BA (HONS) International Business and Management
Contemporary Issues in Management (online) Part 1
The Relationship between Competitive Advantage and Corporate Social
Responsibility
Beverley Cox
(i7939141)
Index
Page No. Contents
3. Abstract
4. Introduction
5. – 8. Competitive Advantage
9. – 12. Corporate Social Responsibility
13. – 16. Corporate Social Responsibility and Competitive Advantage – The
Relationship
17. Conclusion
18. Bibliography
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1. Abstract
With increasing concern with regard to society, ethical behaviour and the
environment, a new generation of customer starts to exist. Companies today are
under intense pressure to create public trust and stay competitive in such a global
economy. Accordingly organisations create a new type of communication strategy in
order to interact with such phenomenon. This type of communication strategy is
known as corporate social responsibility (“CSR”) activity. The term is generally used
to refer to a mode of business engagement and value creation, allowing to meet and
even exceed legal, ethical, and public societal expectations. This paper seeks to
analyse the relationship between CSR and competitive advantage.
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2. Introduction
Strategic management is all about achieving a sustainable competitive advantage.
Strategists are searching for sources that will help them to achieve the required
competitive advantage whilst there is a steadily increasing societal concern about
environmental, ethical, and social issues. This concern is applied during the
purchase process of the new generation of customer (Chen, 2010). This leads
strategists and marketers of organisations to interact with this social phenomenon
and try to create a way of exchanging relationships.
Abu Dhabi National Energy Company “Taqa” is one such company that focuses upon
executing environmental, social and ethical programmes to its stakeholders including
shareholders and employees. Taqa has joined an initiative whereby a group of
business leaders seek to set global limits for temperature increases, and have
specific emission reduction targets. They offered their employees hybrid low
emissions vehicles (Taqaglobal.com, 2014). Taqa started with its employees as it
believes that changing individual behavior is the first step toward changing societies
(Kotler & Keller, 2009).
Having a deeper look in to some famous organisations’ strategies, it is evidently
clear that it becomes a matter of social responsibility and sustainability. For
example, McDonalds (recycled packaging) and Coca Cola (sugar and packaging).
This obviously is evidence that if you do not manage your business with respect to
environmental and social sustainability, your business will not be sustained (Ottman,
1998). This also emphasises the importance of CSR and its social role in the market
for the consumers alongside clear support for the business, and for the brand
specifically. This paper will try to find out if the relationship between CSR and
competitive advantage is a positive one.
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3. Competitive Advantage
3.1 Overview
In today’s aggressive market organisations are trying to have their own individual
strategy in order to protect its position among competitors and also to uphold its
market share. Some organisations seek to do something that rival competitors
cannot do whilst other organisations seek to own something that rival organisations
desire. For example, Apple iphone – initial ideas from Samsung but improved upon.
This shows clearly how all organisations strive to gain and maintain.
Competitive advantage can be defined as “anything an organisation does especially
well compared to rival organisations” (David, 2013). Moreover; and as cited by
David (2013), CEO Paco Underhill says, “Where it used to be a polite war, it’s now a
21st century bar fight, where everybody is competing with everyone else for the
customers’ money”. For example it can be seen that TK Maxx are taking customers
from competitors such as Matalan situated in the same town (Thompson, 2009)
enabling them to gain and keep competitive advantage. An organisation’s target
should not be only to achieve competitive advantage but to also make every effort to
achieve sustained competitive advantage.
David (2013) also cites that this can be achieved through continuous adaptation to
external changes and making the best use of internal resources and capabilities,
also through ongoing evaluation for strategies that get the most out of those internal
resources and external factors.
3.2
Sources of Competitive Advantage
Strategists and researchers have been interested in understanding sources of
competitive advantage for organisations. Normally, they focused on studying
relationship between an organisation’s internal strengths and weaknesses on one
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hand, and its environmental opportunities and threats on the other. This is actually
known as SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis,
which traditional logic suggests that organisations that use their internal strengths in
taking advantage of external opportunities and reducing environmental threats, while
avoiding internal weaknesses, are supposed to gain competitive advantages more
than other rival organisations (Barney & Clark, 2007).
Moving beyond the SWOT analysis; the resource based view and the industrial
organisation perspective are two major perspectives or frameworks that show how
organisations can capture and maintain sustainable competitive advantage. While
the resource based view approach argues that internal resources are the major
sources for an organisation to achieve and maintain competitive advantage, in
contrast the industrial organisation approach contends that the external factors are
more important to achieve competitive advantage (David, 2013).
3.3 Resource Based View Perspective
The resource based view perspective contends that the organisational performance
will be first and foremost achieved through the organisation’s internal resources
(David, 2013). These resources and capabilities include all of the physical, financial,
organisational and human assets used by an organisation to
produce, manufacture, and deliver products or services for customers. Physical
resources include the manufacturing facilities, machines, and buildings the
organisations use during operations. Financial resources include equity, debt,
retained earnings, and so forth. Organisational resources include the organisational
culture, history, relationships along with an organisation’s formal reporting structure,
and compensation policies. Human resources include all the knowledge, experience,
judgment, risk taking, and wisdom of individuals associated with an organisation
(Barney & Clark, 2007).
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The main idea of the resource based view is that the type and the mix of all the
internal resources should be the first issues considered in developing strategies that
can help to achieve sustainable competitive advantage, and the theory declare that it
is advantageous for the organisation to pursue a strategy that is not implemented
and cannot be applied by rival organisations (David, 2013). According to Barney &
Clark (2007), in order to let the organisation make the best out of its internal
resources, managers should answer four important questions about those
resources:-
What is the value?
How fair is it?
Is there any imitation?
How will it be organised?
As for the value of the outcome from these questions, a manager should answer
these questions:-
Do the organisation’s resources and capabilities add value by enabling it to
