Socially Responsible Procedures Hyundai Motors And Tata Motors Marketing Essay

Socially Responsible Practices Hyundai Motors And Tata Motors Marketing Essay

Tata Motors and Hyundai Motors include a lot in common. They both are part of large, family-owned business conglomerates, and from economies that have seen tremendous progress to emerge to be in the top 20 major on the planet [1] . Both companies established themselves and grew together with the growth of the respective nationwide economies of India and South Korea. The TATA group is a lot older even so, being established in 1868 by Jamshedji Tata (TATA.com), the Hyundai Group was established in 1947 by Chung Ju-yung (HyundaiGroup.com). The Hyundai Group was aided to a sizable extent by government plans that supported some go for chaebol [2] organizations (Jeong, S.My spouse and i., 2004, p.44-45). Hyundai Motor enterprise was established in 1967 and used the government policies to promote local automobile industry to their benefits, and braved the East Asian Crisis of 1997 and the existing credit crunch of 2008 in order to emerge as the greatest automobile maker in South Korea, (Jeong, S.I actually., 2004, p.94-95) and 4th on the globe with regards to unit revenue. (The Chosun Iibo bblearn tri c, 2009). Tata Motors was founded in 1945, and is normally India’s largest automobile organization (Tatamotors.com).

Though they belong to the same industry, both companies differ somewhat in their CSR methods, which happen to be effected to a big level by the cultural, public, financial backgrounds and national organization and governing systems (Matten and Moon, 2008, p. 407-409). In this report, Section 1 identifies the various stakeholders that both these businesses need to consider while developing their CSR plans. Section 2, will analyze the similarities and distinctions in their approach towards execution of CSR practices, and move onto critically examining the same in through opposing analysis essay definition viewpoints in Section 3.

Section I: Indentifying the Stakeholder

CSR has arrive to mean in a different way to different persons and is interpreted differently by different corporations. With the growing attention given to this topic and a huge number of articles or blog posts, journals and books dedicated to the same, it is an aspect of business that organisations can’t ignore. With the effects of the financial crisis and the growing concerns for environmental welfare, CSR is being regarded as a model for proactive administration of business practices and its impact on world. (Smith and Lenssen, 2009,p.3). Public judgment is becoming increasingly less tolerant of corporate irresponsibility, which is making it imperative for businesses to adopt corporate citizenship in order to maintain their photograph and survive available in the market. (Blowfield and Murray, 2008,p.11). In order for the Social Responsibility control strategy to work, it is vital to identify the stakeholder [3] and establish their importance for the company and to understand the amount of impact the company’s activities have on them. Regarding to Mitchell, Agle and Solid wood, stakeholders could be classified based on their possessing the following attributes: “capacity to affect, legitimacy of their lay claim and urgency of their claim” (csrquest.net).

Tata Motors and Hyundai Motors will be operating in very similar markets and have virtually identical backgrounds; coupled with the fact that they both belong to the Global automobile sector, functioning under comparable constraints regarding global standards, demands and requirements, their group of Stakeholders is identical.

Referring to the style in Amount 1 below, we can classify the stakeholder as:

Dormant Stakeholders: Both Hyundai and TATA Motors have already been faring better than almost every other car manufacturers in the current credit crunch. Hence, their shareholders, who may in any other case have power to influence activities, do not have any have to have or cause to create any demands. Consequently, they are Dormant Stakeholders

Discretionary Stakeholders: The Indian and South Korean Societies have the best claim to ensure that the companies operate responsibly in the contemporary society. However, they do not have any power to alter their operating behaviours, nor carry out they feel any perception of urgency towards it (Mallin, 2009, p. 142-144).

Demanding Stakeholders: Environmentalists and Global Governing bodies [4] (Mitchell et. al, 1997, p. 867) don’t have any ability, nor are they directly damaged by the companies’ activities, and therefore no real legitimacy. On the other hand, being that they are formed with the aim of making businesses more accountable, they do have got a sense of urgency to ensure that businesses are undertaking and reporting CSR activities.

Dominant Stakeholders: The governments around the world are becoming more conscious of the carbon emissions within their countries and hence are going to penalize large carbon-emitting vehicles, and non-environmentally friendly procedures. Hence, they have the power and legitimacy to make sure that automobile manufacturers stick to certain norms and benchmarks.

Figure 1

Developed from Mitchell et. al, 1997, Hyundai Motors Sustainability Statement 2009 and TATA Motors Sustainability Report 2007-08

Dependent Stakeholders: The suppliers and employees are dependent on the business and practices of the manufacturers. As they are involved in the day-t0-day actions of the firms, there exists a sense of urgency on their part for the manufacturers to take into account better employee management and welfare procedures and for increased support to the suppliers. (Hyundai Motor Firm 2009 Sustainability Report)

Definitive Stakeholders: These possess all three attributes; ability, urgency and legitimacy. In this case, the owners/ chairman of Hyundai Motors and TATA Motors (Mong-Koo Chung and Ratan Tata respectively) will be the Definitive stakeholders.

Section 2: The CSR Approach

According with their CSR survey, TATA Motors identifies their strategy as following a Triple Bottomline of Profits, People and Planet (Blowfield and Murray,2008, p. 101). Though Hyundai Motors’ report will not utilize the same terminology, the approach, as explained by them, is actually the same.

Figure 2

Developed from Blowfield and Murray, 2008, p. 101, Hyundai Motors Sustainability Statement 2009 and TATA Motors Social Responsibility Annual Statement 2008-09

The “Trust based control” refers to focus on boosting labour administration ties, cooperation with suppliers and the spread of ethical and transparent supervision practices, which would therefore translate to profits.

However, while Hyundai Motor’s CSR initiatives will be influenced by the high-economic state of South Korea, along with their open economical policies, which is very a contrast from the relatively additional closed overall economy of India that influences the CSR of TATA Motors (Christie P.M.J, et al, 2003). Consequently, TATA Motors and Hyundai Motors employ a different method of CSR. Relating to Kramer and Kania, businesses adopt also the ‘Defensive’ or ‘Offensive’ approach. Defensive approach pertains to engaging in CSR to safeguard image as the Offensive procedure involves actively participating in CSR and ‘being a part of the solution regardless if you were not part of the trouble’. (Blowfield and Murray, 2008, p. 102-103)

Defensive Procedure: Hyundai Motors’ approach can be classified as Defensive. Southern Korean businesses in general, especially the Chaebol, involved in CSR following the East Asian financial crisis in 1997, when the detrimental effects of ‘business for profits only’ was recognized. The key goal of employing CSR in Korea has gone to repair the damaged reputations of these companies. Hyundai has made attemptedto wash off their broken reputation due to corporate scandals by producing generous philanthropic donations of money (Cho and Hong, 2008). Actually, the picture built by the sociable contributions of previous chairman Chung Ju-Yung [5] , happen to be being used by his son Chung Mong-koo who’s facing corruption fees. (The Economist, 2007)

Offensive Approach: “No victory or achievement in materials terms is worthwhile unless it will serve the demands or interests of the country and is persons and is achieved by fair and genuine means”. This estimate by J.R.D Tata encompasses the eyesight for CSR of the shaped group chairman. This has been the prevalent thought since J.N. Tata founded the group in the 19th century. TATA Motors, following TATA Group legacy of philanthropy, features been actively involved in adding to social welfare ever since the inception of the business as discussed before. The TATA Group has been known for participating in corporate “philanthropy” since the establishment of the J.N. Tata Endowment scheme in 1892 (Kazmi, 2008).

Section 3: Classifying the CSR Activities

The below tables provide a cross-section of the CSR actions undertaken by the companies with respect to two parameters:

The “standard” CSR actions undertaken by automobile market as a whole (Blowfield and Murray, 2008,p.124)

The 6 ways of engaging in CSR which have evolved and are used presently (Kotler and Lee, 2005).

Cause promotion: Creating awareness about certain issues

Cause-related marketing: Companies commit to adding to certain causes on the basis of sales.

Corporate Social Marketing: Make reference to activities directed at bringing about a modification of behaviour ‘to increase public health, safety, the surroundings, or community well-being’.

Corporate philanthropy: Direct contributions to a charity or trigger, most often regarding monetary support.

Community volunteering

6. Socially responsible business practices

The below tables will help get to know the approach and frame of mind of the organizations towards CSR, and will encompass the CSR actions they have undertaken. Comparing the tables, it is obvious that while TATA has

concentrated a big part of their actions in Corporate Philanthropy and taken care of a basic degree of CSR within the realm of organization requirements though involvement in Socially Responsible Business Practices. However, Hyundai Motors seems to have a more balanced spread across all spheres, though it is not as involved with Corporate Philanthropy. Both firms do not indulge in an excessive amount of Cause-Related Marketing CSR initiatives, which could be because of it being a mere marketing gimmick.

The following section analyses the reasons behind this approach and the potency of the same.

Table 1: Hyundai Motors CSR Initiatives

Table 1: Hyundai Motors CSR Initiatives continued

Developed from Blowfield and Murray, 2008, p. 124, Kotler and Lee, 2005 and Hyundai Motors Sustainability Survey 2009

Table 2: Tata Motors CSR Initiatives

Developed from Blowfield and Murray, 2008, p. 124, Kotler and Lee, 2005, Tata Motors Community Responsibility Annual Report 2008-09

Section 4: Analysis of the Approach

In purchase to critique the way towards CSR of the two companies, we are able to view their actions through two contrasting viewpoints towards Corporate Sociable Responsibility.

Milton Friedman’s Shareholder Theory: Believes that “the social responsibility of business is to increase its revenue” (Solomon and Hanson, 1983).

According to Edward Freeman’s Stakeholder Theory, “at this time there are myriad groups who’ve a stake in the firm” and business must address their desires and incorporate it within business management methods. (Freeman and McVea, 2001)

The above contrasting viewpoints could be applied to the Virtue Matrix Model (Martin, 2002) to help classify and analyze the numerous CSR actions undertaken by the 2 2 corporations. The Virtue Matrix Unit, as given in Physique 3 below, has 2 levels of CSR.

Figure 3: Virtue Matrix

Source: Martin, 2002

The base of most CSR activities is created by ‘Instrumental CSR’ or The Civil Foundation, which encompasses those activities an organization undertakes to adhere to the norms, rules and customs that govern the contemporary society in which they can be found. This watch complies with Friedman’s shareholder theory, since it talks about only engaging in activities that are necessary to create profits. The Civil Foundation further has 2 aspects to it

Compliance: An organization either must follow the regulations set by the society or industry.

Both Tata Motors and Hyundai Motors have to comply with the automobile emission targets placed by various nations where they operate. Therefore the R&D for vehicles with lower emissions and vehicles using alternate fuel sources is essential of the business. If they are unable to meet these standards, they’ll lose business. Likewise, “green automobiles” have created their private niche in the market, with consumers actively seeking to buy more fuel-efficient automobiles; building fuel-efficient autos is thus about gaining market talk about. (The Economist, 2007)

Choice: An organization chooses to check out the customs and benchmarks set by the culture or industry.

Both the companies have got voluntarily participated in the UNGC and GRI. Basis the GRI Survey (Appendix 1), Hyundai Motors started reporting in 2004, while Tata Motors began only in 2008. In the adherence and third party checks, as well, Hyundai has been additional pro-active (Globalreporting.org). On the other hand, it can again be argued that doing this enhances their photograph as a more “socially responsible” corporation, and therefore is good for business.

Both the companies engage in exploration into making end-of-life car more recyclable and hence environment-friendly, since that is a norm followed by all automobile manufacturers, because they need to portray a more environmentally-liable stance. (Blowfield and Murray, 2008, p. 124)

The higher-level of CSR incorporates those ‘Intrinsic’ activities that contact form The Frontier. This check out complies with Freeman’s Stakeholder theory, since it involves activities that an organization undertakes to be able to help the society where they operate, or because they look and feel it’s the “right move to make”. However, these activities may not add any value to the shareholders. The 2 2 areas of The Frontier are:

Strategic: This kind of activity benefits the contemporary society, while adding benefit to the shareholders at the same time.

The Traffic Safety advertising campaign and Owner Protection Classes [6] carried out by Hyundai Motors in a variety of regions in which they operate can be an apt exemplory case of this kind of activity. This helps create recognition and imparts useful expertise, but as well, acts as a highly effective marketing tool, because the brand is re-iterated thorough the procedure.

Structural: This includes actions that are purely beneficial to the society, while not adding any value at all or maybe even retracting benefit for the shareholder.

Tata Motors, though its CSR activities and donations, has engaged in pursuits like providing free of charge education, training, healthcare facilities and different support for entrepreneurial activities. They have also made attempts to increasing the standard of life for the most those who have least support in the Indian contemporary society- the farmers and the women.

Tata Motors may have actions that form the ‘Civil Foundation’ which is the basic requirements nevertheless they do not take part in way too many ‘Strategic’ activities, but instead focus on “philanthropic” CSR and lean even more towards Freeman’s Stakeholder Theory, as seen in the Figure 4 below. The below chart provides clearer photo of how Tata Motors appears to falls into the realm of Corporate “philanthropy”.

Figure 4: Mapping Income vs Social Benefits

Critics of philanthropic ‘donations’ say that this just involves giving away large sums of money to be able to catch the eye of the media and appear “goody goody” to the public, while not actively participating in social welfare jobs; this tends to inhibit even more sustainable CSR procedures. (Mallin, 2009, p. 129-131). However, the reason behind such engagement is because of religious and cultural beliefs. As explained in The Economist, “India includes a long traditions of paternalistic philanthropy. Big family-owned organizations such as Tata are particularly energetic in providing basic providers […]. For the rich, who’ve prospered as the market has boomed in recent years, generous philanthropy is also a way of heading off a backlash against organization.” (The Economist, 2008). 2005, p. 429-431).

Hyundai Motors, on the other hand, lean a little towards Freidman’s Shareholder Theory, as their actions are generally in the “high earnings” realm in Figure 4. Hyundai Motors started participating in CSR much later, but has a more balanced approach. The reason behind the difference in the methods is usually rooted in the backgrounds of the two 2 home nations. According to Inglehart and Baker, organizations in low-income economies tend to focus considerably more on the monetary contribution of organization, as the expansion of organization itself would lead to a better way of life for the people. Hence in Korea before the economic development, people didn’t hold companies accountable for contributing to CSR activities, but after the country grew to become a high-income economy, needs for community involvement grew (Mallin, 2009, p. 129-131; Chapple and Moon, 2005, p. 429-431), the new government enforced policies and laws to ensure adoption of proper function practices and CSR actions by the businesses. In this period of re-structuring of the chaebols, CSR also came to be incorporated as part of the companies’ goals (Mallin, 2009, p. 127-130) and so the later inclusion of dynamic CSR from Hyundai Motors. However, in India, since indigenous businesses have establish in the 19th century, they have already been involved in corporate philanthropy, which may be attributed to spiritual traditions, internationalization of business, colonization, and imperialism (Chapple and Moon, 2005)

Conclusion

The Automobile industry demands a certain level of CSR which is instead of the environmental destruction being due to the industry. On the other hand, ‘[g]reening of industry is being taken seriously even more as a business opportunity that will reap rich dividends later on rather than minimizing it to tokenism representing corporate cultural responsibility.’ (THE CHANGING TIMES Of India, 2009)

There is no place formula in regards to what encompasses CSR, neither will there be a way to say what is “good” or “bad”, or what should encompass CSR. If the business is employed in an underdeveloped region, it would have to help uplift the area in order to even operate there. For example, Tata Motors had engaged in social actions in Singur in West Bengal, India, where in fact the plant for his or her small-car project, Tata Nano was to come up. It was the principal reason behind the principle Minister, Budhadev Bhattacharjee, wanting Tata Motors to set up the plant for the reason that area, as it would help develop the spot. (The Economist, 2008).

With the Era of Globalisation, MNCs should be on their toes to ensure they are maintaining best business practices across almost all their operating areas. With less complicated and faster communication systems, the beliefs and ideologies pertaining to CSR in one place may impact the operations and product sales in a world at the other end of the universe. Thus, as a way to maintain brand photo and equity, it could be seen best to engage in Offensive CSR than be produced to activate in Defensive.

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