Critical analysis of marketing ethics- corporate social responsibility

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8 March 2016

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Ethical conduct of marketing activities is essential for any serious business in the current globalized business environment. The issue of corporate social responsibility has been a challenge to many managers and will continue to do so in case proper mechanisms and policies are not put in place and implemented.

The report gives an analysis of CSR practices and subsequently provides arguments in favour of the practice and those that do not. Long term perspective in carrying out CSR has been stressed. Sustainable CSR practices ensure that the business remains relevant in the long run, performs better and the needs of the community and environment are addressed. The impacts of CSR dimensions on the marketing mix strategy adopted by the firm have also been dealt with. The best approach to CSR has been suggested and recommendation is that the approach which resonates well with the goals of the firm must be adopted. The blue-chip company tackled in this report is Nike.

Report summary

It has been observed that marketing ethics still is a topic attracting vigorous debate among scholars and business practitioners. Currently, there is a corporate social responsibility movement that has been incited by a number of catalytic forces. However, these forces driving CSR in the current business setup have been propelled by serious shifts exhibited in the relationship of the market, individual and the state. Core drivers in CSR have been the ever-growing expectations from stakeholders, the ever shrinking role played by the state in businesses, levels of responsibility being put on supply chains, and the adding pressure emanating from shareholders (Amaeshi, et al., 2006, pp.4,17, 25).

Studies that have been conducted indicate that the current public is more sensitive to CSR and thus expects much from businesses and it is therefore coming up with groups such as consumers, activists, community, employees, and shareholders so as to see to it that they are heard by corporate decision-makers. CSR could be viewed as the continuous commitment of businesses to act in a manner that is ethical and subsequently contribute to the economic development of society while trying to improve the life quality of its workforce and their families and that of the local community.

The company becomes obliged to become sensitive to the demands of all stakeholders. It must be stated clearly that CSR does not imply monetary hand-outs in form of grants or donations (McWilliams & Siegel, 2000, pp.603-609). This is a myopic view of CSR that has often led to the vague argument that the business of a business entity is to do business and thus not to be concerned with issues going on in the society. This has often pitted CSR against profitability thus arguing that CSR programs will deter a firm from achieving its profitability goals. Long term views on CSR and profitability however indicate that a firm practicing CSR programs performs better than those which do not. The firm chosen for the report is Nike which deals in sports footwear and apparels.


Critical Analysis of Arguments for and Against Corporate Social Responsibility (CSR)

Friedman (2008, pp.32-33) notes that CSR is deemed to be a very comprehensive package of serious practices and programs guided by policies which are all integrated into the operations of a business entity, supply chains, and its decision making processes in the whole firm and this spins across current and past actions and the impact that the operations have on future welfare of business, society and environment in general. In this regard, CSR issues are related to community investment, governance, business ethics, human rights, market and working environment (Li & Su, 2007, pp.237-256). This eliminates the myopic view of CSR as simple charity and therefore calls upon the firm to incorporate fully the impact of its operations on stakeholders as well as the environment at the point of decision-making.

Managers must thus juggle with a delicate balance that exists between the stakeholder needs, company needs to make profits and perform better, and be able to adequately reward shareholder. The argument posed for new corporate leaders is that of profit optimization being the key to success as opposed to profit maximization thus bringing a serious paradigm shift in terms of accountability to the firm’s shareholders to the social responsibility towards customers and other stakeholders in society (Chapple & Moon, 2005, pp.415-441).

Given the current competitive international marketing, ethics have been singled out as playing a pivotal role since businesses have realized that they are handling human values as well as beliefs. Businesses have largely spread across geographic boundaries and the current marketers are faced with cross-cultural issues that they must deal with. Multinationals that did not notice this responsibility such as McDonald and Nestle ended up facing serious ethical problems in their marketing activities going as far as getting themselves in suits that cost them millions of dollars (Li & Su, 2007, pp.237-256).

Bansal & Roth, (2000, pp.717–736) think that those who support CSR activities bring in very interesting arguments. They hold that CSR practices do enhance the firm and its brand image due to the good reputation that CSR brings on board. Companies that do CSR programs effectively have also been found to easily attract ethical sensitive employees and their retention levels are high because of the satisfaction and motivational levels that such employees do record. Such firms do report high growth rates in terms of market share and are able to easily attract new investors in their business ventures (McWilliams & Siegel, 2000, pp.603-609). Furthermore, firms with working CSR programs have experienced lower costs of operations and are thus able to report high net profit margins.

These arguments for CSR practices are supported by the logic that a firm that is socially responsible does care about its customers, suppliers, employees, society, local community, and the environment as a whole. It thus becomes an approach through which a firm does recognize the wide impact that its business operations have on the society and its development and in essence ends up supporting the firm in pursuit of its business success and that it has to actively handle the social, environmental, economic, and human rights issues. This calls for sustainable development as well as good levels of corporate governance (Roux, 2007, pp.23-25).

Chambers, et al., (2003, pp.112-119) argue that normative arguments do recognize the needs for CSR are mainly pillared on instrumental rationales or ethical, and those that are against CSR practices are based on property rights perspectives or institutional functions. In this regard, ethicists do argue that companies are obliged to act or behave in a manner that is socially responsible since that is something that is morally correct. Extremists in instrumental rationales would still support CSR programs even when they pose unproductive outcomes for the firm.

The stand is based on the rational calculation which presupposes that CSR practices will in the long run benefit the firm in question (Sun, 2010, pp.45-47). This is enshrined in the organizational legitimization philosophy which poses that by showing responsibility, a firm will be able to proactively avoid and anticipate regulations of the government, make good use of opportunities that arise from the increased cultural, sexual, and environmental awareness, differentiate its products and services from those of its competitors who are not proactive, and would continue to benefit from privilege pursuits of economics (Mahon, 2002, pp.415-445). It assumes that the firm has a legal obligation to make maximized economic advantages that do accrue to its owners.

The need for firms to protect their CSR practices is also presented since firms will not make supernormal profits from the CSR initiatives due to the entry of other firms (Visser, et al., 2008, pp.67-69).

Visser, et al., (2008, pp.67-69) are of the view that the case against CSR is supported by the institutional function concept and that of property rights. This argument poses that the best vehicles for CSR are the governments, civil and religious organizations, and labour unions. They further argue that business managers do not have the necessary skills and time required to carry out CSR policies. They also hold that a business sector that is empowered should not be held responsible for its actions since it is not a governmental body that is in place through electoral processes. Thus, allowing businesses to carry out CSR practices is seen as being dangerous since this does allocates huge amounts of authority to the firms without exercising accountability (Chaudhri & Wang, 2007, pp.232–247).

The property rights argument is rooted in neoclassical capitalism and its simplicity resonates with many scholars, especially those in finance. The position is that management reserves no right to carry out anything apart from that which increases the value of stockholders. Actions contrary to this are a violation of legal, moral and fiduciary responsibilities endowed to management (Visser, et al., 2008, pp.67-69). This is also supported by the competitive disadvantage theory which holds that CSR actions will impose a price on the company thus posing a competitive disadvantage when compared to other firms that are not practicing it. However, this is still viewed by many as a narrow view based on short term needs for profitability (Garriga & Mele, 2004, pp.51-74).

How Different Dimensions of CSR Might Affect the Marketing Mix of NIKE

There are a number of CSR dimensions that are tackled by a firm which is ethically responsible in its marketing mix and these include the physical environment, social, consumer, supply chain, and employee relations. The concept of marketing mix in this context is viewed as a theorized as well as structured way of effectively delivering and communicating product and service message to consumers in the market (Waddell, 2000, pp.323–345). The impacts posed by the CSR dimensions are based on the belief that the reputation of the company is quite vital to holding and maintaining a competitive position within the marketing place and in doing business successfully. The chart for CSR dimensions has been given in the appendix at the end of this report.

These ethical issues if not well-addressed could create serious problems with consumers and make the marketing mix in place irrelevant. The marketing mix would include such things are product, price, place, promotion, physical evidence and people which are areas of marketing strategy application (Bhattacharya, et al., 2011, pp.56-58).

The goal of business and marketing has been said to be profit maximization in a lawful manner. The behaviour portrayed in the marketplace must be ethical and ensure that there are societal benefits. The dimensions of CSR have been known to advance the corporate image, create and increase motivation as well as loyalty of both employees and consumers. A company which does not ensure employee development and proper compensation is likely to lose competitive advantage and this in turn affects the success of the marketing mix strategy employed by the firm such as Nike. When employees, who also constitute marketers, are empowered and well-developed, they enhance the performance of a company such as Nike.

The environmental impact on businesses is huge (Secchi, 2007, pp.347-373). Companies that are known not to consider the impact their activities have on the environment lose out in the long run. The way the firm formulates its marketing mix strategy to resonate with the environmental needs will affect its long term viability. Such issues as use of green energy in its operations, use of biodegradable materials in advertisements, use of technology to safeguard the environment, and reduction of carbon emissions through carbon footprint measures could heavily impact on the success of its marketing mix. Ethically sensitive consumers will shun away from Nike if they find out that the company hold poor reputation on environmental issues (Peteraf, 1993, pp.179-191).

Consumers on the other hand demand for quality products at competitive prices and the safety of these products must be guaranteed. A firm which does not take hid of these demands risks being thrown out of the market as consumers would avoid its products making its marketing mix strategies irrelevant. This is where the concept of consumer related marketing finds relevance since current consumers usually recognises CSR brands and end up supporting them (Covin & Miles, 1999, pp.47-63).

Given the fact that Nike operates in the society and not in virtual settings, it is important that the social welfare of the local community be put into consideration in order to win trust, respect and loyalty, factors that enhance brand image and reputation. This also gives the company insurance in the society it operates in. it is hard to market a product of a company that does not have good brand image, has a ruined reputation and the society does not trust it or exhibits near zero loyalty levels (Baum & Wally, 2003, pp.1107-1129).

Supply chain dimension in CSR for Nike must be considered since supply chains have been singled out as being at the core of business operations. The business in question such as Nike must be able to streamline its supply chain to resonate with the CSR demands. Marketing mix strategies that are employed in supply chains that are effectively handling CSR programs such as green logistics and green supplies have been found to resonate well with the consumers since the consumer is placed at the centre of these supply chains (Covin & Miles, 1999, pp.47-63).

The Most Appropriate CSR Approaches to Adopt

Numerous approaches to CSR have been proposed by many scholars and businesses. However, they are all defined by the size and resources bases controlled by organizations and the goals to be achieved in engaging in CSR. These approaches are initiatives based on community, getting into philanthropic activities, and developing business plans which build strong shared values.

The company could adopt two approaches to the practice of CSR in the market. The first one should be coming up with community based initiatives where it supports organizations, events, as well as programs within the local community it operates in as this could pose strong positive impacts in the long run. This could subsequently create a positive brand recognition which resonates well with the community (Barney & Arikan, 2001, pp.67-78). This strategy should be done in combination with the approach of shared value. This shared value approach is a CSR initiative that focuses on building a set of shared values which do recognize the fact that long term success of the business as well as achieving a balanced social system are two concepts that are interdependent to each other.

This approach is enshrined in the belief that for a business to thrive, the community in which it operates in must be healthy, educated, and governed in the most appropriate way possible (Lopez, et al., 2007, pp.285–300). In this regard, factoring in formal investments in areas of education, social well-fare, healthcare, and civil society when coming up with strategic business plans is the best avenue in creating opportunities that enhance and build social value while ensuring long term growth for the firm. Whichever approach a firm such as Nike adopts the most important consideration should be that it has to offer sustainability, win goodwill from the society, and ensure that the company meets its goals. Sustainable CSR practices work to ensure that the company avoid short term focus and looks towards profit optimization in the long run (Banerjee, et al., 2008, pp.51-79).

Conclusion and Recommendations

Considering the current global marketing environment, serious changes have occurred when compared to what it was decades ago. In this regard, it is imperative that firms adopt CSR practices that are sustainable. Indeed there are those who argue for CSR practices by firms and those that argue against these practices as has been established in the analysis. However, differences in opinion happen to emanate due to the aspect of time difference (Agle, et al., 1999, pp.507-525). Companies that focus on short term gains from CSR will be frustrated since this cannot be easily achieved. On the other hand, firms that seek to practice long term CSR programs that are sustainable have been reported to achieve high performance levels and have managed to justify their participation in CSR to their shareholders.

In a nutshell, a serious company in today’s globalized market cannot assume the need for sustainable CSR policies that it should effectively carry out (Waddell, 2000, pp.323–345). The various dimensions of CSR such as environment, social, consumer, supply chains, and employee relations have been seen to pose serious impacts on the marketing mix strategies adopted by the firm such as Nike. Finally, it is recommended that all approaches to CSR must be considered and the best approach or a combination that fits the goals of the company be chosen as has been indicated above.


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