Businesses operate in dynamic environments comprising of both biotic and abiotic factors. These factors affect how businesses operate thereby affecting their profit margins. Since profit maximization is the single most objective of setting up a business, the integration of these abiotic and biotic factors must be considered at all levels of operations. Abiotic factors comprise mainly of those non-human factors which affect business operations and may include both climatic factors such as temperature and infrastructure. The physical environment in which a business operates is one of the most important abiotic factors. Infrastructure, climatic conditions and the physical environment affects the operation costs and ultimately profit margins of any business. Unfavorable climatic conditions such as heavy rains, drought and high humidity may destroy products leading to losses amounting to millions of dollars. Moreover, the physical environment and infrastructure affects availability of resources including raw materials and labor, accessibility and visibility of the business. Poor infrastructure including poor road networks, lack of electricity and internet and telephone lines will ultimately lower the profit margins. Various features of the physical environment including presence of physical features will affect the availability of resources such as labor, raw materials and various social amenities. If the physical environment hinders the provision of these services, the company will experience low profit.
On the other hand, biotic factors are human factors that affect business operations and consequently profit margins. Availability and cost of labor, laws, policies and regulations and various human factors including cultural beliefs and practices greatly affects profits margins of businesses. Together, these biotic factors form the community in which a business operates, the consumers it targets, the employees, the stakeholders who owns the business and the general public. In every step of its operation, the business must be accountable to the public, stakeholders, employees, environment and the community as a whole in order to maximize profits. To achieve this, a business needs to operate in an ethical way by obeying both local and international norms and laws, meeting the welfare needs of the employees and conserving the environment. All these must be done while at the same time maximizing the profits for the stakeholders. This is what corporate social responsibility or sustainable responsible business is all about. Any business must be able to balance these factors which sometimes conflict in order to be successful. It is the level of balancing of these factors that will eventually determine, to a great extent, the profit margins realized. Moreover, it is the successful balancing of these factors that determines reputation of any business. Corporate social responsibility will determine how a company is branded3. Hence, a company with poor corporate social responsibility will be branded negatively and vice versa. Likewise, such a company will have a bad reputation in the markets.
Corporate branding
Corporate branding is an important component of any business as it acts as form of advertisement. It is aimed at promoting the uniqueness of any corporate body that makes it stand out among many. Corporate social responsibility is a feature of branding; it displays the uniqueness of any company. Thus, a company’s unique corporate social responsibilities will market it as a unique brand. The dynamic business environment judges businesses from what they see and not from what is written in the company laws, regulations and policies. The way a business deals with its employees, customers, environment, the community and general public, the laws and the stakeholders will be directly related to how a business brands itself. These are the vital touch-points in corporate branding and corporate reputation management. Thus, corporate branding and reputation management creates pressure for greater ethical and responsible behavior on the part of businesses.
How employees affects Branding and Social Responsibility
Employees are integral part of the success of any company. It is their physical, social and intellectual input that will drive a company to greater when all factors that
affects business operations are held constant. However, to ensure that they give their best to the company, the company must take care of their welfare. Failure to do so will lead a demoralized workforce always worried about their welfare leading to low input and inevitably low profits. Thus, a company branding itself as pro-employees welfare issues must in effect formulate and act on policies, laws and regulations that will ensure the same. Remuneration, health and social well being of employees are some of the areas that are vital when looking into ways of having and retaining highly motivated workers.
Employees should be paid well to motivate them to work hard. Today we are living in a world with high economy and if an employee is demoralized when it comes to payments, then they will have a hard time working. Taking for example the case of Workers at an Indian factory who are being paid 26p for every hour they spend in making perfume bottles by Umbro who is the sponsor of England World Cup. The employees working in the factor are paid less with a minimum basic salary that is half the anticipated minimum cost of living in India. In a day the employees are paid £2.05 which cannot cover the normal household cost of buying food in a country where the inflation rate is 10%. These workers are actually demoralized and they will not be able to stay in the company if their basic salary is not increased. The company however claims that they are paying the employees well which is not correct. There are some states which pay glass workers well for example in Maharashtra, glass workers who are unskilled are being paid £ 2.45 per day while skilled glass workers are paid £2.55. This clearly shows that the glass workers in India are being demoralized which is unethical practice in business. The monthly living cost in India is 6,757 rupees (£98) and this shows how much the employees suffer. Such an environment may drive away potential customers and business partners. Examples of a company that pay their employees well are Apple. Apple greatly rewards its top employees. Apple’s chief was given a stock grants by the company amount worth $ 427million. Mr. Cook’s salary is over $1.4 million and he receives compensation package worth $59 million.
How Consumers affects Branding and Social Responsibility
Consumers are very important component of any business. Thus, any business has the responsibility of actively complying with laws, regulations both at the international levels and also ethical principles regarding their customers. The businesses must put into consideration the cultural beliefs and practices of their customers during all operations of their business. From the type of goods and services produced to the marketing strategies, how the company conducts itself will directly affect its relationship with the customers and consequently, the branding and reputation of the company. The production process and acquisition of raw materials must meet the ethical standards of the customers Ethical policies in trading should be met by every company. Katie Price Perfumes is an example of a company that is following ethical policies when it comes to trading. This was addressed by Katie Price Perfumes spokesman who said that it is a paramount practice in the company whereby they ensure that all products that they manufacture contain checking policies which guarantee safety, health and ethical principles on trading. This will ensure that the products used by the consumers are healthy and cannot cause them any harm. Doing all these is what corporate social responsibility towards customers entails.
The manner in which a company relates with its customers is a very strong determinant of company’s reputation and brand or image. Customers will only remain loyal to a company that respects their customs and beliefs, internal and local laws and ethical standards. A company that does not respect its customers will even find it difficult to recruit new employees or even retain the current ones. On the other hand, a business which respects their customers and put their interests first in all the decision making process will have few or no conflicts with the customers thereby raising their profile among potential partners, investors, customers, stakeholders and employees. Such companies will find it easier to recruit the best employees and retain and motivate their current employees. All these will translate to high profit margins.
Even though taking corporate social responsibility may seem to a tasking venture especially due to the varied religious, racial, social, economic, political, educational and cultural backgrounds, the rewards are far much greater than doing otherwise. Even though it comes with monetary value attached to it, corporate social responsibility towards the customers is an effective branding feature that not only raises a company’s profile and hence image; it also ensures realization of profit margins that far much outweighs the expenditures. Enlightened customers, right groups and the urge to develop a unique image and maintain a good reputation in the competitive business environment has greatly increased the pressure on the businesses to have better corporate social responsibilities towards their customers.
How business environment affects Branding and Social Responsibility
The physical environment in which a business operates plays an integral part of any business’ profit margins. It is from the environment that the business gets its raw materials used in the production of goods. Moreover, it is in the environment that any business is set up. Thus, the accessibility of the business by the customers and potential investors and stakeholders is hinged on the physical environment. The environment in which a business operates will also determine the chances of new employees joining the firm. Businesses located in areas with unfavorable climate and difficult to access usually have difficulties in recruiting new employees. However, the most association between environment and business is the effect the business operations have on the environment.
Apple products are not manufactured in America because the country does not have plants which are flexible and breathtaking speed. The company believes that working in the outside environment will enable them make profits which they will use to pay for innovation. However, this has left Americans with fewer jobs. The workers overseas are also cheaper as compared to Americans. The foreign workers are also highly skilled which will enable them to produce excellent products for their consumers.
In cases where the operations of the businesses have negative effects on the environment, the business must put in place measures that will ensure that the affected parties are rightfully compensated. Moreover, the company must make sure that such damages arising from their operations are as minimal as rationally possible. Failure to compensate victims of their operations and formulate and implement policies, rules and regulations aimed at protecting the environment may lead to conflicts with authorities. Such conflicts may lead to losses in terms legal fees and compensation. Moreover, the company may lose potential customers, investors and employees who may be directly or indirectly negatively affected by the activities of the business. This is mainly attributed by the negative image created by such conflicts and the dented reputation of the company. In contrast, companies which take responsibility of the effects their operations and actions have on the environment usually have better reputations and image. By minimizing the effects of their operations on the environment and properly compensating the affected people, a business will attract more customers, investors and highly skilled labor. The net effect of all these when all other factors that affect business operations are held constant is increased profit margins.
Operations of businesses do not take place in bubbles consisting of only those seemingly important components such as environment, customers, employees and stakeholders. Businesses do not operate in environments inhabited by their employees, stakeholders and customers alone. In fact some businesses especially those dealing in special goods and services such as military goods and services usually do not depend on the local community as the source of their customers. The customers usually come from both local and international markets but not necessarily the local population. However, this does not mean their operations do not affect the local communities. In some cases, the local population may be forced to sell off their lands in order to give space for the business to be set up. Companies which ignore the communities in which they operate in do so at their own peril.
By improving the quality of life of the local community in which it operates, a business will enjoy the benefits of having a stable operating environment. Such small gestures as provision of basic amenities and services such as clean water, building of schools, health facilities and parks will go a long way in ensuring peaceful coexistence between the business and the local community. A stable environment is very important for the success of any business since conflicts with the local community will lead to losses resulting from damage of properties especially when such conflicts turn violent. Moreover, such local communities act as a valuable source of readily available skilled and unskilled labor. However, conflicts with the local community will force the company to hire labor from outside the locality. This is usually expensive in terms of remunerations as they will pay high transport and housing allowances to them. Moreover, a business which does not respect the local community will surely find it difficult to retain their current skilled labor. Moreover, very few professionals would like to be associated with a company which does not respect the local community among whom they operate.
How the public affects Branding and Social Responsibility
The general public is always marked ‘potential…’ Businesses are unsure of what the general public is comprised of. It may comprise of the next investor, stakeholder, business partner, customer or even employee. As the saying goes ‘be careful with the feet you step on along the streets today, it may be supporting the face you may have to be introduced to tomorrow’, the general public can be anything to the business. Due to its potentiality of being anything to the business, the manner in which a business treats the general public will be a great determinant on the future profits margins of the business and its future. Moreover, the investors and business partners who are very vital in the success of businesses will also review how their partners-to-be relates to the general public. No one will be willing to invest in a company with a reputation of maligning the general public. No individual sound in mind will be willing to be partners with a company which does take responsibility for how its actions affect the general public which he may be part of at any time. Which professional in all his senses will be willing to be the image of a company that takes lightly the plights of the general public?
Such activities as organizing free health clinics, waste collection campaigns and sponsoring of various projects and charities that directly or indirectly benefits the general public will go a long way in raising the profile. A raised company profile will attract more investors, skilled labor, stakeholders, customers and business partners. The general public tends to like those companies which show concern to their plight especially those which sponsor and/or participates in charities, environmental cleaning programs, carrying for the disabled in the society and free clinics among others.
Benefits of Corporate Social Responsibility
Corporate social responsibility has a variety of benefits to the business. By taking care of the welfare of the employees, local communities and customers who are the stakeholders in any business, the operations will run relatively smoother leading to higher profits. Corporate social responsibility creates value leading to sustainable development of the business. It achieves by promoting the competitiveness of the business while at the same time promoting the innovativeness and creativity of the employees. Training of employees also improves the value of human capital for both the business and the country at large. These benefits collectively impact on the strategic plan of the business especially by ensuring sustainable development. Moreover, corporate social responsibility (CSR) also helps in risk management as it reduces the effects of those risks that arise from interacting with the external environment and during operations.
All these benefits resulting from corporate social responsibility serve to paint businesses in good light among investors, customers, stakeholders and employees. They brand a company as that which is committed to profit maximization while taking into considerations the needs of the people and environment around it. Failure to include comprehensive corporate social responsibility in its daily activities may lead to the business being outcompeted. Any policy that gives a business an edge over its competitors while giving relatively high returns must be embraced.
All in all, despite the monetary value attached to corporate social responsibility activities, the benefits are far much greater. Many companies have channeled millions of dollars in charities and environmental conservation programs. However, at the end of ever fiscal year the finance manager always present a financial report showing increased profit margins. A highly motivated employee due to proper training, comprehensive health insurance coverage and proper remuneration is far more profitable than a disgruntled one. Moreover, a business operating in an environment that is well conserved and protected will probably save more money compared to one which always has trouble with environmental conservation authorities. On the other hand, a happy customer and public will enable a company to develop and realize more profits. A business which is at peace with both its internal and external environment is more likely to be licensed to operate not only in its locality, but also in international environment. Getting potential investors and business to such a business will be easier due to its high reputation and good image resulting from its corporate social responsibilities. Recruiting and retaining of employees will much easier. Similarly, such companies will have employees with high productivity.
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