Master Thesis
Marketing programme
Corporate social responsibility in Brand equity:
A study on how CSR can increase local franchised fast food
restaurants brand equity.
Authors: Swedenborg, Jesper Mattsson, Frans Supervisor: Billore, Soniya Examiner: Pehrsson, Anders Semester: Spring 2015
Subject: CSR and Brand Equity Level: Master
Course code: 4FE07E
Acknowledgments
This thesis was conducted during the last semester of the one-year master program in marketing. The thesis purpose was to investigate the importance of philanthropic CSR activities on local level and see if these activities can be used to strengthen franchised fast food companies brand equity. The authors have in addition to contributing research in the subject, received a broader understanding of the field. The authors would like to express our graduates towards all those who have been engaged in the process and helped us through our thesis. During the process there have been a few people that we would like to give a special thanks to, the results have not been the same without you. Foremost we would like to thank our tutor Soniya Billore that has been helpful throughout the process. Also we are grateful to our examiner, Anders Pehrsson that has provided valuable feedback and comments. Finally the authors want to thanks all the respondents that have participated in the study. Without you the study
could not have been executed, the authors are deeply grateful that they chose to dedicate their time to the survey.
Abstract
University: School of Business and Economics, Linnaeus University Växjö, Sweden.
Course: 4FE07E
Authors: Swedenborg, Jesper, Mattsson, Frans Tutor: Billore, Soniya.
Examiner: Pehrsson, Anders.
Title: Corporate social responsibility in Brand equity: A study how CSR can increase local franchised fast food restaurants brand equity.
Introduction: Research claims that it is hard to divide the responsibility for the local community between the franchisee and the franchisor because of the franchisee does not have clear understanding to what degree they should be committed to local CSR.
This research will study the importance of philanthropic CSR activities on local level and see if these activities can be used to strengthen fast food companies’ brand equity.
Purpose: To further investigate the importance of philanthropic CSR activities on local level and see if these activities can be used to strengthen fast food companies brand equity.
Research questions: Research have shown that fast food companies are involved in different kinds of philanthropic CSR activities, what part of brand equity has to be dealt with first? What are the important factors in building brand equity with philanthropic CSR activities? How important is the focus on local activities for franchised fast food companies when it comes to the philanthropic CSR activities?
Methodology: This study is targeting the population of Kronobergs region between 18 and 64 years old. The literature review showed that the field of CSR effects on brand equity needed further studies. A construction of four variables within philanthropic CSR was matched towards brand equity with a sample size of 192.
Conclusion: There is a weak positive significant relationship between CSR and brand equity in this study around fast food companies. As authors, we believe that the customers’ awareness is too low, for CSR to affect brand equity the level of awareness needs increase to motivate internal stakeholders for further investments in philanthropic CSR and to get more response from local citizen.
Keywords: Corporate social responsibility, Fast food restaurants, Franchise, Brand Equity, Philanthropic CSR
1 Introduction ...9
1.1 Current situation of the fast food companies ...9
1.2 CSR in media ...11
2 Problem discussion ...13
3 Purpose ...16
4 Research Question ...16
5 Delimitation ...16
6 Conceptual Framework ...18
6.1 CSR ...18
6.2 Philanthropic CSR ...19
6.3 Brand equity ...22
6.3.1 Brand image ...22
6.3.2 Brand Attitude ...23
6.3.3 Brand identity ...24
6.3.4 Brand awareness ...25
6.4 Cause related marketing ...26
7 Hypothesis ...27
The analysis model ...28
7.1 Motivation of Hypothesis ...28
8 Method ...32
8.1 Sampling and data collection -‐ Probability and nonprobability sampling 32 .... 8.2 Survey design ...33
8.3 Operationalization ...33
8.3 Analysis method ...33
8.4 Validity ...35
8.5 Pilot test ...35
8.6 Reliability ...35
9 Analysis and results ...37
9.1 Frequency test ...37
10 Results ...40
11 Discussion ...43
11.1 Brand Image ...43
11.2 Brand Identity ...43
11.3 Brand Awareness ...44
11.4 Brand Attitude ...44
11.5 Philanthropic CSR ...45
11.6 Strategic CSR ...45
11.7 Ethical CSR ...46
11.8 Altruistic CSR ...46
11.9 Environmental CSR ...47
12 Conclusion and contribution ...48
12.1 Conclusion ...48
12.2 Contributions to the Vield ...49
13 Managerial suggestion ...50
14 Limitation and further studies ...51
15 Reference list ...52
Appendix 1 ...61
1.1 ...61
1.2 ...61
Appendix 2 ...64
Table 2.1 ...64
Table 2.2 ...65
Table 2.3 ...66
Table 2.4 ...67
Cronbach’s Alpha Test Tables ...67
Strategic CSR 2.5 ...67
Ethical CSR 2.6 ...67
Altruistic CSR 2.7 ...67
Environmental CSR 2.8 ...68
Brand Equity 2.9 ...68
ANOVA Test ...68
Table 2.10 ...68
Pearson’s r ...69
Table 2.11 ...71
Crosstab test ...72
Table 2.12 ...72
Table 2.13 ...73
Table 2.14 ...74
Table 2.15 ...75
Frequencies test ...76
1 Introduction
Corporate social responsibility (shorten to CSR) is the responsibility a company has towards itself and society (Lichtenstein et al., 2013). Ray Kroc founder of McDonald’s said, “none of us is as good as all of us”. McDonald’s has been engaged helping the community for over 35 years. It started with the Ronald McDonald House of Children; a place for children who needs medical attention for a longer period of time could stay closer to the hospital (Mcdonalds.com 2015). CSR has almost become a necessity for companies today where many practice it more extensively than ever (Sitkin, 2013). The companies that are in focus in this study are in the fast food industry (McDonald's, Burger King, Max Hamburgers and Subway). All of the fast food companies use a franchising business model where the majority of the restaurants are owned and operated on local or regional level. Franchising is the business relationship between two independent units involving the franchisor (the head company) and the franchisee (the new store, shop or restaurant). The franchisees pay the franchisor for the right to sell their products or services under the trademark of the franchisor (Dant & Grünhagen, 2014).
1.1 Current situation of the fast food companies
The majority of these fast food restaurants state on their main website (not everyone on the website for the specific country, e.g Sweden) that they encourage the franchise branch to work with CSR on local level. Subway headquarters work with franchisees to try to eliminate the ethical issues in any kind of discrimination towards race, gender, sexual orientation or religion (subway.com, 2015). On their Swedish website they communicate their CSR such as minimization of environmental impact of their food and just mentions small encouragement to supporting the local community (ibid). Max Hamburgers are working with Samhall an organisation that involves people with disabilities into society (max.se 2015). Burger King headquarters have a consistently focus on environmental performance, they recycling 90% of all waste in the restaurants. They have also a strong focus on ethical and qualitative requirements;
they have continuous controls to ensure it fulfilments (Burgerking.se 2015).
McDonalds is the fast food company that work with locally focused CSR the most.
According to McDonalds Swedish website, they want to be the local company that care for its community. They have examples of four different franchisees that are involved in the local community. They engage in local youth sports, hiring people with disabilities, building playrooms at hospitals, and helping security guards at night which has lead to a decrease in crime rates (Mcdonalds.se 2015). According to Carroll (1979), companies have a corporate responsibility to be involved in social issues while they also have the responsibility to ensure that economic gains will be achieved.
One common concept in CSR is CRM (cause related marketing) that is about using marketing strategies to supportive activities meanwhile they build business. These activities are partnerships between businesses and e.g. charities to market a product or services for mutual benefits (Adkins, 1999). Companies hope CSR will lead to good reputation, employee and customer satisfaction, and long-term relationships and in the end good performance (Skarmeas & Leonidou, 2013) i.e increase brand equity. If the company dismiss this type of social responsibility it can have an impact on the profit and their reputation can be harmed. There have been situations where consumer groups have boycotted companies who do not practiced CSR (Snider et al., 2003).
Examples of boycotts in among food companies can be found in the appendix 1.1.
Researchers have long discussed the impact of CSR. The basic idea of CSR is that companies should be a part of society, receive legitimacy in society and have an obligation to work for social improvements (Fredrick, 1998). The philanthropic idea is to go beyond the basics of the CSR pyramid of economics and legal requirements.
To reach the level of responsibility that CSR advocates, the local community and company needs to be integrated with each other (Wood, 1991) i.e. CRM. This will make it easier to achieve the community’s expectations and needs of corporate contributions to the community because the company does not always know what is expected from the local customers preferences and with an alignment between contributions and need the outcome have a higher potential to be positive (ibid).
Carroll (1979) and Woods (1991) both have the conclusion that there is a connection between CSR and the customer.
1.2 CSR in media
The importance today is where consumers, government and other corporate stakeholders are becoming more interested in giving back to society (Skarmeas &
Leonidou, 2013). Many companies see CSR to the extent of “do well by doing good”
to reach its goals (Skarmeas & Leonidou, 2013). Companies are following the CSR trend to feed of its benefits and avoid bad reputation. Media has the role of pointing out companies’ wrongdoing on any scale, from environmental disaster (e.g. BP in the Gulf of Mexico) to misconduct from employees (Skarmeas & Leonidou, 2013).
Misconduct of employees is where fast food companies, especially McDonald’s in Sweden, have received a bad reputation from being investigated by media and other authorities for different scandals. In 2007, SVT (Swedish television) “Uppdrag Granskning” discovered that McDonalds had a cleaning staff that worked all night every night with awful labour conditions and salaries (SVT, Uppdrag Granskning, 2007).
For companies to defend themselves from media and flaws of a company they interact in activities that are beneficial for society. Groups in society have pointed out the fast food industry to cause obesity among a population. An example is the documentary Super Size Me where a person ate McDonalds every meal, every day for a month and suffered health problems (Super Size Me, 2004). The major companies in the fast food industry use CSR, together with other marketing tools i.e. CRM, to retrieve their reputation of not only causing damage to society but also do good i.e. reclaim brand equity. Many of them work on large scale with CSR but are franchised owned and have a connection to the local community where they could implement more of its CSR activities (Schwitzer et al., 2005). There are many stakeholders that are affected by CSR activities. Business owners, business investors, customers and local citizen all have their opinion about what level or type of CSR that should be implemented.
However is their one problem regarding the responsibility for the local community between the franchisee and the franchisor, the reason is that the franchisor does not have a clear understanding to what degree they should be committed in CSR (Barkays
2013). As mentioned earlier media mediate one image of a company that influence the attitude and awareness of customers. Brand equity and cause related marketing (shorten to CRM) are closely related in these areas. Brand equity is a combined mind- set of aspects that people have in their mind about when they think of a company (Huang & Sarigüllò, 2015). As consumers have taken control of both their media choices and the commercial messages they choose to receive, a firm's communication activities can contribute to the brand knowledge by creating awareness and positive associations among its customers (Keller, 2009). One of the key objectives for CRM programs is to generate a positive attitude towards the brand (Palazon-Vidal &
Delgado-Ballester 2005; Brito & Hammond 2007). Furthermore, sponsorship is well- known and powerful platform for building a brand's image and recognition (Cliffe &
Motion 2005). Companies engage in sponsorship for a variety of brand-related objectives such as increasing brand awareness and establishing, strengthening or changing brand image (Farrelly & Quester 2005). There are examples where fast food companies sponsor sport teams to gain recognition. During the world cup 2014, McDonald's sponsored the Swedish ski team (kostdoktorn.se 2014) and Max Hamburgers sponsors Jon Olsson Big Air in Åre (max.se 2015). As authors of this paper, it shows that CRM is more than just sponsorship of individuals or teams and it can also be expanded into the local community in different ways. Franchise restaurants can build brand equity by being involved in CSR activities. This paper’s goal is to get a better understanding of how franchised fast food companies work with CSR to increase the customers brand equity in the forms of cause related marketing with emphasis on philanthropic CSR activities, their interaction on local level and the response of the customers. With CSR companies can integrate social and environmental concerns in their business operations and interactions with their stakeholders (Porter & Kramer, 2011). Companies have something to gain when they care for the local markets well-being. Over the past decade consumers have become more and more interested in corporate social responsibility (Carrigan & Attalla 2001).
2 Problem discussion
In this chapter are the authors describing the problem surrounding franchise companies CSR activities and how they could use CSR in to build brand equity to connect to the local community.
Many larger companies have ignored the importance of CSR on local level (Sitkin, 2013). Barkay (2013) is a spokesperson to the problem with the responsibility for CSR within the local market. Barkays (2013) research claims that it is hard to divide the responsibility for the local community between the franchisee and the franchisor because of the franchisee does not have clear understanding to what degree they should be committed to local CSR (ibid). The study’s findings show that the local communities are exposed to two forces. The first one is the company’s willingness to increase sales by disillusioned branding strategies. The second one is the company’s response to the public interest for the benefit to the stakeholders within social responsibility. The idea is that corporate values shall be emphasized in community programs in a capitalist ideology, which will gain profits for the company (Barkay, 2013). What is experienced is an unequal balance between the corporation local responsibilities and the stakeholders’ (business owners and investor) interest of return on investments. The difference between the capitalistic ideology and the socialistic ideology is that the capitalistic is undertaking the opportunity of value creation. It sets a price on everything and calculates the return on the investment to make the company or individual wealthier while the socialistic advocates the stability for the many peoples best interest (Marques, 2005).
Meiseberg and Ehrmann (2012) present a linkage between CSR and franchisee and what the CSR relationship is between franchisee and franchisor. The study explores prevalence, performance and outcome of CSR in franchising. When the franchise systems behave in a socially responsible manner and the performance effects of CSR initiatives. If the franchisee makes a mistake can it affect the brand and influence the whole organization's reputation i.e. decrease brand equity. Examples can be found for McDonalds employee scandals were only a few restaurants did something wrong but it affects the whole Swedish organization. The other way around is if the company
does something good it generates something good for the whole company. The article is targeted towards various stakeholders and presents a view of strategic CSR, a use that not only serves philanthropic motives but create competitive advantages, advantages that will lead to increased reputation enhancement, ability to charge premium price, better recruits and retain high quality workers i.e. brand equity. The franchisee plays an active role in the implementation of CSR initiatives within the company (ibid). Meiseberg and Ehrmann (2012) also raise the question of customer’s reaction to local adaptation versus system wide campaigns in CSR strategies. Albaum and Duerr (2011) makes a further statement than Meiseberg and Ehrmann that there is a lack of the local franchisees engagement in non-market strategies, this is due to the franchisor does not know to what degree they should be committed to non-market strategies activities in their region (Albaum & Duerr 2011). They advocates that there is an amount of social responsibility operations on a headquarter level but not at the local franchisees level. This seems to be a problem on the local market because of the social responsibility delegated from the company’s headquarter is not reaching the local customer (ibid).
Dougherty and Olsen (2014) article of adapting CSR strategies points to an increase in value of CSR and that there is an importance of adaptation to the local community rather than a one size fits all model. Dougherty and Olsen suggest that focus should be on customer’s reaction to local adapted CSR rather than reaction to system wide CSR strategies that Meiseberg and Ehrmann suggested in 2011. Therefore it is important to understanding the local culture and threats of entrance for the local stakeholders (customers and citizen) i.e. CRM. In their study about CSR and gold mining industry in Guatemala, the local threats to the stakeholder were when mining companies entered the area was water pollution and occupation of farmland (Dougherty & Olsen, 2014). Previous authors statements remain of the importance of local CSRs adaptation increase value but what is interesting is finding out what is important in a socialistic and well-developed country as Sweden. In many parts of Sweden we do not have the same problems they have in Guatemala i.e. CRM.
Perez (2009) conducted a study of consumer identification towards a company’s CSR, where attitude and affective commitment to the company were measured. Perez found
that there is a positive relationship between the consumer, the attitude and the commitment to the company based upon the company's CSR (Pérez, 2009) i.e brand equity. In contrast to Perez, the conclusion of Öberseder (2011) was that CSR only had a limited role in the purchase decision of customers and that managers could only communicate CSR that are aligned with the company's core values. The difficult factor to investigate for Öberseder was the personal concerns that customers had in their purchase decision (Öberseder et al., 2011). Menon and Kahn (2003) have found that consumers are more likely to support firms that have a given social issue than firms that does not have one i.e. CRM. Customers find it interesting to support companies that engage in cause-related marketing in comparison to firms that works with normal advertising (price and product related advertising) (Menon & Kahn, 2003). There is research that shows that not all consumers perceive all forms of CSR in the same manner, research shows that customers are more dedicated to purchase from a company when there is a “win-win” situation. This means that the companies needs to “win” trust of the consumer and the consumer must feel they receive value from the exchange and understand the company’s contribution of CSR to the community (Green, T., & Peloza, J. 2011).
To narrow the problem down to a problem conclusion; the franchisor does not have a clear directions of how they should promote their engagement in the local community’s CSR. This can be a problem on managerial level of the franchisor or the attitude of the franchisee that they do not see the investment pay off. Previously knowledge from research shows that different stakeholders reaction on CSR strategies. Owners and investors want a high rate of return on their investment but they also want to do by doing good. While the other two stakeholders (customers and citizens) have more public interests. Regarding the introduction it is clear that there is a positive relationship between CSR and attitude and that media influence the image of a company i.e. brand equity.
Local franchisors can engage in local CSR questions to change the brand equity of the company. Local communities with its inhabitants have different values of what they consider needs to be improved on and what companies can support. Then companies could use the local CSR as a marketing tool to change the brand equity of customers
to gain a competitive advantage. Within philanthropic CSR there are different components, environmental, altruistic, strategic and ethical that the consumers can consider more or less important and affect their brand attitude on local level.
3 Purpose
To further investigate the importance of different philanthropic CSR activities on local level and see if these activities can be used to strengthen fast food companies brand equity.
4 Research Question
Research have shown that fast food companies are involved in different kinds of philanthropic CSR activities, what part of brand equity has to be dealt with first?
What are the important factors in building brand equity with philanthropic CSR activities?
How important is the focus on local activities for franchised fast food companies when it comes to the philanthropic CSR activities?
5 Delimitation
Out of three different CSR models (concentric circles and intersecting circles) this papers delimitation are narrowed down to the top two categories of third model, the CSR pyramid, ethical CSR and philanthropic CSR. Due to the bottom (economic and legal) two categories are more focused on generating profit back to the company rather than just do something good for society. The delimitation of not being profit focused has lead to not focus on owner and investor and just focus on customers and people in Kronoberg region. With the emphasis on the local community and the time limitation of this project is it only going to focus on Kronoberg region. Different regions can have different values of what can influence their opinion about a company and the CSR activities. The authors have limited this research down to just brand
equity towards franchised fast food companies due to the connection with the local community. Instead of the attitude towards nations wide CSR philanthropic strategies.
Öberseder (2011) problem was how personal concerns and CSR activities affected the purchasing behaviour. The authors are interested in personal concerns and CSR activities but not how it affects purchasing decision. It considering more interested in how those two affect the brand equity. Brand equity can be divided in different categories or branches. To our thesis the authors have chosen brand image, brand identity, brand awareness and brand attitude as our cornerstones of brand equity.
There are brand equity models including brand knowledge, brand association, brand loyalty and brand preference to mentions some. Cornerstones for philanthropic CSR are strategic CSR, altruistic CSR, ethical CSR and environmental CSR. These four fitted the best into our project where CSR and Brand equity are going to match.
6 Conceptual Framework
This chapter contains the theoretical framework, which the project is built upon. All the material is collected from books and academic papers concerning CSR and Brand Equity different components
6.1 CSR
Corporate social responsibility (CSR) is the responsibility a company has towards itself and society. CSR involves economic (business need to produce goods or services that society wants and sell them with profit), legal (they need to obey the law), ethical (need to exhibit ethical norms and behaviours) and discretionary (they may play a voluntary roles driven by social norms) responsibilities (Lichtenstein et al., 2013). There are CSR activities that are not always beneficial for the company economic situation. The activities can be seen as immoral towards the company’s internal stakeholders. Stakeholders are mostly interested in the company’s economic success and the highest rate of return on their investment. These activities are more in the lines with the philanthropic motives such as care, justice and utilitarianism. These activities are not required by the company and should only be taken into action when a company can be beneficial and enhance the value to the company (Lantos, 2002) (see fig. p16 ).
There are three different models of CSR, the CSR pyramid (hierarchy of separate responsibilities), intersecting circles (non hieratical set of intersecting Circles) and concentric circles (integration of responsibilities; all sharing a central core) (Geva, 2008).
The pyramid divides CSR in different terms of social expectation that responsible corporations should strive to meet. The first three parts, economic where profit making is the emphasis, legal responsibilities to obey the law and ethical where the social expectations are met that is not covered by the legal framework. The last one is philanthropic were voluntarily interaction in society is where the bottom three narrow
down to (Geva, 2008). Other models do not match the research, do to their focus on economic profit or sustainability (sd-network.eu).
CSR Pyramid (Carroll 1991)
6.2 Philanthropic CSR
The role of philanthropy in CSR is that it goes beyond the first three, economic, legal and ethical. It exceeds the bare minimum of CSR and distinguish itself from the neoclassical view and more of the new notion of citizenship that emphasis on the companies giving back (Geva, 2008). The subcategories of philanthropic CSR are ethical, altruistic, strategic and environmental, see fig. on pg 22.
Philanthropic responsibility deals with corporate humanitarians contribution that are not required or expected by society. Instead have a company choose to engage in philanthropic projects like aiding poor in developing countries, build houses for people in need, sponsoring local communities or events, donations to charitable etc.
However, CSR philanthropy can be seen as help to create a better world by actively engaging in programs to promote human welfare and goodwill (Carroll, 1991). The communities firms desire that firms should contribute with their money, facilities and time to humanitarian programs or purpose, but if the firms not will fulfil the communities desire will they not regard the firms as unethical. It is stressed that the philanthropy is more discretionary or voluntary on the part of businesses even if their will always be a societal expectation from the communities. One notable reason to making a distinction between philanthropy and ethical responsibility is that some
Philantropic CSR
Ethical CSR
Legal CSR
Economic CSR
firms feel that they are just socially responsibility to be good citizens in the community. There's one critical factor with philanthropic CSR, their might see as an conflict between companies a firm's concern for profit and their concern for the society. The firms want to be engaged in the society and assist to create a better world, but at the same time need they to focus on their profit to be sure that the business will survive. When it came to the shareholders who want to maximize the profit is it easy that the management forget their responsibility to the society and only focusing on the profit. This is the critical factor with philanthropy CSR, in the theory is it a very good idea but when it comes to the implementing on the company needs they to voluntary want to give the society a favour (Carroll, 1991).
6.2.1 Ethical CSR
Within philanthropic CSR sub categories, ethical CSR is morally required and goes beyond fulfilling a company’s internal economic and legal obligations, to its ethical external responsibilities to avoid harm or social injuries, even if the business might not appear to benefit from this. Examples are to prevent crime and help homelessness or sick people. Hence, a corporation is morally responsible to any individuals or groups where it might inflict actual or potential injury from a particular course of action (Lantos, 2002). Zhu et al (2014) investigated the effects of ethical leadership in 199 tourist firms in China. They found that it modified the firm's reputation indirectly.
The direct effect was that it positively influenced the firm's performance and reputation. The conclusion on the study was that ethical CSR in the form of leadership was only positive when the firm was strong.
6.2.2 Altruistic CSR
Altruistic CSR is the philanthropic responsibilities and involves contributing to the good of various community stakeholders, even if this sacrifice parts of the business’s profit. Companies practicing altruistic CSR help to alleviate various social problems within a community or society, such as lack of sufficient funding for educational institutions, inadequate funding for the arts, chronic unemployment, urban blight, drug and alcohol problems, and illiteracy, among others. The explanation lies in the
fact that the modern corporation has been entrusted with massive economic and human resources and has the power to affect many parties beyond the participants in its transactions. Thus, there is an implicit corporate social contract between business and society, whereby firms agree to be good stewards of society’s resources (Lantos, 2002). Altruistic CSR from the companies’ side is often met by gratitude from the consumers. Algoe and Haidt (2009) study show that gratitude brings people together and strengthen ties and move beyond an exchange relationship into a communal relationship. Not just the communal relationships were strengthened; the image and the attitude were also strengthened and the company received positive word of mouth feedback (Romani et al., 2013).
6.2.3 Strategic CSR
Strategic CSR involves caring of the corporate community service activities that accomplish strategic business goals, e.g. city developments and create new jobs in the community. Here, corporations contribute to their constituencies, not only because it is a kind and generous thing to do but also because they believe it to be in their best financial interests to do so, thereby fulfilling their fiduciary responsibilities to the stockholders (Lantos, 2002). Porter and Kramer (2006) make a case of strategic CSR that companies benefits from a strategic approach to CSR. They should align the corporate plan with a social issue that could carry a competitive value. Quoted from the Porter and Kramer (2006) “no business can solve all of society’s problems or bear the cost of doing so”. That is why companies have to choose one that is aligned with the company’s core beliefs.
6.2.4 Environmental CSR
Environmental CSR relates to contribution of the well being of the biotic community, the coherence of land and ecosystems and the risk of letting threats damaging the biodiversity. It concerns the existing living and non-living creatures within earth’s biodiversity (Safit, 2013).
Shareholders are sensitive towards revealing bad and harmful corporate behaviour.
Flammer (2013) study show that the environmental impact can reflect in decreased
stock value. This have over times made companies more interested in environmental CSR to eliminate their carbon footprint. By engagement in environmental concerns can generate competitive resources, and then see the environment as a resource. The backside is that a company’s environmental CSR lower the profit in the short term because of the cost of involvement, and have caused managerial implications but have shown positive signs for innovation in the long term. The revealing of positive environmental CSR both gives an increase in stock value for shareholders and a positive image for the company in the long term. The investments in environmental CSR have to be coherent with the shareholders of the company (Flammer, 2013).
6.3 Brand equity
Within the concept of brand equity are identity, image, attitude and awareness, which reflect on the company’s economic and social system. It is an indicator of the level of acceptance from the stakeholders. Keller (2002) states that brand image plays out a big role in the consumer purchase decision process on different levels of psychological, sociological and economical. Strategically incorporated CSR has strong influence on the brand image. This makes a combination of what company does in terms of products, operations, and behaviour in the competitive environment and later the profit made for the company and value generated for the society (Popoli, 2011). In the conducted research of Popoli (2011) many articles have proved a strong link between social behaviour and profitable performance. See fig. pg 22.
6.3.1 Brand image
Brand image can be defined as how a brand is represented in people’s minds. The image is a perception that a target group associates the specific brand with (Echeverri
& Edvardsson 2002). The perception can be created in two different ways, logical and emotionally. Because of this the brand also have a symbolic meaning that affects the image. People see the “M” or the “golden arches” of McDonalds and associate it with food. The associations to the brand can be perceived through service, advertising, experience, media and reputation (Holger et al., 2002). If the company has succeeded
with their brand products, then the brand image should convey a distinctive message that communicates the product’s benefits (Kotler et al., 2003). An advantage with having a strong brand image is that it can be protected from competition and establish a good market position for the company. A strong brand image cannot be created over a night; it takes time to create a strong brand image. The company needs to have a clear view over which signals they want to communicate to the customer and not forget that the image should both be geared towards to customers and the employees (Echeverri & Edvardsson 2002). Everything the company communicate with the public needs to be matched with the brand image, if the public view of the brand image reflects differently from the company's core values the brand can experience setbacks from both clients and customers (Kotler et al., 2003). According to Maio (2003), it is important to see it in a long term perspective, their needs to be a strategic long term company plan to create a clear message that share the right image of the brand. In the study of Blombäck and Scandelius (2013) presents the studies that corporation in CSR’s communication is positively related to brand image according to the customer’s options. The connection between the brand and CSR activities increases the customer’s ability to more easily remember and recognize the brand image. The main reason is that CSR entails trust is because it is a critical and an important factor when it is represented in people’s minds (ibid). From a customer's perspective has it been verified that a company with a credible CSR activities is more successful to generate longer terms consumers purchase intentions and loyalty.
Similar with brands that have a CSR identity, they can easier attract and changes a consumer's perception to the brand (Blombäck & Scandelius, 2013).
6.3.2 Brand Attitude
The customer’s attitude is the connection between the customer and the product (Olsen et al., 2014). The concept brand attitude included what the customers think the product does, how well they found it useful and how well the brand treats their employers and the community (ibid). If a person having a strong attitude towards a brand it affects the brand consideration, purchase intention and brand choice. By having a strong attitude all key factors from a company's point of view are met to
maintain customers loyalty (Park et al., 2010). The attitude is based on earlier perceptions to the brand and external sources that influence the customer. The external sources can be things that media writes or example things that the brand do to support the community (Olsen et al., 2014). Previous research has shown that companies who work with CSR have a positive impact on the consumer's attitude.
Thanks to the increased loyalty that is carried when a brand works with CSR will brand identity be affected very positively (ibid). Research has also been found that when a company are introducing a new product on the market can CSR influences on the products credibility positively. Because of the knowledge and awareness customers have about CSR creates automatically a sense of security to the brand when they know that a brand support the community (Olsen et al., 2014). A person's attitude to a brand influences also from the people that are close to you, because of people's increased willingness to work against pollution have this become a topic that are considering to be very important. Just like people are categorization themselves in different groups are brand also doing the same, if a person's group identity are similar to a brand's identity will the person directly feel a connection to the brand thanks to their similar identity (Woo Jin & Winterich 2013).
6.3.3 Brand identity
According to Ghodeswar (2008) the concept brand identity is to create unique associations between the brand and the customers. An association can be a name or a symbol that reflect the products differentiations in relation to the competitors. Brand identity works as a protection against the company’s competitors, it is important that the core identity in a brand constitutes the essence in the company’s identity. When a company builds its brand identity it is important to have a good knowledge about the customers understanding, their attitude and how the product differentiate itself from other similar products and who the competitors are. A strong brand identity needs to match the customer expectations, values, characterizes and items that customers consider being distinctive and creates value for them. Because of the market constant development of products and services and the increased competition companies need to strategically position the brand identity to easier create a strong identity around its
brand. This creates a strong relationship between the customer and the brand in terms of they feel connected and engaged in the brand (Ghodeswar, 2008). According to Morsing and Roepstroff (2015) is there a clear connection between CSR and associations that can reflect a brand. The influence that CSR have on the brand helps the customer to unconsciously create associations and trust to the brand. The more associations that a customer can connect to brand the stronger will the correlation be between them. The articles focus is to develop a conceptual framework to understand how a company's CSR identity becomes defined with helps from political activities and if it can create a strong identity-relation with the customers. The survey has been made with corporations with IKEA to get a deeper understanding how a brand will be affected if they implement CSR (Morsing & Roepstorff 2015).
6.3.4 Brand awareness
Brand Awareness is defined as the consumer’s awareness of the product or a company and how familiar they are with the brand or if the company gives a feeling of acquaintance. If the customer recognize the brand and experience a relationship to it the company succeeded with their brand awareness (Kotler 2010). Early memories from a brand can attach the customer to the store, this happen because the consumer feels a reassurance to the brand. Because of the awareness and the information the customer possesses, this affects the purchase decision and creates a higher affinity to the brand. The primary sources to awareness are advertising, Internet, the staff in the stores and personally contacts, but the strongest impact on the consumers is still the media. The media impact is much stronger than the others, if media writes something negative that have a connection to the brand it can influence the sales in a negative way (ibid). A hot topic when media report companies activities is their social responsibility. Media is a channel of information that makes people aware of company activities in the world. Bad publicity can quickly reach the target group of the company and hurt the brand. There's also a strong relationship between CSR and the consumers awareness regarding to the article. A company's willingness to apply CSR increases the customer’s willingness to pay more and choose the product that is environmentally friendly instead for the substitute (Hartmann et al., 2013).
6.4 Cause related marketing
CRM (cause related marketing) is about using marketing strategies to supportive activities meanwhile they build business. These activities are partnerships between businesses and e.g. charities to market a product or services for mutual benefits (Adkins, 1999). When a company introduce cause related marketing is it with the purpose to increase customers goodwill and improve the company's image, which will influence the reputation (Koschate et al 2012). The general responses of CRM are positive and contributes to consumers are more willing to purchase the company’s product (Adkins, 1999). Because of the effort that the firms do increases the relationship between the company's donation and the customers willingness to purchase the company's products. Further research has also shown that there is a connection between a company's donations and the customer’s willingness to pay more. If a company give something back to the society is not only the purchase decision that will increases, also the customers willingness to pay more for the product comparing to substitute who does not give something back to the society (Koschate et al., 2012). However is there a disadvantage with donation, donating more involves greater cost for the company, which will reduce the profitability.
Reduced profitability leads to dissatisfaction among internal shareholders that can lead to reduce donations because of their desire to increase their profit. That is why it is important to find a connection between the donation and the customers willing to purchase the company’s product (ibid). There are different types of genre of CRM from companies, from altruistic motivation to social motivation but what they all have in common is that there needs to be a relationship towards the personal values of the consumer (Nan & Heo, 2007). This means that the customer must feel a connection between the donation and himself, either that the donation has affinity with the customer’s value (Koschate et al., 2012). According to Jahdi (2014) CSR have become a very important tool to consider; due to the growing importance of creating a sustainable community. This is a concept that the consumers demand from the firms.
To fulfil the customer's expectations regarding donations and the society is a
combination of CRM and CSR something that complementing each other very well.
CRM ensure that the firms will fulfil the expectations regarding donation and CSR ensure that the firms will get something back in terms of higher profit and higher demand from the customers (Jahdi 2014)
Figure 2: Summery of the concepts and sub concepts that will be research in this paper.
7 Hypothesis
To achieve the stated purpose, the following hypotheses were formulated and visualised in the research model
H1 There is a significant relationship between brand equity and Strategic CSR H2 There is a significant relationship between brand equity andEthical CSR H3 There is a significant relationship between brand equity and Altruistic CSR H4 There is a significant relationship between brand equity and Environmental CSR
After the first four hypotheses were tested for significance more hypothesis were added to find out more about the relationship. If the relationship is positive or negative.
H5 There is a positive relationship between altruistic CSR and brand equity.
H6 There is a positive relationship between ethical CSR and brand equity.
H7 There is a positive relationship between strategic CSR and brand equity.
H8 There is a positive relationship between environmental CSR and brand equity.
For further understanding of the relationship and after a second round of hypotheses were tested for a positive or negative relationship between the different kinds of CSR and brand equity a third set hypothesis were added to the investigation. These
Philanth
Ethical Alturisti Strategic Envirom
Brand
Brand Brand Brand Brand
hypothesis are conducted regarding respondents high and low level of importance of brand equity.
H9 There is a significant relationship between high brand equity and environmental CSR.
H10 There is significant relationship between low brand equity and strategic CSR.
H11 There is a significant relationship between low brand equity and altruistic CSR H12 There is a significant relationship between high brand equity and ethical CSR
The analysis model
A model of how the hypotheses are created. There are the four different variables of Philanthropic CSR against Brand Equity. What questions are included in each variable can be seen on pg. 28 ch. 8.3.
7.1 Motivation of Hypothesis
The hypotheses are designed through hypothesis null method, in null hypothesis the theories are assumed to be true by the researcher and then it will be used as a base of an argument (Bryman and Bell 2011). In other words, null hypothesis is a statement created by the researchers based on the theories and literature review of the research (ibid).
H1 Companies that implement altruistic CSR help to alleviate various social problems within a community or society. Companies that implement altruistic CSR consider to also increases their customers brand equity. The customers are aware about the different social problems that existing in the community and tending to increase their trust to a brand when they know that a company prevent and help alleviate various social problems in the community.
Brand Equity
Alutristic CSR Ethical CSR Enviromental CSR
Strategic CSR
H2 The revealing of positive environmental CSR both gives an increase in stock value for shareholders and a positive image for the company in the long term. By having a strong environmental CSR gives advantages that can protect the brand from their competition and establish a good market position for the company. This advantages increases the brand equity.
H3 Ethical CSR is morally required and goes beyond fulfilling a company’s economic and legal obligations, ethical responsibilities to avoid harm or social injuries, provide crimes and help homelessness or disease people. This entails to benefits that will increase the brand equity, when a company do operations in the competitive environment will the value be generated to the society and increase their trust to the brand.
H4 Strategic CSR involves caring of the corporate community service activities that accomplish strategic business goals. Corporations contribute to their constituencies, not only because it is a kind and generous thing to do but also because they fulfilling their fiduciary responsibilities to the stockholders. By fulfilling their fiduciary responsibilities will this affect the customers brand equity, the equity tending to increases when a brand indicates that they care about the community.
H5 Altruistic CSR involves philanthropic responsibilities and contributing to the good of various community stakeholders, even if this sacrifice parts of the business’s profitability. By giving something back to the community even if it sacrifices parts of the business's profitability will the customers perceiving this, as goodwill and it is assumed to affect the band equity.
H6 Ethical CSR is morally required and goes beyond fulfilling a company’s internal economic and legal obligations, to its ethical external responsibilities to avoid harm or
social injuries, even if the business might not appear to benefit from this. By taking external responsibilities that the company might not, as it appears, benefits from this shows that the company not only cares about profit, they also want to contribute to a correct ethical community which is assumed to impact the brand equity positivity.
H7 Strategic CSR involves caring of the corporate community service activities that accomplish strategic business goals, e.g. city developments and create new jobs in the community. By contributing to new jobs and development cities will the customers associate the company with caring of the corporate community which is assumed to increase the brand equity.
H8 Environmental CSR relates to contribution of the well being of the biotic community, the coherence of land and ecosystems and the risk of letting threats damaging the biodiversity. By contribution of the well being of the biotic community will the brand awareness increases which is assumed to affect the brand equity positive.
H9 According to previous studies is CSR environmental something that the customer’s finds very important and can increase a company's brand equity. By having a high brand equity are the customers more aware about the company's activities and also their impact on the environment.
H10 By not having high brand equity shows this that the customers not have a high awareness but they care about things that have impact in their life and the city they live in. Strategic CSR is about creating new jobs and develop cities is assumed to have a relationship with low brand equity.
H11 Altruistic CSR is to help alleviate various social problems within a community or society, such as lack of sufficient funding for educational institutions. This is assumed to have a relationship with low brand equity because it focusing more on problem that is around the customers instead of example environmental problem.
H12 It’s assumed that there is a significant relationship between high brand equity and ethical CSR because this is about customers that have a high involvement and cares about problem in the whole world not only in the city they live in.
8 Method
The following chapter provides empirical analysis. This comprises of the following phases: survey design; pilot testing and the sampling and data collection.
8.1 Sampling and data collection - Probability and nonprobability sampling
According to Bryman and Bell (2011) sampling is the process where the researcher chooses representatives from a population in order to get its empirical data. There are two types of samples, non-probability and probability (Saunders et al., 2003). In non- probability the researchers do not do random selection of sampling while in probability sampling the researchers choose the samples randomly (ibid).
This study has chosen a probability sampling method and targeting the population in Kronoberg region in Sweden to get a to get a broad opinion. The target sample was to find people between 18 and 65 for the questionnaire. The collected sample of respondents was between 18 and 64 years old. The way the sample was collected were through handing out questionnaires manually to people downtown in Växjö, at the shopping mall Grand Samarkand and at the Linneaus university. The survey had a few people answering the questionnaire online through shared link on Facebook.
According to Bryman and Bell (2011), surveys are the best options to conduct questionnaires for a quantitative study. Surveys are used in order to gather primary data in many areas; this method is also commonly used in business studies (ibid).
Furthermore surveys are normally used in studies that contain two or more variables, in this paper the authors are using five variables, thus conducting survey is suitable for this paper. The survey will be conducted offline (i.e hard copies of the survey will be handed out to people within the sample segment), in order to have a larger response rate. Convenient sampling method has been chosen for this research, convenience sampling is a root in non-probability sampling technique normally conducted when researcher wants to choose the target groups that is easiest to reach out to. In other words the researcher chooses the most convenient population to gather its data from (Beheshti et al., 2014; Saunders et al., 2003).
8.2 Survey design
The survey was composed out of the questions regarding the different categories of philanthropic CSR and the components of brand equity. The questions are made up by what different CSR activities fast food companies are involved in based on research (appendix 1.2) and what they can contribute to in the local community i.e. CRM.
The brand equity questions are based on the theory of brand equity and its different components of identity, image, awareness and attitude that match the topic of fast food restaurants.
Questions 1 to 3, are designed to make sure the diversity of the respondents are representable for this area. Questions 4 to 9, are created to get a general opinion of the problem in this area and later be able make conclusion, contribution and managerial suggestions in the industry.
A five point likert scale and “Yes/No or both” questions were used to answer the survey.
8.3 Operationalization
In the table below are the five variables illustrated that are used in this study
For more details about the questions please see the questionnaire in appendix (pg. 54)
8.3 Analysis method
Since this is a quantitative study, descriptive statistic analysis has been chosen as the method of analysis (Bryman & Bell, 2011). The author’s mention that descriptive is a method that is often carried out with SPSS (ibid). Hence, the analysis will be made with the use of SPSS. According to Hair et al., (2006) descriptive analysis allows the researcher to translate raw data from the survey to a more understandable form, it also gives the investigator the ability to track the missing data. When the surveys were put
T h e o r y a n d
constructs:
Questions:
Strategic CSR 10, 11, 12 V1
Ethical CSR 13, 14, 15 V2
Altruistic CSR 16, 17, 18 V3
Environmental CSR 19, 20, 21 V4
Brand Equity 22, 23, 24, 25, 26, 27, 28, 29 V5
in SPSS, 34 questionnaires were invalid for not being complete or the respondent did not live in Kornberg’s region, which resulted in a sample size of 192. Additionally, the mean value and frequency test will be calculated too to investigate trends within our sample size. An Anova test between the four variables and brand equity has been carried out with the sample size of 192 respondents. An Anova test is used when there are more than two variables in each category while a crosstab test are used when there are two variables (e.g. yes/ no) tested against more than two ( e.g. 1 to 5 scale) (Bryman & Bell, 2011). Anova will tell us if weather the scores significantly differ across the table. It also allows us to investigate more than one independent variable.
The dependent variable comprises data measured at interval or ratio level. The independent variable measures random samples from taken from a population. When SPSS perform ANOVA test, the output reports the exact p value for that particular F- ratio. F-ratio will be a number greater or less than one dependent on the ratio of the variance. An F-ratio equal to or less than one indicates a non-significant result as it shows that scores were equally affected or more affected by a nuisance variables. The significant level is set to p< 0,05 due to the sample size. The level of significance can differ depending on the sample size. When the sample size is smaller (less then 150) then level of significance can be set to p<0,1 (Brace et al., 2012)
Pearson’s r has also been used to carry out a parametric test of correlation between the variables of CSR and brand equity. The aim is to see if there are positive correlations in the variables of CSR and brand equity. The test was carried out in a two-tailed significance. A one-tailed test is used if only deviations in one direction are considered possible. The value of r indicates the strength of the correlation. As a rule of thumb from the book SPSS for Psychologists (2012) r-values from 0-0.2 are generally considered weak, 0,3-0,6 moderate and 0,7-1 strong. Large to very large sample sizes (over 100) can be considered statistically very strong but then the r-value still has its significant role. 0,2 is than still considered weak correlation (Brace et al., 2012).
Advice from professor Anders Pehrsson at Linneaus University in Växjö after results from the first four hypotheses were tested. For further investigation of the correlation
between the variables of CSR and brand equity a crosstab test were made. To be able to make a crosstab test the variables have been recorded to a two by three matrix to differentiate the low and high importance of brand equity and CSR. To divide the brand equity respondents in high and low the mean value was used as cut line. Those respondents that scored above mean value in each brand equity category were considered “high” and those below were considered “low”. When this was carried out into a new variable 74 were considered low and 118 were high. The CSR categories were slimmed down from five variables to three. The “not important” and “less important” became “less important”, “neither” remained the same and “important”
and “very important” became “important”. For the Pearson's chi square the significant level was set to 0,05.
8.4 Validity
According to Ghauri and Grønhaug (2005) validity is the process that an expert in the area test to see how accurate the table of operationalization is measuring what is intended to measure. The construct and face validity of this study has been done through a pilot test. Both validity of questions and constructed measurement validity has been made and the results are presented in the pilot test.
8.5 Pilot test
After completing the survey questions, a pilot test was carried out to seven participants due to the risk of getting invalid data. Two of the participants were professors at Linneaus University in Växjö. One was a marketing research student at Linneaus University and four other students. All participants read through the survey and provide us with valuable feedback. The pre-test had both negative and positive feedbacks; the most crucial and common feedback was to add more info regarding the questions to the survey. After completing the pilot test stage, all the feedbacks of the participants were used to improve the survey questions.
8.6 Reliability
Bryman and Bell (2011) state that reliability has two ways to be measured;
repeatability (when the research gets the same outcomes or results if it was made by
another researcher through the same procedures) and internal consistency. Internal consistency is measured by Cronbach alpha, this method shows how the intercorrelations exist in a sample of items on scale of 0 and 1, it must be also mentioned that this value must be over 0.6 in order to give reliable internal consistency (Bryman & Bell, 2011). For repeatability validity researchers can run the study freely in order to test if the investigation gives them the same results. For internal consistency reliability, it examined the reliability by executing a Cronbach alpha test to test the results. The results showed that all five variables was reliable as Cronbach's alpha > 0,60 level (Strategic CSR; =0,601, Ethical CSR; =0,626, Environment CSR; =0,835, Altruistic CSR =0,877 and Brand Equity =0,710).
According to Bryman and Bell (2011), if the Cronbach alpha is over 0.6, the results are reliable. (Appendix 2, Cronbach’s Alpha test tables 2.5- 2.9).
