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Competitive Advantage of Coca-Cola through CSR in Nepal

2081 words (8 pages) Essay in International Business

08/02/20 International Business Reference this

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Research Proposal

Abstract: This research would carry out a detailed study on the current issues and activities Coca-Cola has been carrying out and facing problems in Nepal. The research aims to justify how Coca-Cola can not only cope up issues through CSR activities but can also gain competitive advantage and positive brand perception through systematic CSR model.

Background and Purpose:

Corporate Social Responsibility (CSR) is playing an important role in value maximization and is trending all over the world with firms using it as a strategy to counter uncertain environment. Businesses have realized that they gain competitive advantage through a strong societal support. CSR ensures business to operate and behave ethically taking care of its stakeholders (www.sbcsd.com, 2000).

Today CSR is seen as a key to long term success, reputation and brand image. Corporate bodies have understood that without happy and prosperous society a business cannot flourish. This signifies that companies must identify social trends, behave constructively and work with local communities to promote growth and development.

Significance of Research:

Coca-Cola Nepal is one of the biggest multinational company in Nepal. However, it has been facing some major issues over water usage, accusations over pesticide content and sweeteners, as well as the general concern over the unhealthiness of fizzy drinks in Nepal.

Today, there is an increased focus on what role a corporation should have in the society. With issues surmounting, Coca-Cola can use its Corporate Social Responsibility activities to gain an edge over its competitors and secure its position as the leading soft drink giant. CSR activities will not only benefit the Nepali society but will also improve the face value of Coca-Cola and help to counter the negative brand perception all over Nepal. As of now Coca-Cola has been carrying out following CSR activities:

      Coca-Cola Nepal for ensuring environmental sustainability

      Empowering women

      Distribution of relief boxes

      Promotion of Education

This research intends to carry out a detailed study of how Coca-Cola has inculcated CSR in its activities and how it can overcome its social issues through CSR, gain positive public image and finally, gain competitive advantage over PepsiCo and other local drink companies as well.

Research Questions and Learnings:

Following insights and outcomes are to be obtained through this research:

      Can Coca-Cola survive without practicing CSR?

      Is Coca-Cola’s financial benefits linked with its CSR?

      Whether Coca-Cola’s CSR has built its favorable public image?

      Whether CSR protects Coca-Cola’s profit interests by giving competitive advantage to the firm?

Aims and objectives:

Following are the aims and objectives of the research:

      To show how CSR is the new trend in corporate world.

      To provide a clear overview of CSR activities carried out by Coca-Cola Nepal

      To highlight the issues Coca-Cola has been facing in Nepal.

      To provide solutions for those issue through CSR

      To show the overview of how Coca-Cola can gain competitive advantage by addressing these issues through CSR.

      To improve the brand image of Coca-Cola India among consumers

Literature Review:

Blending ethics with operations have a positive impact on the performance of a business. In the recent years, business firms have realized the importance of community support for gaining reputation (Brendar and Dinah, 2002). CSR depends on the relationship between business and society and how businesses responds towards their key stakeholders such as employees, customers, investors, suppliers, communities, and special interest groups. Since business use the resources from society, they have the moral obligation towards giving back to the society and develop it (Barnett, 2007).

 According to Burke and Logsdon (1996), businesses have started to examine their social responsibility activities in the recent years due to increasing competition, Companies should change one-time philanthropic donations into a systematic program focused towards benefitting community for developing a comprehensive approach towards social responsibility (Crowther and Aras, 2008). CSR is considered as a secret weapon to acquire more market share. Investors are seeking financial gains from their firms’ involvement in CSR initiatives as using ‘CSR for competitive strategy’ is the means by which companies increase profitability(Dan O’Brien, 2001). CSR measures should focus on benefitting ‘people and communities other than those whom the companies are contractually obliged to, namely those who are socially and/or economically disadvantaged (Shrivastava and Venkatateswaran, 2000)

However, some economists believe that firms should focus on financial activities rather than social activities. As Friedman said the social responsibility of business is to increase its profit by using its resources (Friedman, 1967, 1996). According to Abagail & Donald Siegel (2009), CSR has a neutral impact on financial performance of firms. Yet the interest to remain profitable in the long-run is one of the most prevalent reasons to practice CSR. The integration of CSR can directly benefit business by increasing profitability. Companies also believe that they can obtain the benefit of competitive advantage by practicing Corporate Social Responsibility (Davis, 1973). The moral argument of CSR reflects a give and take approach based on meshing of the firm’s value and those of society. It assumes that business recognize that they do not exist in vacuum and that a large part of their success comes as much from actions that are congruent with societal values as from factors internal to the company (Werther and Chandler, 2010).

On the other hand, companies try to establish popular brands in consumer’s minds because it increases their competitive advantage. There are three benefits of CSR to brand: Positive brand building, Brand insurance and Crisis management. A firm must be genuine in its statements and committed to implementing CSR throughout operations for the full benefits to be realized or else it will have undermined the firm’s significant investment in building a positive brand image (Korngold, 2013). Nepali firms are keenly aware that their long-term investment goals can only be achieved with a stable and healthy environment. The term CSR is new in Nepali market, but they have been applying this concept long back ago.

According to Margolish and Walsh (2001), there is a relationship between CSR and financial performance. Most executives believe that CSR can improve profits. They understand that CSR can promote respect for their company in the marketplace which can result in higher sales, enhance employee loyalty and attract better personnel to the firm (Kotler and Lindgreen, 2012). Benefits such as cost reduction, human capital, reduced regulations and access to capital, consumer demand, improved business conditions and new market opportunities are frequently reported leading to the competitive advantage for the company (McWilliams and Seigel, 2000). Husted and Allen (2001) state that CSR strategies can create competitive advantages if used properly, pointing out that there is a positive association between strategic social responsibility actions and competitive advantage. To be a source of competitive advantage, CSR actions should create real and consistent results for society. According to Zadek (2005), for companies in which CSR is rooted, it is not difficult to meet new market expectations, such as dealing with corruption, human rights, environmental management in the supply chain, etc. Companies acting in congruence with the triple bottom line may lead to competitive advantage by leading firms to engage in CSR activities to strengthen the company’s image and brand towards stakeholders (Brunsael, 2009). Novakidentifies a firm’s extra social responsibilities, which would be of direct benefit to the business establishing a sense of community respect and protecting moral ecology (Novak, 1996). Organizations’ corporate social behavior is closely examined from all corners of the marketplace and is factored into their investment, business, purchasing and employment decisions. Studies undertaken by organizations such as Deutsche Bank and the Harvard University Business School3 have found that organizations with good sustainability practices tend to be better corporate performers and are able to access better financing rates(Hawkins, 2006). Brands like Natura, chipotle, Toyota, Tesla Motors, Unilever, Nike, IKEA and others earn more than $1 billion annual revenue from involving social good at its core of product and services (Williams, 2015).

Thus, a firm can be engaged in CSR activities to outperform its competitors in the competitive arena by increasing the value of the brand name, improve the reputation, motivate the employees, and create value in the firm.

In the context of Nepal, Government of Nepal and NRB has implemented an act regarding CSR. The act is applicable basically in two basis (a) investments in the fixed capital, or (b) annual turnover.

(a)  The CSR requirement is applicable to (i) medium industries; i.e. industries having investment in fixed capital exceeding NPR 100,000,000 but less than NPR 250,000,000; (ii) large industries i.e. industries having investment in fixed capital exceeding of NPR 250,000,000 and (iii) cottage industries (i.e. industries based on traditional skill or technology, local raw materials and resources etc.) and small industries (i.e. industries having investment in fixed capital of less than NPR 10,000,0000 except micro and cottage industries) whose annual turnover is more than NPR 150,000,000.

(b)  Fixed capital for IEA is calculated based on assets such as land, buildings, factory, storage house, machineries, vehicles, furniture etc.

Research Methodology:

Quantitative: Survey of 100 Coca-cola customers

Statistical Tools: Semi-structured Questionnaire. The data collected through survey will be represented in the form of bar graphs and pie-charts for clear understanding.

Research Design:

Primary: Survey of 100 Coca-Cola consumers regarding their knowledge on Coca-Cola’s issues and CSR work to know the brand perception

Secondary: Online journals, websites, peer reviewed articles, research reports and online library on Coca-Cola India can be accessed easily through internet.

Discussion:

In the present time a voice has been raised by the public that the government should give pressure to companies to think beside economic gain or profit and work for the benefits of society and environment. Though companies are generating employment to the people, but this doesn’t mean that they’re blind to the social and environmental harm it has been doing. With people losing faith on corporate giants with each passing day, Coca-Cola needs to show its effort towards meeting these expectations of Nepali; else it will risk its operations in Nepal.

Timeline of the Dissertation:

Introduction

7th December

Literature Review

12th December

Research Methodology

16th December

Data Presentation and Analysis

28th December

Conclusions and discussions

2nd January

Bibliography:

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