Corporate Social Responsibility

Chapter 1

Introduction

1.1 Background of the research/ problem

There are 94% of consumers in the world’s largest countries want more of the products and services they use to support worthy social and environmental issues (Cone Communications and Echo, 2012). Because of the growth of ethical consumerism and subsistence of social issue, the pressure for companies to develop and communicate socially responsible programs dealing with ethical issues has been increased significantly (Mamic, 2008). Corporate social responsibility (CSR) is often defined as standards for a business conduct in which the companies to address economic, social and environmental issues that aims to benefit people, societies and communities (Carroll, 1983).

Beyond the shareholder’s point of view, stakeholder theory maintains stakeholder perceptions of socially responsible companies and emphasizes that the survival and success of today’s organizations are increasingly influenced by various stakeholder group, such as employees, consumers, local communities, suppliers and shareholders (Dickson et al, 2009). Hence, companies strive to build competitive advantage not only by implementing social responsible policies but also communicating these positive practices to stakeholders including consumers (Chaudhri and Wang, 2007). When stakeholders not aware of these company’s CSR activities, the company may not able to obtain commercial benefits from it (Du et al, 2010). On the other hand, by implementing this socially responsible business practices, the company’s reputation and financial performance can be improved (Tapscott and Tiscoll, 2003).

1.2 Research focus/topic with rationale and justification

Many research has been done to identify the determinants of loyalty, but corporate social responsibility (CSR) is one of the integral factors neglected in the literature. This research is main concern on impact of CSR towards the customer loyalty. Customer loyalty has become a top priority in the service industry because it has been proven that there are a significant impact on profitability (Verheof, 2003). As the researchers determined customer loyalty is the structure of customer attitude and behavior. It can be concluded that customer loyalty expresses the expected behavior associated with a product or service or company. According to Pearson (1996), customer loyalty is the mindset of the customer who hold favorable attitudes toward an organization, commit to re-purchase the product and service from the company and willing to recommend the product or service to others people.

As highlighted above, customer loyalty appears to be important and valuable for most companies. Bhattacharya and Sen (2004) have point out that the firm with CSR are likely to promote customer loyalty. Campbell (1997) argues that the company may needs the loyalty of its customer to survive and making profit. Besides, this research is also going to investigate further on the mediating effect between CSR and customer loyalty.

Historical studies examined the relationship between CSR and customer loyalty with the intervening effect of customer satisfaction and trust, but it lacks corporate image, brand identification and customer service which also intervene between CSR and customer loyalty. This study contributes in such a way that customer satisfaction; corporate image, brand identification, customer service and trust intervene between the relationship of CSR and customer loyalty (Hongwei and Yan, 2011; Ki Han et al, 2015).

It is important to explore the determinants of CSR, which can increases customer loyalty as marketing managers may be able to incorporate such policy implications, which often affect customer loyalty.

1.3 Problem statement

The purpose of this research was to assess and examine the relationship of CSR and customer loyalty. The problem arising where some of the companies do not understand and able to maintain their customer loyalty until loss the position in the market as customer loyalty is represent profitability of an organization. Therefore, determining the factors which affected customer loyalty, including customer satisfaction, trust, company image, brand identification and customer service is critical. Hence, this research is to investigate how CSR affects customer loyalty and mediating by several factors and also whether there is a significant relationship between them (Muzammal, 2017).  

1.4 Research question

This is the replication study from the research done by Hongwei and Yan (2011); Ki Han et al (2005) and Muzammal (2017). The research question of this research:

1. Is that a relationship between corporate social responsibility (CSR) and customer loyalty?
2. Is that a relationship between corporate social responsibility (CSR) and customer loyalty mediating by customer satisfaction?
3. Is that a relationship between corporate social responsibility (CSR) and customer loyalty mediating by corporate image?
4. Is that a relationship between corporate social responsibility (CSR) and customer loyalty mediating by customer trust?
5. Is that a relationship between corporate social responsibility (CSR) and customer loyalty mediating by brand identification?
6. Is that a relationship between corporate social responsibility (CSR) and customer loyalty mediating by customer service?

1.5 Research objective

This is the replication study from the research done by Hongwei and Yan (2011); Ki Han et al (2005) and Muzammal (2017). The main research objective of this research is:

1. To identify the relationship between CSR and customer loyalty.
2. To identify the relationship between CSR and customer loyalty mediating by customer satisfaction.
3. To identify the relationship between CSR and customer loyalty mediating by corporate image.
4. To identify the relationship between CSR and customer loyalty mediating by customer trust.
5. To identify the relationship between CSR and customer loyalty mediating by brand identification.
6. To identify the relationship between CSR and customer loyalty mediating by customer service.

1.6 Conclusion

This chapter described in details the research background, problem statement, research objectives and research question of the study. Generally, chapter one attempts to describe an overall of the whole research. Next a comprehensive analysis and literature from previous researches on relevant topics will be presented in the following chapter.