The Effect Of Social Responsibility Of Business Organization

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The Effect Of Social Responsibility Of Business Organization


Abstract


The purpose of this study was to understand the effect of social responsibility on business organization and how these SR programmes impact of the company‘s profitability. Hundred (100) questionnaires were administered by the researcher to staff of Nestle Nigeria, made up of top management staff, middle management staff and junior staff. Out of the 100 questionnaires administered for the sample population of 100, eighty six (86) were completed and retrieved. Five (5) questionnaires were distributed to selected business partners of Nestle Nigeria and all 5 respondents completed the questionnaires. The Pearson Product Moment Correlation coefficient table was used. From the result obtained the calculated r (rc) 0.49 is greater > tabled value (rt) 0.21 thus, reject H0 and accept H1.This means that, the relationship is significant at 55% confidence level. This confirms that there is a positive relationship between Social responsibility and profitability. From the study it also was clear that most customers or shoppers are not aware on SR and even understand the meaning. The study was however, limited to finding out exactly how much in terms of monetary value SR programmes contribute to the overall profitability ratios of the companies. For academic and industry discourse it is recommended that further study should be conducted to establish the real value in monetary terms how much SRs contribute to the organizations profitability.


Chapter One


Introduction

1.1 Background Information

Social responsibility could be defined as the recognition that business activities have some impact on the entire society and the consideration of that impact in business decision making. Therefore most business sense of responsibility toward the communities in which they operate in new of the adverse effects of production operations on these communities. Some of these social adverse effect range from health hazards displacement human settlements to environment pollution. Shell petroleum development company for instance has been grappling with the restive behaviour of youths in its area of operation occasioned by the activities of oil companies.

Also output whether that of products and or service could have adverse effects consumers some common example are cigarettes and medical drugs. Business for have the responsibility of educating user of their products or service on their correct usage in order to avoid side effects.

Business organizations also show that they are socially reasonable to their host communities by complimenting the efforts of the government by providing infrastructure facilities like schools hospitals tarred road and eve supporting sports

It is with the foregoing in mind that the research carried out this work to identity the effects of social responsibility in Enugu state as well as proffer solutions to the likely problem associated with discharging it.

Simply, many companies have found that SR has often had a positive impact on corporate profits. Of all the topics related to social responsibility, it is environmental initiatives that have produced, so far, the greatest amount of quantifiable data linking proactive companies with positive financial results. Social responsibility in fast moving consumer goods(FMCG) sector would be aimed towards addressing the peculiarity of the socio-economic development challenges of the country (e.g. poverty alleviation, health care provision, infrastructure development, education, etc) and would be informed by socio-cultural influences (e.g. communalism and charity). They might not necessarily reflect the popular western standard or expectations of SR (e.g. consumer protection, fair practice, green marketing, climate change concerns, social responsible investments, etc) as a result of the effect of the global economic meltdown. Companies are assumed to be socially responsible because they anticipate a benefit from these actions. Examples of such benefits might include reputation enhancement, the ability to charge a premium price for its output, or the use of SR to recruit and retain high quality workers.

These benefits are presumed to offset the higher costs associated with SR, since resources must be allocated to allow the firm to achieve SR status, while a key indicator to determine the true worth and value of modern organizations is their ability to give back to the society part of their income through some mutually beneficial initiatives (Nkanbra and Okorite, 2007). There is no doubt that SR is becoming indispensable, though involuntary, in the contemporary business world as societal needs are making it imperative for the corporate organizations to be sensitive to happenings in their environment, which ensure more understanding and good relationship between the organization and the society they exist, since SR contributes to the wellbeing of the citizenry (Osho 2008).


1.2 Statement of the Problem

On discharging their social duties to their host communities business organizations encounter some problem that affect them negatively. Such problems are as follows

  1. Some organizations have insufficient managerial and financial resources to undertake social charges.
  2. Some organization could not fit in be cause of legal protection from the government of the state.
  3. Social values of communities affect the operation activities of business organization.

The contribution of social problem based on personal responsibility affect negatively an business organization. business organizations in Nigeria perceive and practice Social responsibility as a corporate philanthropy aimed at addressing socio-economic development challenges. But then what impact does this have on the profitability of the organization?

It is against this background that, there is the need to find out how SR impact on the profitability of the business organizations especially, Nestle Nigeria Ltd.


1.3 Research Objectives

The general objective of this study is to examine the effect of Social responsibility of Nestle Nigeria on its profitability. But specifically, the study sought to achieve the following objectives:

  1. To find out how Nestle Nigeria carry its SR as a major partner in the fast moving consumer goods(FMCG) industry.
  2. To find out the challenges of Nestle in practicing of its SR programmes.
  3. To investigate whether Social responsibility guarantee customers‘ confidence and security of depositor‘s fund.

1.4 Research Questions

  1. How does Nestle Nigeria embark on Social responsibility?
  2. What challenges does Social responsibility impose on Nestle Nigeria?
  3. Does Nestle Nigeria‘s Social responsibility guarantee the customers‘ confidence level in the organization?

1.5 Justification for the Study

The study is expected to make contribution to knowledge in the following areas: Provide information about SR in relation to corporate institution especially the FMCG sector. It is also to be a fundamental material for scholarly discourse in management science relating to Social responsibility. The study will provide information on the impact of SR on the profitability of business organizations operations in Nigeria. Finally, the research work will provide information on the challenges of SR in the fast moving consumer good(FMCG) sectors with recommendations.


1.6 Scope and Limitation of the Study

The study is focused on the headquarters of Nestle Nigeria. It critically examines what impact Social responsibility has on the profitability of Nestle Nigeria for the period 2008-2010. However the study is limited to finding out how much in monetary terms Nestle commits to towards social responsibility programmes yearly.


1.7 Brief Methodology of the Study

Primary data was used through the administering of questionnaires to respondents at Nestle Nigeria Limited, Customers, Nestle Business partners and shoppers in general.

The study population is very large, so 100 respondents were selected from the top level management, middle level management and the supervisors which is a good representation of the population based on stratified sampling.

This cuts across the various departments in the organization such as corporate affair department, customer services department, retail department, marketing department and others. Again 300 shoppers/customers were selected through random sampling. Finally, 5 business partners of Nestle were also interviewed through administering of simple structured questionnaires for their response in relation to the study.


1.8 Organisation of the Work

This work is organized and presented in five chapters.

  • Chapter one covered the background information to the study, objectives of the study, the research questions, significance of the study as well as the limitations of the study.
  • Chapter two looked at the review of literature on the subject. This is a review of books, papers, publications of earlier writers on the topic or similar to that.
  • Chapter three did an appraisal of Nestle Nigeria and their operations, it discussed the methods of collecting the data into details.
  • Chapter four analyzed and discussed the data collected for the study.
  • Finally, chapter five discussed the findings, conclusions and recommendations for addressing the problems identified in the study.

Chapter Five


Summary, Recommendation and Conclusion

5.0 Introduction:

This chapter tends to briefly revisit what was set out to achieve as previously stated in chapter one of this study. It also introduces in few paragraphs what has been done in the previous chapters. It will provide a smooth ground into the finding and recommendation.


5.1 Findings – SR impact on Nestle Nigeria’s Profitability

In chapter one and two social responsibility has been defined by many writers who looked at it from numerous perspectives. The research work was basically conducted to find out if Nestle Nigeria embarks on SR, if SR has any significant impact on Nestle

Nigeria‘s profitability and to know if there are challenges faced by Nestle Nigeria for embarking on SR. In carrying out the study, primary and secondary sources of data were made use of in gathering relevant information. From the information gathered, it was found that as SR of Nestle Nigeria increases, there was a corresponding increase in profits of Nestle Nigeria. For example in 2006 when the amount spent on SR was GHc 332,500m the reported profit after tax was GHc19, 831m , in 2007 the amount spent on SR was GHc 621,100m the reported profit after tax was GHc 21,543m, in 2008, amount spent on SR was GHc 780,605m and GHc 30,473m was reported as profit and in 2009 above GHc1.2Million was spent on SR and GHc 35,074m.

SR in the Community

Social responsibility is an accepted practice by both Nestle Nigeria and members of the host community. This was supported by the positive responds obtained from the questionnaire.

Nestlé’s Financial Commitment to SR

There has been increasing amount spent on SR (2006 – 2009) and a corresponding increase in Nestle Nigeria‘s profit records (2006-2009), which is supported by the responses from the questionnaire that SR has a positive impact on the profitability of Nestle Nigeria. Responses also showed that Nestle Nigeria stands to gain other benefits such as Large Customer Base, Customer Confidence, Good corporate Image and Other attributable Benefits aside profitable.

Other Benefits Nestle derives from SR – Value Creation

From the research it came out clear that indeed SR programmes embarked by Nestle has created value for Nestle Nigeria as stakeholders and customers are comfortable transacting business with Nestle. Again stakeholder businesses also grow and therefore improves customer loyalty. This was one major breakthrough Nestle has achieved to stay competitive and the preferred fast moving consumer goods business organization in Nigeria.

Does Nestle embark on SR? – Customer Ignorance of SR programmes

The study also revealed that even though Nestle Nigeria is doing a lot of community based social intervention programmes, the customers or the people in the community are not aware of such programmes. This is because Nestle has not done enough to communicate to the community on the programmes intended to make life much easier for the society.


5.2 Conclusion

The concept of SR has become more and more common in business practices and customers today almost expect companies to be socially responsible. Even though SR is very important for companies, it has historically not been a very lucrative approach for them to involve in these activities. The business of the 21-st century will have no choice but to implement SR. Like any successful management strategy, a SR process needs both high level management vision and support, and buy-in at all levels of the company.

SR does not give immediate results. The same SR initiative will also not work for all types of organizations. Designing SR initiative requires careful planning and implementation mechanism. Corporate organizations should integrate the innovative SR strategies into different marketing communication strategies to build and sustain a competitive advantage. Social responsibility has a significant impact on the profitability of business organizations, and it is a positive impact, which includes good business relationship, good will among other benefits. In today‘s competitive market, SR offer an opportunity for companies to explore other areas of improving profitability. Customers have become very sophisticated and very much aware of their environment against the perception that corporate organizations make a lot of profits, it becomes imperative for these companies to put back into the society through social responsibility programmes. Even though the benefits from SR are over a long time of time, it is such that it gives a lot more intangible benefits to the organizations. Such benefits include, customer loyalty, brand image, improved corporate image, market share and community presence.

Unfortunately, all these benefits cannot be quantified in monetary terms but translates into improving the profits of the organization over time. Indeed SR is capital intensive and needs an extensive programme backed by executive support to roll out various SR programmes. Small and medium enterprises are unable to engage in such ventures due to factors already indicated in the study such as long return on investments, lack of commitment from the executive and the expertise to run such programmes. Government organizations even though may engage in social responsibility programmes its is usually not capital intensive. Of course these organizations are not income generated but are sub-vented by the government and so there is not an allocation for the society. SR activities are usually donations to deprived communities and groups.

As to whether SR can be a business strategy for companies to achieve corporate targets and objectives such as competitiveness in market or market share is another study that can be researched further.


5.3 Recommendation

This section recommends measures to be considered by academia, corporate organization and stakeholders as well as customers so long as social responsibility is concerned.

SR deserves greater attention and more commitment from corporate organizations in that it guarantees other benefits other than just profits. This offers an opportunity to the corporate world to think out of the box and explore other potentially viable areas to improve the company profits portfolio. Corporate organizations stands to gain over a period of time some leverages other that just products and services they render to the society.

SR projects should be well structured and implemented to have maximum impact. This would enhance the well-being of the beneficiaries. From the survey it revealed that some customers or inhabitants of a community are not aware of any SR programme ongoing. Mostly they bare unable to connect with the results of the programme. It tends out that the community expectations are somewhat different form the corporate organization. Organisations could liase with community authorities to identify areas or opportunities available to them to better the lives of the people through the provision of some social amenities. This will go a long way to improve the general living standards of the people.

Corporate organizations should intensify efforts to educate the public on their primary responsibilities, various commitments to other stakeholders and operational/financial limitations. By doing so, the public will begin to show understanding and appreciation of the efforts and contributions of such organizations. In most instances if the customers or the people in the community are involved, monitoring becomes feasible and measurable. Corporate organization should also involve the community in the planning, formulation, implementation and evaluation of SR projects. This will eliminate stakeholder conflicts that may arise in some societies.

Governments and local authorities should explore the areas where a certain amount of tax will be used by the organization to undertake community based projects such as schools, electricity, clean water, jobs and income generating activities. This can be in a form of tax exemptions granted to these organizations. This will make the corporate organization be more responsible in the area of work and contribute significantly to national development.

For academic and industry discussions i recommend that further study should be conducted to establish the real value in monetary terms how much SRs contribute to the organizations profitability. Also further research should be conducted to quantify how much or to what degree these SR programmes have impacted on the society and its corresponding value generation for the company.


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