TITLE: An analysis on the impact of corporate social responsibility (CSR) on customer satisfaction in UK retail industry: a case study of Tesco. Table of Contents SECTION-1: INTRODUCTION .................................................................................................................. 1 1.1 Background of the Research ............................................................................................................... 1 1.2 Research Rationale.............................................................................................................................. 2 1.3 Research Aim and Objectives ............................................................................................................. 2 1.4 Research Questions ............................................................................................................................. 3 SECTION-2: LITERATURE REVIEW ....................................................................................................... 4 2.1 Theoretical Framework: Corporate Social Responsibility .................................................................. 4 2.1.1 Definition of Corporate Social Responsibility: ............................................................................ 4 2.1.2 CSR from Customer’s Perspective .............................................................................................. 5 2.1.3 Approaches to CSR ...................................................................................................................... 5 2.1.4 Driving Factors of CSR................................................................................................................ 5 2.1.5 CSR Models ................................................................................................................................. 6 2.2 Theoretical Background of Customer Satisfaction ............................................................................. 7 2.2.1 Definition of Customer Satisfaction ............................................................................................ 7 2.2.2 Factors Influencing Customer Satisfaction .................................................................................. 7 2.2.3 Customer Satisfaction Strategies.................................................................................................. 8 2.2.4 Customer Satisfaction Models ..................................................................................................... 8 2.3 Conceptual Framework :: Impact of CSR on Customer Satisfaction................................................ 10 CHAPTER THREE: RESEARCH METHODOLOGY.............................................................................. 11 3.1 Research Investigation: Exploratory ................................................................................................. 11 3.2 Research Strategy: Survey Questionnaire ......................................................................................... 11 3.3 Sampling Method: Simple Random Sampling.................................................................................. 11 3.4 Accessibility issues ........................................................................................................................... 12 3.5 Ethical Issues .................................................................................................................................... 12 3.6 Data analysis plan ............................................................................................................................. 12 3.7 Research Limitation .......................................................................................................................... 13 SECTION-4: TIME SCHEDULE AND REFERENCE ............................................................................. 14 4.1 Time schedule ................................................................................................................................... 14 REFERENCE.............................................................................................................................................. 14 SECTION-1: INTRODUCTION 1.1 Background of the Research In competitive customer driven business environment, customers are no more satisfied with high quality and reasonable price as they want their favoured organization will contribute on society, community and environment (Mittal and Frennea, 2010). When an organization can ensure efficient contribution on the betterment of society, community and environment, it enjoys high level of customer satisfaction, sales profitability and performance. Corporate Social Responsibility (CSR) is the newest concept to respond to the new need of customers where organizations integrate concerns of social, community and environmental benefits with their business model to satisfy customers at maximum level (Nareeman and Hassan, 2013). CSR creates positive perceptions and respect among customers regarding organizations (Sarah, 2007). Tesco, the leading retailer in UK retail industry, was an outstanding performer before recession. However, the organization lost its previous glory and performance level in post-recession period. For example- the organization is experiencing negative sales growth trend from 2011 till now (Mycustomer, 2014; Vaitilingam, 2013). Most of the analytical reports have revealed that the major reason for the fall of Tesco’s empire is that the customers are no more satisfied with Tesco. This low level of customer satisfaction of Tesco has been driven by different causes where the major cause is decline in reputation due to poor human resource management e.g. unethical downsize; work hour cut etc. and different scandals e.g. financial flattening, horse meat scandal etc. (BCC, 2014 and The Telegraph, 2014). If the organization wants to enhance its customer satisfaction level to be back in its former position in the market, there is no alternative but healing the poor human resource management image and upholding customer rights to back customer confidence (The Telegraph, 2014 and Salmi, 2011). In this context, most of the retail market analysts have suggested that if the organization can ensure efficient CSR practices, it will heal current poor human resource management image, turn back customer confidence and enhance green business image that will maximize customer satisfaction level (PR Week, 2015, Mycustomer, 2014, Business Matters, 1|Page 2014; Graiser and Scott, 2013). But, there is no validity of this theoretical recommendation from practical context of Tesco. In this gap, the research has been proposed and the purpose of the research will be to analyse how corporate social responsibility (CSR) can enhance customer satisfaction level of Tesco. 1.2 Research Rationale In this post-recession period, Tesco is suffering from continuous sales fall due to its poor customer satisfaction level. From different theoretical analysis, it has been revealed that in this context, efficient CSR practices can contribute to heal the customer satisfaction problem and enhance satisfaction level of the organization to stop its sales fall. The research has been proposed to validate the strategic suggestion from the practical context of Tesco. This research is a burning issue for Tesco as the organization is suffering from continuous sales fall due to its poor customer satisfaction (Business Matters, 2014). In contrast, the research will work for establishing a solution against the problem that efficient CSR practices can enhance its customer satisfaction level. More or less most of the organizations in UK retail industry except discounters like Aldi and LiDl are suffering from regular sales fall (Business, 2014). This research will generate a valid solution to enhance customer satisfaction level and sales. From this context, it is a lively issue for all the organizations in UK retail industry. This research will mainly focus on the investigation of current customer satisfaction level and CSR practices, inefficiencies of CSR practices and relationship between CSR practices and rise of customer satisfaction level of Tesco. 1.3 Research Aim and Objectives This research is aimed at analysing the corporate social responsibility (CSR) on the customer satisfaction of Tesco in UK retail industry. In order to attain the aim, the following research objectives will be achieved: 1. To assess current customer satisfaction level of Tesco. 2. To investigate the current CSR practices of Tesco and inefficiencies of these CSR practices. 2|Page 3. To investigate the impact of efficient CSR practices on customer satisfaction level of Tesco. 4. To recommend possible ways to ensure efficient CSR practices to increase customer satisfaction of Tesco. 1.4 Research Questions The principal research question, which will be focused in this research, is “How Corporate Social Responsibility (CSR) can increase the customer satisfaction level of Tesco in UK retail industry?” Subordinate research questions will be as follows: a. What is the current customer satisfaction level of Tesco? b. What are the current CSR practices of Tesco and what are their inefficiencies? c. What is the impact of CSR practices on customer satisfaction of Tesco? d. How to ensure efficient CSR practices to increase customer satisfaction of Tesco? 3|Page SECTION-2: LITERATURE REVIEW 2.1 Theoretical Framework: Corporate Social Responsibility 2.1.1 Definition of Corporate Social Responsibility: Corporate Social responsibility refers to a business practice that involves participating in initiatives that benefit society (Fallon, 2014). Fallon (2014) has also stated that the key to winning the customers in todays globalized business world, apart from offering strong loyalty program to a personalized, mobile-friendly shopping experience, is using profits of the organizations to do good in the worlds and the surroundings of that organization. [Figure 2.1: CSR Scope, Source: UNIDO 2015] 4|Page 2.1.2 CSR from Customer’s Perspective Researchers have found that most of the customers have agreed that all organizations should do business, make profit and do CSR at the same time and that the customers are loyal to the organizations that do charity works regularly (Somerville, 2013). Moreover, customers also believe that attaining CSR will always bring good to the organization (Becker-Olsen et el, 2010). 2.1.3 Approaches to CSR Tilcsik, and Marquis, (2013) have found that corporate philanthropy is the most common approach or form to CSR which includes purely monetary donation to the communities in financial need and to non-profit organizations that deals with social needs. Risk Management approach of CSR deals with actions that are directly linked with the operations of the company (Groza et el, 2011). CSR mega mind Michael E. Porter and Kramer in their 2006 work “The Link between Competitive Advantage and Corporate Social Responsibility” have said that corporate success and social welfare are interdependent. Crating shared value refers to mutual development. For example, corporations need educated, healthy, tech-savvy work force. If corporations invest some of their profits to educate and train the eligible workforce the communities around them, both will gain significant benefit from such investment (Porter and Kramer, 2006). 2.1.4 Driving Factors of CSR Quaak (2007) have said that CSR approaches and strategies must be transparent in order to be effective to bring good results to the organization. Zhang (2009) have suggested that the organization that is about to take and implement CSR strategies must have good corporate reputation prevalent in the marketplace. Li & Zhang (2010) identified corporate ownership structure as another driving factor of CSR. Du, Bhattacharya and Sen (2010) have identified that the effectiveness of CSR strategy depends largely on the effectiveness of the communication to the stakeholders and community. 5|Page 2.1.5 CSR Models Carroll’s (1991) four-part pyramid model of CSR is widely considered the leading model of CSR. It is a hierarchy of separate responsibilities. The pyramid model was framed to embrace the entire spectrum of society’s expectations of business responsibilities. Geva (2008), in her comparative analysis of CSR models, has defined intersecting circle model as non-hierarchical set of intersecting responsibilities. Concentric circle model was developed and suggested by Committee for Economic Development. This model shows four concentric circles having same four sets of responsibilities as the Pyramid model and the Intersecting Circles model. [Figure 2.2: The Socio Economic Models of CSR, Aviva Geva 2008] Clarkson (1995) have said that the stakeholder model of CSR solved the problems of the previous theoretical models of CSR where it was difficult to measure and test narrowly identifying the actors and defining their positions and functions. Donaldson and Preston (1995) have said that this model has advantage over the other models of CSR in terms of usefulness. 6|Page [Figure 2.3: Stake holder model of CSR, (a) Market Stakeholders of Business, (b) Non-market Stakeholders of Business, Source: Lawrence, James Weber, 2008] 2.2 Theoretical Background of Customer Satisfaction 2.2.1 Definition of Customer Satisfaction Researchers defined customer satisfaction as the difference between the expectations of the customer before purchasing the product and the actual performance received by the customer after purchasing the product (Tse and Wilton, 1988, Oliver 1999). The main factor that affects the competitiveness and the success of any product or service is customer satisfaction (HenningThurau and Klee, 1997). On the other hand, other researchers like Gustafsson et el. (2005) have defined customer satisfaction as how customers evaluate the performance of a product or service. 2.2.2 Factors Influencing Customer Satisfaction A number of researchers have defined price fairness as whether the price that is being charged for a product or service is reasonable, acceptable or justifiable by the customer (Xia et al., 2004; Kukar-Kinney, Xia and Monroe, 2007). Kim, Park and Jeong (2004) defined customer service as a set of activities or preparations including customer support, system to process customer 7|Page complaints, speed of processing customer request and complaints, friendliness of the environment etc. that organizations offer to its customers. Product Quality Service Quality Customer Convenience Factors of Customer Satisfaction Price Fairness Employee Quality Business Environment [Figure 2.4: Factors of Customer Satisfaction, Source: Fornell et al, 2010] 2.2.3 Customer Satisfaction Strategies Different researchers have summed up through maintaining 3 Cs, i.e. consistency with customer journey, consistency in emotion and consistency in communication, an organization can maintain and eventually increase the level of customer satisfaction (Mittal and Frennea, 2010). Another strategy to customer satisfaction is a three-part strategy suggested by Davidow and Uttal (1989), where it is said that customer satisfaction can be achieved through focusing on the segmentation strategy, doing customer research and setting customer expectations. 2.2.4 Customer Satisfaction Models Kano Satisfaction Model: Kano (1984) has developed a model to measure the satisfaction level of customers that distinguishes between six separate categories of quality attributes. He classified 8|Page customer needs that are crucial for customer satisfaction into three categories, such as- a) Primary Satisfiers (More is better), b) “Must Be” or Basic Needs (Must Be Met), c) Excitement Needs (delighters). [Figure 2.5: Kano Satisfaction Model, Source: Kano, 1984] American Customer Satisfaction Index (ACSI) Model: Evans and Lindsay (2012) have described the ACSI model as a tool to calculate customer satisfaction at a national level. 9|Page [Figure 2.6: ACSI Model, Source: Evans and Lindsay (2012)] 2.3 Conceptual Framework :: Impact of CSR on Customer Satisfaction Customer need fulfilment is the main prerequisite to customer satisfaction (Anderson, Fornell and Rust, 1997; Mittal & Frennea, 2010). Now a day, customer needs are not confined within reasonable pricing, best quality products, quick service, and good after sales service etc. Fisher et al. (2009) have found that the customers expect that the organization whose products they are purchasing will contribute in communal developments and ensure eco-friendly operations. Efficient CSR practices enable an organization to bring development in the community in which it operates and creates sense to protect the environment (Ismail, 2009; Kemp, 2010). As a result, it creates a notion in the customer’s mind that the organization is not only just making profit but also is responsible to communal development and careful about the ecological balance (Lee and Shin, 2010). As a result, they become satisfied and loyal to the organization. The above findings from different scholar’s researches have been depicted in the following diagram: Societal Development Efficient CSR Practices Communal Development Customer Expectation Fulfilled Highly Satisfied Customers Environmental Development 10 | P a g e CHAPTER THREE: RESEARCH METHODOLOGY 3.1 Research Investigation: Exploratory Three major types of research investigations are there. They are- exploratory investigation, descriptive investigation and hypothesis testing. Explanatory investigation contains both ambiguous problems and variable, whereas descriptive investigation contains research problems but ambiguous variables and hypothesis testing investigation contains both clarified research problems and variables that need to be established. (Saunders et al., 2007; and Sekaran and Bougie, 2010). As such, this research will be designated as an exploratory investigation since this research investigation will contain both ambiguous research problems and variables that need to be explored. 3.2 Research Strategy: Survey Questionnaire In this research, survey questionnaire strategy will be adopted. The main perspective behind the selection of this strategy is that it will support hybrid research method (Creswell, 2013). Since hybrid method will be used in this research, no other strategies will be able to bring the solid data but the survey questionnaire strategy. Moreover, survey questionnaire strategy will be easily manageable and it will help to get desired data in a very convenient manner. In this research, data will be collected through a precise but well-organized and proficient mixed-type survey questionnaire that will contain both open ended questions and close ended questions. Since the research needs both qualitative and quantitative information, this mixed type questionnaire will contain the questions to supply in-depth data and quantitative data. 3.3 Sampling Method: Simple Random Sampling There are two key systems of sampling- probability sampling and non-probability sampling. Probability sampling has several subclasses, such as- simple random sampling, systematic random sampling, stratified random sampling, multistage sampling etc. (Kothari, 2011). Similarly, non-probability sampling also have several subclasses, such as- convenience sampling, purposive sampling, quota etc. (Kothari, 2011). However, in this research, the sample population will be selected based on the simple random sampling under the probability sampling 11 | P a g e method, where each and every employee and customer of TESCO will have equal chance of being selected for the data collection purpose (Kothari, 2011). The justification behind this sampling method is that it will eliminate biasness and produce superior quality data (Saunders, et al, 2007). 3.4 Accessibility issues Accessibility issue refers to the negative factors that hamper the collection of data and restrict the source of data (Mertens and McLaughlin, 2004). This research might face some accessibility issues like non-cooperation of the respondents and inappropriate time schedule for the survey. The non-cooperation problem can be mitigated through motivating the respondents. On the hand, time schedule mismatch can be eliminated through providing greater flexibility to the respondents. 3.5 Ethical Issues In order to make the research valid and credible to the audience, ethical considerations have to be dealt with carefully (Kothari, 2011). Since a lot of researchers advised about them, ethical issues will be considered very carefully and meticulously here in this research. Plagiarism will be avoided and reference will be given to the works of other researchers. Data will be collected from the respondents in an ethical way without externally motivating or influencing them and without any social and racial biasness. Confidentiality of the organizational data will be maintained. Privacy to the personal data of the respondents will be ensured. 3.6 Data analysis plan This research will use pre-coding system to analyse the numeric data. Responses will be precoded and then evaluated and analyses. Microsoft Excel will be used as the primary data analysing tool because of its flexibility and manageability with the available resources and knowledge base. In this research post coding technique will also be used to analyse the in-depth 12 | P a g e data. Different data presentation tools including pie chart, bar chart, histogram, and radar chart will be used to visually present the data analysis (Cooper and Schindler, 2006). 3.7 Research Limitation Creswell (2013) defined research limitations as barriers to the perfection of the research. In another sense, Saunders et. al., (2007) have said that the research limitations are the factors that obstruct the progress of the research toward gaining the optimum outcome. Several factors have affected this research negatively towards achieving the optimum output of the research. The main obstacles were the small sample size and limitation of academic time and resources. 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