2. Social responsibility in stakeholder theory3
2.1 Why social responsibility?3
4. Case study examples: Starbucks & Nike4
This report focuses on social responsibility issue focusing on stakeholder theory. Social responsibility will be introduced and defined based on stakeholder theory. Next, analysis on the importance and limitations of social responsibility will be shown based on reputable published articles, followed by examples of two successful companies on how social responsibility affects their business. Lastly, conclusion will be concluded based on findings on the issue. 2. Social responsibility in stakeholder theory
According to Caroll and Buchholtz (2012), social responsibility is defined based on four components, which include economic, legal, ethical and philanthropic. Freeman’s stakeholder theory it is defined as a network of different stakeholder that companies have responsibility on, whereby it is a theory of organizational strategy and ethics, (Theyel and Hofmann, 2012). Stakeholder perspectives focus on the four components of social responsibility as a unified whole. 2.1 Why social responsibility?
Practicing of responsibilities towards stakeholder has become an issue that can no longer be ignored. This is due the growing impact on how these stakeholders can affect the profitability, competitiveness, as well as shaping favorable scenarios for both economic and social aspects while creating values, (Adriana, 2010). Adriana (2010) stressed by successfully integrating business strategy with societal and environmental interest, value creation that is beneficial to the society, organization and environment can be achieved. Therefore, it is important for company to manage their relationship with their network chain as these stakeholders can directly or indirectly influence companies from reaching their goals, (Ihlen, 2008). Since stakeholders have the ability to influence the goals of an organsaiton, it is essential for originations to maintain good relationship with them. To do that, businesses should apply stakeholder theory into business strategies and decision-making.
Furthermore, Ihlen (2008) reported that by engaging close relationship with these stakeholders, management would be able to intensively identify or respond to the changes than the other competitors that focus on self-interest. Mentes (2010) believed that through corporate social responsibility, firms could eventually close the gap with their network and build a trustworthy and stable relationship. These encourage a better communication process between two that competitors might not be able to interfere. These sustainable relationships can also lead to an improvement on innovation and creativity as company can learn about the entire operation and improve on operation process, (Theyel and Hofmann, 2012).
Other than that, company can often obtain a positive public image through creating values and practicing responsible activities with their stakeholders as strong images enhance competitiveness while gaining supports by the public. For example, Nike engaging in social responsibilities in their value-chain by implementing code of conducts to ensure better labor and environmental practices, (Nike, 2013). Mentes (2010) stated that firms could achieve differentiation through long-term positive corporate image gained by being socially responsible. Some cases such as The Body Shop against animal testing (The Body Shop, 2013) and Starbucks practicing fair-trading with their suppliers, (Starbucks, 2013), showed how companies can eventually better image by implementing social responsibility. They had gain positive global corporate image and got rewarded with investment opportunities. (Appendix A) displayed the poll result of the advantages of social responsibility by 195...