Ethics part ii 2014 by Dr CC Tan (drcctan@yahoo.com)

Second Part of Business
Ethics – A Concise Version:
Strategy, Theory of Ethics,
HRM, Marketing III,
CSR1, CSR2, CSR3, CSP
D R . C . C . TA N
SCHOOL OF MANAGEMENT
M A E FA H L U A N G U N I V E R S I T Y
2014

Deontology

Utilitarianism

Or
Deontology

Utilitarianism
Making decisions based on ethical consequences

But the ends do not
always justify the (ethical)
means

Utilitarianism begins with the conviction that we should
decide what to do by considering the consequences of our
actions.
 Better overall consequences – those that promote
human well-being: happiness, health, dignity, integrity,
freedom, and respect of all the people affected.
 The emphasis on producing the greatest good for the
greatest number makes utilitarianism a social
philosophy that provides strong support for democratic
institutions and policies.
 Long-term competitiveness and sustainability
 3P (Profit-People:Social-Planet:Environmental)
Results: Shared Values.
 Avoid bad or harmful consequences
 Theme – The end justifies the means.
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Utilitarianism

Deontology

 Example: Healthy Society

creates
Healthy Society

Sustainable
expanding demand
for business
 Successful
companies need
a healthy society

Creating jobs,
wealth, innovation,
and establishes
competitiveness for
the companies, the
regions and the
nation

 Improve standards of living and social conditions
 Tax contribution so government can better develop
infrastructures to maintain and create healthy society

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Deontology

Utilitarianism

Making decisions based on ethical principles

Utilitarianism must be supplemented with the recognition that some decisions should be
matters of principles, not consequences. In other words, the ends do not always justify
the means.
 Principle-based, de-ontological.
 Ethical principles can simply be taught of as types of rules, and this approach
tells us that there are some rules we ought to follow, even if doing so prevents
good consequences from happening or even if it results in some bad
consequences.
 Examples: Law, duty to pay our taxes, to respect the dignity of individual human
being (“Kantian categorical imperative”), object to child labor.





Deontological Behaviors:
Short-term reactive and defense
Long-term proactive moral obligations.
Long-term commitment to social responsibility
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Utilitarianism

Deontology
Sources of Rules:
 Law (Legal Rules)
 Other rules are derived from various institutions in which we
participate or from various social roles that we fill i.e. professional
rules.
 Organizational rules and roles-based rules: As an employee, one
takes on a certain role that creates duties. Every business will have
a set of rules that employees are expected to follow e.g. stated in a
code of conduct, employee handbooks.
Fundamental Ethical Principles of CSR:
Consumer’s Magna Carta:
 The right to be heard
 The right to be informed
 The right to choose
 Safety

The right to be heard

The right to be informed

 Safety:
 The concept of safety, in a
definitional sense, means “free
from harm or risk” or “secure
from threat of danger, harm, or
loss.”
 i.e. Financial services do not
cause damage or financial
harm.

The right to choose
2/6/2014

Safety

Consumerism movement as catalyst: is a social movement seeking to augment the rights
and powers of buyers in relation to sellers. Ralph Nader is still the acknowledged father of
the consumer movement.

Utilitarianism

Deontology

 Safety

The right to be heard
Strategies
and Action
Plans:

 Advertising
 Social
media

Safety:
Design rightly, produce rightly, instruct correctly to prevent misuse.

Design

Produce

The right to be informed
 A product (or service) with full
disclosure of its specification
 No deception, Accurate Information

Instruction

The right to choose
 Truthfully
advertised
 A product that will
meet reasonable
expectations
 Fair values
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Misuse

Safety
 Produce
quality
products

Deontology

Utilitarianism

 Safety

 Quality Dimensions:
 At least eight critical dimensions of product or service quality must be understood if business is to respond
strategically to this factor. These include:
 (1) Performance – refers to a product’s primary operating characteristics. For an automobile, this would include such
items as handling, steering, and comfort.
 (2) Features – The bells and whistles (Fig. extra, fancy add-ons or gadgets) of products that supplement the basic
functioning.
 (3) Reliability – Refers the probability of a product malfunctioning or failing.
 (4) Conformance – is the extent to which the product or service meets established standards.
 (5) Durability – a measure of product life.
 (6) Serviceability – refers to the speed, courtesy, competence, and ease of repair.
 (7) Aesthetics – a subjective factor that refers to how the product looks, feels, tastes, and so on.
 (8) Perceived quality – a subjective inference that the consumer makes on the basis of a variety of tangible and
intangible product characteristics.
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Consumer Stakeholders:
Product and Service Issues

 Quality-Ethics:
 An important question is whether quality is a social or an ethical issue or just a competitive factor that business needs
to emphasize to be successful in the marketplace.
 For many consumers, quality is seen to be something more than just a business issue.
 Three ethical theories based on the concept of duty that informs our understanding of the ethical dimensions of quality
include:
 (1) Contractual Theory
 (2) Due Care Theory
 (3) Social Costs View

Contract Theory

Due Care Theory

Social Costs View

9

Consumer Stakeholders:
Product and Service Issues

 Quality-Ethics:
 The contractual theory focuses on the contractual agreement between the firm and the customer. Firms have a
responsibility to comply with the terms of the sale, inform the customer about the nature of the product, avoid
misrepresentation of any kind, and not coerce the customer in any way.

 The due care theory focuses on the relative vulnerability of the customer, who has less information and expertise than
the firm, and the ethical responsibility that places on the firm. Customers must depend on the firm providing the
product or service to live up to the claims about it and to exercise due care to avoid customer injury.
 The third view, social costs, extends beyond contract theory and due care theory to suggest that, if a product causes
harm, the firm should pay the costs of any injury, even if the firm had met the terms of the contract, exercised all due
care, and taken all reasonable precautions. This perspective serves as the underpinning for strict liability and its
extension into absolute liability.

10

 The US Federal Trade Commission (FTC):
 One of the US federal government’s major instruments for ensuring that
business lives up to its responsibilities in the relevant areas:
 (1) to maintain free and fair competition in the economy and (2) to protect
consumers from unfair or misleading practices.
 The FTC may issue cease-and-desist orders against companies it believes
engage in unlawful practices.
 If the FTC decides an ad is false or misleading, it may order the advertiser to
withdraw the ad or run “corrective” advertising to inform the public that the
former ads were deceptive. Advertisers also may be fined for violating an FTC
order.
Law enforcement role

Utilitarianism

Deontology


 FDA resides within the Health and Human Services Department and engages in three broad categories of activity:
 Analysis
 Surveillance
 Correction
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TQM Model – in explaining the 3 roles of FDA

When found problems during
surveillance, audits or
monitoring, perform
Corrective Actions and/or
Preventive Actions.

Once you have a Total
Quality Management system
in place, you can use that to
monitor, audit according to
the system policy and
guidelines i.e. ISO 9001.

Analyze the possible causes
of the safety and quality
issues

Employ all you learn about
the causes, the variables that
affect quality and safety
issues, to develop and
establish ISO 9001 Total
Quality Management (TQM)
system.

2/6/2014

Utilitarianism

Deontology

 Safety and Ethics:
 Food and Drug Administration - Today, the FDA supervises many different laws and amendments that have been
passed, and regulates $1 trillion worth of products a year. It ensures the safety of all food except meat, poultry, and
some egg products; ensures the safety and effectiveness of all drugs, biological products (including blood,
vaccines, and tissues for transplantation), medical devices, and animal drugs and feed, and makes sure that
cosmetics and medical and consumer products that emit radiation do no harm.
 The FDA was reasserting itself as an agency planning to take swift action against violators.

2/6/2014

 Law Enforcement and Consumer Protection agencies
 Consumerism

Utilitarianism

Deontology
Companies selling the products and services to consumers

 Doctrine of Strict Liability – In its most general form, the doctrine of strict liability holds that
anyone in the value chain of a product is liable for harm caused to the user if the product as
sold was unreasonably dangerous because of its defective condition. This applies to anyone
involved in the design, manufacture, or sale of a defective product.
 Another extension of strict liability is known as market share liability. This concept evolved
from delayed manifestation cases – situations in which delayed reactions to products appear
years later after consumption of, or exposure to, the product.

2/6/2014

Utilitarianism

Deontology
Principles, Rules:
 Compliance-based culture: rulefollowing responsibility
 Personal integrity of its workforce

Goals, Values:
 Value-based is one that reinforces a particular set of
values rather than a particular set of rules.
 Certainly these firms may have conduct of conduct, but
those codes are predicated on a statement of values.

Audit focus

Holistic business focus

Transaction based

Process based and business model driven

Financial account focus

Customer focus

Compliance objective

Risk identification, Opportunities explored and exploited, Improvement

Policies and Procedures focus

Innovation, attending to anxieties and desires and solutions of consumers

Suggested cost center

Accountability for total performance and Sustainability

Methodology: focus on policies, transaction
and compliance

Methodology: focus on goals, strategies, values of i.e. greenness and
sustainability, and risk management processes
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Utilitarianism

Deontology
Principles, Rules:
 Personal integrity of its
workforce
 Doing things right, being
authentic

Goals, Values:
 Value-based culture is one that reinforces
a particular set of values rather than a
particular set of rules.
 Certainly these firms may have conduct
of conduct, but those codes are
predicated on a statement of values.
 Doing right things
 Mission, Vision and Values

Social responsibility (deontology and utilitarianism) is a
set of behaviors: behaviors are exhibited by individuals
in the organization.

Thus both deontology and utilitarianism ethical
behaviors essentially form the ethical culture.

2/6/2014

Utilitarianism

Deontology
Principles, Rules:
workforce
authentic

Goals, Values:
 Value-based culture is one that reinforces a particular
set of values rather than a particular set of rules.
 Certainly these firms may have conduct of conduct, but
those codes are predicated on a statement of values.

Social responsibility (deontology and utilitarianism) is a
set of behaviors: behaviors are exhibited by individuals
in the organization.

CSR1
Corporate Social Responsibility

Thus both deontology and utilitarianism ethical
behaviors essentially form the ethical culture.

CSR2
Corporate Social Responsiveness
An improvement of socially responsibility behavior
requires ACTION i.e. in the form of behavior change, by
everyone in the organization.

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CSP
(Performance)

Habit

Action

Role

CSR3
(Rectitude, Culture
and Brand
Character)

CSR2
(Responsiveness)

CSR1 (Responsibility)

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Deontology
Principles, Rules:
workforce
authentic

Utilitarianism
Goals, Values:

Aim: Strict compliance and audit programs (e.g. ISO 9001, 14000, 22000) are often springboards for
implementing more comprehensive programs addressing ethical values and to world-class
companies.
Actions (Transformation):
 The goals of more evolved and inclusive ethics program may entail a broader and more expansive
application to the firm, including maintain brand and reputation, recruiting and retaining desirable
employees, helping to unify a firm’s global operations, creating a better working environment for
employees, and doing the right thing in addition to doing things right.
2/6/2014

CSR3 (Corporate Social Rectitude, Integrity, Brand Image, Brand Character)

Inputs






Principles
ISO 26000 Guidelines
CSR1
Awareness
Culture of socially
responsible behavior

 Improved social
responsibility
performance
(CSP)

Transformation
(Transformative Actions,
CSR2)

Outputs

Feedback – Continuous improvement
 Social responsibility performance improvement is a process, an ideal, not an ideal state. The minute
one improvement is made, another is possible. We need tools to deploy in that journey, tools that
work at all levels of progress, on all aspects, on all processes.
 Thus, social responsibility as a continuous improvement target.

2/6/2014

 Improved social
responsibility
performance
(CSP)
 Impact to society


Inputs
 Principles
 ISO 26000
Guidelines
 CSR1
 Awareness
 Culture of
socially
responsible
behavior

Transformation (Transformative
Actions, CSR2)

 Examples of Transformation:
 Creating a Customer-Oriented Company:
1. Top-down culture and commitment are
essential
2. Identify internal champions and uphold
them.
3. Commit resources to the task.
4. Hire the right people.
5. Empower employees.
6. Make customer service training a priority.

Outputs
Continued
Purchases by
Consumers

Product
Quality and
Safety

Customer
Satisfaction
Service
Quality and
Safety

Firm
Profitability

Firm
Reputation

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 ISO 26000:
 New edition to ISO
 ISO 26000, Guidance on Social Responsibility, is an effort begun through actions initiated as early as
2001 by the International Organizational for Standardization (ISO)
 This guideline is intended to be a globally consistent, practical guide for any organization wanting to
enhance its social responsibility performance (CSP).
 It is important to note that it is being published as a guideline, not a standard of certification
requirements. There is no expectation that third-party certification to ISO 26000 will take place. As a
guideline it is intended to do just that – provide guidance.
 There are 7 key principles of ISO 26000:
 Accountability
 Transparency
 Ethical behavior
 Respect for stakeholder interests
 Respect for international norms of behavior
 Respect for human rights

2/6/2014

 ISO 26000:
 New edition to ISO
 ISO 26000, Guidance on Social Responsibility, is an effort begun through actions initiated as early as
2001 by the International Organizational for Standardization (ISO)
 This guideline is intended to be a globally consistent, practical guide for any organization wanting to
enhance its social responsibility performance (CSP).
 It is important to note that it is being published as a guideline, not a standard of certification
requirements. There is no expectation that third-party certification to ISO 26000 will take place. As a
guideline it is intended to do just that – provide guidance.
 There are 7 key principles of ISO 26000:
 Accountability
 Transparency
 Ethical behavior
 Respect for stakeholder interests
 Respect for international norms of behavior
 Respect for human rights (i.e. Consumer’s Magna Carta)

2/6/2014

 Accountability: accountable not only for its decisions and actions related to social and environmental
issues, but also for the impact of those issues in society as a whole.
 Transparency: Make information available to the organization’s communities about its practices and
the practices of its key partners and stakeholders.
 Ethical Behavior: Ethical behavior includes acting with integrity, honesty, fairness, and concern for all
stakeholders and the environment. Thus ethical behavior is a commitment of acting in the best
interest of all stakeholders.
 Respect for stakeholder interests – Consideration for the various stakeholders of a firm opens the firm
up to thinking about how its organizational actions impact not only internal stakeholders (suppliers,
employees, stakeholders, etc.), but also external stakeholders (consumers, government, NGOs,
community, etc.).
 Respect for the Rule of Law – It is a principle of respect for those procedures that have been
designated as appropriate by the ruling organization.
 Respect for human rights – The definition of human right is recognized through the United Nations
International Bill of Human Rights. It includes the admonition of discrimination, torture, kidnapping,
slavery, the abuse of children, and the abuse of migrant workers and those of disabilities. Ensuring
that persons involved in the execution of business activities are treated with respect to their full human
rights is considered to be universal.
2/6/2014

 Improved social
responsibility
performance
(CSP)


Inputs
 Principles
 ISO 26000
Guidelines
 CSR1
 Awareness
 Culture of
socially
responsible
behavior

Actions, CSR2)

7 Core Subjects of ISO 26000:
 Organizational governance
 Human rights
 Labor practices
 The environment
 Fair operating practices
 Consumer issues
 Community involvement and development

Outputs
Continued
Purchases by
Consumers

Product
Quality and
Safety

Customer
Satisfaction
Service
Quality and
Safety

Firm
Profitability

Firm
Reputation

 4 Greenness Strategies

2/6/2014


Inputs

 CSR1: A reflection of
shared moral and ethical
principles (in the
mindshare of customers
and stakeholders – brand
identity)
 Co-creating shared value,
ethical innovation
products
 Principles
 ISO 26000 Guidelines
 Awareness
 Culture of socially
responsible behavior

Actions, CSR2)
 CSR2: A vehicle for
integrating
individuals into the
communities in which
they work
(communitization)
 Brand integrity
through proven
actions of
engagement (i.e.
Marketing Mix)

Outputs

 Improved social responsibility
performance (CSP): CSP is a
form of enlightened selfinterest that balances all
stakeholders’ claims and
enhances a company’s longterm values
 Brand character


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 Kotler et al. (2010)’s book explores the changes that are cultivating a more enlightened sort of marketing
whose powers are being enlisted to help solve urgent problems. The trend has shifted to “values-driven,
networked world in which collaboration is easy and ubiquitous”.
 If “Marketing 1.0” was a product-focused enterprise born of the Industrial Revolution, and “Marketing 2.0”
was a customer-focused effort leveraging insights gained from information technology, then Kotler says
marketing’s latest incarnation must do even more. It must engage people in ways that provide “solutions to
their anxieties to make the globalized world a better place.” Practitioners must, as never before, understand
and respond to the values that drive customer choice. – Me, We, World.,

 Kotler, P., Kartajaya, H. and Setiawan, I. (2010). Marketing 3.0: From Products to Customers to the Human
Spirits , USA: Wiley.
Enabling local
Redefining
cluster
Reconceiving
productivity in development
customer needs, the value
products and
chain
markets
Increasing
level of shared
value – scale

2/6/2014

 We are seeing that:
 CSR1,2,3 and CSP essentially form the background and strong roots of the Marketing 3.0 concept that
embraces the 3C principles (co-creation, communitization, and character of spiritual essence) and 3E
actions (explore co-created solutions, engage the communities and customers, and execute with CSR13,CSP actions to develop strong spiritually rooted brand character, that also enables the consumers to live
a better healthier enabled life. – not discussed in Kotler et al. (2010) or elsewhere.
 Thus, marketing is about defining your unique identity and strengthening it with authentic integrity to build
strong image and character, through co-creating with the consumers and the communities that has
transformative values to improve well-beings, intellectuality and happiness, healthiness.

 Now we will see how these CSR-CSP and Marketing 3.0 business ethical principles can be applied on
social entrepreneurship i.e. Doi Tung project.

2/6/2014

Products
and
Services
Resource

Production

CSR

Paradigm Shift

Resources and CSR 1 Principle

Ethics driven
Strategies,
Innovation and
Transformation
(CSR2,CSR3)

CSP (Corporate Social Performance)

Combines commercial success and social progress

2/6/2014


Inputs
Resources

Enacting social
entrepreneurship
spirits:
 Principles of
ethics
 The communities
and societies
 Need to mobilize
resources

Transformation (Transformative Actions, CSR2)

Outputs

 Build innovating commercial activities and social arrangements: mutually
reinforcing changes.
 Create external advisory boards
 Governance systems
 Innovation for social impacts
 Learning attitude
 Nature of innovation
 Leadership development of the communities
 Improve production techniques, knowledge transfer, improve crop
production
 Me-We-World responsiveness actions
 Rolling up relevant technologies
 Build management capacity
 Access communities of all level to funding, health-care, credit, and saving
 Work with relevant stakeholder groups e.g., trade union, cooperative.
 Mobilize ideal capacities, resources and social arrangements required for
long-term sustainable, social transformation
 Education, grassroots mobilization
2/6/2014


Inputs
Resources

Outputs


Grassroots mobilization and build local
capability/capacity to solve problems
We
Leadership development

Then, extend the social
entrepreneurship outcomes to other
groups or other parts of the world
(replicate to other countries)

Me
World

Promote social entrepreneurship model
(knowledge dissemination)

2/6/2014


Inputs
Resources

Source:
Zahra, S., Gedajlovic, E., Neubaum, D.O. and Shulman, J.M. (2009). A
typology of social entrepreneurs: motives, search processes and
ethical challenges, journal of business venturing, 24, pp. 519-532.

 Social constructionists
– typically exploit
opportunities and
market failures by
filling gaps to
underserved clients in
order to introduce
reforms and
innovations to the
broader social system

Outputs


Me

World:
Social engineers – recognize
systemic problems within
existing social structures and
address them by introducing
revolutionary change.

We
Social Bricoleurs –
usually focus on
discovering and
addressing smallscale local social
needs.

2/6/2014


Inputs
Resources

Outputs


Leadership / Stewardship (to where: sustainable well-being etc.)

Transparency (also ISO 26000 Principle)

We
Me

Community
Participation
Due Care

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Vision and Mission, Motives and Ambitions

Inputs and Resources:
 Local communities
as key resources

Outputs:
Public good and
society

Transformation (Transformative Actions, CSR2),
Governance and control mechanism in place

 Continuous Improvement
 Allocating social wealth
 To establish efficiency of the allocation process

2/6/2014


Inputs
Resources

Outputs







Scaling up approaches
Innovation
CSR1,2,3, CSP
Marketing III

Now

Future

Social Entrepreneurship

2/6/2014


Inputs
Resources

Outputs


Outputs/Utility:
 Create social wealth, total wealth, public
good, common good
 Reduce and solve social problems
 Transform lives, to promote social change
and reform
 Catalyze sustainable social transformation
 To address inequity
 Promote genuine democratic participation
for all people
 Improve the general welfare of rural farm
families
 Promote community development
 Develop self-sustaining income-generating
capability and visibility
 Enriching community
 Reduce social costs
2/6/2014

Marketing Trends:

Market Analysis:
The age of
participation
Technology

Market

Socio-Culture

Political-Legal

Economy

Emerging
trends
enable:

The age of
global-localized
culture
More creative
and in need of
spiritual
cultivation

Co-Creation
 Explore, to co-create a brand
meaning of transformative value in
the mind-share of consumers, a
brand identity itself.
Communitization
 Engage consumers to connect to
one another in communities,
through market-share tactic, to
establish brand integrity (trust of
the communities)

Character building
 Take actions (execute) through
CRM and services, brand’s
spiritual meaning promotion, to
establish brand image.

2/6/2014

The 3i Model
Mind-Share

 Kotler proposes a triangle of Positioning (Strategy,
Explore, Mind Share), Differentiation (Tactics, Engage,
Market Share), and Branding (Value, Execute, Heart
Share) as the core of Marketing.

i

Brand ntegrity
Positioning

Market-Share

Differentiation

3i
Brand

Heart-Share

39

Summary:
 We are making an effort to develop towards a theory of deontology, transformative and
utilitarianism business ethical approach for social entrepreneurship to develop business
and communities simultaneously and seamlessly.
 A good theory, according to Weick (1995), explains, predicts, and delights. This work
represents an effort to stimulate research on social entrepreneurship by using existing
bodies of knowledge in marketing and business ethics.
 Weick, K. (1995), Definition of Theory, pp. 565-567. in Nigel Nicholson (Ed.), Blackwell
Dictionary of Organizational Behavior, Oxford: Blackwell.

 Social entrepreneurship = a process involving the innovative use and combination of
resources to pursue opportunities to catalyze social changes and address social needs.

2/6/2014

 Brand stories with strong integrity pose no reason to worry.






Marketing should be redefined to its root as a triangle of Positioning, Differentiation, and Brand.
A brand should be clearly positioned in the consumer’s mind to give it a clear Brand Identity.
To give Brand Integrity to your Positioning, it must be supported by strong Differentiation.
Positioning supported by strong Differentiation will in turn lead to strong Brand Image.

 Brand Identity is about positioning your brand in the minds of the consumers. The positioning should
be unique for your brand to be heard and noticed in the cluttered marketplace. It should also be
relevant to the rational needs and wants of the consumers.
 Brand Image is about acquiring the consumer’s mind share. Your brand values should appeal to
consumer’s emotional needs and wants beyond product functionalities and features.
 Brand Integrity is about fulfilling what is claimed through the positioning and brand value through
solid Differentiation. It is about being credible to your promise and establishing the trust of the
consumers to your brand. The target of Brand Integrity is the Spirit of the consumers.
 It is the main message of this triangle: Marketing shall not be regarded as telling lies for selling
purposes. Instead it should be regarded as keeping the promise to your customers.

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Original Brand Mission
Brand:

Brand Meaning (Identity) and Image, and its Integrity

IKEA
Virgin
The Walt Disney
Southwest Airlines
The Body Shop
Microsoft
Apple
Amazon.com
eBay
Google

Make stylish furniture affordable
Bring excitement to boring industries
Create magical world for families
Make flying possible for many people
Embed social activism in business
Realize ubiquitous computing
Transform how people enjoy technology
Provide the biggest selection of knowledge delivered conveniently
Create user-governed market space
Make the world’s information organized and accessible

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Consumer empowerment

Co-creation

communitization

Need a story that moves people

Three
Characteristics
of a good Brand
Mission

Character building

Business as usual

2/6/2014

Three characteristics of a good mission:
 Business as usual – Creating (Brand character building – uniquely transformative)
 Story that moves people – Spreading (transformative story and reality to help consumers to connect
to one another in communities)
 Consumer empowerment – Realizing (co-creation, co-creating values, also to help consumers to
connect to one another in communities)
 Brand missions are authentic and reflect what Peter Drucker argued: Business should start from a
good mission. Financial results come second. Amazon.com earned its first profit in 2001, after 7
years of online existence. Twitter has not even finalized its business model and is still not sure how
to monetize its services.
 A good mission is always about change, transformation, and making a difference. Thus, marketing 3
(to be discussed later) is about changing the way consumers do things in their lives. When a brand
brings transformation, consumers will unconsciously accept the brand as part of their daily lives. As
the experience economy matures, it is time for the transformation economy to emerge. We believe
that the transformation economy – where a company’s offering is a consumer’s life-transforming
experience – is already on its way.
Experience Economy

Transformation Economy

2/6/2014

 A brand possesses great characters when it becomes the symbol of a movement that addresses the
problems in the society and transforms people’s lives – (business as usual)
 Example:
 The Body Shop
 is the symbol of social activism
 Disney
 a symbol of family ideal
 Wikipedia
 the symbol of collaboration
 eBay
 the symbol of user governance.
 Consumer empowerment – Giving consumers a sense of empowerment is crucial in the pursuit of a brand
mission. Mission belongs to the consumers, and it is the company’s responsibility to fulfill the mission. It is not
only about getting buy-in but making an impact. Although the individual consumer is weak, their collective
power will always be bigger than the power of any firm. The value of consumer’s collective power is rooted in
the value of a network. The network may develop with 1-to-1 relationship, 1-to-many relationship, or many-tomany relationship.
 Example:
 At Amazon.com it is common for readers to write Reviews of books and recommend them to others. It is also
common at eBay when people rate buyers and sellers and leave comments that determine their reputations –
all these are the consumer empowerment platforms. Consumer empowerment is the platform for consumer
conversation. Many-to-many conversation is what makes a consumer network so powerful. A brand story has
no meaning when consumers are not talking about it. In Marketing 3.0, conversation is the new advertising.

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 In short, to market the company’s product mission to consumers, companies need to offer a mission of
transformation, build compelling stories around it, and involve consumers in accomplishing it.

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Deontology
Principles, Rules:
 Compliance-based
culture: rulefollowing
responsibility
 Personal integrity of
its workforce
 Doing things right

Utilitarianism
Goals, Values:

 Culture (compliance cum value based) – can cultivate values, expectations, beliefs and patterns of
behavior that best and most effectively support ethical decisions making.
 Thus it becomes the primary responsibility of corporate leadership to steward this effort.
 In thought, word and deed, a company’s leader must clearly and unambiguously both advocate
and model ethical behavior.
 Ethical business leaders not only talk about ethics and act ethically on a personal level, but they
also allocate corporate resources to support and promote ethical behavior. There is a longstanding credo of management: “Budgeting is all about values.” More common versions are “Put
your money where your mouth is” and “walk the talk.”
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 A good leader is simply anyone who does well what leaders do.
 Since leaders guide, direct, and enable others towards a destination, a good leader
is someone who does this successfully and, presumably, efficiently.
 Good leaders are effective at getting followers to their common destination.
 But not every good leader is an ethical leader.
 One key difference lies with the means used to motivate and achieve one’s goals
(utilitarianism).
Ethical Culture: compliance and value-based

Leadership

Deontology
Means ( used to motivate and achieve one’s goals)

Utilitarianism
2/6/2014

Make ethical responsible decisions

 The leader’s role in ensuring social responsibility behavior is to establish an organizational
culture of socially responsible behavior.
 Awareness – Be aware of the actions and projects within the organization.
 Culture – Establish a culture that rewards socially responsible behaviors.
 Continuous improvement – Support many, small, impactful changes must be
recognized.
 Strategy – The project selected should be linked to the overall strategy of the firm
i.e. the 4 Greenness Strategies (light green, market green, stakeholder green, and
dark green)

Light Green: Ethical
governance,
Compliance with the
Laws
Factor Condition:
Innovation in
particular (Dark
Green)

Competitive
Advantage

Market Condition:
Market Green

Stakeholder Green (Value Chain, Supporting Industries, Communities Clusters)
2/6/2014


Leadership

Deontology
 Means ( used to motivate and achieve one’s goals)
 The Methods

Utilitarianism
 Make ethical responsible decisions
 The goals

 While some means may be ethically better than others (e.g., persuasion rather than
coercion), it is not the method alone that establishes a leader as ethical.
 In other words, while perhaps necessary, ethical means of leading others are not sufficient
for establishing ethical leadership, and the other element of ethical leadership involves the
end or goal towards which the leader leads.
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Leadership

Deontology

Utilitarianism
 One cannot be a leader and
there cannot be followers
unless there is a direction
or goal towards which one
is heading.
 In the business context,
productivity, efficiency, and
profitability are minimal
2/6/2014
goals.

Culture

Leader
A strong leader with a sense of responsibility and connection to the community

Identify stakeholders (responsibility to whom): CSR across the value chains and beyond
CSR:
 CSR suggests that a business identify its stakeholder groups and incorporate their
needs and values within its strategic and operational decision-making process.

Deontology
 Social contract – Rules and Principles, the
basic rules of society that embodied in law
and ethical custom.
 Business is responsible: it is reliable,
dependable, trustworthy, providing good
customer service.
 Obey law and beyond i.e. not to violate
anyone’s rights, to prevent harms.

Utilitarianism
 Extent of responsibility: Me-We-World Utilities and Values
 (CSR contributes) beyond the maximization of profits
 For public good – a social mission. Share profits, make
society a better place.
 Incorporating CSR can lead to differentiation and
competitive market advantage for the business,
something that can contribute to the company’s brand for
the present and future, reduce risk, better stakeholder
relationships and supporting long-term strategic interests.
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Culture

Leader
A strong leader with a sense of responsibility and connection to the community

Identify stakeholders (responsibility to whom): CSR
CSR:
 CSR suggests that a business identify its stakeholder groups and incorporate their
needs and values within its strategic and operational decision-making process.

Deontology

Utilitarianism

 CSR increases the sustainability of an organization by meeting the needs of its
supporting constituencies.
 Employees are well treated in their work environments may prove more loyal and more
effective and productive in their work.
 Reputation. Brand recognition. Brand loyalty.
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Only lacking
legitimacy. Could use
coercion or violence
i.e. environmentalists
spiking trees or
employee sabotage.

Power

1

Dormant Stakeholder

Dormant stakeholders possess power
to impose their will on a firm, but by
not having a legitimacy relationship or
an urgent claim, their power remains
unused. Example: Employees fired or
laid off could seek to exercise their
latent power.

 When stakeholder’s claim is urgent
(in particular the moderately and
4
highly salient stakeholders),
Dangerous
Dominant
managers have a clear and
Stakeholder 7
Stakeholder
immediate mandate to attend to
5
Definitive
and give priority to that
Stakeholder
stakeholder’s claim.
 Else, demanding is urgent only,
6
like “mosquitoes buzzing in the
Demanding
Discretionary
Stakeholder
Stakeholder
ears” of managers.
Dependent
Stakeholder
3
2
Lack power, depend upon
Urgency
others for the power necessary
to carry out their will.

Stakeholder Typology

Having power and legitimacy to
draw active attention i.e. board of
directors, government and
employees. Actions taken include
annual report, HRM practices,
public relations.
Legitimacy

Absolutely no pressure on managers
to engage active relationship due to
lacking of power and urgency.
Typically the recipients of philanthropy
i.e. non-profit organizations like
schools and hospitals who receive
donations and volunteer labors.
54

 Salience – as the degree to which managers give priority to competing stakeholder claims.
Thus stakeholder salience will be high where all three of the stakeholder attributes –
namely, power, legitimacy and urgency – are perceived by managers to be present.

(Latent Stakeholders)
Low salience stakeholders
(1,2,3)
Moderately salient stakeholders
(4,5,6)

Highly salient stakeholders (7)

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HRM Perspective:
Deontology
Employee / HRM:
 Focus on employee rights to fair treatment and due process in the
workplace: Due process is the right to be protected against the arbitrary
use of authority. In legal contexts, due process refers to the procedures that
police and courts must follow in exercising their authority over citizens.
 Due process in the sense that employees are constantly supervised and
evaluated in the workplace, (and such benefits as salary, work conditions,
and promotions can also be used to motivate or sanction employees).
 Basic fairness – implemented through due process – demands that power
or authority be used justly.
 Employees’ health and safety are both means for attaining other valuable
ends (and as ends in themselves).
 Rewards and compensation structures (reward fairly)
 Employment at will – Unless an agreement specifies otherwise, employers
are free to fire an employee at any time and for any reason. But, justice
demands that such tools not be used to harm other people.
 Reverse discrimination – to encourage greater ethnics and cultural
diversity.
 Affirmative action – known as positive discrimination and as employment
equity, referring to policies that take factors including race, color, religion,
sex, or national origin into consideration in order to benefit an
underrepresented group.

Utilitarianism

Employee / HRM:
 Employees’ Health and Safety at
work
 Provide well-being and positive
motivation to employees (i.e.
through rewards and
compensation structures)
 Benefits such as salary, work
conditions and promotions.
 Business expansion, Improves
economy, and thus more job
opportunities and job market for
the employees.

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Sustainability Perspective:
Deontology

Utilitarianism

Sustainability:
 Eco-efficiency: Doing more with less.
 Biomimicry: Closed-loop production which seeks to integrate what
is presently waste back into production. In an ideal situation, the
waste of one firm becomes the resource of another, and such
synergies can create eco-industrial parks. Just as biological
processes such as photosynthesis cycle the waste of one activity
into the resource of another, this principle is often referred to as
biomimicry. The ultimate goal of biomimicry is to eliminate waste
altogether rather than reducing it.
 Cradle-to-cradle responsibility: This extends biomimicry further,
responsible for incorporating the end results of its products back
into the productive cycle.
 Beyond eco-efficiency and biomimicry, towards a sustainability that
involves a shift in business model from products to services,
enabling a service-based economy i.e. clothes cleaning, floor
covering, illumination, entertainment, cool air, transportation, word
processing, and so forth. Services aimed to solve customers’
problems directly and efficiently, and thus saves costs and reduce
environmental impact.
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New definition of Marketing:


Marketing is the activity, set of institutions, and processes for creating,
communicating, delivering, and exchanging offerings that have value for consumers,
clients, partners, and society at large (American Marketing Association, 2008)



Offerings include products, services, experiences, places, persons, ideas, and
causes.

58

Thus, marketing the mission to:





Consumers
Employees
Channel Partners
Shareholders

59

Moving towards Marketing 3.0:
Marketing 1.0

Marketing 2.0

Marketing 3.0

Mind

Heart

Spirit

Product-Centered

Customer-oriented

Value-driven

Economic value

People value

Environmental
value

Profits

Social Progress

Sustainability

60

The challenge:




Re-moralize the market
Re-localize the economy
Re-capitalize the poor

What is value?


Value = Benefit – Cost (Transactional)

61

Competitive Environment Analysis:

The Age of Participation
and collaborative
Marketing

Technology

Political
legal

Economy

The Age of Globalization
Paradox and cultural
Marketing

Socio
culture

The Age of Creative
Society and Human Spirit
Marketing

Market


Leadership

Value Creation
Deontology

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Utilitarianism

 In order to stay relevant in Marketing 3.0,
companies should always target the
consumers as a whole human – has
physical body, a mind capable of
independent thought and analysis, a heart
which can feel emotion, and a spirit – soul
and philosophical center.

 New wave technology facilitates the widespread dissemination of information, ideas, and public opinion that
enable consumers to collaborate for value creation.
 Technology facilitates the widespread dissemination of information, ideas and public opinion which enables
customers to collaborate in value creation.
 Technology also drives globalization of political and legal, economy and social culture landscape which will
create paradoxes and opportunities. The iconic brands which address the anxiety and desire of the
customers will win the competition in this world of paradox. In an interlinked economy, the “butterfly effect”
exists. A small change in one part of the world can make big changes in other parts of the world. A business
leader who captures this small change might gain significant advantage.
 Consumers’ sophistication generates the future market – the creative consumer market.
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Co-Creation

Communitization

Character Building
 Transformative

 Targeting the mind – the battle in the consumer’s mind. That is, how you position the product in the mind of the
prospect relevantly is what matters.
 Touching the heart – the marketing concept evolved because the world became more emotional. Targeting the
mind is no longer enough. Marketers should also target the hearts of the consumers through emotional
marketing, experiential marketing, emotional branding, etc. Examples: Starbucks’ concept of “third place for
drinking coffee”, Apple’s “creative imagination” are the implementations of emotionally relevant marketing. These
aimed at our emotional hearts which bear feelings.
 Transcending the spirit – The concept will need to evolve once more to embrace the spirit of the consumers.
Marketers should discover the anxieties and desires of the consumers and do what Stephen Covey calls
“unlocking the soul’s code” in order to stay relevant.
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Co-Creation

Communitization

Character Building
 Transformative

 A brand possesses great characters when it becomes the symbol of a movement that addresses the
problems in the society and transforms people’s lives – (business as usual)
 Example:
 The Body Shop
 is the symbol of social activism
 Disney
 a symbol of family ideal
 Wikipedia
 the symbol of collaboration
 eBay
 the symbol of user governance.

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The future of marketing : Horizontal not
vertical
The Disciplines of
Marketing
Product Management

Customer Management
Brand Management

The Four Ps
(product, price, place,
promotion)

STP
(segmentation,
targeting, and
positioning)

Brand building

Brand
Product

Today’s Marketing
Concept

Future Marketing
Concept

Co-creation
Communitization
Character building

Customers
66

Evolution of Marketing:
Product
Management

Customer
Management

Brand
Management

Value
Management

1950s-1960s

1970s-1980s

1990s-2000s

2010s –
2020s

Creating a social dimension to the value
proposition

67

 Consider Whole Foods Market, whose value proposition is:
 to sell organic, natural, and healthy food products to customers who are passionate about food and the
environment.

68

Creating a social dimension to the value proposition:
 Social issues are fundamental to what makes Whole Foods unique in food retailing and to its ability to command
premium prices.
 The company’s sourcing emphasizes purchases from local farmers through each store’s procurement process.
Buyers screen out foods containing any or nearly 100 common ingredients that the company considers
unhealthy or environmentally damaging.
 The same standards apply to products made internally. Whole Foods’ baked goods, for example, use only
unbleached and un-bromated flour.
The Firm

The Rivalry

Healthiness
Environmental RM Source Screening

69

Investment in competitive context

 Whole Foods’ commitment to natural and environmental friendly
operating practices extends well beyond sourcing. Stores are
constructed using a minimum of virgin raw materials.
 Recently, the company purchased renewable wind energy credits
equal to 100% of its electricity use in all of its stores and facilities, the
only Fortune 500 company to offset its electricity consumption
entirely.

The Firm

The Rivalry

Philanthropy

Price
Env. Friendly infrastructure
Environmental RM Source Screening:
Env. Friendly waste treatment
 Food
Env. Friendly process / transports
 Cleaning products

 Unique market
positioning
 Self-sustaining
capability

70

 Spoiled produce and bio-degrable waste are trucked to regional centers for composting.
 Whole Foods’ vehicles are being converted to run on biofuels.
 Even the cleaning products used in its stores are environmentally friendly.

71

 And through its philanthropy, the company has created the Animal Compassion Foundation to develop more
natural and humane ways of raising farm animals.
 In short, nearly every aspect of the company’s value chain reinforces the social dimensions of its value
proposition, distinguishing Whole Foods from its competitors.

72

 Not every company can build its entire value proposition around social issues as Whole Foods does, but adding
a social dimension to the value proposition offers a new frontier in competitive positioning.
 Government regulation, exposure to criticism and liability, and consumers’ attention to social issues are all
persistently increasing. As a result, the number of industries and companies whose competitive advantage can
involve social value propositions is constantly growing.

Gov. regulation, exposure to criticism and liability, consumers’ attention to social issues

73

 Sysco, for example, the largest distributor of food products to restaurants and institutions in North America, has
begun an initiative to preserve small, family-owned farms and offer locally grown produce to its customers as a
source of competitive differentiation.

74

In short, CSR across the entire value chain:

2/6/2014

Firm Infrastructure: e.g., financing,
planning, investor relations:
 Financial reporting practices
 Government practices
 Transparency
 Use of lobbying
HRM:
 Education and job training
 Safe working conditions
 Diversity and discrimination
 Health care and other benefits
 Compensation policies
 Layoff policies
Technology Development:
 Relationships with universities
 Ethical research practices, e.g.,
animal testing, GMOs
 Product safety
 Conservation of raw materials
 Recycling

Procurement:
 Procurement and supply chain practices, e.g.,
bribery, child labor, pricing to farmers
 Uses of particular inputs, e.g., animal fur.
 Utilization of natural resources
Transportation Impacts:
 Emissions
 Congestion
Operations:
 Emissions and Waste
 Biodiversity and ecological impacts
 Energy and water usage
 Worker safety and labor relations
 Hazardous materials

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Utilitarianism

De-ontology

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Type of
responsibility

Societal
Expectation

Economic

Required of business
by society

Be profitable. Maximize sales, minimizes costs. Make sound
strategic decisions. Be attentive to dividend policy. Provide investors
with adequate and attractive returns to their investments.

Legal

Required of business
by society

Obey all laws, adhere to all regulations. Environmental and
consumer laws. Laws protecting employees. Comply with SarbanesOxley Act. Fulfill all contractual obligations. Honor warranties and
guarantees.

Ethical

Expected of business
by society

Avoid questionable practices. Respond to spirit as well as to letter
of law. Assume law is a floor on behavior, operate above minimum
required. Do what is right, fair, and just. Assert ethical leadership.

Philanthropic

Desired/Expected of
business by society

Explanations

Be a good corporate citizen. Give back. Make corporate
contributions. Provide programs supporting community – education,
health or human services, culture and arts, and civic. Provide for
community betterment. Engage in volunteerism.

78

CSR Definition and Pyramid are minimal level of sustainable stakeholder models:
 Each of the 4 components of responsibility addresses different stakeholders in terms of the
varying priorities in which the stakeholders are affected.
 Economic responsibilities – most dramatically impact owners or shareholders and employees
(because if the business is not financially successful, owners, and employees will be directly
affected). When the economic recession hit, employees were displaced and significantly
affected.
 Legal responsibilities are certainly crucial with respect to owners, but in today’s society, the
threat of litigation against businesses emanates frequently from employees and consumer
stakeholders.

79

CSR Definition and Pyramid are sustainable stakeholder models:
 Ethical responsibilities affect all stakeholder groups, i.e. consumers, employees, and the
environment.
 Philanthropic responsibilities most affect the community, but it could be reasoned that
employees are next affected (research suggested that a company’s philanthropic performance
significantly affects its employee’s morale).

 The definition and pyramid are sustainable in that they represent long-term responsibilities that
overarch into future generations of stakeholders as well.

Community (We, World)

Stakeholders

Owner
Company

80

Ethically driven, ecologically sustainable

All indispensable
Unified whole

81

 Pyramid as a unified whole – A CSR or stakeholder perspective would focus on the total pyramid as a unified
whole and on how the firm might engage in decisions, actions, policies, and practices that simultaneously fulfill all
its component parts.
 This pyramid should not be interpreted to mean that business is expected to fulfill its social responsibilities in some
sequential fashion, starting at the base. Rather, business is expected to fulfill all its responsibilities simultaneously.
 Total corporate social responsibility = economic responsibilities + legal responsibilities + ethical responsibilities +
philanthropic responsibilities.
 Stated in more practical and managerial terms, the socially responsible firm should strive to:
 Make a profit
 Obey the law
 Be ethical
 Be a good corporate citizen

82

Example of philanthropic responsibilities:
 Timberland underwrites skills training for women working for its suppliers in China. In Bangladesh, it helps provide
microloans and health services for laborers.

83

Example of philanthropic responsibilities:
 Chick-fil-A, the fast-food restaurant, through the WinShape Centre Foundation, operates foster homes for more than
120 children; sponsors a summer camp that hosts more than 1,700 campers every year, from 24 states; and has
provided college scholarships for more than 16,500 students.

85

 The Body Shop continues to increase its positive environmental practices. In 2001, The Body Shop UK
region and service-centre head offices in Watersmead, switch to Ecotricity, providing them with energy
from renewable sources. In addition, a number of The Body Shop® stores have now converted to green
electricity.
 Campaign successes include the Against Animal Testing campaign. The campaign leads to a UK-wide
ban on animal testing of cosmetic products and ingredients in November 1998, and the largest ever
petition (four million signatures) being delivered to the European Commission in 1996.

88

Ecotricity Rolls Out the World's First Wind Powered Car
Charger

89

 When Blake Mycoskie was on a visit to Argentina in 2006, a bright idea struck him. He was wearing alpargatas –
resilient, lightweight, canvas slip-ons – shoes typically worn by Argentinian farmworkers, during his visit to poor
villages where many of the residents had no shoes at all.

90

 He formulated the plan to start a shoe company and give away a pair of shoes to some needy child or person for
every shoe the company sold. This became the basic mission of the company.

91



In the summer of 2006, he unveiled his first collection of Toms shoes.
Stores such as American Rag and Fred Segal in Los Angeles, and
Scoop in New York, started stocking his shoes. By fall, the company
had sold 10,000 pairs and he was off to the Argentinian countryside,
along with several volunteers, to give away 10,000 pairs of shoes.

92



In an article in Time magazine, Blake was quoted as saying, “I always thought I’d spend the first half of
my life making money and the second half giving it away. I never thought I could do both at the same
time.”



By February 2007, Blake’s company had orders from 300 stores for 41,000 of his spring and summer
collection of shoes, and he had big plans to go international by entering markets in Japan, Australia,
Canada, France, and Spain in the summer of 2008.
The company is also planning to introduce a line of children’s shoes called Tiny Toms. Another shoe drop
is planned for Argentina, with future trips targeting Asia and Africa.



Toms shoes

 Customer Value
Proposition
 Strategy Canvas
(Value Curve)

Competitors

Price

Leading philanthropic responsibility

Fun, Easy slip-on, Comfort, Fashion
93

Benefits back to societies (Globally)

Gear out production and operations – business expansion

Creating waves of customer showing interest and buy-in

Innovative customer and market value propositions

CSR enabled business strategies

94

Summary:
 To really develop and implement strategic CSR, companies must shift from a fragmented, defensive posture
to an integrated, affirmative approach.
 Perceiving CSR as building shared value rather than as damage control or as a PR campaign will require
dramatically different thinking in business.
 The focus must move away from an emphasis of image to an emphasis on substance.
 Corporations are not responsible for all the world’s problems, nor do they have the resources to solve them
all. Each company can identify the particular set of societal problems that it is best equipped to help resolve
and from which it can gain the greatest competitive benefit.
 Addressing social issues by creating shared value will lead to self-sustaining solutions that do not depend on
private or government subsidies.

Dimensions:

Integrity:

Fragmented, defensive CSR

Integrated, affirmative approach to CSR

Activeness:

CSR as damage control

CSR as building shared value / PR campaign

Emphasis on image

Emphasis on substance

through
Content:

96

 In fact, all these examples illustrate that in CSR the leaders make that a personal mission. Actions must
be taken. Thus Corporate Social Responsibility is given a trust and commitment on action towards
Corporate Social Responsiveness:
 Corporate social responsiveness is depicted as an action-oriented variant of CSR.
 The connotation of “responsibility” is that of the process of assuming an obligation. It places an
emphasis on motivation rather than on performance. Responding to social demands is much more than
deciding what to do. There remains the management task of doing what one has decided to do, and
this task is far from trivial.

Motivation:
 Obligation
 Decided what to do

Performance: extending motivation to performance (Action
Phase of management’s response in the social sphere)

Actually doing it

2/6/2014

 Sethi’s three-stage scheme: Sethi proposes a three-stage schema for classifying corporate behavior:
social obligation, social responsibility, and social responsiveness.
 Social responsiveness suggests that what is important is that corporations be “anticipatory” and
“preventive”, and is concerned with business’s long-term role in a dynamic social system.
Long-term role
Anticipatory
Preventive

Responsiveness
Corrective

time
Obligatory nature

Social responsiveness nature

Social responsibility nature

98

 Frederick’s CSR1, CSR2, CSR3.
 CSR1 refers to the traditional, accountability concept of CSR.
 CSR2 is responsiveness focused. It refers to the capacity of a corporation to respond to social
pressures. It involves the literal act of responding to, or achieving, a responsive posture to society. It
addresses the mechanisms, procedures, arrangements, and patterns by which business responds to
social pressures.
 CSR3 refers to corporate social rectitude, which is concerned with the moral correctness of the actions
or policies taken. CSR3 integrates business ethics into responsiveness.

Moral correctness value

CSR3
CSR2

Being accountable

Being responsive

CSR1

99

Three dimensions of the CSP Model:
 Definition and dimension of corporate social responsibility – the economic, legal, ethical, and discretionary
(philanthropic) components.
 Social responsiveness dimension – continuum of responsive actions.
 Social (or stakeholder) issues involved – concerns the scope or range of social or stakeholder issues that
management must address in the first two dimensions.
 The model is useful step toward understanding social responsibility and provides a framework that could lead to
better-managed social performance.
 The model could be used as planning and diagnostic problem-solving tool. It can assist the managers by
identifying categories within which the organization and its decisions can be situated.

Definition and
dimension of
corporate social
responsibility

Social responsiveness dimension

Social (or stakeholder) issues involved
 Performance

100

Legal
Responsibility

Carroll’s Corporate Social Performance Model
Proactive
Accommodation
Defense

Social Responsibility
Categories

Reaction
Discretionary
Responsibilities
Ethical
Responsibility
Legal
Responsibility

Economic
Responsibility

Consumerism

Environment Discrimination Product Safety Occupational
Safety
Social (Stakeholders) Issues

Shareholders

101

Corporate Citizenship:
 Corporate citizenship is a collective term embracing the concepts of corporate social responsibility, responsiveness,
and performance.
 It is a term practitioners and academics alike have grown fond of but it is really not distinct from CSR, CSR, CSP.
 Corporate citizenship has become an important practitioner-based movement and that it conveys a sense of
responsibility for social impacts or a sense of neighborliness in local communities.

Corporate Citizenship

Broad View

CSR View and Motivation

Narrow View

CSR Behavior

CSP / Stakeholder Needs Met

102

Corporate Citizenship

Broad View
 Corporate citizenship encompasses terms that
basically embraces all that is implied in the
concepts of social responsibility, responsiveness,
and performance:
 Social responsibility – a reflection of shared moral
and ethical principles.
 Social responsiveness – a vehicle for integrating
individuals into the communities in which they work.
 Social performance – a form of enlightened selfinterest that balances all stakeholders’ claims and
enhances a company’s long-term values.

Narrow View
 Corporate community relationship – It
embraces the functions through which
business intentionally interacts with
nonprofit organizations, citizen groups,
and other stakeholders at the
community level.
 Extend to global community levels.

103

What drivers companies to embrace corporate citizenship and what are the benefits of good corporate citizenship to
business itself?
Internal motivators:
 Compliance
 Tradition and values
 Reputation and image
 Business strategy
 Recruiting or retaining
employees
 Compassionate urge
Corporate
Citizenship

External pressures:
 Customers and consumers
 Expectations in the community
 Laws and political pressures

 Improved employee relations (i.e., improves employee
recruitment, retention, morale, loyalty, motivation, and
productivity)
 Improved customer relationships (e.g., increases
customer loyalty, acts as a tiebreaker for consumer
purchasing, and enhances brand image)
 Improved business performance (e.g., positive impacts
bottom-line returns, increases competitive advantage,
and encourages cross-functional integration).
 Enhanced company’s marketing efforts (e.g., helps
create a positive company image, helps a company
manage its reputation, and supports higher prestige
pricing)

104

 The development of corporate citizenship reflects a stage-by-stage process in which seven
dimensions (citizenship concept, strategic intent, leadership, structure, issues management,
stakeholder relationships, and transparency) evolve as they move through five stages, and
companies become more sophisticated in their approaches to corporate citizenship. This is a
five-stage model beginning with Stage 1, which is Elementary, and growing toward Stage 5,
which is Transforming.

Dimensions on the stages of corporate citizenship:
Responding to society: Inside-Out
 Citizenship concept
 Strategic intent
 Leadership
 Structural
 Relating to society: Citizenship Outside-in:
 Issues management
 Stakeholder relationships
 Transparency

2/6/2014

Stage 5: Transforming
Stage 4:
Integrated
Stage 3:
Innovative
Stage 2: Engaged
Stage 1:
Elementary

Commitment

Coherence

Capacity

Credibility
2/6/2014

Deontology

Utilitarianism

Top 10 Reasons companies are
becoming more socially responsible:
 Enhanced reputation
 Competitive advantage
 Cost saving
 Industry trends
 CEO or board commitment
 Customer demand
 SRI (Socially responsible
investment) demand
 Topline growth
 Shareholder demand
 Access to capital

2/6/2014

 In summary:
 As consumers become more collaborative, cultural and spiritual,
the character of marketing also transforms.
Building Blocks of Marketing 3.0:
Building Blocks
What to offer:
Content

Why?

Collaborative Marketing
 Value-Creation

The Age of Participation (the Stimulus)

Context

Cultural Marketing

The Age of Globalization Paradox
(the Problem, the Opportunity)

How to offer:

Spiritual Marketing

The Age of Creativity (the Solution)

108

The 3i Model
Mind-Share

 Kotler proposes a triangle of Positioning (Strategy,
Explore, Mind Share), Differentiation (Tactics, Engage,
Market Share), and Branding (Value, Execute, Heart
Share) as the core of Marketing.

i

Brand ntegrity
Positioning

Market-Share

Differentiation

3i
Brand

Heart-Share

110

Value-driven Marketing (Marketing 3.0)
Product-Centric Marketing
(Marketing 1.0)

Value Curve

Consumer-Oriented Marketing
(Marketing 2.0)

Marketing 1.0
Product-centric
Marketing

Marketing 2.0
Consumer-oriented
Marketing

Marketing 3.0
Values-driven
Marketing

Objective

Sell products

Enabling forces
How companies see
the market
Key marketing
concept
Company marketing
guidelines

Industrial Revolution
Mass buyers with
physical needs

Satisfy and retain the
consumers
Information technology
Smarter consumer with
mind and heart

Make the world a better
place
New wave technology
Whole human with mind.
heart, and spirit

Product development

Differentiation

Values

Product specification

Corporate and product
positioning

Corporate mission,
vision, and values

Value propositions

Functional

Functional and
emotional

Functional, emotional,
and spiritual

Interaction with
consumers

One-to-many transaction

One-to-one, to-many

Many-to-many
collaboration
112

Meaning

Marketing

 Marketing in its culmination will be a consonance of three concepts:
 Identity
 So people get to known you
 Integrity
 So people have trust and confidence on you
 Image
 So people recognize you to deliver relevant value
 Marketing is about clearly defining your unique identity and strengthening it with authentic integrity to
build strong image.
 Marketing 3.0 is also about the marketing of meaning embedded in the corporate mission, vision,
and values. Marketing should no longer be considered as only selling and using tools to generate
demand. Marketing should be considered as the major hope of a company to restore consumer trust
and to promote social well-being.

2/6/2014

Heart

Spirit

MISSION
(Why)

Deliver
SATISFACTION

Realize
ASPIRATION

Practice
COMPASSION

VISION
(What)

Profit Ability

Return Ability

Sustain Ability

VALUES
(How)

Values-Based Matrix (VBM) Model

Mind

Be BETTER

DIFFERENTIATE

Make a
DIFFERENCE

114

Ethics part ii 2014 by Dr CC Tan (drcctan@yahoo.com)

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