Seminar in Strategic Management

Topic

Relationship between corporate social responsibility and

competitive performance

Contents
Defining corporate social responsibility......................................................................2
Historical Background of CSR..................................................................................... 3
Types of Corporate Social Responsibility....................................................................4
Internal and external factors of CSR................................................................4
Economic area...................................................................................................... 6
Legal Responsibilities......................................................................................... 6
Ethical Responsibilities....................................................................................... 6
Philanthropic Responsibilities...........................................................................6
Social area............................................................................................................ 7
Environmental area............................................................................................. 7
Dimensions of corporate Social responsibility............................................................7
Challenges Facing Corporate Social Responsibility Implementation...........................7
Lack of Community Participation in CSR Activities........................................7
Need to Build Local Capacities:.........................................................................8
Transparency problems:..................................................................................... 8
Non-availability of Well Organized Non-governmental Organizations:......8
Narrow Perception towards CSR Initiatives:...................................................8
Non-availability of Clear CSR Guidelines:........................................................9
Creating competitive advantage................................................................................9
Strategies to create a competitive advantage..........................................................11
Low Cost Strategy............................................................................................. 11
The products differentiation strategy............................................................11
The focus or market segmentation.................................................................11
Outsourcing the competitive advantage.......................................................12
Sustainability of the competitive advantage................................................13
Transforming CSR into a competitive advantage......................................................15
Intergraded social perspectives in business frameworks...........................16
Shared benefits between society and business...........................................17
The Socially Anchored Competencies (SAC) Model......................................18
Negative and Positive effect of CSR on Competitive performance...........................20
Positive effect of CSR on Competitive performance....................................20
Negative effect of CSR on Competitive performance..................................22

Conclusion................................................................................................................ 24
Table of figures......................................................................................................... 25
Appendix.................................................................................................................. 25
References................................................................................................................ 26

Introduction
This paper is conducted to provide an in depth look at corporate social
responsibility

(CSR)

and

its

impact

on

company`s

competitive

performance, Corporate Social responsibility has become a key subject

for todays businesses.
This type of responsibility refers to the promise of the firm to behave
ethically and contribute to economic development while directly
enhancing the quality of life of the workforce, families, local community
and society as a whole.
Considering the journey that CSR has been on and its importance is
growing significantly over the years, this paper focuses on the real
purpose of CSR today and how can the CSR transferred to a competitive
advantage to the organization and the pros and cons of it are the goals
of this paper.
In the era that we live in nowadays, the performance and the success of
any organization revolve around the concept of competitive advantage.
Having knowledge and understanding about strategic areas where
sustainable competitive advantage could be derived has become a
dominant part of research in todays organizations
The paper begins with defining the corporate social responsibility from
the aspect of history, types, dimensions and theories then introducing
the competitive advantage as a definition, how to create it passing by
the relation between the CSR and the competitive performance.

Defining corporate social responsibility

Corporate social Responsibility (CSR) is a very broad term as it can be
defined according to different CSRs dimensions over different segments
of time. Since there is no unique and specific definition that is used for it,
therefore many definitions cover different dimensions of CSR including:
ethical practices, economic development, environmental protection,
transparency, stakeholders involvement, responsible behavior, and
corporate responsiveness. (Rahman 2011: 166; Mcwilliams et al. 2006:
1).
Corporate Social Responsibility is defined as accomplishment of selfactualization both internally and externally (Darsono, 2009). Its a
concept in which the organization is responsible of affecting the society
and the employees, shareholders. Kitchin tried to find a solution to this
method through defining each word. First, Corporate, he assumed that it
is a profit intending entity. Second, anything related to society. Kitchin
mentions society as individuals of needs. Finally, Responsibility refers
to the duties of corporations and the normal responsibility they enforce
in the society (2002).
The

main

feature

of

corporate social

responsibility

is

that the

performance of the firms must be charitable (Porter, 1971). The

corporate social responsibility perception includes two stages. It means
not to do anything that affects the neighborhood. On the other, it may
be stated as the voluntary statement of the responsibility to help solve
neighborhood problem (Eilbert, 1973).
Accordingly, the fact that one solution fits all to define CSR, should be
abandoned

and

instead

accept

various

definitions

were

each

organization can choose which concept and definition is the best option
for it, matching with the aims and goals of the organization and also
aligning with its strategy. (Van Marrewijk 2003: 95-96).

Historical Background of CSR

The idea of CSR is neither new nor has evolved recently, as it has long
historical roots. Over the past decades the demand concept of CSR has
significantly grew in importance and significance. CSR has started to
become a phenomenon, specifically after World War II by 1939 and its
importance increased remarkably in the 1950s which is considered to be
marked as the modern era of CSR. However, it makes sense to
concentrate more about recent concepts of CSR, so we will start to
tackle the CSRs evolution since the 1950s. During that period, it was
discussed to link CSR with benefits for business, so the main focus was
on businesss responsibilities to society from the belief that several
businesses were vital cores of decision making and power that affects
the lives of citizens at many aspects. This period ended up by a warning
addressed

to

the

business

world

about

the

dangers

of

social

responsibility if ignored. (Caroll and Shabana 2010: 85-87; Caroll 1999:

268-269).
While in the 1960s, CSR grew more in popularity and took a definite
shape starting by what CSR means, so CSR literature expanded in that
period.

From

responsibility

the

most

recognizes

highlighted
the

definitions

intimate

was

relationship

that

social

between

the

corporations and society that must be kept in mind by managers while

they are pursuing their goals. (Caroll 1999: 270; Caroll and Shabana
2010: 87; Rahman 2011: 168).
The 1970s was the decade in which CSR was the center of discussions
and the time that witnessed further growth of CSR definitions. It was also
the time when the noble prize economist Milton Friedman presented

many CSR definitions which made a great impact on CSR up till now.
(Caroll and Shabana 2010: 87; Caroll 1999: 273; Rahman 2011; 168).
However, in the 1980s there were fewer new definitions of the concept
with more research on CSR and the rise of alternative concepts and
themes, which included business ethics, stakeholder theory, and public
policy. The interest in CSR did not vanish rather, the core concerns of
CSR began to be reinforced in those alternative concepts and themes.
(Caroll and Shabana 2010: 88; Caroll 1999: 284; Rahman 2011: 169).
Finally, in the 1990s, 2000s and even up till now it became the era of
global corporate citizenship with new dimensions of CSR were the CSR
concept served as the base point of it. This is when the business case for
CSR has gained solid foundation that explains that what is good for the
environment and society is also good for financial performance of
business. Since the middle of the 1990s; the importance of social
initiatives in order to build strong company reputation that might protect
companys image against negative publicity or help regain it has been
highlighted by business experts.
In addition that, the 21st century is considered to be the era of emerging
CSR industry as the business community became fascinated about
sustainable development through CSR. Large corporations constructed
full CSR departments, hiring CSR managers and CSR consultants. In
addition, now the public is attentive more than ever to what
organizations are saying and implementing about CSR. (Vanhamme and
Grobben 2009: 273; Rahman 2011: 170-172; Caroll and Shabana 2010:
88; Caroll 1999: 288).
Types of Corporate Social Responsibility
6

CSR depends on three key standards. They are economic, social and
environmental. Every part of CSR contains a variety of exercises relying
upon the sort of big business and the prerequisites of partners
Internal and external factors of CSR

There are main factors that force the firms to care about their corporate
social responsibility. Some of these factors are considered internal
factors and the other are external factors. Both types of factors have
great effect on the CSR practices (Babiak &Wolfe, 2009:719)
Internal factors that affect the CSR are the factors extracted out from the
firm itself such as the attitudes, interests, beliefs and ethics of the top
management and the employees. The managers should have a belief
that the internal resource and skills of their organizations can be used
for social benefits .Also they must belief in the necessity and advantages
of the CSR (Babiak &Wolfe, 2009:719; See, 2009:9).
Pervious researches have predicted that there are external factors that
force and influence the organizations to be socially responsive and the
way and flow of the social activity they will be involved in. External
factors are the factors from outside the organization .they are mainly
divided into three sections which are social, economic and institutional
factors. Social factors include customers and investors.
The institutional factors include formal institutions such as legislation,
and governments and informal institutions such as members of local
communities, NGOs and activist groups. The last factor which is the
economic includes the multinational firms in the country and market
share. Such external factors believe in the importance of the CSR and
are expecting that organizations are doing their best for their societies
(Babiak &Wolfe, 2009:719; see, 2009:6).

Figure (1) Carrolls Global Corporate Social Responsibility Pyramid Archie B.

Carroll is Robert W. Scherer Professor of Management and Corporate Public
Affairs at the College of Business Administration, University of Georgia,
Athens, Greece

Economic area

A Company supposed to act clearly. A positive association with investors,

customers, suppliers and others business accomplices is additionally
anticipated The effects of the organization on the economy at nearby,
national and worldwide levels are checked.

Legal Responsibilities

Legal responsibility is associated with government establishing laws, in

which reflects a code of ethics that a company should follow. Payment of
taxes and environmental protections are examples of included laws
(Olawale, 2010). Carroll adds that the legal responsibilities include;
acting in unison with government laws, comply with any regulations,
fulfill legal obligations such as paying taxes regularly, and finally
products and services should abide by with governmental laws (Carroll,
1991)
Ethical Responsibilities

CSR ethical theory implies that when engaging corporate social

responsibility approach, it provides to the company added values which
wasn't not considered previously in their core business and enhancing
their ethical operation to be a complete one even if the outcome wasn't
of a profitable one. This promotes the idea that when engaging social
responsibility makes the companies responsibilities towards social
welfare increases subconsciously. Moreover when companies dont work
in parallel with social demands and welfare, they create the image that
this company operates in an irresponsible manner (Jamali and Mirshak
2007: 246-247; Caroll 1999: 283-284; Abd Rahim et al, 2011:122-123)

Philanthropic Responsibilities

At the highest point of the pyramid lies the philanthropic responsibility.

As indicated by Carroll (1991) this last stride is neither a commitment
nor a desire yet a craving of the society. Philanthropic responsibility can
be seen as "cooperative attitude", i.e. giving money related guide and
taking an interest in (chiefs and workers) charitable activities/events. It
is essential to upgrade the personal satisfaction in the community,
wherein the corporation is dynamic
Social area

In the social area, behavior is focused on the attitude to employees and

on supporting the local community. The company influences the
standard of living, health, safety, education and cultural development of
citizens.
Environmental area

The company is aware of its impact on the living and inanimate nature in
the environment. This includes the ecosystem, land, air and water. There
is an assumption that the company will protect nature and natural
resources.
Dimensions of corporate Social responsibility
Could be Human rights, Working conditions, Equality and diversity,
Consumer protection, Environment and health impacts, Economic
development, Ethical business practices
Lobbying and political influence, Businesses role in conflict zones
Challenges Facing Corporate Social Responsibility Implementation
Lack of Community Participation in CSR Activities:

10

There is a lack of interest of the community in participating and

contributing to CSR activities of companies. This is largely attributable
the fact that there exists little or no knowledge about CSR within the
communities as no serious efforts have been made to spread awareness
about CSR and impart trust in the communities about such initiatives.
The circumstance is further irritated by an absence of correspondence
between the organization and the group at the grass roots.

11

Need to Build Local Capacities:

There is a need for capacity building of the local non-governmental

organizations as there is serious shortage of trained and efficient
organizations that can adequately add to the ongoing CSR activities
initiated by companies. This seriously compromises scaling up of CSR
initiatives and subsequently limits the scope of such activities.
Transparency problems:

There is an expression by the companies that there exists lack of

transparency on the part of the local implementing agencies as they do
not make adequate efforts to disclose information on their programs,
audit issues, impact assessment and utilization of funds. This reported
lack of transparency negatively impacts the process of trust building
between companies and local communities, which is a key to the
success of any CSR initiative at the local level.
Non-availability
Organizations:

of

Well Organized

Non-governmental

It is also reported that there is non-availability of well-organized

nongovernmental organizations in remote and rural areas that can
assess and identify real needs of the community and work along with
companies to ensure success full implementation of CSR activities. This
also builds the case for investing in local communities by way of building
their capacities to undertake development projects at local levels
Narrow Perception towards CSR Initiatives:

Non-governmental organizations and Government agencies usually

possess a narrow outlook towards the CSR initiatives of companies, often
defining CSR initiatives more donor-driven than local in approach. As a

12

result, they find it hard to decide whether they should participate in such
activities at all in medium and long run.

13

Non-availability of Clear CSR Guidelines:

There are no clear cut statutory guidelines or policy directives to give a

definitive direction to CSR initiatives of companies. It is found that the
scale of CSR initiatives of companies should depend upon their business
size and profile. In other words, the bigger the company, the bigger is its
CSR program.
Definition of competitive advantage
Competitive advantage is what differentiates an organization from its
competitors; it is mainly the ability of a firm to develop and implement a
strategy that is not used by other firms.
Quick changes in market attributes and the technological innovations
are common and faster challenges, resulting in products, processes and
technologies. The competitive advantage is unstable, hard to acquire
and more hard to keep up and reinforced with consumer who through
their individual decisions polarization affirms the acknowledgment
execution and award competitive advantages, therefore bringing on the
aggressive positioning of organizations present in a specific market.
(Daniela, P. A. 2014).
Organizations should show the ability to adjust to changes in the
business environment in order to keep up the helded positions. (Sull,
Donald Norman. 2005).
Creating competitive advantage
The goal of all businesses is getting a competitive advantage in relations
with competitors on the market. This advantage can be achieved by two
ways, i.e. selling products at a lower price, or their differentiation
(M.Porter 1985).

14

An organization creates a competitive advantage from either its

resources or capabilities, and for resources or capabilities to establish a
competitive advantage, two factors must be present which are: first
scarcity as if a resource or a capability is available within the industry it
will not be a satisfactory basis for a competitive advantage, second
relevance as a resource or a capability has to be relevant to the main
success factors in the market as well as its relevance to the core
business of the organization. (Grant 2008:139-140).
Creating a unique competitive advantage for an organization is not
enough as the organization must make sure that this competitive
advantage is sustained , and of the extent of difficulty for a competitor
to imitate it. (Smith 2007: 188). Sustainable competitive advantage is a
journey not a destination so, it depends on whether resources and
capabilities are durable, where some resources are more durable than
others, and therefore they are the ones which create a secure basis for a
competitive advantage. (Grant 2008: 140; Chaharbaghi and lynch 1999:
45).
To highlight the sources of competitive advantage of an organization
must know the components on which depends its creation. The most
important are the internal, i.e. those in the "inside" of the company, for
example, structure, assets, abilities and capabilities of the association.
An effective organizational structure will facilitate communication
between correspondence departments, consequently expanding work
effectiveness. A part of the internal attributes of the organization that
are the key in making competitive advantage are: physical resources,
financial, human and organizational assets that are used for its
improvement and performance (Bragge, V. 2015).

15

Strategies to create a competitive advantage

Low Cost Strategy

Organizations utilizing this procedure, intend to hone the most minimal

expenses in the business. In theory, if the sale price may equal the
average market prices, having the lowest cost of production, the
company will even find highest profits. Practicing with the lowest prices
on the market requires investment in various divisions of the company
(Bragge, V. 2015).
The products differentiation strategy

The technique can be utilized as a part of those market segment

portions where customer needs are not met, where there is competition,
rivalry, and the price is not the fundamental element of picking products.
The differentiation is on the company's ability to provide products that
are distinct from those of their competitors. It can be called as positional
advantage after its receiving would come about the organization's
position in the market (Daniela, P. A. 2014)

The focus or market segmentation

Market segmentations purpose is to allocate the resources efficiently

with greater level of profits (Miller and Granzin 1979). It is dividing
customers with similar needs, wants and buying attitudes to be able to
reach customers more efficiently (Meadows and Dibb 1998). In the retail
sector, the process of customer segmentation is becoming really difficult
because shoppers now are always a part of cross-shopping process
which is defined as the rapid change of customers loyalty and
preferences toward a retail outlet. Also, it is becoming more difficult
because of the concept of out-shopping where customers shop in
retailers that arent in their living area (Johnson and Raveendran 2009).
16

Also,

Lazer

and

Wyckham

(1969)

studied

the

effect

of

retail

segmentation on the profits of the retail outlets. They segmented the

customers according to their buying behavior, personality traits, family
life cycle and they found that for example the family life cycle affects the
buying behaviors of customers, but it doesnt affect their choice of their
retail outlets. So, segmentation can help you maintain customers by the
availability of their favorable products, existence of retail personnel and
the overall reputation of the outlet. But its not sure that it will attract
customers on the first place, as this require more of marketing efforts.
We can conclude that the segmentation process is done not only by the
manufacturer who segments the retailers to find the best channel to
serve its customers. But also by the retailer that segment customers and
tries to approach them by their preferences and needs to achieve
customer loyalty and consequently high profits.

Outsourcing the competitive advantage

Outsourcing, mainly used for downsizing and cost reductions at major

companies, should be used as a strategic tool to convey an intense
effect on corporate growth and financial stability. By outsourcing
unnecessary work, the company can disregard resources and focus on
its areas of competitive advantage. To reach that goal, the corporation
must know its core competencies, the nature of work inside the
company, and manage the outsourcing procedure.
outsourcing strategy emerged and became an essential business
strategy, steadily expanded in terms of scale, scope and pace over the
last two decades, (Zee & Brandes, 2007; Mohiuddin, Z. Su & A. Su,
2010). What changed in strategic management thinking is that the main
17

idea of analyzing competitive advantage of firms not only inside the

organization (Porter, 1985; Mintzberg, 1983) but also the supply network
of the firm.
Like it was previously mentioned that mainly the reasons behind
outsourcing were cost reduction, flexibility and improving quality
The firms outsourced activities that do not support the firms core
competence to be able to focus and give more attention and resources
to pursue the companys core competence (Beaumont and Sohal, 2004,
Brewer etal, 2012). On the other hand it was argued that these core
competence driven firms will face negative implications,
First it was said that the core competence could change from one year to
another due the dynamic markets (Beaumont and Sohal, 2004, Brewer
etal, 2012).
Secondly, some of the non-core activities that the firm might outsource
could be interdependent so the firm could lose it core competence and
finally outsourcing many of the non-core activities could empower the
vendor by costing the firm high prices and the vendor could then create
his core competence (Brewer etal. 2012).
Due to the uprising need of outsourcing because of the previously
mentioned motivators, some traps of outsourcing needed to be
highlighted
The first trap is lack of outsourcing communication plan which means
that the management did not consider a legitimate communication plan
when it undertook an outsourcing strategy (Power, etal, 2004).

18

The second trap is minimal knowledge of outsourcing methodologies

which means that firms nowadays lack knowledge on how to apply an
outsourcing strategy (Power etal, 2004)
The third trap is failure to get outsourcing professionals and this is due
to the weak management decision on how to approach a vendor not
recognizing that it is a complicated and difficult decision to take (Power
etal, 2004).
Sustainability of the competitive advantage

The term sustain competitive advantage appeared in the 1980s precisely

1985 when Michael Porter argued about the types of competitive
strategies (Hoffman 2000:4) Understanding how can we have a
sustained competitive advantage has become a major part of research in
strategic management.
A framework suggests that firms gain competitive advantage by
applying

strategies

that

show

their

internal

strengths,

through

responding to environmental opportunities, while keeping external

threats neutral and avoiding internal weaknesses (Barney, 1991: 99).
Some authors said that sustained competitive advantage is competitive
advantage that lasts a longer period of time (Jacobsen, 1988; Porter
1985).
A firm gains competitive advantage and sustain it if it implements
strategies that uses their internal strength and responses to the
environmental changes, external elements. The most important element
in creating and sustaining competitive advantage is the capability of the
firm thats why earlier we discussed the different types of capabilities

19

and how the firm have an advantage through them (Kaptanoglu,

Stockton, Ziarati: 2).
Other factors like relative cost position of a firm, a firm's ability to
differentiate its product, ability of the firm to cooperate in strategic
alliances and information technology are said to be factors that help in
sustaining competitive advantage of the firm (Mata, Fuerst, Barney
1995: 487). Competitive advantage is sustained if it is continuous and
always duplicates the advantage gained from the general competitive
advantage. Firm's sustainable competitive advantage depends on
managing the firm's resources (Oliver, 1997: 697). "Four empirical
indicators of the potential of the firm resources to sustain competitive
advantage are value, rareness, immitability and substitutability." (Barney
1991). This mean companies resources should be valuable, rare, cannot
be imitated and cannot be substituted in order for the company to gain
sustainable competitive advantage.

Other factors that will help in

sustaining the competitive advantage are superior skills, which are the
different capabilities of people that set them apart from the people or
employees in the competing firm and superior resources (Hoffman 2000:
5).
In conclusion, only organizations themselves can create and sustain a
competitive advantage, putting in consideration pressure and challenge
in order to keep pursuing its core competitive advantage. (Porter 1990:
89).

20

Figure 2: Sources of Competitive Advantage

Transforming CSR into a competitive advantage

It is concluded from all what was mentioned about CSR and competitive
advantage, that CSR of an organization will never have a positive impact
unless it is implemented as a strategy of the organization were it is
reflected in its mission, vision, value-system and in the whole culture of
the organization.
In order to transform CSR into a competitive advantage, organizations
have to identify CSR aspects that provide the main instruments of
formation of competitive advantage which are composed of many
stages, as at the beginning the organization mostly get the impulse of

21

social responsibility changes from the environmental changes where CSR

programs and systems are created to realize those changes.

22

Such recognized changes, are met with the reestablishment of the

organizations strategy in order to include CSR as a long-term
competitive advantage. This alignment between the organizations
strategy that includes CSR, complex of marketing and consumers and
stakeholders satisfaction is the core of transformation of CSR into a
competitive advantage.
At the end, the organizations attitude towards CSR becomes adopted in
the organizations vision, mission, and values, so it will not be perceived
as using the CSR as a deception tool for the public but instead it will be
perceived as a real part of the organizations long-term policy and
competitive advantage as shown below. (Juscius and Snieska 2008: 3437). In another words, organizations must focus on how they may use
CSR implementations in order to set themselves apart from their
competitors. (Caroll and Shabana 2010: 97-98).
The importance of transforming CSR into a competitive advantage also
lays in the fact that sometimes CSR implementations maybe the
tiebreaker for a consumer to favor an organization among other
undifferentiated
addressing

organizations,

societal

which

expectations

for

led

many

competitive

CEOs,

consider

success

using

innovative techniques and approaches. (Bhattacharya and Sen 2004: 23;

Galbreath 2009: 109).
Later, three different strategies that can be implemented in corporations
to transform CSR into a competitive advantage are discussed.

Intergraded social perspectives in business frameworks

This strategy is the socially perceived image of the organization depends

on the marketing of CSR strategies as for example Make it easy for the

23

consumer to be green, empower the consumer with solutions, establish

credibility with all public and enlist the support of consumers. By this
way of marketing organizations affection is claimed to public to enhance
its corporate image.
One of the reasons behind that social responsibility provides a
sustainable competitive advantage is that it requires a business
framework and culture that can successfully reflect an adequate social
image of the organization. Also, it will be hard for competitors to
duplicate that image as those of them who seek to match the CSR
competency of an organization will find themselves unable to capture
the

consumer

attachment

or

governmental

trust

of

the

other

organization it is imitating. (Smith 2007: 188; Juscius and Snieska 2008:

36).
Once

the

corporates

image

is

established

upon

effective

CSR

implementations that will result in the integration of CSR in the

corporates strategy as it already became part of its image to the
customers.
Shared benefits between society and business

The second strategy is based on the mutual dependence of corporations

and society states that both business decisions and social policies must
fulfill the principle of shared value, which are choices that benefit both
sides. Also, it is about creating economic value and benefits in a way
that also creates value and benefits for society as well.

24

Redefining productivity in the value chain, recreating products and

markets, building up supportive industry clusters at organizations
locations can be created by organizations
Each of these is part of the circle of shared value and benefits by
improving

value

in

one

area

(empowering

organizations

CSR),

opportunities are enhanced in other areas (a long-term competitive

advantage is sustained). (Porter and Kramer 2011: 2-4).
Organizations have to put in consideration, the strategies for the bottom
of the economic pyramid which are considered from the most successful
CSR implementations that are transformed to be a competitive
advantage relying on the concept of shared benefits between society
and business, as traditionally most businesses focus on targeting upper
and middle-class consumers, however most of the worlds population is
poor who are estimated to be around 4000 million people.
By recognizing that the poor are an opportunity to innovate instead of
considering them as a problem, in this way a unique competitive
advantage for an organization will be created. A specific mean of
innovation targeting Bottom of the Pyramid (BOP) is used which is known
as disruptive innovations which are products or services with a low
production cost and that are different from the ones offered to the main
stream markets, but at the same time they meet the necessities and
needs of BOP population. (Porter, M. E., & Kramer, M. R. 2007)
It is an effective tool as it improves the economic and social conditions
of the BOP population and at the same time it creates a competitive
advantage for an organization. (Garriga and Mele 2004: 54-55).

25

At the end, while managers are planning strategies that are targeting
BOP population; they must understand the true meaning of corporate
social responsibility and its role as a competitive advantage for their
organizations, also to understand that by doing this, they will be able to
support the societies which are supporting their business. (Davidson
2009: 24).
By depending on shared benefits between society and business,
corporate will be able to operate while putting in consideration that both
society and business are interdependent so none of them can operate
individually without benefiting the other.

The Socially Anchored Competencies (SAC) Model

The SAC model presents a sophisticated process of taking core business

competencies, combining them with stakeholder analysis, and getting a
set of competencies that are socially anchored. In order for this model to
be applied each organization starts by identifying its core competencies
which are the sets of experiences, skills, and abilities that compose the
organizations collective learning, so they are considered to be the roots
of an organizations competitive advantage.
Then, the organization has to determine the potential impact of its core
competencies on its stakeholders and to avoid any negative effect that
may be reflected on the stakeholders and instead to use those
competencies in order to benefit them.
Finally, this identification of core competencies while putting in
consideration stakeholders benefits results in generating a set of
competencies that have a positive social impact.

26

By applying this model, organizations will be able to introduce new

socially responsible products or services, to add new social value to their
existing products and services and at the same time to fulfill corporate
social and business objectives .Also, this model helps organizations to
develop different concepts about CSR which are unique and cannot be
imitated by competitors.
As it focuses on each organizations core skills, strategic alliances,
integration, shared social and business benefits. These aspects differ
from an organization to another which will make each organization has
its own SAC model in order to help it survive in the current competitive
market as long as they believe they can earn a competitive advantage
by being socially responsible. (OBrein 2001: 6-9; Bhardwaj 2012: 4;
Choudhary and Singh 2012: 12).

27

Negative and Positive effect of CSR on Competitive performance

Overall it would seem that corporate social responsibility to create a
competitive advantage would be all advantages, but there are both
advantages and disadvantages that are further explored.
Positive effect of CSR on Competitive performance

A company should know the sources of the advantage in order to

measure the sustainability of the competitive. The sources may be high
or low orders. Technology or equipment for processes are examples of
lower orders. The suppliers sell these sources to the competitors as well.
Thus these sources will create a short-term competitive advantage
however all competitors will have the same advantage (Miltenburg,
2005).
As for the high orders, they are totally different from the lower orders.
High orders are difficult to be copied by competitors but they require
higher

capabilities

like

training

employees

and

having

closer

relationships with the suppliers.

However, any advantage could be copied from competitors despite its
long-term

competitive

advantage.

So

organizations

must

have

advantages as fast as possible as the competitors copy the old ones

(Porter, 1998).
According to one study, competitive advantage as a result of CSR took
place when consumers saw that companies with the CSR initiative were
more proactive and had a positive influence on society and the
environment, versus those who used more defensive measures such as
advertisements and public relations. The brand image improved and

28

gained further market share as a result of the positive associations

between the CSR and the company.
CSR can distinguish a companys reputation but cannot protect it;
defensive CSR can protect a reputation but cannot distinguish it. Both
are necessary to succeed in todays business climate (Militaru, 2006).
A study showing the relationship between corporate social responsibility
and competitive advantage demonstrated very confirmative results
showing that 70% of consumers believed that companies should practice
CSR, 55% of the consumers saw that CSR has a benefit to both the
companies and the society, 14% of consumers even went to the extreme
of stating that they could boycott companies that did not practice CSR,
considering that they would find an alternative who did practice CSR and
offered similar prices and quality. This only proves that consumers are
well aware and very considerate of CSR practices, and even if they dont
do it on purpose, but their purchasing behavior is always more attracted
towards those who practice CSR (Militaru, 2006).
Corporate social responsibility can also increase market share because it
has strategic implications like a strategic investment, reputation building
or maintaining tool, in addition to the fact that it creates predictions
regarding patterns of investment in CSR (Militaru, 2006).
In terms of the marketing implications of CSR, this act almost replaces
advertising;

it

is

almost

more

sophisticated

replacement

for

advertising. CSR in some cases works better than advertisements as it

gives the company a good reputation. They are people that want to
benefit the society around them and not just persuade people to buy
their products (Militaru, 2006).

29

CSR works better than advertising specifically when it is reactive CSR, as

in, it is a reaction to a disaster or a boycott, or something that happened
in the society. It creates a good impression and almost gives people a
reason to forgive the company for whatever reason they had been
boycotting it. Of course, it is important to mention that proactive CSR
usually makes it difficult for people to believe rumors about businesses
to begin with, therefore it is more beneficial to have proactive CSR than
to have reactive CSR. (Militaru, 2006).
In other words, advantages of CSR to sustainable competitive advantage
fall under increased profits for the company or firm through cost savings
in advertisements and public relations and so on. Furthermore, the
company is perceived in a positive light and customers create positive
associations with it.
According to a research conducted by the Economic and Social Research
Council, an example of this can be found with Toyota, the car
manufacturing company. Toyota found that the advantages of sustaining
CSR have increased their profits as they have worked on manufacturing
cars that are more fuel efficient and environmentally friendly. In addition,
through its efforts, Toyota has also managed to keep a positive
reputation among its consumers, and even established a competitive
advantage in the market due to its CSR practices (ESRC, 2010).

Negative effect of CSR on Competitive performance

It may seem unexpected for CSR to have kinds of disadvantages, but in

fact it does. CSR can be deadly to corporations if they do not fulfill their
promises or obligations towards both their primary and secondary
30

stakeholders. With the implementation, media, government and people

in society have expectations from companies, if these are only
verbalized without being put into action, negative associations are made
with this company (ESRC, 2010).
Overhead costs can be another disadvantage for companies or
corporations. If they are not planned well and incorporated in the most
advantageous way possible within the business plan, CSR activities can
turn out to be an added cost that no company wants to execute. This
may not only be about the cost of running the activity, but even
investing in something that is noteworthy. Companies need to be very
concerned about where their CSR investment is going, making sure it is
not funding that will create a negative reputation or association (ESRC,
2010).
One example of competitive disadvantage that took place in 1982, when
Johnson and Johnsons executive director pulled back from the market
the entire product line of Tylenol after it was discovered that several
people in Chicago and died do to it. This was ethically a smart decision,
but it also created unprecedented monetary losses for the company. But
even with the monetary losses, the company gained great respect from
the media and the people and created long term customer loyalty
(Cheers, 2011).
Another example of competitive disadvantage took place when Toyota
created

environmentally

friend

hybrid

cars,

while

American

and

Germany car manufacturers did not. This put them in a competitive

disadvantage

and

major

public

environmentalism (Cheers, 2011).

31

criticism

for

their

lack

of

In much of the literature however, CSR seems to be oversimplified, it is

not a simple equation to implement CSR and keep a profit making
business. Many businesses have discovered, however, that the pursuit
of societys welfare often leads to a reduction in profits. If managers
pursued CSR activities that hampered profits they would likely be out of
a job (Cheers, 2011).

32

Conclusion
Every organization has to know their strength and weaknesses and what
they are specialized in. After the company knows its strength it should
start directly on working on the companys competitive advantage. Any
business represents a part of a bigger society and does not operate in isolation or in a
separate environment which requires the business to assume more responsibilities that
exceed the narrow scope of just maximizing profits. Firms have responsibilities towards
their shareholders, employees, and stakeholders and failing in meeting such responsibilities
would result in jeopardizing the organization profits on the long term (Oketch, 2005: 31).
Competitive advantage is what differentiates a company from another,
and giving a company such a green line in order to be the market leader.
As for CSR, Overall it would seem that corporate social responsibility to
create a competitive advantage would be all advantages, but there are
both advantages and disadvantages. Studies showed a relationship
between

CSR

and

Competitive

advantage

demonstrated

very

confirmative results showing that many consumers believed that

companies should practice CSR; others saw that CSR has a benefit to
both the companies and the society.
This research joins two essential concepts for executives, managers and
employees today: corporate social responsibility and firm performance.
Due to the global economic recession of late years and emphasis on
accountability,

environmental

sustainability

and

transparency

in

organizational operations, these points are prone to stay at the cutting

edge of the minds of consumers, business people, scholars, nonprofit
leaders and government authorities.

33

To sum up, it can be said that the primary objective in this paper was to
explain how Corporate Social Responsibility affect the performance of
organizations using it. It was mentioned that it is better to contribute in
CSR activities. As it was mentioned earlier, CSR add values to the
organizations for better performance. It was claimed that CSR put the
firm in a better position between its competitors.

34

Table of figures:
Figure (1) Carrolls Global Corporate Social Responsibility Pyramid
5

Figure 2: Sources of Competitive Advantage.

..15

Appendix:
CSR: corporate social responsibility
NGOs: non-governmental organizations
CC: Corporate Citizenship
CEO: Chief executive officer
BOP: Bottom of the Pyramid
SAC: Socially Anchored Competencies

35

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