved through analyzing sustainability issues, which ranged from digital privacy, access to technology, product safety to transportation. This assessment was made based on ways in which these aspects affect the business as well as their importance to communities, NGOs, consumers and the governments. Best Buy’s sustainability team and advisory group decided to work towards product stewardship, sustainability solutions, customer access and inspired workplace in order to implement its sustainable development plan. Hence, the strategy for Best Buy was developed on grounds of these criteria. Strategy Development team had some aims and goals with respect to sustainable development in each area. In the area of product stewardship, goal was to lead the industry from product design to end-of-use solutions. In the area of sustainability solutions, the company aspired to provide products and services that allow customers to lead more sustainable lives. In the area of access, the objective was to build business models that enable individuals to access benefits of the connected world. As far as inspired workplace is concerned, Best Buy wanted to become the preferred place of work through sustainability efforts. The strategy also developed specific targets for each area and proposed a sustainability governance structure that creates clear leadership and accountability within the company, besides a structured review process that incorporates external input. The impact of these initiatives was that strategy projects, which set the direction for changes, had fully come into practice over medium to long term (McWilliams and Siegel, 2000). Best Buy has made significant progress in establishing its sustainability strategy and a foundation for progress. To begin implementing this strategy, company leaders started to develop relationships with consumer product manufacturers, which focused on sustainability. These relationships were the key to achievement of Best Buy’s sustainability goals. Main Discussion Q1. Why do you think Best Buy has been able to gain competitive advantage in the retail electronics market while also driving many initiatives to support sustainability? Solution: Best Buy was found by Richard Schulze who was a specialist in consumer electronics. In 1966, he opened Audio Specialty store in Twin cities with a name of ‘Sound of Music’. The business started flourishing, the stores basically aimed at college going students who wanted high-end electronic goods. Best Buy is regarded as the largest retailer in its segment in the US with a formidable market share of 21%. It is quite clear from the Best Buy’s vision statement that it wants to create superior value for employees, customers and other stakeholders. The company desires to establish best practices across the organization. It aims to pay back to the environment where it operates. Many initiatives were taken by Best Buy to improve their competitiveness by following various sustainability measures. Some of the measures have been discussed in the following paragraphs. To meet competition, Best Buy had opted for acquisitions so as to increase business dimensions as well as to attract more customers as it would serve as a one-stop retail house for electronics, thereby solving all requirements of customers. This would also make customers brand loyal. The company believed that the only way to attain competitive advantage was by considering customers’ feedback. As a consequence, the company involved customers in the decision making process. It uses online forums and blogs to improve the communication with customers so that they can address customers’ problems. The company was very keen in Corporate Social Responsibilities because market research indicated that consumers were more concerned about the electronic waste as they feared that the latter contributed towards covering landfills. The company wanted a solution that can recycle this electronic waste, so initiatives were taken to set up recycling kiosks through which people could do away with their waste or obsolete electronic products. Best Buy recycled these items for a nominal charge of $10 each product. The company gave the customers Best Buy Gift voucher worth $10, which encouraged customers to visit again to purchase any other electronic product. There were certain products, which the company could not recycle, so these were recycled by recycling companies with whom Best Buy had tie ups. (Hemingway and Maclagan, 2004). They had even devised electronic cycles. The company also undertook initiatives for reducing carbon credits in their offerings. As consumers could calculate the amount that they could save on using energy star products on company websites, these products became highly popular. They even started using electronic documents to save paper (Branco and Rodrigues, 2006). Best Buy maintained 24 hours call centre service, where customers could get their problems solved any time. In case of any problem, employees would get the computers repaired within a matter of hours as opposed to the competitors. Speakeasy provided IT, broadband voice, and data services to business customers of Best Buy. Technical individuals of Speakeasy were always available to solve issues of their business customers.  Q2. Do you think the resources that Best Buy is investing to help consumers recycle their old electronic devices is a good investment for Best Buy? Solution: All the stakeholders including employees and customers were worried about ways to combat Electronic waste from covering the landfills and to use this waste in a productive manner (Garriga and Melé, 2004). In such context, Best Buy came up with “Greener Together” initiative, a program that enabled consumers in each household to recycle two electronics every day. The electronic products that were 32 inches could be recycled in $0, including CRTs, TVs, monitors and laptops. The consumers had to pay a fee of $10 for getting a product recycled. For promoting this, the company had incorporated an initiative to give Best Buy gift card to consumers for getting the product recycled as well as for buying electronic products offered (Maignan and Ferrell, 2004). This was a win-win situation for consumers as well as the company, where the former could get products recycled at no extra cost because the amount was already reimbursed in the form of Best Buy gift card. Also, the company could sell these recycled products, adding to the revenue and simultaneously, invite customers to spend more in their stores by offering gift cards worth $10. The company had also set up recyclable kiosks and provided pick up service for transporting recyclable products. The company also offered online facilities through which customers could check the value being offered for old electronics items and that of a similar new item. From this analysis, they could decide to accept or decline the offer (Lantos, 2001). Such initiatives by Best Buy to invest its capital and resources towards recycling initiatives proved to be profitable for the company. With the help of these measures, Best Buy could sell products that could not be recycled to companies like, eBay, which can resell the products. The $10 Gift card issued by Best Buy, as a result of recycling done, was helpful in marketing research and they were able to realize effectiveness of the initiative in gaining new customers as well as attracting environment friendly existing customers. This gives a clear message to the public that the company is not only concerned about selling products, but also about electronic waste disposal and recycling of wastes (McWilliams, Siegel and Wright, 2006). Most importantly, the company is able to portray its ethical and environment friendly image to the public, which would bring social acclaim, apart from fetching higher revenue and improving bottom line for the company. The ethical and sustainable efforts made had helped Best Buy to get listed in Ethisphere’s 2010 most ethical companies (McWilliams and Siegel, 2001).  Q3. How does Best Buy’s social responsibility effort impact key stakeholders such as employees, shareholders, consumers, and suppliers? Solution: Besides providing high quality products at discounted prices, Best Buy aims at maintaining sustainability with a customer-centric approach. Best Buy has taken various initiatives that have greatly enhanced its reputation in terms of Corporate Social Responsibility. Best Buy realized that as the world is moving towards a sustainable environment, stakeholders, especially the employees and customers, were becoming more and more concerned about the electronic wastage that is caused by breakage or obsolesce of the electronic product. Best Buy captured the needs for sustainability by formulating several innovative energy saving products and also by implementing a recycle program that helped consumers recycle old electronics, instead of eliminating them in manners that may cause environmental damage (Maignan and Ralston, 2002). Best Buy also desired to aid sustainability of the environment by converting all its documents in electronic form, thereby eliminating the wasteful use of paper. This action had saved 187 metric tons of paper in the year 2008. Best Buy’s Social Responsibility efforts have not only impacted the company, but also its stakeholders such as, employees, customers, shareholders and suppliers. The social responsibility initiatives adopted by Best Buy such as, recycling of old electronics improves its reputation to customers, which in turn helps to generate higher revenue through greater sales. This enables shareholders to benefit through higher profit share. Initiatives taken by Best Buy such as, the ROWE system and the Open Source Approach, allow employees to benefit and grow along with the company (Basu and Palazzo, 2008). Under the ROWE system, employees have freedom to work as and when they want, subjected to the fact that results are delivered (Matten and Moon, 2008). The Open Source Approach allows the employees to suggest developments in company’s processes by using their experience. Such an opportunity always inspires them to produce innovations like, developing the HDMI cables` packaging, which reduces consumption of plastic used for packaging. Best Buy helps in promoting sustainable as well as ethical practices among its vendors. Suppliers have to adhere to compliance standards of the company, which are audited annually by Best Buy. In the annual audit, if any supplier is found to neglect the compliance standards set by the company, the company cancels contracts with the supplier (Moir, 2001). Since Best Buy believes in a customer-centric approach, it has taken customer’s needs and concerns seriously. In response to demands made by consumers, the company started publishing its Corporate Social Responsibility Reports from 2007, facilitating consumers to be aware of actions taken by the company so as to address the sustainability issue. In programs like @15, teenagers who formed major part of the target customer segment could interact with the company and also find out innovative ways that are being developed by the company. They could even share their opinions through a website called “www.at15.com”. It also provided education and scholarship programs where they offered scholarships worth $9.5 million. It aimed to use technology so that students are able to learn in a better manner. Under disaster relief program, the company offered huge packages for relief in the affected areas. It even helped employees staying in disaster affected areas. Conclusion Through the study, some of the initiatives of Best Buy were critically analyzed so as to propagate the brand as sensitive to social issues. The brand has tried to establish itself as a brand that helps in sustainable development of the society and environment at large. This strategy has also encouraged the company to establish itself as a premium brand in the mindset of customers. This enabled the company stores to up sell and cross sell. The initiative to recycle electronic goods for a fee of ten dollars helped to gain market share by way of increasing loyalty of socially responsible consumers. This initiative also provided the company with immense publicity, which formed its communication and advertising strategy. This policy also opened a new line of business, which is a lucrative business opportunity. To improve this line of business, the entire reverse supply chain was meticulously designed by the company (Campbell, 2007). The company increased its bottom line as well as attain the goodwill required to grow in the competitive market. The company also increased its repeat purchases through distribution of ten dollar gift vouchers on availing recycling services. 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