Research consultancy
CORPORATE SOCIAL RESPONSIBILITY AND SALES REVENUE OF TELECOMMUNICATION COMPANIES
A CASE STUDY OF MTN MBALE BRANCH
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
This section includes; Historical background, theoretical background, conceptual background and contextual background.
1.1.1 Historical Background
Worldwide, firms are coming to the realization that a corporation’s socially responsible (CSR) behavior can positively affect consumers’ perceptions and attitudes toward the corporation. Meaningful CSR efforts can result in improved reputation, enhanced corporate image, motivated employees, as well as promote customer loyalty (Lii and Lee, 2012). A stronger customer loyalty could increase levels of repeated purchasing (Senthikumar, Ananth, and Arulraj, 2011). The corporate sector across the globe is coming to terms with its new role, which is to meet the needs of the present generation without compromising the ability of the next generation. Businesses are slowly but surely assuming responsibilities for the ways their operations impact society and the natural environment.
The issue of organizations running operations in a responsible manner is no longer disputable due to the common understanding of the inherent benefits. Davis (1967) observes that huge corporations possess power to control and influence the quality of employees, customers, shareholders, and residents of local communities in which they operate. However, according to Porter (2011), Corporate Social Responsibility (CSR), focuses mostly on reputation and has only limited connection to the business, making them hard to justify and maintain over the long run.
In western countries, the practice of CSR has been dominated by developments in Western developed countries, such as the United States of America (USA) and the United Kingdom (UK) (Chambers et al. 2003) and it is unclear whether it translates easily into developing and non-Western countries. These specific circumstances have been discussed by several scholars who have identified the gaps between developed and developing countries when CSR is implemented (Chambers et al. 2003; Matten and Moon 2004; Chapple and Moon 2005; Visser 2007). Writers such as Edmondson and Carroll (1999), Burton et al. (2000) and Khan (2005), have suggested that different cultural models and traditional customs may mean that a great deal of what is currently understood about CSR may not be applicable in developing countries such as Uganda.
Developing countries face a major problem for the implementation of CSR plans, in that they lack a reasonable framework to assess their effectiveness. There is little evidence to show that the organisations in these countries have employed CSR plans based on international CSR standards, policies and principles. However, scholars are reluctant to directly adopt CSR principles, standards and policies in the developing world for many reasons. Several studies (Chambers et al. 2003; Welford 2005; Baughn et al. 2007) have found that cultural differences are the major limitation to adopting international CSR standards in the developing world. In addition, these authors have argued that there are many differences among the developing countries themselves, and hence framework development is a major issue. Despite this, Visser (2007) has introduced a common CSR framework for Asian and African countries based on Carroll‘s CSR pyramid concept. Accordingly, the organisation‘s first obligation is economic responsibility, the second is philanthropic, the third is legal and the fourth is discretionary responsibility
In Africa, it seems many firms do not have sufficient knowledge to actualise it (Fernando 2007). Others suggest that manager’s lack of understanding about the benefits of CSR inhibits its implementation (Fernando 2007; Agarwal 2008). Consequently, stakeholders and organisations have poor information about the applicability of many aspects of CSR in developing countries. Furthermore, this information comes from global institutions such as UN Global Compact, and Global Reporting Initiative (GRI), which have supported the development of many CSR plans. For example, UN Global compact has introduced ten principles, which are used in both developed and developing countries as a foundation for applying CSR in their organisations. In Africa, people have different perceptions towards corporate social responsibility activities in organizations however in 2010, MTN group, supported 2010 FIFA World Cup in South Africa.
It is imperative to note that organizations depend on corporate social responsibility in achieving their goals and even when they are utilizing their resources plus their factors of production, (Reynard and Forstater, 2002). This greatly creates awareness to the public and hence increase in the level of sales Performance of Organizations that undertake the initiative.
Scholars like Nkiko and Katamba (2010) and Gisch-Boie (2008) have carried out research on CSR in Uganda especially on what it entails. However, the volume of published research in the area of CSR in Uganda is still extremely low, with most research focusing on business ethics. There is great scope for expanding the amount of research on CSR in Uganda and Africa, as well as improving on the diversity of its content and its geographic reach (Visser, 2006). The formation of the CSR consultative group, a network of major Corporate Social Responsibility stakeholders and players in Uganda, also made the researcher have a keen interest in the issue of CSR.
1.1.2 Theoretical Background
The study will use social contract theory
According to Weiss (2008) a social contract is a set of rules and assumptions about behavioural patterns among the various elements of society‘. This theory combines organisational attention with stakeholder management. Much of the social contract is rooted in the traditions of society. The theory says that the social contract is formulated between people and organizations when exchanging something. Weiss stated that basic social contract theory is mutual trust and relationship between the organization and the stakeholders (Weiss 2008).
Donaldson and Preston (1995) explained that social contract theory establishes the general legitimacy of business and further restrictions and changes should not be part of the contract. However, they argued that the changes should be made within the limitations of the contract. Social contract theory focuses on the relationship between the business customers and stakeholders. The long-term economic benefits for organizations, shareholders and other stakeholders arise from the contracts with them, which should balance the external and internal regulations of the corporations. Therefore, the stakeholder management approach of the corporation is grounded in the concept of the social contract.
1.1.3 Conceptual Background
Corporate social responsibility refers to the discretionary actions undertaken by companies that are intended to advance social issues (Richardson A.J, Welker M, Hutchinson I.R. (1999).et al, 1999). Corporate Social Responsibility is defined as actions that appear to further some social good beyond the interests of the firm and which is required by law cited in Katamba, 2008).
Sales performance is defined as the rate at which a given business enterprise completes a commercial activity (Gilligan & Grauthern (1976:27). Sales are as a result of marketing communication in consultation with other marketing variables (Gilligan & Grauthern 1976:27). Sales performance refers to the quantity an organization is able to exchange for money. A sale is completed by a seller who is the owner of the goods. It starts with the consent to an acquisition followed by passing of title (Rubaliskas 2006).
1.1.3 Contextual Background
Institutions like Uganda Chapter for Corporate Social Responsibility Initiatives Ltd (UCCSRI) have undertaken research on CSR in Ugandan entities focusing on the perceptions, approaches and needs of companies. Nkiko and Katamba (2010), and Gisch-Boie (2008) have in the same line also highlighted the various CSR activities that companies are engaged in including environmental responsibility, practices concerned with labour, worker health and safety as well as quality of life of the community. Other scholars like Wanyama et al (2006) have linked CSR to Corporate Governance (CG).
In Uganda, most companies evidently view CSR as a move that would further eat into their already limited profit margins (Katamba, 2018). This explains why most companies operating in Uganda still do not have CSR policies. For most of those that do, it is only on paper as there is nothing on the ground to show they are actually implementing the policy. Social and environmental problems are wreaking havoc in the country as a result of poor corporate governance practices. As a result of not taking CSR seriously, there is in the country a strong belief that generally, locally-operating companies care only for their personal economic growth and nothing about the well-being of the communities in which they operate. But labelling all profit-making companies in Uganda as selfish would not be fair, as there are some companies operating in the same economically unstable environment, but have done a lot to improve the communities in which they operate. Many Ugandan companies do not traditionally engage in areas of public welfare. These firms have little knowledge about the benefits of corporate social responsibility in improving company performance in the long run. The result is that companies make decisions on CSR with limited background information. Recently, however, Ugandan companies especially those in the telecommunications sector are starting to see the positive benefits of these programs. With a recently stabilized economy, middle class Ugandans have the purchasing power to choose between service providers and are showing a growing appreciation for non-political, local community engagement (Katamba, 2018).
In Uganda, the concept of corporate social responsibility has also been practiced in many organizations almost to all levels of management, (Gray, R. 2001).Corporate social responsibility helps managers perform their tasks effectively like decision making, planning, organizing, staffing and at the same time leading. It is even corporate social responsibility that encourages managers to exercise their human skills, conceptual skills, technical skills, efficiency and even effectiveness.
MTN Mbale Branch has for the last five years been involved in sponsoring events such as table tennis tournaments; football competitions, secondary school music galas, sponsoring the upcoming local artistes in the area as well as sponsoring intellectually gifted but poor children and its employees for further studies.
According to Romani and Kumar (2008) one reason for corporate social responsibility among organizations is that they develop and adopt a business orientation that allows them to survive in an increasingly competitive market place. This promotes competitiveness between the organization and others thus promoting the product sales. MTN Uganda, Mbale Branch could be seemingly venturing into these activities as a means of capturing the good will of people. Corporate Social Responsibility is a key to a successful business and therefore maintenance of good relationship with community will foster business development and attract more customers.
According to Uganda Bureau of Statistics (2007), companies that employ over 101 employees are involved in some form of corporate social responsibility. MTN is no exception. MTN is committed to being a socially responsible company in Uganda. MTN views its Corporate Social Responsibility initiatives as integral to its core mission and sales performance.
In Mbale, corporate social responsibility has been considered important, but people have developed different perceptions towards corporate social responsibility, that is all functions of management like planning, organizing, staffing, leading and controlling are no longer effectively achieved in MTN and they expect corporate social responsibility to be the major cause, it is against such a back ground that the researcher will intends to assess the relationship corporate social responsibility and sale performance within organizations.
1.2 Statement of the Problem
There has been an increase in budget allocation for CSR practices by MTN Uganda and other telecommunications companies to serve a need and a higher purpose to the communities within which they operate. MTN sponsors sports events, promotes talent development by sponsoring local artistes, organizes charity walks for the noble cause of the disadvantaged, promotes strategies for achieving environmental sustainability and supports community development through construction of schools, sponsoring its employees to pursue further studies, among others (MTN, 2019 Annual Report).
Despite the various corporate social responsibility initiatives implemented by MTN, the company has not achieved its targets of increased market share through high turnover (MTN Corporate Department Reports, 2017, 2018 and 2019 ).
MTN Uganda needs to recognize that they cannot act independently from the society and environment in which they operate. If the issue of CSR is not addressed with the urgency that it deserves, the long term survival of MTN Uganda will be jeopardized due to increase in social problems and widening of the gap between the rich and the poor. MTN is also facing problems of retaining the right staff because of lack of internal CSR practices. Nevertheless, the impact of CSR on performance has hardly been analysed in the Ugandan context. It is against this background that it has become necessary to undertake this research to investigate the impact of CSR on sales performance of companies in the telecommunications sector in Uganda basing on a case of MTN
1.3 Purpose of the Study
The purpose of this study is to examine the impact of corporate social responsibility and sales performance of telecommunications companies a case Study of MTN Mbale Branch
1.4 Objectives of the Study
- To determine the influence of Corporate sponsorship on sales performance
- To examine the influence of Public relations on sales performance at MTN Mbale Branch.
- To establish the relationship between Strong corporate values on sales performance at MTN Mbale Branch.
1.5 Research Questions
- What is the influence of Corporate sponsorship on sales performance?
- What is the influence of Public relations on sales performance at MTN Mbale Branch?
- What is the relationship between Strong corporate values on sales performance at MTN Mbale Branch?
1.6 Scope of the Research Study
Geographical scope
The research will be conducted at the MTN District branch offices in Mbale District. This case study will be chosen because Mbale distict is one of the Largest district in Eastern Uganda with the Majority number of MTN network users in the Eastern Region.
Time scope
The research will cover a period of five years of implementation of corporate social responsibility initiatives by MTN from 2015-2020. This is because it is expected to be having the necessary information pertaining CSR and its effect Sales Performance on since this is the period MTN increased its CSR activities.
Content scope
This study will include; Corporate sponsorship on sales performance, Public relations on sales performance and relationship between Strong corporate values and sales performance.
1.7 Conceptual Framework
1.8 Significance of the Research Study
- The research findings helps the government and policy makers to understand the various CSR activities that the Company is involved in and how its of great benefit to the entire public and the possible support that can be offered by the government.
- The researcher will benefit from the study through acquiring proficiency in carrying out future research studies with ease.
- The findings contribute to the new knowledge and information in the areas concerning CSR which will help other researchers and academicians in conducting research in the same area.
- The study will enable management to understand the challenges faced in the implementation of CRS and the possible solutions based on the recommendations given by the researcher so as to improve on the CRS activities.
CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction
This section reviews related literature on the CSR and sales performance. These will include; Corporate sponsorship on sales performance, Public relations on sales performance and relationship between Strong corporate values and sales performance.
2.2 Corporate sponsorship on sales performance
Sales performance of a given product refers to the volume or the level of product sales in a given period of time. It is usually measured by key performance indicators; such as, the number of promotional relations and sales of a given commodity (Balunywa 1998). For any company, sales refers to the total amount of money received by the company for goods sold or services provided during a certain time or period. The basic principle is that a sale can only be recognized when the transaction is already realized or can easily be realized. This means that the company should have received payment or the chances of receiving payment are high (Kakuru, 2000). Sales can be gross or net. Gross sales refer to the total invoice value of sales, before deductions for customer discounts, allowances or returns. Net sales refer to the gross sales revenue after deducting returns, allowances, discounts and all other selling expenses.
A sensitive measure of how customers regard a product or service can be sales or market share. After all, if a product’s relative value to a customer changes, sales and market share should be affected, although there may be some occasional delay caused by market and customers’ inertia. Sales levels can be strategically important. Increased sales can mean that the customer base has grown. A problem using sales as a customer measure is that it can be affected by short-term actions, such as promotions by a brand or its competitors. This area must be monitored and tracked to ensure that the additional sales are based on changes in consumers’ preference (Aaker, 1998).
2.3 Public relations on sales performance
A number of scholars have picked concern on the influence of Corporate Social Responsibility on the firm (Adams 2002; Bansal and Kilbourne 2001; Ganesan et al. 2009; Gupta and Pisch 2008; Hummell and Savitt 19988; Webster Jr 1975).
Moir (2001) and Wilson (2000) argued that there are a multitude of reasons behind the motivation of an organization to engage in Corporate Social Responsibility. According to William et al (1997), often organizations tend to seek for appropriate information to increase their sales volume. However as they go for new markets, they forget and ignore the existing ones, defect to the competition for the support and service that was promised by the selling organizations. Therefore he urges organizations to always conduct after sale service and investigations about their customers to obtain information about whether satisfaction has been obtained or not. This helps them to cope up with new strategies to maintain their customers to increase their sales volume. Albert (1993) argued that buyers especially of high class services tend to resist new services for fear of quality. He therefore recommends organizations to establish such information through marketing research to break through that fear to be able to realize an increased level of sales.
Ramani and Kumar (2008) commented that organizations need to develop and adopt a business orientation that allows them to survive in an increasingly competitive market place. They further reiterated that Corporate Social Responsibility may be conceptualized as a business orientation.
If an organization prescribes to a business orientation, then it is assumed that the firm will exhibit corresponding capabilities that are aligned with that orientation (Day 1994).
From marketing studies which were conducted, ceteris paribus, a company’s practices of CSR can actually attract customers. In a national survey done by Smith and Alcorn (2009) found that 45.6% of the participants indicated that they were likely to shift brands in favour of those who donates to charitable events. This implies that CSR investment can positively affect market share of any entity leading ultimately leading to increases in revenue. Revenue increases can be reached indirectly through improvement in brand image or directly through market development.
Before making any purchase decision, customers consider a company’s CSR activities (Bhattacharya and Sen 2004, Penn Schoen Berland 2010). Their research suggests that customers are willing to spend an extra amount for products of those firms with high CSR engagement and practices. Work from other authors in the same discipline argue that although consumers are not prepared to pay a higher price, they are more likely to purchase goods from organizations which are into corporate social responsibility. These results support Baron’s (2001) insight that “a practice that is labelled as socially responsible raises the demand for the firm’s products”. Some companies carry out strategic CSR activities which positions themselves to maximize firm value.
A majority (77%) of consumers think that companies should be socially responsible, according to a survey by branding company Landor Associates cited by the University of Pennsylvania’s Wharton School. Consumers are drawn to those companies that have a reputation of being a good corporate citizen. Research at Tilburg University in the Netherlands showed that consumers are prepared to pay a 10 percent higher price for products they deem to be socially responsible. CSR practices must have a direct financial impact which refers to cumulative financial impact, where there is improved access to capital, reduced penalty payments, direct cost savings due to proactive measures, improvements in investors’ relations and shareholder value, and also impact on returns and revenues directly attributable to responsible business practice.
2.4 Relationship between Strong corporate values on sales performance
Whilst on the other hand, similar studies established different results which showed that CSR actions and investments leading to additional costs for an organisation, which would lead to a comparative disadvantage as compared to their rivals without those actions. Costs can be separated into opportunity costs, sunk costs and recurrent costs. Opportunity costs include any activity that could not have been undertaken due to capital and labour being bound to the CSR activity, which might result in lost revenues (Sprinkle & Maines, 2010). Some scholars (Economist, 2004) presume CSR may cause companies to add additional costs which will reduce their profits. The Economist, 2005 contends that CSR reduces both profits and social welfare due to most of CSR activities having at least some cost. Therefore, CSR seems only increase the total expense and lead companies get in losses and no advantages at all.
Carrol (1979) notes that organizations have four responsibilities or obligations to the societies in which they operate. These are economic, legal, ethical, and discretionary obligations. The economic and legal responsibilities are obligations that have always existed for organizations and obligations that will continue to exist in the future regardless of further changes in the mindset of consumers (Balmer et al. 2007; Drucker 1984). They include producing a product that is demanded by consumers and ensuring that the organization is obeying legislations enacted by the government at all levels.
Being socially responsible has been linked to an organization achieving a positional advantage (Garriga and Mele’ 2004; Porter and Kramer 2006). According to the authors, a firm that has a strong Corporate Social Responsibility orientation will have invested in creating continual superior value for its customers, as a key stakeholder group. The superior value that is consequently present is unique to the firm and helps to strengthen the positional advantage the firm has over its competitors.
Numerous other studies, however, suggest that, as a result of a firm engaging in socially responsible practices, overall profitability of the firm is enhanced (Berrone et al. 2007; Mc Williams and Siegel 2000; Orlitzky et al. 2003). Mc Williams and Siegel (2000), in their analysis argue that there has been mixed results of the financial impact of such well –doing strategies on short –term and long term profitability of the organizations. Corporate social responsibility and an organization’s goals share a broader connection and much research supports a positive correlation between corporate social responsibility and an organization’s financial performance (Lee 2008).
When annual statements of companies disclose improved sales turnover, this is an indication that these companies are capturing larger market shares through customer goodwill. From this finding, the research deduces that, within the Ugandan firms, environmentally friendly practices affect corporate performance and corporate image. Hence, Environmental investment is not a wasteful venture, but is part of corporate strategy, as well as, corporate responsibility to comply with regulations and support the environment while at the same time achieving the economic goal of the firm.
CHAPTER THREE
METHODOLOGY
3.1 Introduction
This chapter is about the methodology that was used in the study. It includes research design, study area, study population, sample size and selection, research tools, data collection and data analysis.
3.2 Research design
A cross sectional research design will be adopted for this study. This is where data is gathered just once from a cross section of sources for purposes of answering research questions (Sekaran, 2003). Furthermore, this being a snap shot study, the other research designs of longitudinal and experimental will be considered unsuitable. This will involve a description and analysis to help the researcher make accurate conclusions about the corporate social responsibility initiatives and sales performance of MTN Mbale branch.
3.3 Study population
The study targeted 60 employees of MTN at both strategic and operational levels of management.
3.4 Sample Size, Sampling Technique and procedure
The sample size will be is 52 determined using Krejcie and Morgan Table of 1970. After determining the number of respondents from each stratum, the individual respondent will be selected using both purposive and simple random sampling techniques. Purposive sampling will be applied to select the type of respondents according to the sectors where they belong. Purposive sampling is one where sampling is confined to specific types of people who can provide the desired information (Amin, 2005). Purposive is a judgmental sampling method whereby respondents are picked on the presumption that each would satisfy the research objectives (White 2002).
The questionnaire will contain statements that aimed at examining the items under investigation. The respondents will be requested to answer the question by choosing the best choice, anchoring their answers on a six-point Likert scale, such as 1= Strongly Disagree, and 6= Strongly Agree. A six-point Likert scale will be used because it provides more accurate answers since it doesn’t require participants to take a stand on a specific subject matter but rather allows them respond in an extent of agreement thus making answering questions easier for respondents. Both students and staff members used the same questionnaire.
3.6.1 Primary data
Primary data for this study was collected using questionnaires. According to Roston (2001), primary data is that kind of data that has been gathered for the first time, it had never been reported anywhere. Primary data will be collected from respondents through self-administered questionnaires. Questionnaires are efficient and convenient in collection of qualitative data (Sekaran, 2003).
3.6.2 Secondary data
Secondary data for this study was got from policy documents, abstracts of various scholars and archived reports .Roston (2001) defines secondary data as that kind of data that is available, already reported by some other scholars.
3.6.3 Data collection methods
Data will be collected using the questionnaire method and content analysis of documentation method.
3.7.1 Questionnaire Survey Method
The researcher will administer the questionnaire in person to the respondents. This method will be used because of the fact that it is time saving, many respondents were covered within a short time and sensitive questions could be confidentially answered by respondents. A questionnaire method gives time to the respondent to think and analyze the questions asked before giving an appropriate answer. A Likert scale of five containing statements which the respondent will be asked to evaluate will be used. It was a five-order scale in which SD=1 was Strongly Disagree, D= 2 was Disagree, NS= 3 was Not Sure, A= 4 was Agree and SA= 5 was strongly agree.
3.7.2 Documentary Review
A review of primary documents will also be done. This particular method requires reviewing all the information which has been collected and therefore it provides raw information in the sense that there is no interpretation which has been given to the information and data that have been collected. Document review method will be used for this study; for example: list of circulars, reports, budgets, press releases among others.
3.8 Validity and Reliability of Instruments
3.8.1 Validity
In order to ensure the validity of the data collection instrument, the researcher after designing the instruments will carry out a peer review and possible amendments will be made.
3.8.2 Reliability
This will be achieved through pre-testing 15% of the instruments, and after the exercise, questionnaires will be pre-drafted if found yielding.
3.9 Data Analysis
After collecting data, it will be sorted and coded so as it is input in SPSS for analysis. The analysis was done using percentages and Mean so as to indicate the aggregate opinions of respondents
A researcher is expected to observe ethical principles when conducting a study (Shamoo & Resnik, 2009). Such principles include, being observant to the intellectual property and authorship, ensuring anonymity of the respondents, and recruitment of respondents on a voluntary basis. Other principles include confidentiality, and privacy. An introduction letter from the university will be acquired indicating the nature of the study.
3.11 Limitations of the study
Financial constraints
Financing the research study was too costly in terms of transport costs, feeding and processing of the proposal and research report. The researcher ensured he worked for long hours so as to reduce on the number of days for collecting data. For typing purposes, the researcher used his computer to cut down the costs.
Limited time
Inadequate time frame required for a detailed research study. Comprehensive research study involves a great deal of collecting, analyzing and processing that requires a lot of time.
The researcher drew data analysis grids for purposes of summarizing the collected data on a daily basis so as to catch up with time.
Respondents were not easily met given the fact that they were always busy. However, the researcher requested the respondents to fill the questionnaires in the evenings when they were setting off from work.
Power was very erratic and this hindered the schedules of the researcher in meeting the set deadlines. However, the researcher set the default settings of the computer to save after every one minute automatically such that changes/ new typing made would not lost.
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