How Embracing the Idea of Corporate Social Responsibility Can Positively Impact the Firm's Profits - Assignment Example

? Corporate Social Responsibility Insert Semester Introduction Arguably, corporate social responsibility is among the most innovative aspects of the modern business world. Many gurus in contemporary business practice have established that there is a remarkably strong link between corporate social responsibility and a firm’s profitability (Marcello & George, 2006). Gone are the days when the single most prominent target of the business was to maximize a company’s profits on behalf of the shareholders. Currently, being socially responsible is inevitable. Corporations engage in corporate social responsibility for many different reasons. Corporate social responsibility does not have a common definition as many companies understand, interpret and apply the concept differently. For instance, the activities that the company A can engage in as part of their corporate social responsibility program cannot be the same activities that company B will apply. As such, defining the concept becomes difficult. Even so, considering all aspects of the concept, a broad definition can be established. The general definition for the concept states that: corporate social responsibility refers to the deliberate efforts by the organization beyond its business obligations to do appropriate things and engage in behavior that is appealing to the society. This paper seeks to explain how embracing the idea of corporate social responsibility can have a positive impact on the profits f an organization. One of the most notable ways through which corporate social responsibility of a company impacts on its revenues is through the reduction of the expenses it incurs. One of the most prominent ways through which a corporation can reduce its expenses, is through the fact that a socially responsible corporation will likely receive tax incentives from the government (Mackey et al, 2007). Such incentives may come in the form of tax holidays, periodic relief and reduction in tax burden. A company usually pays tax out of its annual profits. Tax is a pre-dividend deduction. In the event that it is not deducted, the net income of the company will possibly be high. As a result, the amount of money accruing to each member or shareholder will be considerably high. Governments across the world are finding the need to have companies participate in social matters. It is for this point that they promote the concept of social responsibility. They reward those companies that engage in such activities as prevention of soil erosion, reforestation and provision of social amenities. Under normal circumstances, the amount spent in the execution of the social activities is too little compared to the tax savings made. The second way through which corporate social responsibility pays out is that it helps a company gain an upper hand in the industry. Research carried out in California in the year 2008 indicated that the average consumer was likelier to purchase commodities from a socially responsible firm, than one that is unconcerned about the welfare of the general public. It is an issue of common knowledge that in the business world, today, competition is serious in all industries. This is so because of advancement in technology and the effects of globalism. One of the ways of surviving the completion, especially among the multi- national companies, is through engaging in activities that contribute to the wellbeing of the society (Bishop, 2008). Consumers associate a socially responsible firm with an excellent public image. This plays a primary psychological role in the minds of the community. It is from such psychological phenomena that the potential clients get to prefer the corporation that is socially responsible. This, in turn, translates to an increase in revenue. An increase in revenue is connected to an increase in the profits of the concerned corporation. Much like total quality management, corporate social responsibility is a social transaction. A social transaction is a process through which different parties cooperate in such a manner that they initiate a state of mutual satisfaction. In social responsibility, the gain is mutual as the benefits are two-way. In simple terms, the society benefits from the activities and facilities associated with corporate social responsibility. Similarly, the firm benefits from the same process. Typically, the members of the public enjoy the facilities that the responsible firms avail to them, such as swimming pools, roadside shades, and health facilities (Rivoli & Waddock, 2011). As a result, the people develop a positive attitude towards the company. Consequently, they gain more confidence to buy from the corporation. Such positive attitude is a combination of trust and loyalty. An average consumer will always trust that party that shows concern about his or her wellbeing. Therefore, they tend to purchase and consume more of the corporation’s products. As such, the sales of the concerned company grow. A growth in the sales increases sales revenue and consequently boosts the net income of profit of the firm. Corporate social responsibility is part of an uninterrupted process of development in the organization. Such improvement touches on all elements of the business. In the modern world of trade and industry, continuous improvement is the only way through which a firm can survive (Reng &Huang, 2011). It is for this point that the business gurus recommend such things as Kaizen; a Japanese management technique that emphasizes continuous improvement or change for the better. Social responsibility is a dynamic concept of business in the sense that the needs of the social order are particularly dynamic. Responding to the ever- changing needs of the society is a way of keeping abreast with the trends in terms of the tastes of consumers. Through assisting the consumers socially, an organization can easily establish their needs. Such knowledge and information can be incorporated in the manufacturing process. For instance, in providing services as part of social responsibility, a textile manufacturing organization can easily learn the dressing habits of the community. Such habits can be catered for during the process of manufacturing clothes. As such, the sales of the organization will be on the rise. The company will have gained competitive advantage over competitors. This way it will earn higher returns compared to a firm that is not socially concerned. A combination of corporate social responsibility and managerial ethics can be the most appropriate market penetration strategy, especially in countries where the people value social links a great deal. The best example of such a country is china. In China, the people do not value money-driven business relationships but rather relationship-based connections among the trading partners (Sabadoz, 2011). Considering such ethical practices as the Guanxi, it is worth arguing that a company whose managers do not embrace ethics cannot penetrate and thrive in the Chinese market. Arguably, China has the oldest cultural system. The Chinese culture is one that is highly characterized by ethical conduct and old beliefs. The story of Chinese business culture is long and may not easily be understood, but the bottom line is that ethical conduct and personal relationships are extremely beneficial in establishing business links. While still on this example, it is worth mentioning that the Chinese view the westerners as people who are exceptionally friendly, but cannot be trusted. For a company to gain the trust and hence business partnership in china, they ought to embrace business and managerial ethics as well as act socially responsible. Management ethics has been described as the main beliefs, standards and principles, held by the management, that define that which is right or wrong. These vary from one organization to another depending on the philosophy and core values of the organization. It is for this very reason that an organization having the same resources, and dealing in the same products as another, will perform well in a given market (Ahlstrom, 2012). Management ethics are closely linked to corporate social responsibility. It is from such ethics that social responsibility decisions are based. For instance, a company’s management may find it unethical to set exorbitant prices on their products. As such, they seek to set those prices that are pocket-friendly to the average member of the society. This makes the products of the organization affordable among the populace. A firm that is reasonable in its pricing is considered socially responsible as being fairly priced is equal to responding to the social needs of the community (Kottler & Lee, 2004). A firm whose ethical standards do not encourage unfair pricing practices, such as price discrimination, is likely to gain popularity among the members of the general public. As such, it is likely to earn more than other companies in the same line of business in terms of revenue earned. This way, managerial ethics and social responsibility, will be said to have paid back positively. Socially responsible firms have always been named in global rankings. Being named a top socially responsible firm comes with quite a number of advantages. Chief among the merits is that such a firm is associated with a positive corporate image. A positive corporate image is associated with quality and efficiency. Such firms hold a particularly excellent reputation. Such reputation is associated with the potential to deliver products that are designed according to the desires of the general public. The fact that most people do not understand the parameter used in determining which firm is socially responsible is an advantage to the organization (Crowther & Bacchus-Rayman, 2004). Members of the public, who are laymen, in most cases, tend to think that a firm that has been named as the most socially responsible deals in quality products. This way, they tend to consume the commodities provided by such corporations. Additionally, the average consumer will definitely want to be linked with the most reputable company. Being named as the most reputable company globally as far as social responsibility is concerned, makes the company go global, and reach markets that it had not explored. This way it will be able to expand the sales and consequently boost the profits. Social responsibility plays a key role in marketing the company. Interacting with the general public and providing social amenities and other facilities, markets a company. This is because the company, through socially responsible behavior, is capable of touching on the seven fundamental P’s of marketing (Hawkins, 2006). People, being the most important of all P’s are touched by the socially responsible conduct of a firm. Since the people that enjoy the social amenities provided by a socially responsible company are the same consumers that make up the market, it is likely that a company will establish a wide clientele base from the society in which it acts. This way, it will stand better chances of expanding the sales volume, as well (Schwartz, 2011). When the sales volume increases through corporate social responsibility, it is said to have risen at a remarkably low cost. This is fundamentally so because the cost of being socially responsible is much low compared to the gains it brings to the company. Since social responsiveness and obligation are part of social responsibility, they can be termed as being an essential part of the company’s marketing strategy. Conclusion In conclusion, it is pretty clear that from the foregoing, being socially responsible is the key to the success of an organization. Much as some researchers have critiqued the concept as being costly to the organization, the benefits it comes with cannot be compared to the cost. The proponents of the profit maximization goal of the firm are archaic as social responsibility is one of the most effective ways of boosting the sales revenue of a company. As established in the above discussion, social responsibility is way of marketing that improves the image and reputation of the organization. Additionally, it is a way of creating social transactions that yield mutual gain. It creates a global market for a firm that has not fully explored the international market. Customer loyalty, which is associated with the concept of social responsibility, gives the socially responsible organization an upper hand in the modern business world where competition is a prominent feature. Further to this, research has it that the concept is inextricably connected to a company’s profitability. References Ahlstrom, D. (2012). Innovation And Growth: How Business Contributes To Society. Academy Of Management Perspectives, 24(3), P11-24 Bishop, J. (2008). For-Profit Corporations in a Just Society: A Social Contract Argument Concerning the Rights and Responsibilities of Corporations. Business Ethics Quarterly, 18 (2), P191-212 Crowther, D. & Bacchus-Rayman, L. (2004). Perspectives on Corporate Social Responsibility. London: Ashgate Publishing Limited Hawkins, D. (2006). Corporate Social Responsibility: Balancing tomorrow’s Sustainability and Today’s Profitability. New York: Palgrave Macmillan Kottler, P & Lee, N. (2004). Corporate Social Responsibility: Doing the Most Good for Your Company and You Cause. New York: John Wiley & Sons Mackey, A., Mackey, B & Barney, B. (2007). Corporate Social Responsibility and Firm Performance: Investor Preferences and Corporate Strategies. Academy Of Management Review, 32 (3), P817-835 Marcello P. & George S. (2006). Corporate Social Responsibility and Business Success. The European Baha’i Business Forum, 112 (4) P.45-56 Reng, V &Huang, M. (2011). Corporate Social Responsibility: Consumer Behavior, Corporate Strategy, and Public Policy. Social Behavior & Personality: An International Journal, 39 (4), P529-541 Rivoli, P & Waddock, S. (2011). The Grand Misapprehension. California Management Review, 53(2), P112-116 Sabadoz, C. (2011). Between Profit-Seeking and Prosociality: Corporate Social Responsibility as Derridean Supplement. Journal of Business Ethics, 104(1), P77-91 Schwartz, M. (2011). Corporate Social Responsibility: An Ethical Approach. Ontario: Broadview Press Read More