CSR and Competitive Advantage

Question

In what manner is CSR relevant to competitive advantage?

Answer

Corporate Social Responsibility (CSR) is very relevant to helping a company achieve competitive advantage. Reputation is something that is very important in the business world. If a company has a poor reputation for being socially responsible it is likely that they will not be a popular company and potential consumers will not buy the company’s products or services. However, if a company has a good reputation for being socially responsible then this can lead to increased sales and ultimately competitive advantage for the company with a good reputation. 21st century consumers are becoming increasingly aware of ethical issues relating to business practices. Therefore, if a company can position itself through their operations and marketing actions as being an ethical company and one that cares about society they can gain competitive advantage over their industry rivals. Volvo and Whole Foods Market are good examples of two companies in different industries that have used such a strategy to enhance their competitive advantage.

Another way in which CSR practices are relevant to competitive advantage is by taking a CSR approach to business resources used. A company could reduce the costs of their operations, which in turn could lead to lower product/service costs, and if the company is following a cost leadership strategy then this could create competitive advantage for such a company. For example, if a company is able to reduce the energy costs or packaging needed to produce a product this would save them money and such savings could be passed on to the consumer by lowering the cost of the end product. Having the cheapest product available would lead to competitive advantage.

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