Tesco was established in 1919 by Jack Cohen, it has started from selling daily products and has developed itself to selling mobile phones, and other electronic items in their chain stores. It is having branches in many countries around the globe. The major reason for its success is its corporate strategy that is focus on customer, providing quality products at the cheap prices etc (Tesco, 2006). Tesco is an organization which believes in contributing for the social welfare of the people. Let us discuss how it relates itself to the CSR.
Corporate Culture of an Organization
The corporate culture of an organization can be defined as the principles of the organization which are expressed in terms of their ethics. The definition itself states that the organization has to examine and understand the phenomenon of their organization firstly with corporate values which are considered to be seen in the annual reports specially given by the CEO of the organization. Secondly it also defines the terms and policies that the organization has to follow so as to hold the integrity of the organization. It even defines the practices that the organization has to follow on the public front as customer themselves consider to be the part of the organization. The culture and ethics of the organization are considered to be important aspects of the financial performance of the organization and even the performance can be maximized with the help of the some of the cultural values which will become motivation for the employees at the same time enhance the productivity of the organization (Simon A. Booth & Kristian Hamer, 2008).
Tesco’s corporate strategy is for extended term development and concentrates on the center purpose of generating value for customers in order to produce loyalty for the lifetime. Company is committed towards carrying business in a socially responsible and also in an ethical manner. It maintains code of conduct for its staff, suppliers for the sake of protecting environment by using commercial strength to apply its principles in practice (CSR Best Practice, 2003).
Philip Kotler and Nancy Lee (2008) in their book “Corporate Social Responsibility: Doing The Most Good for Your Company and Your Cause” says that as an initiative from corporate world is crucial aspect which needs to be undertaken by a business to support social grounds and to complete obligations with respect to CSR. Social causes like prevention of AIDS, safety, eradicating illiteracy, developing socially and economically, employment and environmental issues are some of the issues that are pulling the worlds development. Authors have included important elements that are to be made mandatory by law in order to save society from the economic and environmental issues. These kinds of activities are done by the NGO’s (Non-Governmental Organizations). Corporate houses can support these NGO’s in many forms like contributing in cash, paying grants, providing publicity, promotional sponsorships, paid advertising, donating goods kind of things like computers, providing employee volunteers, etc.
Tesco practices CSR in their business dealings taking responsibility of the society and it feels that CSR is not an additional burden on company nor it is a distraction from providing services to the customers. But in 2004 it has been rated as the worst lawbreakers on environmental and social problems and are been seriously criticized about its CSR by independent companies (Accountability / CSR Network, 2004). But I’ve observed that this criticism has been denied by the Tesco and after that it has concentrated on the welfare of its staff and the society. I believe that author has been proved wrong later as Tesco has scored highest the most responding company to the big challenges of society.
The above figure exhibits about the percentages of CSR affects on brand image, customers expectations about CSR from the organizations, organizations who are interested in implementing or using CSR, in the figure we can see that civil society organizations expectations are lowest for CSR it is just 7.1% only. But overall impact can be seen clearly.
Ethical principles are the things which are supposed to be followed in every aspect of life. In business also it is essential to follow ethics; it will enable business to run in a proper and correct manner. Organizations those who follow ethics will stand apart from other companies in market. UK supermarkets are growing and developing globally earning record breaking profits and have moved into other products than food like mobiles, electronics, etc. The author Strong, C., (1996) says that ethical consumerism includes each and every principle of ecological consumerism and others taking on panel for public related element of ethical consumerism. Author says that co-operation between government and NGO’s can make ways to solve CSR issues and can put pressure on supermarkets to integrate CSR into their company’s objectives. It is known that author is describing consumer’s also need to buy environmental harmless products in order to protect environment and to maintain green peace. This statement tells us about the importance of ethical consumerism along with CSR.
Let us discuss about the other side of CSR, which is negative effects this could effect the organizations. In the article called Fostering Corporate Social Responsibility through Public Initiative: From the EU to the Spanish Case, Moore (2001), have found that economic performance depreciated as performance in societal increased after conducting research on UK supermarket sector. Some other author Matthias Zacek (2007) says that when a company is placed as socially being responsible then involuntarily customer’s expectations will also be raised. They also have mentioned that companies will open up to a range of prospective criticisms which could not be handled by organization. Author Moore found the performance kill earlier to him other authors have found that customer expectations will increase if organizations starts using CSR. These research statements made clear that CSR will have its own negative impact on the organization. Here it is stressed that organizations inability is towards fulfilling customer’s expectations. But they have failed to prove it, like giving any examples or case studies to prove their statements. Evidence lacking has created confusion whether to consider the point are not.
Some researchers are trusting that customers have become skeptical about the organizations who involve themselves in social activities or social responsible behaviors just for the sake of doing well business rather than charitable concerns. Author like Bowen S.A., (2004) believes that Tesco and Sainsbury are two companies which consider CSR as a part of their business marketing.
This argument cannot be believed as Tesco provided a considerable support whenever world has fore gone the unseen disasters like Tsunami. It has donated about £310, 000 to the British Red Cross society. It has also offered support for education like providing computers for schools, providing support to international education etc (Tesco society, 2004).
PART B: Ethical Issues of Tesco
Ethical issues in an organization are expected to show impact on the business strategies of an organization. In an organization the impact of ethics and its issues can seen on the relationships of the employees and even the organization. At the same time it is even observed that the ethical issues of an organization are mostly influenced by the some of the practices and commercial policies. Sometimes the pressures of business performances may create some of the ethical situations and it becomes a tedious work to decide whether the practice is an ethical or not. This complication of choice even increases when it is an international organization i.e., when it is established in different countries among different cultures throughout the world. The decision of channel in an organization which may show its impact on the other channels or departments will lead to the formation of the ethical issues. The international organizations in the global market have many ethical issues if the organization confines to single country or culture (Cravens, 2009).
Tesco is considered to be one of the largest organizations of UK and at the same time it is the most profitable industry with their supermarket even in expanding their business in overseas. From many of the researches it has been observed that the Tesco will impose the risks and costs of its new business process mostly on the farmers who are considered to be major stakeholders of the organization. The main aim of the organization is to make sure that the working environment and the condition of the employees or workers has to meet the standards of the international labor. To carry out their business process they have followed some of the ethics in the organization among which ethical trading is showing its impact on the standards of the employees and as well as the organization. In order to give out good yield in their production they have followed the objectives which are considered to be the aspects of ethical trading. This process includes communication of their policies to their suppliers, auditing and evaluating the sites of the suppliers training the stakeholders on the process of resolving the ethical issues and many more.
The selected issues of CSR by Tesco are Community, Colleagues, Environment, Customers and Suppliers, Responsible use of technology, Suitable raw materials, Community programs, Ethical trading and Animal welfare. These are the considered as the important issues which mainly concentrate on places, people and products (Peter Jones and Daphne Comfort, 2005).
Business ethics of Tesco includes to the maintenance of the standards of the international labors, ethical trading reducing the cost of production and increasing the price of the products, employing the labor on contract basis so as to reduce the cost of labor. All these ethics have become issues in the point of stakeholders of the organization. The suppliers have been complaining that they were paid less for their supplies at the same time the organization is earning good amount on their products. Tesco has declared that the suppliers has to send their products like grapes to the supermarkets in UK in the closed and sealed bags which were costing three times more than that of the normal packing. It even includes more involvement of the labor for packing these bags and also there is an increase in time to pack these bags. But Tesco is not paying for all these expenses to the farmers which is leading the dissatisfaction in the suppliers to the supply the products and even not accepting the bags with seal. Farmers are always put under pressure to meet the standards of the organization but the management is least bothered of the business and labor aspects of the farmers from which they will have their supplies. It is just up to the ethics of the farmers how they deal their workers and their liabilities (Kate Raworth and Anna Coryndon, 2004).
Framework of the relationships in the corporate culture (Simon A. Booth & Kristian Hamer, 2008, p. 714)
Tesco always tries to use temporary employees in their production instead of permanent one’s so as to reduce the cost of labor in their production. They will pay very less wages and perks to that labor that are on temporary basis and even give very less appraisals to the employees who stay permanently in the organization. This was considered to be the outcome of the high production of goods and price suppression on those goods by the retailers. One more issue which is bothering the organization is the hiring of women on contract basis for a season nearly from eight to eleven months every year. Even though if there some of the permanent contractors among these temporary employees they are paid very less wages. Women who are working on contract basis for Tesco for nearly 10 to 11 months in a year they can’t even go for other jobs in the free period as a result of which they are unable to meet both ends and even some of needs of their children. All these has become their ethical issues in terms of their productions process and paving way to the dissatisfaction of the labor and as they left with no choice they are continuing to work with Tesco (Kate Raworth and Anna Coryndon, 2004).
Corporate Social Responsibility also includes the maintenance of their employees and stakeholders. Providing some of the minimum facilities to the employees even though they are on contract base will fulfill a part of the social responsibility of the organization. Even Tesco will enforce their stakeholders to follow some of the international standards in supplies the goods to the organization which was showing a great impact on them to concentrate on the quality of the production and supply. Tesco has failed to follow some of the policies of corporate social responsibility by not providing their employees and the stakeholders with some of the minimum ethical features.
Apart from all these issues Tesco is following some of the principles of CSR by encouraging their employees to participate in the social development activities, even pay attention towards the recycling of some of the energy resources, making use of organics in their production being conscious of the environment.
The attempt of normative ethics is to provide the general theory which tells us how an organization must live in the society for increasing their business. Normative ethics is not like metaethics, the normative ethics doesn’t attempt the moral properties (Normative Ethics, 2005).
A normative theory in an organization provides the descriptive image, for example, aiming them as effectiveness, representing them as rational, and also aiming them as efficiency. For clarifying the productions actual process these theories are of no use (Jan Achterbergh and Dirk Vriens, 2009). For a business ethic the normative theory is the attempt of focusing the exclusive general theory upon which the human life aspects depend on business relationships. In business ethics if Tesco the first normative theory is the stake holder theory. In this theory the arrangements are merely made through which the stockholders are the group of people where the arrangements are merely made to the other group which has the advance capital. The managers of the organization realize the particular ends through which the ventures of ownership will be received by the stockholders. In this prospect the manager acts as the stockholders agent and they are managed to empower the money before stockholders. They are bound with the relationship of agency for doing exclusively for the purposes which are delineated through their principals of stockholders. The other theory of business ethics normative theory is the social contract theory, this theory really consists of closely related family theories and in other ways they are still in different ways process formation. Although, the social contract theory in the accepted wide form the theory of social contract, these all businesses are obligated theoretically for enhancing the customer satisfaction and the interest of the employee by not violating the justice of gnarl canons (Hasnas, John, 1998). The reason for this is particular nature is the obligation which can be best appreciated in the derivation theory. The theory of social contract is mainly based on the social contracts traditional concept. The implicit agreement among artificial entity and society where in this society the existence of entity is recognized on the condition which makes the particular ways of specified interests in society. The theory of social contract for the business ethics will be on the same approach which is deriving the responsibilities of the business. The business obligations of ethical issues towards the business individual members of the society are derived from the agreements. Therefore the social contract theory that speculates the implicit contract among the business and its members where the particular specified benefits that exists. The granting business, which have the right to exist the society members who have the recognition legally as the individual agents and to authorize for using land, resources and hiring members as employees from the society (Hasnas, John, 1998).
The other theory of the normative theories is the Stakeholder theory, this theory is the business ethics of the normative theories. By default the theory of stakeholder is troublesome; the reason for this is the theory is used for referring both the normative and empirical theory of business ethics that are regularly not clearly distinguished between them. As the management of empirical theory, the theory of stakeholder holds the effective management which requires the balanced consideration and attention of the legitimate interest. The normative theory when viewed as the stakeholder theory managers must manage the business that benefits the most; even if the financial performance is not improved the business must be improved. On their return managers pay much attention to the investment which legitimates the stakeholders. Tesco doesn’t maintain the performance of the business rather it concentrates on the financial aspect. Normative theory has a clear approach and doesn’t feel that the firm is not as mechanic which increases the financial aspect it feels it as the vehicle which coordinates the interest and have the relationship management of judiciary which not only looks the stakeholders but also all the stockholders. But Tesco doesn’t give importance to the stake holders and concentrates only on the financial aspect. If Tesco considers all stakeholders and stock holders then the company will increase their performance. According to the stakeholder normative theory the management of Tesco must give consideration equally to the stakeholder’s interests and if these interests conflict, the business is managed so as to attain the minimum balance among the stakeholders. Therefore in normative form of the stakeholder theory Tesco do not have social responsibilities that imply business performance (Hasnas, John, 1998). Tesco mainly depends on the individual decisions rather than group decisions and according to the normative theory decisions that are taken from individual is time taking when comparing with the group decisions. According to this theory subordinates are committed to the decisions that were made by the group participation. Ambiguous and complex tasks need more data and consultation to reach high quality decisions. Tesco not only depends on its own decisions and also not allow the employees to give their decisions only managers in Tesco take all the responsibilities regarding decisions (Normative theory, 2009).
Part C: Corporate Social Responsibility
CSR (Corporate Social Responsibility) is considered as a new exhortation; however it is not a concept that is new for the organizations like Tesco. Provided that the business exists, there are some expectations on the responsibilities in the organization. The notion of Corporate Social Responsibility has been recognized in the mid 1920s and it took an identifiable shape in these years. Hence for acting and building the trust in shareholders the executives and business representatives have searched for the requirement of corporate directors. This can be applied for both the social claimants as well as the stockholders (Frederick, W. C., 1994). But in the 1970’s many changes are made in CSR by the society and organizations in order to lift up their society and business to a modern and more sensible sphere, by means of practicing the management and business professionals. Here the ethics reason of each company has been focused on their dependency among the society and business. Over the last half of 20th century, the CSR’s framework has been developed and the demand for growth of CSR has been increased over last 2 decades (McIntosh, M., Thomas, R., Leipziger, D., & Coleman, G., 2003). There are many objectives for the volatile demand of CSR’s framework. Following are five drivers for the CSR’s framework of Tesco:
- Globalizing the markets of Tesco
- Establishing the knowledge economy
- Employing the communications technology globally
- Coalescence of power to achieve the corporate responsibility when compared to the less number of global and international organizations
Requirement of new social partnerships among the states of corporations and other civil societies to gain solutions for problems of global local societies (McIntosh, M., Thomas, R., Leipziger, D., & Coleman, G., 2003).
The above mentioned drivers make Tesco to be more responsible in their relations with stakeholders, government and other investors. It can be said that if there is an increasing disappointment related to the share owning society then it would result in the company’s inadequate management. As a result, the empowerment of stakeholders need to contribute for the invest time of organization in conversing with the stakeholders in order to achieve a license to function (McIntosh, M., Thomas, R., Leipziger, D., & Coleman, G., 2003). The explosive development of companies like Tesco which operated all over the world will contribute for the growing demand of CSR. The global problems are regarding water, poverty, and shortage of food, violation of human rights, pollution, defected education and unemployment. Being a part of CSR the Tesco has contributed its operations to reduce some of the global problems. Enhancing their business and at the same time providing solutions for the global problems is complex so the organizations need to involve the concerns on social, political, economical, legal and ethical. They will present challenges to everybody like businesses, society and government (Zadek, S., 2001).
In a similar way, Tesco argues that the Corporate Social Responsibility has been an integral part of the overall framework of corporate governance of the organization and it has totally incorporated into existing systems and management. In Tesco, a team of cross-functional senior executives or professionals are available to provide leadership on CSR and the organization’s Corporate Responsibility Review are the important methods for communicating its performances and policies in the area of CSR. The senior professionals of Tesco argue that CSR has been their integral part and also has become its brand (Peter Jones and Daphne Comfort, 2005).
The CSR is a concept whereby Tesco incorporates environmental and social concerns in their company operations and in their relations with the stakeholders on a basis of voluntary. The contemporary developments in ethical approaches imply that the organization has to concentrate on the ethical perspectives. These current developments will focus on the ethical necessities which strengthen the relation among the society and business (Garriga, E., & Mele, D., 2004). These theories are dependent on the values to enhance and safeguard the environmental and societal health. In a similar stratum, Tesco focuses on the significance of being local and functioning locally. Tesco also highlights the commitment towards the local resources compared to its global business. It follows the approaches to have a good relationship with the local and global stakeholders. The other contemporary developments are Customer Question Time, Healthy Living Club, Behaviors and Operational Training, Regeneration and Reclamation of deprived groups, employing Key Performance Indicators and Schemes of energy saving (Peter Jones and Daphne Comfort, 2007).
For the successful performance of any organization, many of the professional believe that leading retailers need to have strong cultural values. In a similar vein, the CEO of Tesco says that the success of Tesco lies behind the values and these values of Tesco are their working ways, managing the by different ways and finally it is everything they do as well as forever will be followed (Tesco, 2000). In the 2008 annual report of Tesco it was said that the organization has been looking forward for the staff with the intention that they can take care of the clients is one among the important business values (Tesco, 2008). So Tesco implements the Steering Wheel model which illustrates the relation among the personal objectives of employees to corporate values as well as to assist the balancing of values by staff successfully in the daily organization of work. The model was implemented to highlight the facts on corporate responsibility that it is not considered as a professional function in Tesco, but it is considered as a day-to-day job of every employee. Tesco’s main purpose is to generate the business values for customers so as to earn their loyalty throughout their lifetime. Its success is totally based on people who shop with them and work with them. If customers like what they provide then would definitely come back. They main values are expressed as treating people in the way they like to be and no one aims harder for clients.
Steering Wheel (Witcher and Vinh Sum Chau, 2009, p. 84)
Every business personnel have to accept that business and society are inseparable. I suggest that CSR should be made a crucial part of any successful organizations business strategy. Long term commitment towards CSR can make organization to advance in social and economic progress. I think an excellent business is achieved when there is a development in the quality and standards of living for people in the place where business is carried. I completely believe in author Strong (1996) words, as it is necessary that customer and seller both contribute towards fair trade by maintaining ethics in performing one’s own jobs. Above we have seen how Tesco has achieved success and profits after implementing CSR in its organization. Researches have proved that business could run smoothly and could sustain progress only if society is in general satisfied with its whole contribution to community well-being. Now let us discuss about normative theories and let us evaluate their activities, situations etc. It can be concluded that CSR has both positive and negative points which an organization have to bear both. Tesco’s ethical issues are having great impact on their strategies of business, as the organization is considered as one of the largest organizations among UK the organization must concentrate on the issues which they are facing. Tesco is imposing the costs and risks of the business on to the farmers and other stakeholders. For improving their performance Tesco must follow some of the ethics in the organization regarding the impact on the employees and even on the organization. Tesco always tries to have good performance in the organization but doesn’t have a good social relationship with the employees as it believes in temporary hiring of employees as they can give fewer appraisals. Tesco doesn’t flow the social responsibility and failed in that situation. According to the normative theory the organization must depend on the group decisions and even the organization must give importance to the stakeholders with the financial aspect, but Tesco only relays on the production and tries to increase in the financial aspect. Corporate Social Responsibility is the new and essential concept in many of the organizations like Tesco. Theoretical frameworks were discussed as to take the corporate responsibility as this has been the integral part of the organizations corporate governance. The annual report of Tesco shows that the organization is looking forward for development. Hence the main purpose of Tesco to generate the business values for customers to earn their loyalty will succeed in future.
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