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1 Multinational Pharmaceutical Compa nies and their approach to Integrating Corporate Social Responsibility into Business Strategy Bachelor Thesis submitted in fulfilment of the Degree Bachelor of Business Administration in Tourism and Hospitality Management Submitted to Dr. Ursula Christine Loisch Marthissa M. Maerz 0911550 Vienna, 9/10/2011

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Multinational  Pharmaceutical  Compa-­‐nies  and  their  approach  to  Integrating  

Corporate  Social    

Responsibility  into  Business  Strategy  

 

Bachelor  Thesis  submitted  in  fulfilment  of  the  Degree  

Bachelor  of  Business  Administration  

in  Tourism  and  Hospitality  Management  

Submitted  to  Dr.  Ursula  Christine  Loisch  

 

Marthissa  M.  Maerz  

0911550  

 

Vienna,  9/10/2011      

 

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AFFIDAVIT    

I  hereby  affirm  that  this  Bachelor  Thesis  represents  my  own  written  work  and  that  I  have  used  no  

sources  and  aids  other  than  those  indicated.  All  passages  quoted  from  publications  or  paraphrased  

from  these  sources  are  properly  cited  and  attributed.  

The  thesis  was  not  submitted  in  the  same  or  in  a  substantially  similar  version,  not  even  partially,  to  

another  examination  board  and  was  not  published  elsewhere.  

 

     

Date     Signature  

 

 

 

 

 

3  

ABSTRACT  

Recent  years  have  shown  an  explosion  in  academic  literature  regarding  corporate  social  responsibil-­‐

ity  (CSR).  Several  reasons  have  caused  the  rise  of  interest  in  the  field  of  CSR,  such  as  growing  stake-­‐

holder  concern  and  high  media  exposure.  Focusing  on  the  current  developments  of  those  initiatives,  

this  study  attempts  to  explore  its  foundations  and  underlying  concepts.  Based  on  the  methodological  

approach  of  a  qualitative  content  analysis   including  frequency  counts,  this  paper  sheds  light  on  the  

impacts   of   CSR   activities   of   large  multinationals   in   the   pharmaceutical   industry.   The   industry   was  

chosen  for  analysis  as  it  enjoys  a  high  percentage  of  return  on  sales  (ROS)  and  return  on  equity  (ROE),  

being  one  of  the  most  profitable  industries  in  the  world.    

Inspired  by  Milton  Friedman’s  article,  ‘The  Social  Responsibility  of  Business  is  to  increase  its  Profits’,  

this   thesis   responds   to   the  question  whether  and  why   firms   in   the  pharmaceutical   industry  are   in-­‐

cluding   CSR   in   their   business   strategies.  Most   importantly,   this   paper   identified  whether   their   ap-­‐

proach   is  beneficial   to  both  society  and   the   firm.  The  background  of   this  question  comes   from  the  

prejudice  that  CSR  might  only  be  a  promotional  tool  to  attract  shareholders.  The  research  question  

centres  on  Carroll’s   (1991)  four-­‐part  model,   including  four  different   layers  of  responsibilities,  which  

together  make  up  the  concept  of  CSR.  Annual  reports  have  been  analysed  according  to  these  respon-­‐

sibilities  to  show  where  the  multinationals  place  their  emphasis.    

The  sample  for  empirical  research  has  been  chosen  from  four  different  pharmaceutical  multination-­‐

als,  all  of  which  are  listed  in  the  Forbes  List  2000,  a  list  identifying  global  leading  players  according  to  

their   revenues   and   net   income.   The   chosen   sample   includes   two   direct   competitors   amongst   the  

American  based  healthcare  providers,  namely  Pfizer  Inc.  and  Johnson  &  Johnson  and  two  Swiss  con-­‐

tributors,  specifically  Novartis  AG  and  Hoffmann-­‐  La  Roche  Ltd.  The  sample  will  not  be  representative  

for   the  whole  market,   but   allows   for   significant   and   informative   comparison   between   two   leading  

pharmaceutical  sectors  and  their  approach  to  integrating  CSR  into  business  strategy.        

 

 

 

 

 

4  

KEYWORDS  

Business   strategy,   competitive   advantage,   corporate   social   responsibility,   document   analysis,   fre-­‐

quency  counts,  multinationals,  pharmaceutical  industry,  qualitative  content  analysis  

 

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LIST  OF  TABLES  

• Table  1  The  three  measures  of  return  for  the  pharmaceutical   industry  and  for   five  other   indus-­‐

tries,  adapted  from  Heal  (2008)  

• Table  2  Gross  domestic  products  in  each  of  the  seven  study  nations  and  the  proportion  attribut-­‐

able  to  pharmaceuticals,  GDP  data,  OECD  statistics,  adapted  from  Chew  at  al.  (1985)  

• Table  3  Number  of   employees   in   the  pharmaceutical   industry   in   the   seven   study  nations,  OHE  

survey  data,  adapted  from  Chew  et  al.  (1985)  

• Table  4  Categorizing  scheme  based  upon  theoretical  outlook  

• Table  5  Comparison  of  discussed  pharmaceutical  firms  

• Table  6  Outputs  of  Frequency  Counts  Pfizer  Inc.  from  annual  report  2010  

• Table  7  Outputs  of  Frequency  Counts  Johnson  &  Johnson  from  annual  report  2010  

• Table  8  Outputs  of  Frequency  Counts  Novartis  AG  from  annual  report  2010  

• Table  9  Outputs  of  Frequency  Counts  Hoffmann-­‐  La  Roche  Ltd.  from  annual  report  2010  

• Table  10  Top  statements  from  annual  reports  2010    

 

 

 

 

 

 

 

 

 

 

 

 

 

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LIST  OF  FIGURES  

• Figure  1  Carroll’s  4-­‐part-­‐model  of  CSR:  adapted  from  Carroll  (1991)  

• Figure  2  Varieties  of  CSR  (The  Economist  Newspaper  Ltd,  20/01/2005)  

• Figure  3  The  five  Ps  of  strategy,  adapted  from  Mintzberg  (1987)  

• Figure  4  Porter’s  five  forces  framework,  adapted  from  Porter  (1980)  

• Figure  5  Porter’s  diamond  framework,  adapted  from  Porter,  The  Competitive  Advantage  of  Na-­‐

tions  (1990)  

• Figure  6  Reputation  and  Corporate  Responsibility  –  Questionnaire  (Lewis,  2003)  

• Figure  7  Reputation  and  Corporate  Responsibility  –  Questionnaire  (Lewis,  2003)  

• Figure  8  Starbucks  Goals  and  Progress  2010,  adapted  from  Starbucks  Global  Responsibility  Report  

(Starbucks,  2010)  

• Figure  9  Total  U.S  Jobs  supported  by  the  Biopharmaceutical  Sector  in  2008,  Archstone  Consulting  

and  R.  L.  Burns,  adapted  from  PhRMA  (2011)  

• Figure  10  Johnson  &  Johnson  statistics,  the  World's  Most  Admired  Companies,  Source:  Haygroup  

and  Fortune,  adapted  from  CNN  Money,  money.cnn.com  

• Figure  11  The  process  of  qualitative  data  analysis,  adapted  from  Denscombe  (2007)    

• Figure  12  Procedure  in  content  analysis,  adapted  from  Denscombe  (2007)  

 

 

 

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GLOSSARY  OF  TERMS  

Different  related  terms  in  this  field  have  led  to  confusion  and  misunderstanding.  In  order  to  avoid  or  

overcome  this  problem,  the  glossary  should  provide  the  reader  with  necessary  information  and  de-­‐

scription   of   used   terms   throughout   the   thesis   together  with   a   short   layout   of   their   concepts.   CSR  

related  terms  are  differentiated  by  strategic  terms  in  the  following  two  tables.  

CSR  –  TERMINOLOGY,  CONCEPTS,  DEFINITIONS:  

Business  Citizenship:  (also  corporate  citizenship,  CC)  can  be  explained  by  how  the  corporation  defines  

its  role  in  society  and  how  it  manages  to  engage  with  its  community.  The  company  can  limit  its  en-­‐

gagement  of  CC  to  philanthropic  actions  or  extend  this   through   involving   itself   for  example   in  gov-­‐

ernance  or  other  actions  that  go  beyond  donations  to  charity  (Waddell,  2000).  

Business  Ethics:   (also  corporate  ethics)   is  the   idea  that  business  task  goes  beyond  increasing  profits  

and   behaving   according   to   set  moral   standards   by   demonstrating   responsibility   not   only   to   share-­‐

holders  but  also  employees,  customers  and  suppliers  (Crane  &  Matten,  2007).  

Corporate  Social  Responsibility  (CSR):  draws  on   legal,  ethical,  and  philanthropic  expectations,  which  society  has  from  business  organizations  (Crane  &  Matten,  2007)  

Ethics:  is  concerned  with  the  study  of  moral  issues  and  the  application  of  standard  rules  that  identify  

if  a  situation  is  right  or  wrong.  Various  ethical  concepts  and  theories  have  been  established  in  order  

to  classify  correct  ethical  behaviour  (Crane  &  Matten,  2007).  

Multinationals:  (MNCs)  can  be  defined  as  the  largest  businesses  contributing  to  world  trade  and  in-­‐vestment.   Because   of   their   growing   power   and   large   effect   they   have   on   economic   development,  

there  is  a  need  for  policy  implementation  and  regulatory  standards  especially  in  times  of  rapid  politi-­‐

cal  change  (Ahiakpor,  1990).  

Organizational  Citizenship  Behaviour   (OCB):   can  be  explained  by   the   terms   ‘altruism’   referring   to  a  

general  helping  and  caring  behaviour  as  well  as  a  ‘generalized  compliance’  with  the  company  by  the  

employee  to  promote  efficient  and  effective  work.  Furthermore,  there  is  a  high  correlation  between  

job  satisfaction  and  the  variable  of  altruism.  (Organ,  2006)  

Sustainability:   ‘implies  meeting  the  needs  of   the  present  without  compromising  the  ability  of   future  

generations   to  meet   their   own   needs’   (United  Nations,   Report   on   Environment   and   Development,  

1987,  p.  1)  

Transparency:  companies  are   following  the  trend  towards  showing  the  public  more  comprehensive  

 

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and  reliable  information  about  their  business,  meaning  government  and  all  other  stakeholders.  They  

are  engaging  in  a  proactive  approach  to  report  their  actions  and  are  therefore  are  more  likely  to  take  

the  consequences  of  these  in  case  of  failure.  This  trend  can  also  be  applied  to  governmental  and  non-­‐

profit  organizations.  (Oliver,  2004)  

Triple  Bottom  Line:  term  encouraged  by  John  Elkington,  Director  of  the  SustainAbility  consultancy;  or  

in   other  words   ‘People,   Planet,   Profit’   referring   to   the   social,   environmental   and   economic  way   a  

company  is  trying  to  conduct  its  business.  (Crane  &  Matten,  2007)  

Values:  the  term  encompasses  two  different  concepts.  The  first  is  referred  to  as  the  ‘global  common  

values’,  which  are  desirable  or  undesirable  beliefs   that  are  more  or   less   shared  between  most  cul-­‐

tures  and  originally  derived  from  religion.  The  second  concept  is  the  one  of  ‘country  cultural  values’,  

referring  to  common  beliefs  within  a  specific  group.  (Ferrell  et  al.,  2010)  

 

STRATEGIC  MEASURES  –  TERMINOLOGY,  CONCEPTS,  DEFINITIONS:  

Business  Strategy:   refers   to   the   long-­‐term  goals  a  company   is  able   to  achieve  by  taking  specific  ac-­‐

tions  and  deploying  resources  effectively  (Chandler,  1962).  

Competitive   Advantage:   is   an   increasingly   important   topic   and   specifically   addresses   the   firm.   It   is  

concerned   with   differentiation   from   competitors;   reduction   of   uncertainty   and   value   proposition  

across  the  whole  product  or  service  chain,  meaning  it  also  includes  also  suppliers.  (Porter,  1998)  

Corporate  Governance:  can  be  referred  to  a  system  by  which  corporations  are  controlled  by  govern-­‐

ment.   It   is   important   to  have   a   regulatory   framework,   so   resources   are  used  efficiently   (economic  

level)  and  accountability  and  transparency  are  ensured  to  the  public   (social   level).  Governance  sys-­‐

tems  include  a  board  of  directors  and  an  external  auditor.  (Clarke,  2008)  

Corporate  Social  Strategy:  covers  strategic  meaning  economic  aspects  of  a  business  strategy  with  a  

focus  on   social  welfare.  According   to  Husted   (2001)   a   corporate   social   strategy  emphasizes  on   the  

realization  of  both  social  welfare  and  economic  competitive  advantage.    

Efficiency:  can  mainly  be  explained  by  the  ratio  of  a  company’s  inputs  measured  against  its  outputs.  

There  are  a  variety  of  efficiency  ratios   indicating  how  well  a  business   is  using  its  assets  to  generate  

profit.  Common  ratios  include  the  return  on  capital  employed  (ROCE),  which  stresses  labour  efficien-­‐

cy   but   also   ‘stock   turnover’   giving   an   impression   on   how   a   company   is   managing   its   inventories.  

(Campbell,  2011)  

Globalization:  Manfred  Steger  (2010)  defines  globalization  as  a  concept  inheriting  an  economic,  polit-­‐

ical,   cultural   and  ecological  dimension.   Furthermore,  he  argues   that  globalization  might  be   the  de-­‐

velopment  and  continuous  process  of  transformation  of  social  relations  around  the  world.  

 

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TABLE  OF  CONTENTS  

1   Introduction  ..........................................................................................................................  11  1.1   Context  and  previous  research  ..........................................................................................  11  1.2   Research  aims  and  structure  .............................................................................................  13  

2   Corporate  Social  Responsibility  ............................................................................................  15  2.1   Historical  development  of  corporate  social  responsibility  ................................................  15  2.2   Corporate  Social  Responsibility  Theories  ..........................................................................  16  2.3   Differentiation  of  CSR  to  related  terms  .............................................................................  21  2.3.1   Business  ethics  and  CSR  ................................................................................................................  21  2.3.2   Corporate  citizenship  ....................................................................................................................  22  

3   Business  Strategy  ..................................................................................................................  24  3.1   Competitive  advantage  and  strategy  ................................................................................  24  3.2   CSR  as  strategic  competitive  advantage  ............................................................................  28  3.3   CSR  Measurement  and  Impact  on  Financial  Performance  ................................................  32  

4   Multinationals  in  the  Pharmaceutical  Industry  ....................................................................  35  4.1   The  Pharmaceutical  Industry  .............................................................................................  35  4.2   Challenges  for  pharmaceutical  businesses  ........................................................................  37  

5   Consolidation  ........................................................................................................................  40  5.1   Relationship  and  connection  .............................................................................................  40  5.2   General  relevance  and  author’s  relevance  ........................................................................  41  

6   Methodology  ........................................................................................................................  43  6.1   Qualitative  and  quantitative  research  methods  ................................................................  43  6.2   Qualitative  research  methods  ...........................................................................................  43  6.3   Quality  in  qualitative  research  ..........................................................................................  44  6.4   Selection  of  methodology  .................................................................................................  45  6.5   Operationalization  .............................................................................................................  47  6.6   Sample  ...............................................................................................................................  49  6.6.1   The  American  based  health-­‐care  providers  ..................................................................................  49  6.6.2   The  Swiss  corporations  .................................................................................................................  51  6.7   Data  Analysis  and  Results  ..................................................................................................  52  6.7.1   Pfizer  Inc.  ......................................................................................................................................  52  6.7.2   Johnson  &  Johnson  .......................................................................................................................  55  6.7.3   Novartis  AG  ...................................................................................................................................  57  6.7.4   Hoffmann-­‐La  Roche  Ltd.  ...............................................................................................................  59  

7   Discussion  and  Interpretation  of  Findings  ............................................................................  61  

 

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8   Conclusion  ............................................................................................................................  65  8.1   Summary  ...........................................................................................................................  65  8.2   Contribution  to  knowledge  ...............................................................................................  67  8.3   Limitations  and  Future  research  ........................................................................................  68  

9   Bibliography  ..........................................................................................................................  69  

 

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1 INTRODUCTION    In   recent   years   the   term  corporate   social   responsibility   (CSR)  has   gained  prominence  and  multina-­‐

tionals   are   trying   to   integrate   societal   issues   in   their   business   strategies   (Kotler  &   Lee,   2005).   This  

task  has  become  more  complex  given  the  development  of  technology  and  globalization,  since  expec-­‐

tations   on   how   business   firms   should  manage   resources   and   their   relationship   to   society   and   the  

environment  have  changed  over  the  last  decade.    

 

It   is   a   fact   that   global   companies  manage   enormous   resources;   hence   they   have   an   enormous   re-­‐

sponsibility  to  carry.  Above  all,  in  times  of  financial  instability  and  corruption,  management  of  multi-­‐

nationals  goes  beyond  operating   in   the   interest  of  shareholders.   It   is  business  rather   than  the  gov-­‐

ernment   committing   themselves   to   societal   issues.   Accountability   and   transparency   have   to   be  

achieved  to  make  sure  stakeholders  establish  their  trust  in  good  times  and  do  not  branch  off  in  bad  

times,  as  negative  word-­‐of-­‐mouth  and  uncertainty  will  promote  a  negative  image  of  the  company.      

 

Thus,  this  paper  reviews  the  concepts  of  CSR  and  its  underlying  theories  in  connection  with  multina-­‐

tionals’   business   strategies.   The   primary   question   to   answer   is  whether   the   integration   of   socially  

responsible  practices  within  a  business’  strategy  is  beneficial  to  the  firm  as  well  as  to  society.  Multi-­‐

national  companies  in  the  pharmaceutical  industry  will  be  examined  on  their  business  strategies  and  

approaches  to  strategic  CSR  in  order  to  find  the  best  practices.    

 

1.1 Context  and  previous  research    

Since  CSR  became  an  increasingly  distinctive  topic  in  the  globalised  world,  researchers  have  tried  to  

build  a  framework  for  defining  and  implementing  this  tool  for  businesses  (Carroll,  1999).  Several  rea-­‐

sons  have  caused  the  rise  of  interest  in  the  field  of  corporate  responsibility.  Increased  awareness  of  

corporate  practices  together  with  the  rise  in  media  exposure  has  led  to  growing  expectations  in  this  

field.  The  public  is  becoming  involved  in  scandals  and  disasters  from  which  multinational  companies  

sometimes   fail   to   recover.   According   to   Chryssides   and   Kaler   (2005),   trends   such   as   Total   Quality  

Management  (TQM),  which  defines  in  advance  the  direction  in  which  the  business  wants  to  go  and  

ensures  standards  from  relevant  systems,  have  also  led  to  a  growing  concern  over  socially  responsi-­‐

ble  actions.        

 

 

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In  fact,  the  term  dates  back  to  the  eighteenth  century,  whereas  the  current  phrase  emerged  in  the  

1960s.  An  article  by  Milton  Friedman,  published  in  1970  in  the  New  York  Times  Magazine,  led  to  an  

international  stir  because  of  his  assertion  that  resolving  social  problems  is  a  governmental  task  and  

not   a   business   one.  He   further   argues   that   a   business   executive’s   primary   responsibility   is   to   care  

about  shareholders  and  their  interests  and  to  act  in  accordance  with  the  law,  meaning  he  shall  act  in  

a  way  to  satisfy  them  and  not  society  at  large.  This  article  provoked  problems  because  it  stated  that  

socially  responsible  actions  could  only  occur  at  a  cost  to  an  organization,  while  the  purpose  of  busi-­‐

ness   is   to   increase  profit   in   its  shareholders’   interests.   It  was  certainly  not  the  only  article  to  argue  

against  CSR,  but  definitely  one  of  the  most  prominent  ones.    

 

In  the  late  twentieth  century  Archie  Carroll  initially  started  to  conceptualize  CSR  into  a  4-­‐part-­‐model,  

which  is  still  one  of  the  most  established  models  in  contemporary  literature.  Carroll  (1991)  addressed  

a  model,  which  integrates  4  different  layers  of  corporate  responsibilities.  In  the  form  of  a  hierarchy  

he  states  that  starting  at  the  bottom:  economic,  legal,  ethical  and  philanthropic  responsibilities  have  

to  be   fulfilled   in  order   to  meet   social   responsibility.   Further  adaptations   to   the   initial   version  were  

made  and  published  up  to  the  year  2000.    

 

Matten  and  Crane  (2003)  still  suggest  that  corporate  citizenship  and  responsibility  are  far  more  pro-­‐

found  than  the  way  companies  currently  adopting  them.  ‘Corporate  ‘citizens’  normally  assume  their  

role  only  if  it  is  in  their  self-­‐interest  to  do  so.  This  leads  to  activities  of  CC  that  are  often,  but  certainly  

not  always,  praiseworthy  and   for   the  benefit  of  society.’   (Matten  &  Crane,  2003,  p.118)  Nowadays,  

there  is  a  need  to  critically  reflect  upon  big  businesses  using  CSR  as  a  tool  to  influence  profit  margins  

as  well   as   image  and   reputation.  Companies  are   trying   to   change   their   reputation  and   their   stake-­‐

holder’s  perception.  There  are  various  reasons  why  a  company  might  use  CSR  related  activities.    

Morally,  society  gives  a  business  the  base  for  profit.  It  can  be  described  as  a  reciprocal  relationship,  

because  business  cannot  make  profit  without  society,  whereas  business  should  provide  society  with  

the  reasonable  return  in  a  socially  responsible  way.  Rationally,  businesses  should  try  to  follow  a  con-­‐

trol  strategy  by  designing  and  incorporating  control  points  into  the  system  and  reacting  appropriately  

in  order  to  minimize  company-­‐hazardous  effects.  Economically,  the  argument  would  be  that  CSR  is  of  

interest   to   the  business  because   it   enhances   value  and   in   turn  maximizes   appeal   for   stakeholders,  

which  is  in  fact  important  to  maintain  the  long-­‐term  profitability  of  a  company.  (Werther  &  Chandler,  

2011)  Arguably,  CSR  tackles  different  parts  of  a  business  and  reinforces  relationships  on  a  give-­‐and-­‐

take  basis.  

In   fact,   it   is   claimed   that  both  business   strategy,  meaning   increasing   revenue  and   satisfying   share-­‐

holders’  needs,  plus  taking  society   into  account,  can  be  combined  to  achieve  better  results  overall.  

 

13  

Carly  Fiorina1  (2003)  mentioned  during  the  business  for  social  responsibility  annual  conference  that  

integrating  society   issues   into  business  strategy,   in  a  correct  manner,  would  actually  help   the  busi-­‐

ness   to   improve   accountability   and   at   the   same   time   increase   competitive   advantage.   In   fact,   the  

integration  of  CSR  becomes  increasingly  important  because  most  businesses  operate  in  a  global  con-­‐

text,  deal  with  diverse  stakeholder  groups  and  endeavour  to  establish  distinguishable  brands.   (Jen-­‐

kins,  2005)  Businesses  are  only  likely  to  win  in  a  continuously  changing  environment  if  they  are  able  

to  fulfil  the  needs  and  wants  of  their  stakeholders.  (Werther  &  Chandler,  2011)  Drawing  on  relevant  

literature   and   current   practices   of  multinationals  will   then   assist   in   revealing  whether   responsible  

practices  can  both  enrich  society  and  also  add  a  benefit  to  the  firm’s  bottom  line.    

 

1.2 Research  aims  and  structure  

The  purpose  of   this   thesis  and   its  associated  work   is   to   research  and  study   the   foundations  of  CSR  

and  relate  this  then  to  the  global  framework  of  multinational  companies  and  their  current  practices.  

By  looking  at  business  strategies  of  pharmaceutical  multinational  companies,  the  author  will  be  able  

to   draw   conclusions   in   regard   to   the   importance,   the   potential   benefits   and   the   pitfalls   of   CSR.   In  

addition,  this  paper  aims  at  exploring  the  extent  to  which  CSR  strategies  are  currently  implemented  

and  if  so  which  concrete  actions  are  being  taken  to  meet  internal  objectives.    

 

This   will   be   possible   by   critically   analysing   the   literature   on   'socially   responsible   strategies'   whilst  

comparing   and   contrasting  different  perceptions,   namely   from  an  economic,   legal   and  ethical   per-­‐

spective.   Focusing   on   the   critical   evaluation   of  multinational   companies,   this   paper  will   show  how  

American   and   Swiss   multinational   pharmaceutical   companies   are   implementing   corporate   social  

strategies  and  whether  they  are  able  to  achieve  competitive  advantage  through  social  actions.  Four  

different   countries  as  well   as  multinational   companies  and   their   respective  practices  will  be  exam-­‐

ined  by  using  the  approach  of  case  study  research  and  document  analysis  of  company  reports.  The  

addressed  markets   are   France,  Germany,   Poland  and   the  United  Kingdom.  Based  on   the   literature  

review   and   the   research,   possible   approaches   for   better   implementation   and   a   discussion   on   the  

findings  will  be  presented.  

 

                                                                                                                         

 1  ‘Carleton  S.  (Carly)  Fiorina  was  president  and  chief  executive  officer  of  Hewlett-­‐Packard  Company  from  1999  to  2005.  She  served  as  chairman  of  the  board  from  2000  to  2005.  Prior  to  joining  HP,  Fiorina  spent  nearly  20  years  at  AT&T  and  Lucent  Technologies,  where  she  held  a  number  of  senior  leadership  positions  and  directed  Lucent's  initial  public  offering  and  sub-­‐sequent  spin-­‐off  from  AT&T.’  (Hewlett  Packard,  2011)  

 

14  

Chapters  1  and  2,  aim  to  provide  the  context  for  this  paper  by  reviewing  literature  on  CSR  and  busi-­‐

ness  strategy.  Chapter  2  will  deal  more  explicitly  with  providing  definitions  and  identifying  the  histor-­‐

ical  background  of  CSR  and  also  categorize  different  trends  affecting  businesses  on  a  CSR  level.  Fol-­‐

lowed  by  the  most  important  CSR  theories,  concepts  and  models,  Chapter  2  will  also  develop  a  work-­‐

ing  concept  of  CSR  to  be  used  throughout  the  whole  paper.  Furthermore,  the  author  will  try  to  dif-­‐

ferentiate  CSR  between  related  terms  to  avoid  confusion  and  false  conclusions  (Chapter  2.3).  

 

Chapter   3  will   then   deal  with   the   basic   understandings   of   business   strategy   (Chapter   3.1)   and   the  

contemporary  issues  businesses  have  to  deal  with  when  setting  up  their  strategy  (Chapter  3.2).  Fur-­‐

thermore,  the  author  will  relate  CSR  to  business  strategy  and  try  to  come  up  with  arguments  for  in-­‐

tegrating  CSR  into  business  strategy  as  well  as  trying  to  evaluate  why  many  businesses  are  trying  to  

neglect  those  issues.  This  will  show  if  implementing  CSR  into  business  strategy  can  lead  to  competi-­‐

tive  advantage.  Chapter  4  identifies  key  players  in  the  multinational  pharmaceutical  industry,  where-­‐

as  Chapter  5  will  explore  the  relation  of  the  three  topics  of  CSR,  business  strategy  and  the  pharma-­‐

ceutical  industry  and  identify  general  relevance  as  well  as  the  author’s  personal  relevance.  

 

After  an  overview  on  the  understandings  of  CSR  and  business  strategy  and  linking  them  together,  the  

author   places   emphasis   on   real-­‐life   examples   of   the   global   pharmaceutical   companies.   Chapter   6  

includes  the  research  methodology,  namely  information  on  the  research  process  and  the  sample.  By  

screening  and  analysing  MNCs’  business   and  CSR   the  author  will   draw  conclusions  on   the  benefits  

and  pitfalls  of  corporate  social  business  strategies.    

Chapter  7  presents  findings  through  qualitative  content  analysis  and  Chapter  8  will  summarize  major  

points  and  declare  the  contribution  to  knowledge  made.  To  conclude,  Chapter  8.3  will  pinpoint  sig-­‐

nificant  limitations  and  address  implications  for  stakeholders.    

 

 

 

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2 CORPORATE  SOCIAL  RESPONSIBILITY  

In  order  to  identify  the  importance  of  CSR,  it  is  necessary  to  briefly  discuss  the  evolution  of  the  term  

in  relation  to  the  role  of  business  in  society  and  its  respective  nature.  Although  the  term  is  now  well  

established,  it  is  important  to  reveal  its  development  and  underlying  concepts  taking  various  defini-­‐

tions  into  account.    

2.1 Historical  development  of  corporate  social  responsibility  

CSR   is   a   subject   that  has  had   to   face   a   lot   of   criticism  and   controversy   in   recent   years.     Its   rise   to  

awareness  in  the  1990s  and  over  the  past  decade  illustrates  that  this  is  a  relatively  new  field  of  aca-­‐

demic   research.   Hence,   it   is   not   surprising   that   conceptualization   and   definitions   have   still   not  

reached  a  general  consensus  and  that   the   impacts  of   the  theme  are  still   facing  heated  discussions.  

(Carroll,  1999)  

Discussions  relating  to  the  role  of  business   in  society  date  back  to  the  late  1800s  where  businesses  

became  concerned  about  employees  and  productivity,  although  at  this  time  CSR  was  not  addressed  

by  name  and  very  few  cases  of  charitable  donations  can  be  found.  CSR  was  rather  referred  to  as  so-­‐

cial  responsibility  (Carroll,  2008).  The  1950s  brought  new  developments,  which  Murphy  (1978)  classi-­‐

fies   into   different   eras.  He   proposed  differentiating   time  periods   according   to   companies’  ways   of  

thinking  and  operating,  namely   the   ‘philanthropic  era’,   the   ‘awareness  era’,   the   ‘issue  era’  and  the  

‘responsiveness  era’.  The  first,  identified  as  the  ‘philanthropic  era’,  was  mainly  concerned  with  dona-­‐

tions   and   financial   sacrifices   to   society,   followed   by   fostered   recognition   for   social   issues,   and   de-­‐

scribed  as  the  ‘awareness  era’.  In  the  1970s,  businesses  began  to  respond  to  specific  issues  in  society  

such  as  environmental  pollution  and  discrimination  of  particular  groups,  which  he  decided  to  name  

the  ‘issue  era’.  Finally,  during  the  ‘responsiveness  era’,  businesses  began  to  develop  boards  of  direc-­‐

tors  who  were  in  charge  of  defining  corporate  ethics  and  performance  measurement  (Murphy,  1978,  

cited  by  Carroll,  2008),  reflecting  an  increased  awareness  that  business  activity  goes  beyond  econom-­‐

ics.    

In   1960   the   trend   arose   towards   a   definition   or   formalization   of   CSR.  Davis   (1960)   refers   to   ‘Busi-­‐

nessmen's  decisions  and  actions  taken  for  reasons  at  least  partially  beyond  the  firm's  direct  econom-­‐

ic  or  technical  interest.’  He  takes  an  example  of  an  old  employee  whose  productivity  compared  to  his  

co-­‐workers  is  rather  low  but  is  still  retained  by  the  company  due  to  moral  obligations.    

 

16  

Moreover,  in  the  1980s  most  European  and  North  American  governments  started  to  introduce  legis-­‐

lation   concerning   specific   issues   such   as   the   elimination   of   gender   and   race   discrimination   at   the  

workplace.  However,  due  to  the  accomplishment  of  introducing  new  legislations  the  interest  in  CSR  

was  on  the  decline  again.  (Griseri  &  Seppala,  2010)  

During  the  1990s,  concern  for  CSR  revived  and  was  raised  by  various  society  groups,  such  as  NGOs  

pressuring  businesses  to  match  their  practices  to  the  welfare  of  society  and  the  environment.    Fear-­‐

ing  scandals  and  loss  of  image  to  the  public,  companies  started  to  rethink  their  strategies  and  invest  

in  philanthropic  activities.  (Matten  et  al.,  2003)  Most  recently,  CSR  gained  prominence  because  the  

question  is  no  longer  whether  a  company  should  recognize  business  actions  in  relation  to  its  impact  

on   society,   but   more   profoundly   what   specific   measures   can   be   implemented   to   gain   a   strategic  

competitive  advantage  and  raise  social  welfare  at  the  same  time.  (Griseri  &  Seppala,  2010)  Compa-­‐

nies  started  to  think  of  CSR  as  a  strategic  tool  to  increase  labour  productivity,  strengthen  their  mar-­‐

ket  position  and  encourage  customers  to  purchase  their  product.  (Brooks  et  al.,  2011)    

This  chapter  focused  on  the  emergence  of  CSR  and  the  position  it  has  taken  in  today’s  business  prac-­‐

tices.  In  order  to  obtain  a  better  understanding  of  the  term,  the  next  section  will  outline  the  existing  

definitions  and  concepts  of  CSR,  since  the  term  itself  is  still  not  linked  to  a  universal  definition.    

2.2 Corporate  Social  Responsibility  Theories  

As  mentioned  earlier  in  this  paper,  Carroll  (1991)  initially  started  to  conceptualize  CSR  into  a  4-­‐part-­‐

model.  Figure  1  shows  Carroll’s  model,  which  integrates  4  different  layers  of  corporate  responsibili-­‐

ties.   In   the   form  of   a   hierarchy  he   states   that   starting   at   the  bottom:   economic,   legal,   ethical   and  

philanthropic   responsibilities   have   to   be   fulfilled   to   in   order   to  meet   social   responsibility.   (Carroll,  

1991)  

 

17  

   

Figure   1   Carroll’s   4-­‐part-­‐model   of   CSR:  adapted  from  Carroll  (1991)  

Figure   2   Varieties   of   CSR   (The   Economist   Newspaper   Ltd,  20/01/2005)  

The  economic  principle  is  situated  on  the  bottom  line  of  the  pyramid  and  represents  the  base  for  all  

other  sections.   It  can  be  argued  that  this   layer  has  to  be  fulfilled   in  order  to  build  upon  further  re-­‐

sponsibilities.   It  relates   in  the  first  place  to  a  business  firms’  responsibility  towards   its  shareholders  

and  employees  as  well  as  to  the  firms’  obligation  to  produce  quality  products  and  services  at  a  rea-­‐

sonable  price.  This  layer  of  the  pyramid  is  especially  important  in  times  of  crisis,  when  a  solid  founda-­‐

tion  is  required.  An  evident  example  is  the  financial  crisis  in  the  early  twentieth  century,  where  mul-­‐

tinationals  were  not   able   to  manage   the   risks   involved   in   issuing   a   very  high   amount  of   loans   and  

finally  lost  their  control  over  their  economic  responsibility.  (Crane  &  Matten,  2007)  

The   legal   responsibility   refers   to   a   set  of   given   rules  by   law,  whereby   the   firm  must   fulfil   its   legal  

obligations  and  comply  with  regulations  on  various   levels.  Pharmaceutical  companies,   for  example,  

have  to  go  through  a  set  of  guidelines  in  order  for  one  of  their  products  to  reach  the  market.    

Ethical  issues  are  not  necessarily  governed  by  legal  restrictions  and  go  even  further  than  just  behav-­‐

ing  according  to  the  rules  of  the  state.  Society  usually  defines  or  guides  companies  on  their  expecta-­‐

tions   of   ethical   behaviour,   although   companies   have   to   be   aware   of   consumer’s   expectations   and  

their  understanding  of  those  expectations  since  wrong  assumptions  could  lead  to  a  reverse  change  in  

reputation.  (Carroll,  1991)  

At  the  very  top  of  the  pyramid  philanthropic  responsibilities  of  corporations  represent  the  last  stage  

of  achievement.  Encompassing  actions  to  improve  quality  of  life  together  with  promoting  goodwill  by  

supporting  charitable  incentives  are  incorporated  at  this  stage  of  the  model.  In  contrast  to  economic  

and   legal   responsibilities,  which   are   either   required  by   law  or  business  partners,   ethical   behaviour  

Philanthropic  Resp.    

Ethical  Responsibilikes  

Legal  Responsibilikes  

Economic  Responsibilikes   • Reduces  profit  

and  social  welfare  

• Reduces  profit,  raises  social  welfare  

• Raises  profit,  reduces  social  welfare  

• Raises  profit  and  social  welfare  

Good  manage-­‐ment  

Pernicious  CSR  

Delusional  CSR  

Borrowed  virtue  

 

18  

can  be  seen  as  an  expectation  by   society.  Philanthropic  achievement  goes  even   further  and   repre-­‐

sents  society’s  mere  desires.  (Carroll,  1991)  

The  pyramid-­‐model  of  responsibilities  represents  a  good  overview  of  the  expectations,  which  stake-­‐

holders  place  on  a  business  and  the  areas  that  are  included  in  CSR,  yet,  it  ‘fails  to  predict  or  indicate  

priorities  for  managerial  decision-­‐making’  (Griseri  &  Seppala,  2010,  p.20).  The   linkage  between  CSR  

and  how  to  implement  it  in  the  right  ways  is  specifically  important  for  this  paper  in  order  to  come  up  

with   a   working   definition.   Figure   2   shows   a   model   adapted   from   The   Economist   Newspaper   Ltd,  

20/01/2005   presenting   different   ways   of   using   CSR   and   addressing   more   intensively   the   issue   of  

managerial  decision-­‐making.  It   is  basically  a  response  to  whether  a  company’s  CSR  policies  improve  

the  profit  margin,  i.e.  the  long-­‐term  profitability  of  a  business,  or  whether  it  improves  social  welfare,  

or  both.    

This  approach  shows  that  CSR  can  be  divided  into  two  dimensions,  namely  profit  and  society,  mean-­‐

ing  improving  or  reducing  social  welfare  as  well  as  encouraging  or  discouraging  profit.  According  to  

The  Economist  Newspaper  Ltd,  20/01/2005,  businesses,  which  are  merely  financially  profitable,  are  

also  likely  to  raise  social  welfare  at  the  same  time.  CSR  would  therefore  not  be  the  right  description,  

because  it  refers  more  to  ‘good  management’.  Successful  management  of  a  firm  and  a  positive  out-­‐

come   for   society   reflects  a   ‘win-­‐win   situation’,   such  as  Marc  Benioff  experienced   in  his  position  as  

CEO  of  salesforce.com2.  The  company  is  providing  online  business  services  and  combines  CSR  actively  

with  the  business  strategy  by  offering  flexible  working  options  and  encouraging  employees  to  engage  

in  charitable  activities  at  the  firm’s  expense.  It  is  a  fact  that  employee  satisfaction  and  performance  

relate  directly  to  job  design  and  the  company’s  long-­‐term  profitability,  since  satisfied  employees  tend  

to   be   loyal   employees.   Employee   loyalty   or   commitment   is   also   highly   related   to   an   organizations  

culture  and  the  employee’s  identification  with  it.  But  ‘good  management’  is  hard  to  achieve  and  can  

easily  turn  into  ‘borrowed  virtue’,  where  social  welfare  may  still  arise,  but  the  expense  is  simply  too  

high  to  reinforce  the  cycle  of  revenue  growth.  ‘Borrowed  virtue’  therefore  refers  to  plain  donations  

without  actually  caring  about  for  example  including  employees  in  these  donations  to  show  that  the  

business  is  really  motivated  and  interested  instead  of  only  donating  a  sum  of  money  to  keep  stake-­‐

holders  quiet.      

But  the  article  raises  an  important  question,  namely  whether  a  manager  being  charitable  can  really  

be   described   as   philanthropic,   since   he/she   is   spending   shareholder’s   money.   ‘When   Robin   Hood  

                                                                                                                         

 2  Salesforce.com  provides  business  applications  and  solutions  for  various  fields,  such  as  customer  relationship  management  (CRM)  (http://wwwsalesforce.com/)  

 

19  

stole  from  the  rich  to  give  to  the  poor  he  was  still  stealing.  He  might  have  been  a  good  corporate  citi-­‐

zen,  but  he  was   still   a  bandit’   (The  Economist  Newspaper   Ltd,  20/01/2005).  Although  a   company’s  

net  loss  due  to  charity  might  be  a  poor  CSR  resolution,  this  case  is  still  not  the  worst.  In  fact,  the  most  

uncomfortable   outcomes   are   ‘delusional   CSR’   and   ‘pernicious   CSR’,  where   companies   are   actually  

acting  in  opposition  to  the  interests  of  society.  ‘Delusional  CSR’  reduces  profits  and  social  welfare  at  

the  same  time  and  ‘merely  goes  through  the  motions,  delivering  no  new  resources  to  worthy  causes,  

giving   the   firm's  workers   or   customers   no   good   reason   to   think  more   highly   of   it’   (The   Economist  

Newspaper  Ltd,  20/01/2005).  

 

Ameshi  and  Adi  (2007)  clarify  the  matrix  of  the  publishing  in  the  Economist  by  matching  the  different  

forms  of  CSR   to   religious  characters.   ‘Good  management  could  be   labelled   ‘the  saint’,  as  borrowed  

virtue  –   ‘the  martyr’,  while  pernicious  and  delusional  CSR  could  both  be   labelled   ‘the  hypocrite’  and  

‘the  sinner’  respectively.’  (Ameshi  &  Adi,  2007,  p.9)  The  possibility  of  reducing  social  welfare  and  the  

link   to   religion   illustrates   the   ethical   responsibilities   as   shown   in   Figure  1.   The  wide  nature  of   CSR  

(ethical-­‐,   legal-­‐,   economic   issues)   complicates   achieving  a  unique  definition.   In  order   to   clarify   and  

avoid  confusion,  the  next  section  will  explain  the  most  relevant  terms  in  relation  to  CSR.    

 

According  to  Garriga  and  Melé  (2004),  the  literature  on  CSR  theories  can  be  divided  into  four  differ-­‐

ent  areas,  namely  instrumental  theories,  political  theories,  integrative  theories  and  ethical  theories.  

The  next  pages  will  outline  their  differences  and  illustrate  an  example  for  each  of  them.    

Firstly,  instrumental  theories  describe  CSR  as  a  mere  ‘means  to  an  end’  of  profits,  where  companies  

use  activities  to  achieve  financial  profitability.  (Garriga  &  Mele,  2004)  This  relates  to  Friedman’s  view,  

stating   ‘the  only  one   responsibility  of  business   towards  society   is   the  maximization  of  profits   to   the  

shareholders   within   the   legal   framework   and   the   ethical   custom   of   the   country’   (Friedman,   1970,  

p.32).  Compared   to   the  matrix   in  The  Economist  Newspaper   Ltd,  20/01/2005   this  belief   could  also  

refer  to   ‘good  management’  by   increasing  social  welfare  (not  always  willingly)  too,  since   ‘in  certain  

conditions   the   satisfaction   of   these   interests   can   contribute   to  maximizing   the   shareholder   value’.  

(Garriga  &  Melè,  2004,  p.  53)   In   the   field  of   instrumental   theories,   two  approaches  are  most  com-­‐

mon:  ‘Maximizing  shareholder  value’  which  is  rather  short-­‐term  oriented  and  developing  ‘strategies  

for   achieving   competitive   advantage’   with   a   focus   on   long-­‐term   profit   acquisition.   Although   both  

approaches  do  not  explicitly  exclude  stakeholder’s  interest,  their  main  purpose  is  to  achieve  econom-­‐

ic  objectives.    

 

The  second  theory  section,  political  theories,  focuses  on  political  considerations  concerning  CSR  poli-­‐

cies   and   the   relationship   between   stakeholders   and   the   firm   in   a   political   setting.   The   main   ap-­‐

 

20  

proaches  are  ‘Corporate  Constitutionalism’  and  ‘Corporate  Citizenship’  which  is  a  relatively  new  de-­‐

velopment   in   the   field   of   CSR.  More   detailed,   ‘Corporate   Constitutionalism’   refers   to   a   company’s  

possession  of  power  and   its  use.   (Garriga  &  Mele,  2004)  Davis   (1973)   identifies   two  principles   that  

explain  the  management  of  power,  namely  ‘the  social  power  equation’  and  ‘the  iron  law  of  responsi-­‐

bility’.   According   to   Davis   (1973)   business   can   only   exist   due   to   society   and   therefore   businesses  

should   treat   society   in   a   responsible  manner   addressing   their   needs   and  wants   correctly.   For   this  

reason,  a  firm’s  social  power  defines  its  amount  of  social  responsibility  (Davis,  1973,  cited  by  Garriga  

&  Mele,  2004).  In  more  detail,  the  ‘iron  law  of  responsibility’  states  that  if  a  company  fails  to  perform  

and  address  society’s  needs  and  wants,  it  will  lose  social  power  and  ‘other  groups  will  eventually  step  

in   to   assume   those   responsibilities’   (Davis,   1973,   p.314).   As  much   as   ‘the   authority   of   government  

derives   from  and   is   limited  by  a  body  of   fundamental   law’   (Fehrenbacher,  1989,  p.1),  business’  au-­‐

thority  stems  from  and  is  limited  by  society.  This  explains  why  the  theory  is  named  ‘corporate  consti-­‐

tutionalism'.    

Another   approach,   ‘corporate   citizenship’,  which  will   be  explained   in  more  detail   in  Chapter  2.3.2,  

refers   to   a   framework   that   views   the   changes   in   recent   years,  which  have   caused   the  demand   for  

businesses   to   reconceptualise   their   role   in   society.   Globalization,   advances   in   technology   and   the  

power  of  consumers  to  influence  business  events  have  shifted  economic  power  from  governments  to  

multinationals.   (Andriof   and  McIntosh,   2001)  More   power  means  more   responsibility,   so   in   other  

words  citizenship  represents  a   ‘device  of  new  governance  structures  on  an   international  and  global  

level’  (Andriof  and  McIntosh,  2001,  p.  12).  

 

Third,   integrative   theories   relate   to   business   duties   towards   society   depending  on   time,   situation,  

and  ideals  of  society  at  this  stage.  This  means  that  a  business  has  no  long-­‐term  obligation  of  corpo-­‐

rate  responsibility  but  has  to  adapt  to  changes  in  its  environment.  (Garriga  and  Mele,  2004)  Moreo-­‐

ver,  Ackerman  (1973)  discusses  the  theory  of  issues  management,  stating  that  societal  concerns  are  

changing  over  time  and  have  to  deal  with  a  certain  process  of  strategy  or  in  his  words  ‘response  pro-­‐

cess’   (Ackerman,  1973,  p.96)  which   involves  risk  assessment  and  careful  planning.  This   is  quite  rea-­‐

sonable,  since  a  project  cannot  simply  just  be  carried  out,  but  requires  planning  and  control  for  prob-­‐

lem  identification.  Furthermore,  Mitchell  (1999)  explains  that  in  the  planning  part  of  social  responsi-­‐

bility  management,  stakeholder  management  is  important  in  order  to  best  integrate  the  demands  of  

society.  Garriga  and  Mele  (2004)  enforce  a  so-­‐called  ‘stakeholder  dialogue’  (Garriga  and  Mele,  2004,  

p.  59)   in  order  to  cater  best   for  society’s  needs  and  reveal   issues  that  might  not  be  obvious  to  the  

firm   at   first   sight.     Through   integrating   stakeholder   management   and   reacting   appropriately   to  

changes  in  the  environment,  a  company  might  then  be  able  to  best  address  CSR  demands.    

 

 

21  

Lastly,  there  is  the  section  of  ethical  theories,  which  includes  the  ‘stakeholder  normative  theory’  as  

well   as   the   approach   of   ‘universal   rights’.   By   introducing   his   publishing   ‘Strategic  Management,   A  

Stakeholder  Approach’,  Freeman  (1984)   laid  out  the  base  for  theoretical  development,  since  he  of-­‐

fered  a  novel  way  to  approach  societal  challenges  in  a  business  environment.  Donaldson  and  Preston  

(1995)  tried  to  summarize  the  developments  in  theory,  which  followed  Freeman’s  approach.  One  of  

those  was  the  ‘normative  stakeholder  theory’,  which  is  basically  linked  to  the  moral  obligations  of  a  

firm  towards   its  stakeholders.  Furthermore,  Donaldson  and  Preston  (1995)  propose  that  stakehold-­‐

ers  are  measured  by  their  ‘intrinsic  value’,  meaning  ‘each  group  of  stakeholders  merits  consideration  

for  its  own  sake’  (Donaldson  and  Preston,  1995,  p.67)  

 

After  having  discussed   the  different   approach  on  what  CSR  might   consist   of,   the   researcher   found  

that  in  all  models  four  important  factors  are  addressed,  namely  ‘philanthropy’,  ‘ethics’,  ‘politics’  and  

‘economics’.   The   Commission   of   the   European   Communities   (COM)   (2002)   proposes   the   following  

definition   of   CSR:   ‘A   concept   whereby   companies   integrate   social   and   environmental   concern   in  

their   business   operations   and   in   their   interaction  with   stakeholders   on   a   voluntary   basis’   (COM,  

2001,  p.  366).  This  definition  appears  to  be  suitable  for  this  thesis,  since   it  encompasses  previously  

discussed  dimensions  and  was   found  to  be  the  definition  with  most   frequency  counts   from  Google  

concerning  dimensions  relating  to  CSR  (Dahlsrud,  2006).  

 

After  having  summarized  the  most  important  theories  related  to  CSR  and  presented  a  working  defini-­‐

tion  of  CSR  for  this  paper,  Chapter  2.3  will  deal  with  related  terms  for  clarification  purposes.      

2.3 Differentiation  of  CSR  to  related  terms  

‘Numerous  definitions  of  CSR  have  been  proposed  and  often  no  clear  definition  is  given,  making  theo-­‐

retical   development  and  measurement  difficult’   (McWilliams  et   al.,   2006,  p.3).  Although   this  paper  

includes  a  glossary  of  terms,  the  following  terms  are  explicitly  relevant  to  the  field  of  CSR.  They  re-­‐

quire  an  extended  view   in  order  to  differentiate  or  perhaps   link  them  to  the  relevant  topic  of  CSR,  

because  there  is  no  strong  consensus  on  a  definition  for  CSR.                                                                                                                                                                                                                            

2.3.1 Business  ethics  and  CSR  

CSR   is   of   course   also   concerned   about   the   ethical   stance   behind   a   business   strategy,   but   it   is   im-­‐

portant  that  ethics  is  just  one  part  of  CSR,  as  outlined  in  Carroll’s  four-­‐part  model  (Chapter  2.2,  p.14).  

It  is  a  well-­‐known  fact  that  persuading  others  and  doing  good  business  is  a  result  of  clear  justification  

and   decision   skills.   Ethical   behaviour  may   be   relevant   in   any   of   those   situations.   Typically,   ethical  

analysis   involves   the   right   code  of   conduct   and   is   required  when  what   is   right   is   either   unclear   or  

 

22  

involves  a  conflict.  According  to  Hartley  (2005),  there  are  some  fields  where  it  is  not  entirely  certain  if  

an  action  is  ethical  or  not.  This  could  be  a  controversial  issue,  on  the  one  hand  helping  society  while  

negatively  influencing  it  at  the  same  time:    for  example,  more  tourists  travelling  to  a  receiving  coun-­‐

try  and   increasing  pollution  but   in   turn  opening  employment  possibilities   for   the   local   community.  

Here   for   example,   careful   analysis   and   reason   giving   is   necessary   to   determine   appropriate   action  

and  to  persuade  others  that  it  is  justified.  

 

‘By  using  the  language  of  right  and  wrong,  we  have  already  identified  that  a  situation  is  moral  in  na-­‐

ture.’  Morris   (2004   cited   by   Crane  &  Matten,   2007,   p.129)   According   to   Crane  &  Matten   (2006)   a  

situation  may  be  reviewed  as  moral   in  consideration  of  three  factors:  first,  the  decision  on  ‘right  or  

wrong’  is  considered  moral  when  having  an  effect  on  other  people;  second,  when  the  decision  is  built  

upon  choice,  meaning  there  is  an  option  for  an  alternative;  and  third,  if  others  consider  the  decision  

as  ethical,  regardless  of  your  opinion  in  this  context.  

 

Business  ethics  portrays  ethical  behaviour  within  the  company,  thereby  mainly  including  a  company  

culture  with  ethical   codes.   ‘Various  scandals  concerning  undesirable  business  activities,   such  as   the  

despoiling  of   rivers  with   industrial  pollutants   […]  have  highlighted  the  unethical  way   in  which  some  

firms  have  gone  about  their  business’  (Crane,  Matten,  2007,  p.4).  Sadler-­‐Smith  (2012)  uses  Aristoteli-­‐

an  tradition  and  Darwinian  naturalism  in  order  to  argue  that  morality  in  business  decisions  involves  a  

theory,  which  states  that  we  are  innately  prepared  to  develop  moral  modules.  That   is  to  say,  being  

ethical  doesn’t  need  to  mean  that  a  business  engages  in  philanthropic  activities.  CSR  strategies  have  

to  comprise  not  only  ethical  behaviour,  but  also  need  to  meet  legal  and  economic,  i.e.  shareholder,  

responsibilities.    

 

2.3.2 Corporate  citizenship  

Corporate  Citizenship   (CC)   is  another   term,  which   is  highly   related  to  CSR,  as  already   introduced   in  

the  glossary.  CC  can  be  explained  by  how  the  corporation  defines  its  role  in  society  and  how  it  man-­‐

ages   to   engage  with   its   community.   The   company   can   limit   its   engagement  of   CC   to   philanthropic  

actions,  or  extend  this  through  involving  itself  for  example  in  governance  or  other  actions,  which  go  

beyond  donations  to  charity  (Waddell,  2000).  The  term  developed  in  the  1990s  and  initially  only  ad-­‐

dressed  philanthropic  actions  of  a  business,  however  the  emergence  of  a  new  term  led  to  more  con-­‐

fusion  with   the   whole   terminology.   Basically,   there   are   two   different   ways   of   applying   ‘corporate  

citizenship’  to  a  business:  (Griseri  &  Seppala,  2011)    

 

23  

One  view  of  CC  sees  a  company  as  an  individual  ‘citizen’  or  more  a  local  and  global  ‘actor’  in  society  

depending  on  the  size  and  the  impacts  it  has  on  society.  Moreover,  this  means  the  company  has  to  

take  care  of  their  rights  and  responsibilities  alongside  other  ‘citizens’.  Wood  and  Logsdon  (2001)  of-­‐

fered   a  more   business-­‐related   view   of   citizenship,   namely   ‘business   citizenship’   where   businesses  

operating  in  a  global  environment,  should  conform  to  the  rules  of  every  country  they  are  operating  

in.    

The  second  approach  involves  the  position  of  a  company  as  a  form  of  governmental  actor  taking  the  

approach  of  providing   citizenship   rights.   This  means,   the  business-­‐related  view  of   citizenship   is  ex-­‐

tended   through   the   involvement   in   so-­‐called   actions,  which   the   government   should   usually   be   ac-­‐

countable   for,  going  beyond  donations   to  charity.  An  example  would  be  supporting  poor  countries  

with   the   construction   of   educational   and   health   facilities   or   fighting   for   the   approval   of   political  

rights,  or  pressing  the  local  governments  to  operate  in  a  different  way  to  open  up  new  rights  for  citi-­‐

zens.  (Griseri  &  Seppala,  2011)      

CC  can  be  seen  as  focusing  on  citizens’  rights  and  responsibilities  or  ways  of  how  companies  might  be  

able  to  control  them  by  providing  employees  with  a  good  working  environment  and  respecting  the  

rights  of  members  of  society.  (Waddell,  2000)  According  to  Matten  and  Crane  (2005),  there  are  three  

different  views  of  CC,  one  of  which  is  the  limited  view  referring  to  philanthropy  of  the  firm  such  as  

mere  financial  donations,  which  do  not  need  to  be  related  to  the  company’s  activity.  The  equivalent  

view   relates   to   the   framework   of   Carroll   (1991)   and   the   four   different   layers   of   CSR,  whereas   the  

extended  view  of  CC  describes  firms  as  participating  in  governmental  roles  and  administrating  politi-­‐

cal   rights.   (Scherer  &  Palazzo,  2010)  All   in  all,   corporate  citizenship  consists  of   two  different  views,  

either  taking  the  responsibilities  of  a  citizen  in  respect  to  other  citizens  or  taking  the  responsibilities  

of  a  governmental  actor.    

This   chapter   provided   an   overview   of   the   related   terms   and   the   differentiation   to   CSR.   The   next  

chapter  will  focus  on  the  identification  of  the  term  ‘business  strategy’  and  its  composition  in  order  to  

relate  CSR   to  strategy.  Further,   the  next  section  will   try   to   find  whether   strategic  CSR  can  serve  as  

competitive  advantage.    

 

24  

3 BUSINESS  STRATEGY  

In  order  to  identify  the  impacts  of  CSR  on  a  firm’s  business  strategy,  there  is  a  need  to  take  a  closer  

look  at  the  terms  ‘strategy’,  ‘business  strategy’  and  ‘competitive  advantage’.  Therefore,  this  chapter  

will  focus  on  the  main  points  of  a  business  strategy,  namely  gaining  competitive  advantage  through  

developing  and  planning  an  effective   strategy.  Moreover,   Chapter  3.1  will   identify   the   relationship  

between  competitive  advantage  and  strategy,   leading  to  Chapter  3.2,  which  will  deal  with  CSR  as  a  

factor  of  competitive  advantage.  Finally,  Chapter  3.3  will  focus  on  CSR  measurement  and  the  impacts  

of  implementing  CSR  on  the  financial  performance  of  a  firm.    

3.1 Competitive  advantage  and  strategy  

Many  scholars  have  covered  the  area  of  business  strategy  including  economists  (such  as  Porter),  so-­‐

ciologists  (like  Mintzberg)  but  also  consultants.  (Cashian,  2007)  Defining  the  term  ‘strategy’  serves  as  

a  starting  point  in  order  to  understand  the  concepts  of  a  ‘business  strategy’.  Henry  Mintzberg  (1987)  

has  therefore  developed  the  ‘five  Ps’  of  strategy,  since  the  term  can  be  used  in  different  ways,  which  

makes  it  rather  impossible  to  give  one  single  explanation.  Figure  3  shows  the  ‘five  Ps’  bearing  in  mind  

that  they  should  be  used  jointly  in  order  to  achieve  the  best  overview.    

 

Figure  3  The  five  Ps  of  strategy,  adapted  from  Mintzberg  (1987)  

‘Planning’   is  one  of  the  first  words  one  associates  with  a  strategy,  because  a  structure  of  what  and  

when  a  business  wants  to  achieve  is  often  a  useful  start.  As  a  business  establishes  different  intended  

goals,  one  has  to  distinguish  between  short-­‐  and  long-­‐term  goals.  Planning  is  often  related  to  defin-­‐

Strategy  

plan  

ploy  

papern  of  behaviour  

posikon  in  respect  to  others  

perspeckve  

 

25  

ing   internal   skills   and   external   threats   by   using   a   SWOT-­‐Analysis,   PEST-­‐Analysis   and   other   project  

management  tools.  (Campbell,  2002)  Developing  a   ‘ploy’  refers  to  a  short-­‐term  strategy,  where  ob-­‐

jectives  can  easily  be  changed  and  can  only  be  loosely  defined,  as  for  example  in  any  sport  strategy  

that  is  used  to  win  a  game.  (Campbell,  2002)  Moreover,  a  ploy  can  be  defined  as  a  ‘specific  manoeu-­‐

ver  intended  to  outwit  an  opponent  or  competitor’  (Mintzberg,  1998,  p.14)  ‘Pattern  strategies’  refer  

to  developing  a  strategy  on  the  base  of  on-­‐going  regular  conduct,  whereby  the  actual  development  

of  a  strategy  is  often  not  realized  because  of  an  inherited  pattern  of  actions.  An  analysis  of  core  com-­‐

petences  as  well  as  a  USP-­‐Analysis  can  be  helpful   in  order  to  allocate  resources  effectively.   (Camp-­‐

bell,  2002)   ‘Positioning’   refers  basically   to  a  company  placing   itself   in  a  specific   field   in   the  market  

and   then   trying   to  match   the  organizations   resources   in   the  best  way   to   the   target  market  within  

which  it  operates.  This  often  includes  a  PEST-­‐Analysis,  Porter’s  Diamond  Framework  and  Porter’s  Five  

Forces   in   order   to   help   gain   or   improve   competitive   advantage.   (Sengubta,   2005)     A   ‘perspective  

strategy’  denotes  changing  the  mentality  or  perhaps  even  culture  of  the  organization  and  represents  

an  entrepreneurial  approach  in  achieving  goals.  This  tactic  is  very  visionary  in  nature  and  includes  the  

whole  organization.  (Campbell,  2002)  

Although  the  five  approaches  to  strategy  appear  to  be  very  different  in  nature,  it  is  important  to  con-­‐

sider   objectives,   expected   results   and   the   desired   outcomes   of   a   strategy.   According   to   Cashian  

(2007),  ‘all  are  concerned  with  process  -­‐  either  the  process  of  decision-­‐making  or  the  means  by  which  

profits  are  made  and  maintained’  (Cashian,  2007,  p.8).    This  suggests  that  every  strategy  needs  to  be  

controlled  by  focusing  on  milestones  and  the   line  of  development,  because  achieving  the  expected  

goal  of  a  strategy  requires  process-­‐related  monitoring  of  its  life  cycle.    

As  Henry  Mintzberg’s  5  Ps  refer  to  a  rather  general  perspective  on  strategy,  a   ‘business  strategy’   is  

more  about  an  organization’s   long-­‐term  plan  and  achievements   in   the   future.  An  organization  also  

often   includes  those  goals   it  wants  to  achieve  as  well  as  their  strategic  aims  and  objectives   in  their  

mission  statement.   (Johnson  et  al.,  2011)  Alfred  Chandler   (1962)  places  emphasis  on  three  compo-­‐

nents   of   strategy,   namely   the   ‘long-­‐run   goals   and   objectives   of   an   enterprise   and   the   adoption   of  

courses   of   action   and   the   allocation   of   resources’   (Chandler,   1963,   p.13).   He   argues   that   strategic  

objectives  need  to  be  rational  and  realistic.  Once  an  organization  has  established  and  conceptualised  

those  objectives,   specific  actions  need   to  be   taken   in  order   to   fulfil   the  mission.  However,  without  

the  necessary  different  nature  of  resources  or  inputs  (e.g.  financial)  the  complete  process  would  not  

be  able  to  attain  a  desirable  output.    

According  to  Campbell   (2011)  the  development  of  a   ‘business  strategy’   is  part  of  a  framework  con-­‐

sisting  of  a  ‘strategic  analysis’  of  the  firm,  which  assists  in  defining  a  ‘business  strategy’  and  can  then  

be  implemented  and  referred  to  as  ‘strategic  management’.  The  ‘strategic  analysis’  can  help  by  ana-­‐

 

26  

lysing  the  business  internally  (processes,  SWOT,  stakeholders)  and  externally  (macro-­‐  and  microenvi-­‐

ronment,   PEST-­‐Analysis)   and   will   help   in   selecting   core   competences   to   define   the   best   ‘business  

strategy’.  The  main  purpose  of  a  strategic  analysis  is  to  gain  information  regarding  possible  competi-­‐

tion  and  improve  the  companies’  own  competitive  advantage.  (Campbell,  2011)  This  is  of  particular  

importance   for   this  paper,   since   the   focus   is   to   identify  whether  CSR  activities   relating   to  business  

strategy  improve  a  firm’s  position  in  their  competitive  environment.    

Nowadays,  growing  competition  makes  it  much  harder  to  distinguish  products  and  find  outstanding  

performance   features   in  a  business.  Achieving  competitive  advantage  encompasses  a   ‘strategic   fit’  

between   the  organization  and   its  environment.  Michael  Porter   (1998)  established  a   framework   for  

analysing   the   competitive   environment   of   a   business,   namely   the   ‘Five   Forces’.   Competitive   ad-­‐

vantage  can  be  seen  as  the  overall  logic  goal  of  a  business  and  goes  hand  in  hand  with  its  profitabil-­‐

ity.  When  a  business  is  able  to  achieve  a  long-­‐term  competitive  advantage  and  retain  higher  profits  

than  its  competitors,  it  can  in  turn  reinvest  in  business  strategy  to  maintain  this  advantage.  (Spulber,  

2009)  In  order  to  keep  this  virtuous  circle  alive,  businesses  need  to  focus  on  one  or  more  forces.  Alt-­‐

hough  they  are  all  important,  not  all  of  them  are  particularly  relevant  due  to  changes  in  the  environ-­‐

ment.  (Campbell,  2011)      

Figure  4  illustrates  the  five  elements  of  the  framework.  These  are  ‘industry  rivalry’  and  four  directive  

forces,  namely  the  ‘threat  of  potential  entrants’,  the  ‘power  of  buyers’,  the  ‘threat  of  substitutes’  and  

the  ‘power  of  suppliers’.  ‘Industry  rivalry’  explains  the  degree  of  competitiveness  within  the  industry  

where   a   business   is   operating.   The   level   of   competition   depends   on   the   number   and   the  market  

share  of  competitors,  customers’  brand  awareness  and  the  prevailing  price  competition  in  the  area.  

(Campbell,  2011)  The   ‘threat  of  entrants’   is  subject  to  the  start-­‐up  costs   in  the  market,  customer’s  

retention  and  loyalty  rate,  legal  regulations  and  the  dominance  of  existing  marketing  channels.  Fur-­‐

thermore,  brand  equity  can  play  an  important  role  when  trying  to  keep  a  prevailing  market  position.  

The  ‘threat  of  substitutes’  depends  largely  on  customer  loyalty  and  switching  costs  to  another  prod-­‐

uct,  meaning  the  likelihood  of  customers  swapping  their  brand  if  a  new  product  of  another  producer  

with  similar  features  enters  the  market.  The  third  aspect,  namely  the  ‘power  of  suppliers’  describes  

whether  the  firm  is  tied  to  work  with  one  major  supplier  or  many  different  suppliers.  The  fact  of  hav-­‐

ing  only  one  major  supplier  available  might  not  be  the  best  decision,  as  the  firm  might  be  bound  to  a  

contract  where  the  supplier  can  charge  monopolistic  prices.  Further,  whether  or  not  there  is  only  one  

major  supplier  available  might  relate  to  the  scarcity  of  resources.  Lastly,  the  accessibility  of  substitute  

products  and  the  quantity  of  purchase  by  a  customer  will  influence  the  degree  of  ‘power  of  buyers’.  

When  buyer  power  is  high  this  means  that  customers  are  determining  the  price,  as  there  are  many  

 

27  

suppliers  and  only  one  segment  of  buyers.  Therefore  it  is  likely  that  the  power  of  buyers  has  an  effect  

on  a  firm’s  competitive  advantage  and  profitability.  (Campbell,  2011)  

   

Figure  4  Porter’s  five  forces  framework,  adapted  from  Porter  (1980)  

Figure  5  Porter’s  diamond  framework,  adapted  from  Porter  (1990),  The  Competitive  Advantage  of  Nations  

Porter  and  Kramer  (2006)  present  a  more  general  perspective  of  strategic  CSR,  suggesting  that  ‘effec-­‐

tive  CSR   requires   an  understanding  of   the   social   dimensions   of   the   company’s   competitive  context’  

(Porter  &  Kramer,  2006,  p.  9)  by  using  the  so-­‐called  ‘diamond  framework’.  Figure  5,  which  illustrates  

the  ‘diamond  framework’,  helps  in  understanding  the  link  between  corporation  and  society  and  takes  

the   viewpoint   of   an   ‘outside-­‐in’   approach,   showing   the   different   external   conditions   that   affect   a  

company’s  activity.  Porter  and  Kramer  (2006)  address  four  key  conditions  that  are  important  in  order  

to  improve  value-­‐chain  activities  environmentally  and  economically.    

The  first  condition,  the  ‘context  for  firm  strategy  and  rivalry’  defines  the  context  in  which  a  firm  is  

operating  by  looking  at  specific  regulations  and  policies  governed  by  law.  An  example  would  be  mar-­‐

ket   entry   regulations   or   policies,  which   hinder   corruption   and   address   the   competition   in   a   firm’s  

field,  which  motivates  firms  to  look  for  unique  ways  to  achieve  customer  attention  and  a  best-­‐in-­‐field  

position.   (Porter   and  Kramer,   2006)  One  of   the   current  mechanisms   could  be  annual   reporting   to-­‐

wards  CSR  activities  of  the  firm.    

Moreover,  customers’  purchasing  behaviour  is  also  an  important  determinant  for  a  firm  in  order  to  

strive  for  competitive  advantage,  which  is  described  as  ‘local  demand  conditions’  in  the  model.  The  

authors  give  the  example  of  consumers’  rise  of  awareness  to  more  healthy  and  biological  products,  

which  causes  companies  to  rethink  and  extend  their  product  lines.  It’s  not  just  consumers  who  have  

a  great  influence  on  a  company’s  decision  for  strategy  but  also  ‘related  and  supporting  industries’,  

Compekkve  rivalry  

Actual  or  potenkal  entrants  

Buyers  

Subsktute  products/services  

Material  provider

s  

Firm  strategy,  structure  and  

rivalry  

Demand  condikons  

Related  and  supporkng  industries  

Factor  condikons  

 

28  

such  as  local  suppliers,  which  explains  the  company’s  supplier  relationship  or  the  access  to  any  avail-­‐

able   related   firm.   The   fourth   element   of   the  model   is   given   to   ‘factor   or   input   conditions’,  which  

refers  to  the  inputs  and  resources  available  to  a  business,  such  as  infrastructure,  capital  and  natural  

resources.   From  a   CSR   perspective   input   conditions  might   be   sustainable   options   to   infrastructure  

and  training  for  employees  to  improve  human  resources.  (Porter  and  Kramer,  2006)  

Operating   ‘in  ways   that   secure   long-­‐term  economic   performance  by   avoiding   short-­‐term  behaviour  

that   is   socially  detrimental  or  environmentally  wasteful’   (Porter  &  Kramer,  2006,  p.4)  might  enable  

companies  to  significantly  improve  the  triple-­‐bottom  line3.  At  any  of  those  stages  or  conditions  CSR  

might   be   able   to   generate   competitive   advantage.   For   example   by   the   use   of   ‘sustainable   natural  

resources’   relating   to   responsible   input   mechanisms,   or   the   ‘transparency   degree’   companies   are  

showing  their  stakeholders   in  relation  to  the  context  of  firm  and  rivalry.  However,   it   is  not  possible  

for  a  business  to  address  each  condition.  It   is  central  to  select  them  according  to  their  relevance  to  

the  business  in  order  to  achieve  and  sustain  competitive  advantage.  (Porter  &  Kramer,  2006)  

‘Few,  if  any,  competitive  advantages  can  be  sustained  indefinitely,  so  the  company  must  continually  

seek  opportunities  to  create  the  most  value.’  (Spulber,  2009,  p.231)  One  possibility  for  a  firm  to  gain  

competitive  advantage,   improve  their  reputation  and  reduce  their  operational  cost  might  be  to  en-­‐

gage  in  socially  responsible  activities.  Therefore,  the  next  chapter  involves  a  closer  look  at  CSR  activi-­‐

ties  and  their  impact  on  a  firm’s  competitive  advantage  and  potential  benefits.  

3.2 CSR  as  strategic  competitive  advantage  

In  order  to  assess  the   importance  of  CSR  for  a  company’s  competitive  advantage,   it   is  necessary  to  

understand  how  a  business   is   implementing   those   issues  or   linking   them   to   their   strategy.   In   fact,  

doing  good,  when  done  in  the  right  way,  can  have  several  strategic  benefits.  A  wide  range  of  possibil-­‐

ities  exist  showing  social  responsibility  to  the  public.  Therefore,  a  difference  has  to  be  made  between  

‘having   a   corporate   social   responsibility   (CSR)   strategy   and   adopting   a   strategic   approach   to   CSR’  

(Campbell,  2011,  P.331).    

Having   a   CSR   strategy   ‘implies   that   certain   fairly  well   defined  and   focused  goals   have   been   estab-­‐

lished  for  a  giving  program  and  that  specifiable  means  have  been   identified  to  achieve  those  goals’  

                                                                                                                         

 3  Triple  bottom  line:  The  term  originally  developed  in  1994  by  John  Elkington  in  the  sense  of  financial  and  envi-­‐ronmental  performance  covering  later  social  and  economic  dimensions  as  well.  A  comparable  approach  can  be  the  3  P’s  referring  to  the  phrase  ‘people,  planet,  profit’.  (Visser  et  al.,  2008)    

 

29  

(Post  &  Waddock,  1995,  p.69)  By  using  the  term  ‘giving  program’,  the  authors  refer  to  philanthropic  

activities   of   a   firm   to   show   their   societal   concern.   Furthermore,   this  means   that   the   company  has  

learnt  how  to  react  to  certain  ethical  issues  and  how  to  manage  capital  resources  in  relation  to  cer-­‐

tain  stakeholders.  However,   this  definition  of  a  CSR  strategy   ‘may  or  may  not  be  directly  related  to  

the   enterprise’s   own   goals   and   strategy’   (Post   &  Waddock,   1995,   p.69).   This   implies   that   the   CSR  

strategy  might   relate   to   individual   decisions  made  by  powerful  members   and  does  not  necessarily  

mean  that  it  is  the  overall  concern  of  the  business.  The  authors  give  the  example  of  a  tobacco  enter-­‐

prise  sponsoring  an  arts  event  in  order  to  obtain  a  certain  public  image.  (Post  &  Waddock,  1995)  

Companies  exist  who  are  adopting  a  strategic  approach  to  CSR.  It  is  a  much  broader  approach  where  

‘corporate  resources  that  are  given  have  meaning  and  impact  on  the  firm  as  well  as  the  community  

that  receives  those  resources’  (Saiia  et  al.,  2003,  p.185)  This  explains  that  ‘strategic  CSR’  relates  to  the  

overall  thinking  or  mission  of  the  firm  and  can  be  found  in  the  outline  of  the  company’s  overall  long-­‐

term  strategy.  In  addition,  ‘strategic’  explains  that  the  business  only  engages  in  certain  strategic  ac-­‐

tions  in  relation  to  social  and  environmental  behaviour,  if  it  is  also  for  the  benefit  of  their  sharehold-­‐

er’s   (Campbell,   2011).   Not   only   shareholders   whose   interest   largely   centres   on   the   value   of   their  

stock  will   be   affected.   Companies   introducing   CSR   as   part   of   their   overall  mission   can   significantly  

influence  stakeholder   relations.   Lewis   (2003)   illustrated   that  44%  of  consumers   indicated   that   they  

would   favour   a   particular   company  when   it   shows   a   high   degree   of   social   responsibility.   Figure   6  

shows  the  growing  trend  of  CSR  among  customers  from  1998  to  2002,  which  represents  a  significant  

development  in  only  four  years.    

 

Figure  6  Reputation  and  Corporate  Responsibility  –  Questionnaire  (Lewis,  2003)  

 

30  

When  employing  CSR,  it  can  have  several  strategic  implications.  It  ‘should  be  considered  as  a  form  of  

strategic   investment   […]   and   can   be   viewed   as   a   form  of   reputation   building   or  maintenance’   (Mc  

Williams  et  al.,  2005,  p.7.).  This  means  that  through  the  engagement  in  CSR  activities  a  business  can  

manage   its   image   or   reputation   and   show   its   efforts   to   stakeholders.   Stakeholders  might   include  

customers,   employees,   suppliers,   the   government   and   the   local   community.   Furthermore,   the   au-­‐

thors  are  indicating  that  CSR  might  help  to  improve  product  differentiation  and  help  the  customer  to  

identify  their  product  due  to  the  added  value.  When  customers  favour  one  product  over  a  competi-­‐

tor’s  one,  this  might  then  directly  relate  to  the  company’s  bottom  line.  For  example,  a  ‘sustainable’  

heating  system,  such  as  pellet  heating  or  solar  panels  is  more  sustainable  to  the  environment  than  a  

gas-­‐heating  systems  but  also  cost-­‐saving   in  the   long  run.  Thus,   it   is  very  reasonable  that  many  cus-­‐

tomers   prefer   the   sustainable   version   to   the   ‘normal’   one   and  might   be  willing   to   pay   a   premium  

price  for  it.  Husted  and  Salazar  (2006)  conclude  that  a  strategic  approach  to  CSR  can  be  beneficial  to  

both   society  and   the   firm   since   social   investment  will   result   in   greater   social  output.   Furthermore,  

the  authors  state   that  CSR  might  help   to  differentiate  products  because  of  unique   features,  which  

will  often  go  hand  in  hand  with  the  possibility  to  charge  a  premium  price  and  result  in  a  greater  eco-­‐

nomic  output  for  the  firm.  Moreover,  the  authors  suggest  that  costs  may  decrease  for  example  be-­‐

cause  of  investment  in  human  resources  through  on-­‐the-­‐job  training  resulting  also  in  employee  loyal-­‐

ty  and  greater  productivity.  (Husted  and  Salazar,  2006)  

‘CSR  is  an  opportunity  to  re-­‐configure  the  competitive  landscape  as  well  as  to  develop  distinctive  and  

dynamic  resources  and  capabilities’  (Husted  &  Allen,  2007,  p.605).  The  authors  address  the  notion  of  

‘distinctiveness’,   which   suggests   that   CSR  might   be   helpful   in   developing   product   differentiation.  

However,  the  authors  state  that  CSR  might  not  directly  lead  to  competitive  advantage  without  taking  

the  right  approaches  and  integrating  it  into  strategic  management.  The  study  was  based  on  Spanish  

MNE’s  and  their  perception  of  key  variables  that  lead  to  value  creation  and  greater  firm  profitability.  

The  authors  concluded  that  key  variables,  (adapted  from  Burke  and  Logsdon,  1996),  which  should  be  

addressed,  are   ‘visibility’,  relating  to   image  and  reputation  management  of  a  firm,   ‘appropriability’,  

related  to  stakeholder  management  and  ‘voluntarism’,  which  refers  to  a  company’s  voluntary  will  to  

engage  in  socially  responsible  actions.  (Husted  &  Allen,  2007)  

The  key  variable  of  ‘visibility’  relates  to  transparency  and  the  communication  of  strategic  responsible  

activities  directed  at  the  public.  As  most  strategic  benefit  stems  from  communicating  and  promoting  

to  customers,   it   is   important   to   take  a   look  at   the   relation  between  strategic  CSR  and  advertising.  

Indeed,   informing   the   customer   about   what   is   going   on   in   the   business   is   increasingly   important.  

Lewis  (2003)  reported  that  in  the  UK  72%  of  customers  wanted  businesses  to  make  efforts  to  show  

information   regarding   CSR   activities.   Figure   6   illustrates   the   results   of   the   study   in   that   customers  

 

31  

wish  to  be   informed  about  on-­‐going  CSR  activities  which  helps  them  to  value  one  product  over  an-­‐

other.    

 

Figure  7  Reputation  and  Corporate  Responsibility  –  Questionnaire  (Lewis,  2003)  

Furthermore,  strategic  CSR  is  only  effective  when  it   is  meaningful  and  not  simply  used  as  a  promo-­‐

tional  tool  (Carroll,  1999).  Many  multinationals,  such  as  Starbucks,  are  now  publishing  information  on  

CSR  activities  annually,  as  can  be  seen  in  Figure  6,  Starbucks  Global  Responsibility  Report.  This  gives  

more  transparency  to  customers  and  could  enhance  their  credibility.   In  Starbuck’s  responsibility  re-­‐

port,  the  company  refers  to  responsible  purchasing,  community   involvement,  recycling,  energy  and  

water  conservation  and  green  building.  By  2015  they  want  all  of  their  coffee  purchases  to  be  audited  

and  certified  by  an  accredited  body,  such  as  Fair-­‐trade  for  example.  This  means  Starbucks  is  adopting  

a  strategic  approach  to  CSR,  since,  as  outlined  before,  CSR  activities  are  included  in  the  overall  com-­‐

pany   strategy   and   even   in   their  mission   statement4.   One   of   their   statements   which   the   company  

includes   in  their  profile   is  that   ‘by  2015,  all  of  [their]  coffee  will  be  grown  using  ethical  trading  and  

responsible  growing  practices’  (Starbucks,  Company  Profile,  2011,  p.3)  

 

 

                                                                                                                         

 4  Starbucks  Mission  Statement,  Principle  1:   ‘It  has  always  been,  and  will  always  be,  about  quality.  We’re  pas-­‐sionate  about  ethically  sourcing  the  finest  coffee  beans  […]’  (Starbucks,  2011)  

 

32  

 

Figure  8  Starbucks  Goals  and  Progress  2010,  adapted  from  Starbucks  Global  Responsibility  Report  (Starbucks,  

2010)  

Publishing  annual  reports  can  be  seen  as  one  way  of  a  communications  strategy  or  brand  manage-­‐

ment.   (Lewis,   2003)   But  when   communicating   information   to   the   customer,   companies   should   be  

careful  about  the  potential  perceptions.  They  have  to  distinguish  between  offering  ‘persuasive  CSR-­‐

advertising   and   informative  CSR  advertising’   (McWilliams,   2005).   By   informing   the   customer   about  

CSR  activities  without  trying  to  be  influential,  a  company  might  be  able  to  raise  quality  perceptions  

of  the  brand  and  influence  its  brand  image.    

With  the  combination  of  CSR  and  strategy  a  business  might  then  be  able  to  ‘use  organizational  core  

competencies  and  resources  to  address  key  stakeholders  interests  and  to  achieve  both  organizational  

and  social  benefits’  (McAlister  and  Ferrell,  2002,  p.  690).  But,  Reinhardt  (1998)  argues  that  business-­‐

es  having  implemented  CSR  strategies  might  only  be  able  to  hold  a  ‘best-­‐in-­‐field’  position  and  make  

profits  when  keeping  competitors’  possibility  to  replicate  their  strategy  to  a  minimum.  This  might  be  

hard  to  achieve,  since  CSR  needs  to  be  forwarded  to  stakeholders  and  is  therefore  relatively  obvious  

and  transparent.  In  order  to  identify  whether  CSR  can  have  a  positive  impact  on  a  firm’s  profitability,  

the  next  chapter  will  focus  on  measurement  approaches  and  correlations  between  CSR  and  financial  

performance.    

3.3 CSR  Measurement  and  Impact  on  Financial  Performance  

There  have  been  numerous  further  studies   in  trying  to  assess  the  relationship  between  CSR  and  fi-­‐

nancial  performance  of  a  company.  (McWilliams  &  Siegel,  2000)  One  series  of  studies  focused  on  the  

impact  of  CSR  on  short-­‐term  financial  performance  of  a  firm  with  the  conclusion  that  the  two  varia-­‐

bles  are  negatively  correlated  (Wright  &  Ferris,  1997),  highly  positively  correlated  (Posnikoff,  1997)  

and  not  correlated  at  all  (Teoh  et  al.,  1999).  Clearly,  the  approaches  to  identify  the  impact  of  CSR  did  

 

33  

not  reach  a  general  consensus.  The  other  series  focused  on  the  long-­‐term  impacts  of  CSR  on  a  firm’s  

bottom  line.  Waddock  and  Graves  (1997)  for  example,  came  to  the  conclusion  that  the  two  variables  

are  positively  related.  However,  McWilliams  and  Siegel  (2000)  argued  that  their  approach  on  calcu-­‐

lating   the  correlation  was  not   totally  correct;   reasoning  that  without   the   inclusion  of   research  and  

development  (R&D)  factors  the  econometric  modelling  would  be  inadequate.  By  adding  R&D  factors  

to   the  actual  equation  of  Waddock  and  Graves,   the  authors   found   that  R&D  was  highly   correlated  

with  corporate  social  performance  CSP  and  advertising.  The  measurement  of  CSP  allows  sharehold-­‐

ers  and  stakeholders  to  assess  a  company  based  on  their  socially  responsible  performance,  which  is  

basically  a  measure  of  CSR.  (McWilliams  &  Siegel,  2000)  CSP  measurement  can  be  used  for  ‘socially  

responsible   investing   (SRI)   screens   to   select   or   avoid   investing   in   firms   according   to   their   environ-­‐

mental  and  social  preferences’  (Chatterji  et  al.  2009,  Delmas  and  Doctori-­‐Blass  2010  cited  by  Chen  &  

Delmas  2010).

MSCI  is  a  company  providing  tools  such  as  the  environmental,  social  and  governance  (ESG)  and  CSP  

indices  for  investment  decisions.  Roughly  800  companies  have  been  examined  on  9  different  factors  

of  social  responsiveness,  which  include  among  others  employee  relationships  and  indicators  of  envi-­‐

ronmental  behaviour,  and  were  then  translated  into  a  CSP  value.  (MSCI,  2011)  Without  the  inclusion  

of  R&D  factors,  ‘CSP  was  not  a  significant  determinant  of  firm  performance’  (McWilliams  et  al.,  2005,  

p.17)   In   fact,   the   latter   research   shows   that   R&D   is   a   significant   part   of  most   of   the  multinational  

pharmaceutical  companies,  since  they  have  to  ensure  the  quality  of  their  product  and  try  to  develop  

new  vaccines  and  pills  against  diseases.  

Further  approaches   to   test   the  variable  of   ‘shareholder  value’,  which   is  associated  to   financial  per-­‐

formance,   in   relation   to   the   two   variables   of   CSR,   namely   ‘stakeholder  management’   and   ‘social  

issue  participation’,  have  been  carried  out  by  Hillmann  &  Keim  (2001).  By  using  the  method  of  Mar-­‐

ket  Value  Added  (MVA),  which  is  calculated  according  to  the  following  equation,  ‘MVA  =  market  val-­‐

ue  –  capital’  (Hillmann  &  Keim,  2001,  p.  129),  the  authors  discovered  ‘that  stakeholder  management  

leads   to   improved   shareholder   value,   while   social   issue   participation   is   negatively   associated   with  

shareholder  value’  (Hillmann  &  Keim,  2001,  p.125).  In  other  words,  not  every  measure  of  CSR  leads  to  

increased  shareholder  value.  The  authors  conclude  that  effective  stakeholder  management  with  pri-­‐

mary  stakeholders  may  lead  to  shareholder  value  creation  and  further  on  to  competitive  advantage.  

As  a  base  of  their  research  approach  they  used  the  KLD  index  of  social  performance  by  MSCI.  Besides  

the  method  of  MVA  in  analysing  those  factors,  the  authors  used  traditional  performance  measures,  

such  as  the  return  on  assets  (ROA)  and  the  return  on  equity  (ROE).  The  ROA  and  the  ROE  are  two  of  

the  most   important  measures  of   return,  describing  profits   as   a  percentage  of   shareholder’s   equity  

and   profits   as   a   percentage   of   total   assets   respectively   (Heal,   2008).   Table   1   shows   the   three  

 

34  

measures  of  return  for  six  different  industries  including  the  pharmaceutical  industry,  which  is  one  of  

the  major  players  in  terms  of  return  on  sales  and  return  on  equity.  (Heal,  2008)  

  Drugmakers  

(Major)  

Money   Cen-­‐

ter  Banks  

Personal  

Computers  

Aerospace  

Defense  

Automakers   Semi-­‐

conductor  

Makers  

Return   on  

sales  

16.83%   16.48%   6.41%   4.13%   2.39%   13.45%  

Return   on  

equity  

22.43%   13.81%   35.18%   12.39%   9.73%   13.99%  

Return   on  

assets  

11.07%   1.09%   12.69%   4.16%   1.49%   9.84%  

Table  1  The  three  measures  of  return  for  the  pharmaceutical  industry  and  for  five  other  industries,  adapted  from  Heal  (2008,  p.  97)  

According   to  McGuire  et   al.   (1988),   corporate   social   responsibility  has   a  positive  effect  on  a   firm’s  

financial   performance   according   to   a   significant   correlation   based   on   the   values   of   Fortune  maga-­‐

zine’s  annual  survey  results.  Throughout  their  research  they  also  measured  the  relationship  between  

a  risk  variable  and  CSR.  The  authors  conclude  that  ‘lack  of  social  responsibility  may  expose  a  firm  to  

significant  additional  risk  from  lawsuits  and  fines  and  may  limit  its  strategic  options’  (McGuire  et  al.,  

1988,  p.868).  This  means  that  not  only  a  significant  correlation  between  firm  profitability  and  CSR  has  

been  proven,  but  it  is  even  more  important  to  address  the  issue  of  what  can  happen  if  a  firm  doesn’t  

engage   in  CSR  activities.   It  appears   that  CSR  and  firm  financial  performance  are  two  mutually   rein-­‐

forcing  variables.    

To  conclude,  in  general  there  is  a  trend  towards  a  significant  relationship  between  CSR  measures  and  

financial  performance  of  a  firm.  What  is  interesting  is  that  CSR  implementation  is  negatively  correlat-­‐

ed  with  firm  financial  performance,  showing  the  importance  of  this  variable,  because  if  not  pursued  

it  can  cause  reputation  damage  and  loss  of  brand  image.  (McGuire  et  al.,  1988)  The  next  chapter  will  

focus   on  multinational   pharmaceutical   companies   and   their   ways   of   implementing   a   strategic   ap-­‐

proach  to  CSR.    

 

35  

4 MULTINATIONALS  IN  THE  PHARMACEUTICAL  INDUSTRY  Multinational  companies  (MNCs)  are  able  to  affect  the  economy  in  an  extensive  way.  The  economic  

crisis  in  the  years  between  2007  and  2009  was  one  of  the  major  reminders  of  how  decisions  of  cor-­‐

porations  can  fail  and  influence  society  and  the  environment.  First,  this  chapter  will  give  an  overview  

of  the  pharmaceutical  industry  itself;  identify  key  players  in  the  industry  and  outline  major  challenges  

in  the  sector.  Second,  this  paper  will  focus  on  four  different  pharmaceutical  companies  based  in  the  

U.S.  and  Switzerland  examined  on  their  CSR  activities  as  well  as  on  their  financial  performance.    

4.1  The  Pharmaceutical  Industry  

‘Today,   some  50,000  multinational   enterprises  and   their   450,000  affiliates   employ  over  200  million  

people   throughout   the   world’   (International   Labour   Organization   (ILO),   2011,   p.28).   Multinational  

companies   impose   a   high   impact   on  employment   and  economic   activity   and   are   therefore   able   to  

change  society  and  their  environment  in  a  tremendous  way.  The  pharmaceutical  sector  is  one  of  the  

most  important  due  to  its  influence  on  human  health  and  disease  prevention  and  is  ‘praised  as  one  

of  the  nation’s  leading  industrial  sectors’  (Schweitzer,  1997,  p.3).  The  VfA,  an  association  of  research-­‐

based  pharmaceutical  companies  in  Germany,  concludes  that  the  supply  of  medicines  is  considered  

to   be   an   elementary   component   of   everyday   life,   which   is   less   likely   to   be   affected   by   economic  

changes  than  other  goods.  (vfa,  Statistics  2011)  Further,  they  identified  that  apart  from  its  resistant  

character,  the  industry  is  growing  rapidly.  The  vfa  statistics  (2011)  show  that  Spanish  and  American  

markets  increased  by  70  per  cent  in  size  within  ten  years  from  2000  to  2010.        

The  industry  itself  began  to  evolve  in  the  1930s  in  different  countries  amongst  which  the  most  pros-­‐

perous  were  the  United  States,  the  United  Kingdom,  Germany,  France  and  Switzerland.  (Chew  et  al.,  

1985)  Chew  et  al.  reported  the  importance  of  the  sector  in  seven  different  OECD  -­‐  (Organization  for  

Economic  Co-­‐operation  and  Development)  countries,  as  listed  in  Table  2.  Further,  Table  2  shows  the  

percentage  increase  of  0.83  to  1.02  of  pharmaceutical  output  as  a  proportion  of  GDP   in  each  host  

country  from  1970  to  1982.    

 

36  

 

Table  2  Gross  domestic  products  in  each  of  the  seven  study  nations  and  the  proportion  attributable  to  pharma-­‐ceuticals,  GDP  data,  OECD  statistics,  adapted  from  Chew  at  al.  (1985,  p.  8)    

The  percentage  increase  of  pharmaceutical  output  over  the  given  time  period  in  nearly  every  study  

nation  shows  the  increasing  importance  of  the  industry.  ‘The  USA,  with  around  36  %  [of  global  phar-­‐

maceutical  sales],  is  still  the  world’s  largest  single  market,  followed  by  Europe  and  Japan’  (vfa,  Statis-­‐

tics  2011,  p.  44).  Referring   to  employment   figures,   this  means   for  example   for   the  United  States  a  

larger  employment  spectrum  than  comparably  in  Switzerland.  Table  3  shows  the  drastic  rise  in  em-­‐

ployment,  specifically  for  Japan  and  the  United  States.  But  it  is  noteworthy  that  ‘in  addition  to  direct  

employment,  pharmaceutical  production  also  creates  employment  in  supplier  industries’  (Chew  et  al.,  

1985,  p.13)  According  to  PhRMA  (Industry  Profile,  2011,  p.4),  each  employment  position  created  in  

the  U.S.  pharmaceutical  industry  creates  another  3.7  jobs,  either  indirect  or  induced,  meaning  relat-­‐

ed  to  suppliers  or  reinforced  by  employee  spending.    

   

Table  3  Number  of  employees  in  the  pharmaceutical  industry  in  the   seven   study  nations,  OHE   survey  data,   adapted   from  Chew  et  al.  (1985)  

Figure   9   Total   U.S   Jobs   supported   by  the  Biopharmaceutical   Sector   in  2008,  Archstone   Consulting   and   R.   L.   Burns,  adapted  from  PhRMA  (2011,  p.4)  

Total  U.S.  jobs  supported  by  the  biopharmaceu]cal  sector  

in  2008:  3,095,000    

Direct  jobs  655,000  

Indirect  and  induced  jobs  2,440,000  

 

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Besides  pharmaceutical  output,  sales  percentage  and  employment  in  the  industry,  it  is  important  to  

take  a  look  at  the  pricing  of  pharmaceuticals  and  the  profits  made  or  in  other  words  the  profitability  

of   the   sector.   ‘Pricing   of   pharmaceuticals   is   perhaps   the  most   controversial   aspect   of   the   industry’  

(Schweitzer,  1997,  p.  8).  The  author  explains  the  cost  of  new  product  development  and  the  process  

of  entering  an  existing  market.  Schweitzer  (1997)  found  that  pricing  of  medicines  is  mostly  related  to  

prices  of  current  existing  products  and  to  the  demand  for  the  product,  which  is  highly  dependent  on  

brand   awareness   by   a   producer   and   consumers’   quality   perceptions.   Furthermore,   producers   are  

discriminating  prices  between  high  and  low  elasticity  segments,  such  as  health  maintenance  organi-­‐

zations  (HMOs)  and  retail  pharmacies  correspondingly.  Schweitzer  (1997)  concludes  that  demand  is  

the  most  influencing  factor  for  pricing  decisions  in  this  industry.  

The  provided   information   indicates   that   the  pharmaceutical   industry   is  one  of   the  most  profitable.  

Profitable  industries  are  often  the  most  competitive,  which  is  why  firms  are  trying  to  maximize  prof-­‐

its  strategically.  Launching  new  products  has  to  be  done  in  a  strategic  way,  since  the  ‘burden  imposed  

by  regulatory  compliance,  the  types  of  marketing  and/or  advertising  activities  permitted  and  the  ex-­‐

posure  to  liability  for  safety  or  quality  problems’  (OECD,  2008,  p.12)  can  vary  highly.    

This  chapter  has  presented  a  brief  industry  description  and  will  now  try  to  identify  why  CSR  is  specifi-­‐

cally  relevant  to  pharmaceutical  multinationals.    

4.2 Challenges  for  pharmaceutical  businesses  

As   previously   identified,   pharmaceutical  multinationals   enjoy   a   high   percentage   of   return   on   sales  

(ROS)  and  return  on  equity  (ROE)  among  industries  such  as  the  automobile  and  the  computer  indus-­‐

try.  This  might  be  because  they  are  selling   life-­‐saving  medication  and   improving  health  and   life  ex-­‐

pectancy  through  researching  and  developing  new  pills  and  vaccines.  (Heal,  2008)  Being  one  of  the  

most  profitable  industries  and  selling  elementary  products  to  human  health  seems  to  be  quite  ironic  

and  makes   the   industry  vulnerable   for  public  attacks.  According   to  a  Harris   Interactive  poll  of  U.S.  

adults  in  2005,  the  public  perception  of  pharmaceutical  companies  is  rapidly  declining  and  only  15  %  

of  the  population  have  come  to  the  conclusion  that  the  industry  can  be  trusted  as  opposed  to  50  %  in  

1998.  In  comparison,  banks,  airlines  and  the  computer  industry  enjoyed  a  satisfactory  percentage  of  

50%   in   2005   (Harris   Interactive   cited   by   The   Economist   Newspaper   Ltd,   20/01/2005)   showing   the  

poor  performance  in  relation  to  the  U.S.  population.  (Heal,  2008)  

 

The   ‘pharmaceutical   industry   has  made  a  number  of   serious  mistakes   (…)   from   the  perspective  we  

have  developed  on  corporate  responsibility’  (Heal,  2008,  p.100).  The  author  stated  the  pricing  situa-­‐

tion  of  HIV  drugs  in  South  Africa,  data  suppression  of  a  medication  relating  to  increased  suicides  and  

 

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constantly  increasing  prices  of  medication  but  also  rendered  credit  to  Merck’s  medical  donations  to  

cure   blindness   in   Africa.   According   to   Esteban   (2008),   the   industry   has   to   overcome   certain   com-­‐

plaints  and  accusations  by  various  stakeholders.  Allegations  of  negligent  animal  testing,  overpricing  

of  medicines,  but  also  complaints  about  cutting  jobs  and  governmental  pressure  to  amend  costs  are  

all  some  of  the  challenges  the  industry   is  currently  facing.  Further,  the  author  states  that  the  phar-­‐

maceutical  sector  has  a  very  complex  stakeholder  network,  which  has  to  be  managed  appropriately.  

Stakeholders   range   from   patients   and   public   to   government   and  media.   As   a   result,   the   industry  

needs  to  concentrate  on  three  issues,  namely  ‘transparency’  concerning  on-­‐going  activities  and  busi-­‐

ness  reports,  ‘people  management’  to  ensure  satisfaction  of  employees  especially  in  the  latest  cases  

of   merging   and   acquisition   of   new   firms,   and   the   ‘control   of   environmental   challenges’   which   is  

mostly  associated  with  the  use  of  water  resources  and  managing  waste.  (Esteban,  2008)  

 

In   fact   ‘people  management’   has   to   be   taken  much  more   seriously   in   the   industry.   HayGroup,   to-­‐

gether  with  FORTUNE  magazine,  conducted  a  world  survey  in  order  to  identify  the  World's  Most  Ad-­‐

mired   Companies   2011.   The   survey   included   about   15,000   top   executives   and   directors   as  well   as  

business   analysts  who   rated   the   largest  multinationals   according   to   nine  different   criteria,   such   as  

social   responsibility,   innovativeness   and   financial   soundness.   In   total   13   companies  of   the  pharma-­‐

ceutical  industry  were  included  in  the  study.  Interestingly,  when  looking  at  the  top  50  of  the  list,  only  

one  pharmaceutical  firm  can  be  found,  namely  Johnson  &  Johnson.  (Haygroup  &  Fortune,  2011)  Fig-­‐

ure  10  shows  the  ratings  of  the  firm  within  the  pharmaceutical  industry.    

Johnson  &  Johnson  stats  –  Nine  key  attributes  of  reputation

Industry  Rank

Innovation 8

People  management 1

Use  of  corporate  assets 2

Social  responsibility 1

Quality  of  management 2

Financial  soundness 1

Long-­‐term  investment 1

Quality  of  products/services 5

Global  competitiveness 2  

Figure  10  Johnson  &  Johnson  statistics,  the  World's  Most  Admired  Companies,  Source:  Haygroup  and  Fortune  

(2011),  adapted  from  CNN  Money,  money.cnn.com    

 

 

 

39  

The  company  reached  remarkably  high  ranks  for  the  attributes  ‘people  management’,  ‘social  respon-­‐

sibility’,  ‘financial  soundness’  and  ‘long-­‐term  investment’.  Amongst  others,  Esteban  (2008)  highlight-­‐

ed   that   ‘people   management’   is   an   important   factor   to   sustain   CSR   and   employee   relationships.  

Therefore,  it  might  not  be  a  coincidence  that  the  firm  is  rated  best  in  related  attributes.  But  in  fact,  

‘transparency’   in  the  field  of  CSR  has  made  it  extremely  difficult   for  multinationals  to  achieve  com-­‐

petitive  advantage  because  of  CSR.  As  mentioned  earlier,  CSR  might  chiefly  help  when  trying  to  miti-­‐

gate  risk  as  part  of  a  risk  assessment  or  when  trying  to  maximize  employee  satisfaction.    

 

Bearing  in  mind  that  the  most  profitable  pharmaceutical  industries  can  be  found  in  Switzerland  and  

the  United  States,  these  are  potentially  the  best  candidates  to  invest  in  CSR  activities  and  most  likely  

to  be  in  the  limelight  of  industry  related  discussion.    

 

This   chapter   aimed   at   exploring   the  main   structures   of   the   pharmaceutical   industry   including   key  

players  and  important  facts.  The  following  chapter  is  going  to  link  all  three  themes  and  clarify  their  

relationship  together  with  the  topics’  current  as  well  as  the  author’s  relevance.      

 

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5 CONSOLIDATION  

5.1 Relationship  and  connection  

Chapters  1-­‐3  presented  an  overview  on  CSR,  business  strategy  and  the  pharmaceutical  industry.  This  

chapter  is  going  to  highlight  their  relationship  and  connection.  ‘It  would  be  a  challenge  to  find  a  re-­‐

cent  annual  report  of  any  big  international  company  that  justifies  the  firm's  existence  merely  in  terms  

of  profit’  (The  Economist  Newspaper  Ltd,  20/01/2005).  Clive  Crook,  interviewed  in  this  section  of  the  

Economist  argues  that  CSR  has  become  a  need  for  MNCs  to  deal  with  and  can  no  longer  be  ignored.  

CSR   is  not  a   tool   to  distinguish  oneself  over  another  anymore  but  has  become  an  obligation  when  

trying  to  keep  stakeholders  interested.  Nevertheless,  ‘CSR  is  an  opportunity  to  re-­‐configure  the  com-­‐

petitive  landscape  as  well  as  to  develop  distinctive  and  dynamic  resources  and  capabilities’  (Husted  &  

Allen,  2007,  p.605).  Although  CSR  comes  along  with  costs  to  the  company,  related  activities  can  be  of  

true  long-­‐term  advantage  when  it  comes  to  stakeholder  relationships  whether  this  is  about  employ-­‐

ees,  customers  or  suppliers.    

‘It   is   suggested   that   for   some   firms   (e.g.,   in   the  pharmaceutical   and   resource  extraction   industries)  

CSR  may  be  a  major   influence  on   corporate   strategy’   (Smith,  2003,  Abstract).   This   is  precisely  why  

Smith  states  that  CSR  is  highly  associated  to  this  sector.  Smith  mentions  the  industry’s  rise  to  promi-­‐

nence  due  to   large  donations  and  contributions,  such  as  Merck’s  philanthropic  actions  to  help  cure  

river  blindness  in  the  developing  world,  Novartis  attempt  to  treat  leprosy  and  Pfizer’s  engagement  in  

research   and   development   to   resolve   trachoma   suffering.   (Smith,   2003)   The   author   indicates   that  

CSR  might  not  be  directly  related  to  the  characteristics  of  the  industry  and  highlights  the  unintelligi-­‐

bility  of  over-­‐pricing  of  life  saving  medicines.  This  reveals  the  contradictory  nature  of  the  pharmaceu-­‐

tical  industry,  praised  for  charitable  donations  on  the  one  hand  and  needing  to  accept  heavy  criticism  

on  inhibiting  unrestrained  access  to  medicines  on  the  one  hand.  The  nature  of  the  industry  makes  it  

vulnerable   for  public  attacks,  which  need  to  be  mitigated  by  employing  a  CSR  strategy,  best  at   the  

core  of   the   company’s  business   strategy.   ‘Safeguarding   the   corporate   reputation  and  brand   image  

have  become  ever  more   important  as  markets  have  become  more  competitive  and  reputations  and  

image  have  become  more  vulnerable’  (Smith,  2003,  p.15)  

 

 

 

 

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5.2 General  relevance  and  author’s  relevance  

Why  should  one  actually  want   to  explore   the   relation  of   the   three   topics  of  CSR,  business  strategy  

and  the  pharmaceutical  industry?  This  is  probably  the  most  important  question  and  guides  this  paper  

to  its  general  relevance  as  well  as  the  author’s  personal  relevance.  

Firstly,  it  is  important  to  notice  that  CSR  is  a  topic  that  is  nowadays  more  public  than  ever.  ‘CSR  has  

been  one  of   the   leading   topics   at   recent  World   Economic   Forum   (WEF)  meetings’   (Smith,   2003)  As  

discussed  in  previous  chapters,  large  corporations  are  in  the  limelight,  which  is  why  they  have  to  deal  

with  current   topics   such  as  CSR   in  order   to  avoid  potential  pitfalls.  Businesses   should   see  CSR  as  a  

conscious  change   towards   the   improvement  of   social  welfare.   John  Mackey,   the   founder  of  Whole  

Foods  Inc.  states  ‘that  the  enlightened  corporation  should  try  to  create  value  for  all  of  its  constituen-­‐

cies’   and   not   solely   think   of   the   maximization   of   shareholder   satisfaction   (Reason   Magazine,  

10/2005).   The   reason  why  other   stakeholders   such   as   customers   are   satisfied   and   actually   choose  

one  brand  over  another   can   successfully  be  managed  by   rethinking  business   strategy  and   showing  

that  the  company  is  working  towards  a  good  cause.  As  examined  in  Chapter  3,  CSR  can  directly  add  

up   to  a  company’s  bottom   line,  when  customers   favour  one  product  over  another  because  of   the  

added  value  enforced  by  CSR  activities.  

 

Secondly,  business   leaders   shouldn’t   ignore   the  potential  benefits  of  CSR   for   their   company.  Apart  

from  mitigating  the  risk  of  social  deterioration  and  the  possibility  to  attract  customers,  CSR  can  help  

recruiting  and  motivating  workforce.  There   is  simply  no  better  employer  than  one  who  truly  cares  

about   social  welfare  having  employed   the   right   incentives,   such  as   the   clothing  brand  Timberland.    

‘Timberland  has  provided  employees  the  opportunity  to  take  significant  amounts  of  paid  time  off  to  

volunteer  for  social  causes  of  their  choosing’  (Sprinkle  &  Maines,  2010,  p.447)  There  is  the  chance  to  

create   a   company   culture   based   on   CSR,   help   stay   employees  motivated   and   avail   of   a   long-­‐term  

opportunity  such  as  employee  loyalty.   ‘For  example,  Starbuck’s  employee  turnover  is  said  to  be  less  

than  a  third  that  of  the  average  for  the  retail  food  industry’  (Smith,  2003,  p.  14)

Further,   CSR   can   also  help   reduce   costs,   such   as   packaging   costs,  when   implemented   in   the   right  

way.   Sprinkle   &  Maines   (2010)   state   that   ‘Wal-­‐Mart   reduced   transportation   costs   by   $3.5   million  

through   one   initiative   to   reduce   packaging   on   toys’   (Sprinkle  &  Maines,   2010,   p.447)   Additionally,  

companies  can  benefit  from  potential  tax  exemptions  and  profit  from  externally  initiated  advertis-­‐

ing,  when  their  approaches  are  worthy  to  report  on  (Sprinkle  &  Maines,  2010).    

 

Apart   from   global  multinational   firms   and   their   interest   in   engaging   in   CSR   activities,   the  author’s  

 

42  

interest  stems  from  the  given  educational  background.  The  possibility  to  participate  in  CSR  related  

activities  in  an  academic  environment  fostered  the  author’s  concern  for  this  booming  topic.  Further,  

Vienna,  as  the  city  rated  best  for  quality  of  living  in  three  consecutive  years  (Mercer,  2011),  literally  

pushes  an  aspiring  business  student  to  reflect  upon  business  decisions  of  large  corporations  and  the  

way  in  which  they  handle  stakeholder  relationships.  Since  stakeholders  shape  the  way  in  which  large  

corporations  present  themselves,  it  is  interesting  to  see  whether  companies  are  using  CSR  merely  as  

a  procedure  to  please  stakeholders  or  actually  believe  CSR  to  be  a  long-­‐term  advantage  as  well  as  a  

pioneer  tool  for  redesigning  business.  Further,  a  good  standard  of  quality  of  living  is  highly  related  to  

the  country’s  healthcare  system,  as  governmental  authorities  are  responsible  for  choosing  appropri-­‐

ate  pharmaceutical  providers  for  different  prescription  medicines.  According  to  the  Federal  Ministry  

of  Health   in  Austria   (BMG)   ‘in  2009  a  new-­‐born  girl  had  a   life  expectancy  of  82.9  years  and  a  new-­‐

born  boy  of  77.4  years’   (BMG,  2010,  p.2)  High   rates  of   life  expectancy  are  definitely   related   to   the  

health  care  system  provided  in  a  country.  In  Austria,  the  whole  structure  is  centred  on  social  insur-­‐

ance,  which  comes  along  with  several  benefits  such  as  emergency  care,  physiotherapy  and  prescrip-­‐

tion  medicines  made  available  for  all  inhabitants  regardless  of  their  income  (BMG,  2010).  Compared  

to  America,  European  citizens  enjoy  the  financial  support  of  the  country’s  government  who  defrays  

medicinal  costs.  American  based  health-­‐care  providers  find  themselves  more  and  more  in  a  dilemma,  

because  citizens  simply  can’t  afford  prescription  drugs  anymore.  Hence,  ‘for  some  corporations  (e.g.,  

in   the  mining   and   pharmaceutical   industries)   CSR  may   be   unavoidable   and   it   appears   to   have   as-­‐

sumed  strategic  significance’  (Smith,  2003,  p.  34)  Through  the  strategic  implementation  of  CSR  at  the  

core  of  a  business  strategy,  customers  can  be  assured  to  get  the  best  products  and  might  be  more  

likely  to  pay  a  premium  price  for  it.    

 

This   chapter   showed   that   CSR   can   present  many   potential   benefits,   but   in   order   for   it   to   become  

successfully   implemented   in   business   strategy,   companies   need   to   specify   and   address   individual  

stakeholder  needs  and  apply   them   to   their   strategic  mission   to  ensure   social  welfare.  The  connec-­‐

tions  between  the  given  topics  as  well  as  their  relevance  and  the  origin  of  the  author’s  personal  con-­‐

cern,  make  clear  that  CSR  is  definitely  a  topic  that  needs  planning  and  research  in  order  to  integrate  

it  best.  The  purpose  of  this  thesis  is  now  to  explore  pharmaceutical  business  strategies  and  their  CSR  

execution,  which  is  why  it  is  now  essential  to  proceed  to  the  empirical  part  of  this  thesis.    

 

 

43  

6 METHODOLOGY  

Previous  chapters  have  identified  the  theoretical  outlook  of  this  thesis,  which  is  why  it  is  now  

necessary  to  reflect  upon  how  evidence  will  be  collected  to  answer  the  primary  research  ques-­‐

tion.  In  addition,  conclusions  shall  be  made  whether  approaches  of  the  different  multinationals  

lead  to  competitive  advantage  within  the  industry.    

6.1 Qualitative  and  quantitative  research  methods  

In  order  to  proceed  with  the  empirical  section,  it  is  important  to  distinguish  between  two  clas-­‐

sifications  of  methods,  namely  quantitative  and  qualitative  methods.  The  first   ‘aim  at  cover-­‐

ing  the  phenomena  under  study  in  their  frequencies  or  distribution  and  therefore  work  with  big  

numbers   of   cases   in   data   collection’   (Flick,   2011,   p.   125).   Further,   quantitative  methods   are  

often  concerned  with  statistical  analyses   and  causal   relationships  whereas  qualitative  meth-­‐

ods   allow   for   greater   flexibility   and  work  with   interpretative   analyses.     For   quantitative   re-­‐

search,   generalizations   can   be  made   in   a   statistical   sense,   whereas   qualitative   research  will  

draw  on  generalizations  in  a  theoretical  sense.  (Flick,  2011)  The  differences  of  qualitative  and  

quantitative  research  can  be  shown  on  an  example  with  the  same  setting.  Suggesting,  the  in-­‐

tention  is  to  gather  data  on  customer  satisfaction  within  a  shopping  centre.  On  one  hand  for  

example,  this  data  can  be  obtained  by  posing  questions  to  a  specific  target  group,  which  can  

be  answered  freely  and  autonomously.  Respondents  would  have  the  possibility  to  add  specific  

reasoning  to  their   individual  statements.  On  the  other  hand,  a  quantitative  approach  would  

be  to  design  a  standardized  questionnaire   including  rating  scales  from  ‘totally  unsatisfied’  to  

‘totally   satisfied’   allowing   respondents   to   tick   according   to   their   sentiments.   This   approach  

would   facilitate   the   comparison  amongst   respondents   and  allow   for   identifying   variations   as  

well  as  differences  between  diverse  units  within  the  targeted  setting.  (Bortz  &  Döring,  2006,  p.  

296)  

6.2 Qualitative  research  methods  

For  this  thesis,  the  author  found  that  it  is  most  appropriate  to  choose  qualitative  over  quanti-­‐

tative  research.  Before  moving  on  to  the  explanation  of  the  actual  research  method,  this  sec-­‐

tion  will  outline  most  important  qualitative  methods  and  their  quality  criteria.      

           

44    

Qualitative  research  serves  as  an  umbrella  term  for  principal  methods  such  as  interviews,  ob-­‐

servation  techniques  or  objective  hermeneutics  and  nonreactive  approaches  (Bortz  &  Döring,  

2006).  Probably  the  most  common  method  used  in  qualitative  research  is  the  design  of  inter-­‐

views,  where  qualitative  research  implies  transcribing  interviews  or  outputs  of  focus  groups,  a  

special  form  of  interviewing  more  than  one  respondent  at  a  time.  Further,  there  exist  observa-­‐

tion   techniques,  where   the   focus   is  mainly   on   displaying   observed   data,   as   used   for   in-­‐field  

ethnographic   purposes.   Lastly,   nonreactive   approaches   include   the   analysis   of   documents,  

such  as  different  types  of  text,  files  and  photos.  (Flick,  2007)  These  techniques  have  little  to  no  

effect  on   the  organization  or  people  examined,   since   there   is  no  direct  contact  between   the  

researcher  and  the  ‘respondent’  as  for  example  in  an  interview  setting  (Bortz  &  Döring,  2006).  

Interviews  are  most  likely  to  be  used  when  the  researcher  wants  to  get  an  insight  about  a  spe-­‐

cific   topic   related   to   certain   people   and   allow   the   respondent   to   tell   his/her   point   of   view  

(Flick,  2007).  For  the  author’s  own  research  question,   interviews  might  be   impractical,  as  the  

intended  answer,  of  whether  CSR  within  a  business’  strategy  leads  to  a  corporate  as  well  as  a  

social  benefit,  might  not  be  reliable  from  one  single  person  representing  a  large  multinational  

cooperation  with  about  100,000  employees.  Further,  participant  observation  will  neither  give  

sufficient   information  on  the  company’s  CSR  practices  nor  on  the  financial  situation  resulting  

out  of  those  practices.    

A  corporate  report  will  give  the  financial  information  on  whether  CSR  pays  off  to  the  company.    

Publications  on  CSR,   such  as  mission  statements  and  value  descriptions,  will   indicate   the  de-­‐

gree  of  social  benefit.  Therefore,  this  thesis  will  be  centred  on  the  nonreactive  approach  of  a  

document  analysis,  mainly  focusing  on  annual  company  reports  and  published  statements  on  

CSR  activities  within  the  business.  Before  moving  to  an  in-­‐depth  analysis  of  the  documentary  

analysis  as  a   research  method,   as   this   is   the  primary   technique  used   in   this   thesis,   the  next  

section  will  focus  on  the  identification  of  the  quality  criteria  of  qualitative  research  methods.  

6.3 Quality  in  qualitative  research  

In   general,   there   exist   three   quality   criteria   of   both   qualitative   and   quantitative   methods,  

namely  validity,   reliability   and  objectivity.   (Flick,  2007)  According   to  Przyborski  and  Wohlrab-­‐

Sahr  (2008),  validity  in  terms  of  quantitative  methods  can  be  identified  through  so-­‐called  pre-­‐

tests   that   measure   for   example   the   correlation   between   two   variables.   For   qualitative   re-­‐

search,  validity  is  the  ‘question  of  whether  the  researchers  see  what  they  think  they  see’  (Flick,  

2006,  p.  371).  In  other  words  validity  explains  whether  the  researcher  is  actually  researching  

what   he/she   identified   beforehand.   Validity   also   refers   to   the   sample   being  measured   and  

                 

45  

whether  the  sample  is  representative  for  the  research  question.  (Leedy,  1985,  p.25)  For  quali-­‐

tative  research  ‘quality  (…)  is  the  result  of  efforts  in  planning,  conducting  and  reporting’  (Flick,  

2007,   p.   67).   These  might   reflect   upon   the   accuracy   of   a   paper   and   further   leads   on   to   the  

quality  criteria  of  reliability.  Reliability  within  a  research  method  is  then  constituted  if  the  re-­‐

searcher  guarantees  formal  accuracy.  Further,  the  criterion  refers  to  the  assumption  that  dif-­‐

ferent  researchers  of  the  exact  given  topic  and  circumstances  using  the  same  research  method  

are  likely  to  come  to  similar  results  (Denscombe,  2007).  It  is  rather  easy  to  measure  reliability  

within  a  quantitative  setting  as  statistical  tests  can  be  used,  which  is  why  reliability  as  a  quality  

criterion  in  terms  of  qualitative  research  has  triggered  rather  controversial  reactions  (Devers,  

1999).  

When   it   comes   to  objectivity,  Denscombe  refers   to   ‘the  extent   to  which  qualitative   research  

can  produce  findings  that  are  free  from  the   influence  of  the  researcher(s)  who  conducted  the  

enquiry’  (Denscombe,  2007,  p.300).  Procedures  such  as  probing  in  interviews,  additional  com-­‐

ments  on  the  context  within  document  analysis  and  slight  changes  or  reformulations  in  surveys  

can  help  to  justify  the  quality  criterion  of  objectivity  (Denscombe,  2007).  

6.4 Selection  of  methodology    

In   order   to   apply   theory   to   current   practice   relevant   document   analysis   based   on   business  

strategies  of  pharmaceutical  multinationals  and  the  topic  of  CSR  will  be  conducted.  Documen-­‐

tary   analysis   is   one  of   the  many   techniques  being  part   of   nonreactive   approaches,  meaning  

the   researcher  has  no   influence  on   the  observed  object  whatsoever.  Document  analysis  as  a  

method  to  analyse  organizations  is  taking  a  more  and  more  important  part  in  research  (Bowen,  

2009).  By  means  of  analysing  officially  published  documents,  the  researcher  wants  to  identify  

whether   for   example   proposed  mission   and   value   statements   fit   together  with   the   financial  

tributes   to  CSR  published   in  a   company’s   annual   report.   ‘Official   documents  also   function  as  

institutionalized   traces   (…)   to   draw   conclusions   about   the   activities,   intentions   and   ideas   of  

their  creators  or  the  organizations  they  represented’  (Flick  et  al.,  2004,  p.284).  This  statement  

leads  to  the  purpose  of   this   thesis,  namely  to  gain  an   insight   into  pharmaceutical  companies  

activities   and   their   socially   responsible   practices.   Further,   the   use   of   already   existing   docu-­‐

ments  is  time  saving  and  perfectly  fits  the  research  question.  In  fact,  document  analysis  is  be-­‐

coming  more  and  more  important  since  companies  want  to  show  transparency  via  publishing  

corporate  reports  on  their  webpage  so  these  documents  are  easily  accessible  (Altheide  et  al.,  

2010)  But,  the  researcher  has  to  keep  in  mind  that  ‘texts  and  statistics  have  their  own  structure  

that   is   often   strongly   influenced   by  who   produced   them   and   for  what   purpose’   (Flick,   2011,  

           

46    

p.124).  It  is  presumed  that  every  company  will  present  itself  in  the  best  light  especially  on  their  

own  public  website  and  try   to   leave  out  potential  questionable   topics   the  business  was  or   is  

involved  in,  which  is  why  it  is  important  to  keep  an  overview  about  the  context.    

In  general,  qualitative  data  is  analysed  by  following  five  major  steps,  although  their  emphasis  is  

subject   to   different   methods   used   (Denscombe,   2007).   The   author   proposes   the   following,  

visualized   in  Figure  11.  This  thesis  will   take  these  steps  as  a  guideline  and  complement  them  

with  Denscombe’s  (2007)  suggestions  for  proceeding  with  content  analysis  as  part  of  research-­‐

ing  documents,  visible  in  Figure  12.    

 

 

Figure  11  The  process  of  qualitative  data  analysis,  adapted  from  Denscombe  (2007,  p.  288)  

Figure  12  Procedure  in  content  analysis,  adapted  from  Denscombe  (2007,  p.  237-­‐238)  

Document  analysis  as  a  research  method  references  data  in  by  citing  sentences  or  paragraphs  

to  then  systematize  these  extracts  into  categories  established  by  theory  (Labuschagne,  2003).  

In   other   words,   cited  material   is   categorized   and   so   facilitates   comparisons   between   docu-­‐

ments  or  in  this  case  between  different  companies.  Flick  (2004)  suggests  the  first  approach  to  

analysing  qualitative  data   is   ‘to  search   for   relevant  parts  of   the  data  and   to  analyse   them  by  

comparing  them  with  other  data  and  by  naming  or  classifying  them’  (Flick  et  al.,  2004,  p.284).    

For   this  case,   in  order   to  compare  collected  data   from  several  pharmaceutical   firms,   there   is  

the   need   to   name   or   classify   data   into   several   sections   to   facilitate   contrasting.  Qualitative  

content  analysis,   a  procedure   for  analysing  written   research  material,   suggests  paraphrasing  

relevant  texts  for  summarizing  content,  including  information  about  the  context  for  explaining  

content  and  searching  for  formal  indices  for  structuring  content  (Flick,  2006).  Particular  weight  

is  given  on  paraphrasing  and  summarizing   the  content,   since   ‘reduction  of   the   information   is  

presentakon  of  findings  

verificakon  of  the  data  

interpretakon  of  the  data  (codes,  categories,  concepts)  

faimiliarity  of  the  data  

preparakon  of  the  data  Text  

• choosing  an  appropriate  sample  of  texts  

Categories  • developing  relevant  categories  for  analysing  data  

Priorikes  

• coding  units  in  line  with  the  categories  • counkng  the  frequency  in  which  these  units  occur  

Values  • idenkfying  posikve  and  negakve  statements  

Ideas  • proximity  of  ideas  within  the  text,  logical  associakon  

                 

47  

part  of  the  analysis’  (Flick,  2011,  p.129).  Flick  (2011)  suggests  establishing  categories  based  on  

theoretical   secondary   research,   in   this   case   the   literature   review,   and   not   based   on   the  ob-­‐

served   documents   themselves.   ‘The  methodological   core   of   content   analysis   is   the   category  

system  used   to  classify   the  materials’   (Flick,  2011,  p.134)   reflecting   the   importance  of  estab-­‐

lishing  this  structure.  Further,  this  thesis  will  use  frequency  counts  as  part  of  the  content  anal-­‐

ysis   to   identify  whether   a   company   is   placing  much   emphasis   on   specific   categories   such   as  

social  welfare  or  revenue  generation  by  counting  respective  words.  Applied  to  this  thesis,  fre-­‐

quency   counts   together  with   direct   quotes   from   annual   reviews  will   provide   the   researcher  

with   necessary   information   on   potential   effects   on   social   welfare.   ‘The   assumption  made   is  

that  the  words  that  are  mentioned  most  often  are  the  words  that  reflect  the  greatest  concerns’  

(Stemler,  2001,  p.  2).  Words  such  as  ‘environmental’  and  ‘environment’  will  fall  together,  since  

the   researcher  will   search   for   ‘environment*’,  whereby   the   asterisk   indicates   that   all  words  

matching  at  least  this  part  will  be  considered  for  example  for  the  respective  category  of  ethical  

responsibilities.  A  prerequisite  is  however  that  the  researcher  considers  only  words  for  count-­‐

ing  that  match  the  description  and  meaning  of  the  category.            

After  having  discussed  the  major  points  researchers  have  to  follow  when  conducting  a  docu-­‐

ment  analysis  and  content  analysis  including  frequency  counting,  the  researcher  will  now  focus  

on  establishing  categories  for  the  retrieval  of  results.      

6.5 Operationalization  

In   a   research   context,   to   ‘operationalize’   means   to   make   the   proposed   theoretical   outlook  

measurable  by  applying  and   testing   the   research  question   in   its   real   setting   (Flick,  2011)   For  

this  thesis,  in  order  to  gather  insights  from  theoretical  models,  such  as  Carroll’s  (1991)  4-­‐part  

model,   it   is  necessary  to  clarify  the  dimensions  of  the  four  different  parts  given  in  the  model  

which  will  be  used  as  a  categorizing  scheme  in  terms  of  a  content  analysis  of  the  companies’  

business  reports.    

The   theoretical   outlook   of   this   thesis   has   placed   high   emphasis   on   the   composition   of   CSR,  

namely   economic-­‐,   legal-­‐,   ethical-­‐   and   philanthropic   responsibilities   developed   by   Carroll  

(1991).  All  the  categories  together  will  lead  to  a  good  CSR  implementation.  This  means,  when  a  

company  scores   in   implementing  all  categories   in  their  annual  reviews  to  a  maximum,  that  a  

good  implementation  is  given  and  the  possibility  of  increasing  social  welfare  is  high.  Although  

Carroll   (1991)  provides  a  comprehensive  and  clear  structure  of  what  CSR  should  be  made  of,  

the  author  finds  that  the  variable  of  strategic  decision-­‐making  in  terms  of  the  firm’s  business  

           

48    

strategy  is  missing.  As  mentioned  earlier  in  this  paper,  the  4-­‐part  model  of  responsibilities  rep-­‐

resents  a  good  overview  of  the  expectations,  which  stakeholders  place  on  a  business  and  the  

areas  that  are  included  in  CSR,  yet,  it  ‘fails  to  predict  or  indicate  priorities  for  managerial  deci-­‐

sion-­‐making’  (Griseri  &  Seppala,  2010,  p.20).    Managerial  decision-­‐making  implies  that  certain  

strategic  variables  are  in  place  and  defined.  By  the  means  of  introducing  this  category  the  au-­‐

thor  will  try  to  find  whether  the  company  is  stressing  the  fact  of  CSR  as  competitive  advantage  

and  if  yes,  how  they  are  differentiating  themselves  from  competitors  by  incorporating  strate-­‐

gies.   Table   4   gives   an   overview   of   the   proposed   categories   and   their   sub   items,   established  

according  to  the  theoretical  base  of  this  paper.    

 

Categories   Sub-­‐categories  (Identifiers)   Carroll’s  4  part  model  (1991)  

Exemplar  Phrases  for  frequency  count  

1. Philanthropic  responsibilities  

Donations,  provision  of  free  medication  for  poor  countries,    

Highest  level  of  achieve-­‐ment,  represents  socie-­‐ty’s  mere  desires  

‘voluntary’,  ‘research  emphasis’,  ‘donations’  

2. Ethical    responsibilities  

CSR  as  a  social  welfare  indica-­‐tor:  GRI  Index,  employee  rela-­‐tionships,  number  of  job  cuts  in  the  past  10  years,  awards  

Could  be  split  up  in  envi-­‐ronmental  and  social  responsibilities    

‘environmental  manage-­‐ment’,  ‘employee  wel-­‐fare’,  ‘environmental  concerns’  

3. Legal    responsibilities  

Steps  a  company  needs  to  go  through  to  introduce  a  new  product  to  the  market  

Fulfilling  legal  obligations,  complying  with  regula-­‐tions  on  various  levels  

‘legal',  'regulation',  'intro-­‐duce'  

4.  Strategic    responsibilities  

CSR  as  part  of  business  strategy:  mission,  vision,  values,  short  term  and  long-­‐term  goals  from  the  annual  report  

Not  included  in  the  mod-­‐el,  added  by  author  

‘innovative',  'authentici-­‐ty',  'transparency',  'unique',  'differentiate',  'competitive',  'strategic'  

CSR  as  competitive  advantage:  innovativeness,  authenticity,  transparency,  progress  in  terms  of  acquisitions,  uniqueness,  differentiation  from  competi-­‐tors,  investments  in  R&D  activi-­‐ties  

5. Economic  responsibilities  

CSR  and  its  impact  on  financial  performance:  ROE,  ROI,  pro-­‐gress  reports,  profit  and  loss  account  statement,  sales  growth  and  revenue  growth  over  past  3-­‐5  years  

Base  for  all  other  layers,  layer  has  to  be  fulfilled  to  build  upon  further  re-­‐sponsibilities,  relates  to  the  firm’s  responsibility  towards  its  shareholders,  employees  and  pricing  decisions  in  the  first  place    

‘income',  'growth',  'earn-­‐ings',  'revenue'  

Table  4  Categorizing  scheme  based  upon  theoretical  outlook  

                 

49  

The  chosen  pharmaceutical  companies,  as  identified  in  Chapter  6.7  will  be  examined  according  

to  their  activities  respective  to  the  established  sections,  namely  philanthropic-­‐,  ethical-­‐,  legal-­‐,  

strategic-­‐  and  economic  activities.  Sub-­‐categories  identified  within  each  category  relate  to  the  

theoretical  outlook  of  this  paper.    

A  table  with  differences  amongst  the  four  pharmaceutical  providers  will  be  given  in  Chapter  7,  

full   evidence  on   the   results   can  be   found   in   the   respective   statements   in   the   appendix.   The  

author  will  only  focus  on  the  most   important  aspects  and  differences  of  evidence,  which  will  

be  directly  quoted  in  the  following  Chapter  7.  A  brief  discussion  of  the  sample  will  be  given  in  

the  next  section.    

6.6 Sample  

According   to   the   Forbes   List   2000   (Forbes.com,   2012)   and   their   revenues   listed   in   financial  

reports  2009,  the  leading  global  pharmaceutical  players  are  Pfizer  Ltd.,  Novartis  AG,  Merck  &  

Co.,  Hoffmann-­‐LaRoche  Ltd.  and  Johnson&Johnson  only  to  name  a  few.  This  thesis  will  focus  on  

the   strategic   approaches   to   CSR   of  Pfizer   Ltd.   and   Johnson  &   Johnson,   two   American   based  

health-­‐care  providers,  as  well  as  Novartis  AG  and  Hoffmann-­‐LaRoche  Ltd.,  which  are  both  Swiss  

corporations.  These  will  be  examined  according  to  their  values,  CSR  activities,  business  reports  

and   financial  measures.   CSR   can   be   evaluated   by   various  ways   of   looking   at   a   business,   for  

example  by   identifying  the  company’s  progress  over  the  past  few  years,   looking  at  new  mer-­‐

gers   or   acquisitions   and   the   rate   of   job   cuts,   employee   satisfaction   rates,   differentiation   of  

products,   research   and   development   activities,   short-­‐   and   long-­‐   term   goals   from   the   annual  

report  as  well  as   the  company’s  values  and  their   implementation   into  every-­‐day  business.   In  

order  to  get  an  overview  of  the  four  different  companies,  the  following  section  tries  to  eluci-­‐

date  the  companies’  profiles,  development  and  position  in  the  industry.    

6.6.1 The  American  based  health-­‐care  providers  

Pfizer  Inc.   is  one  of  the  most  important  American  pharmaceutical  multinational  corporations,  

having   branches   in   180   countries   worldwide   including   the   firm’s   headquarter   in   New   York.  

Chairman   of   the   corporate   board   and   chief   executive   officer   to   date   is   Ian   Read.   Pfizer   Inc.  

produces  key  pharmaceutical  products,  such  as  Lipitor  (for  lowering  blood  cholesterol),  Lyrica  

(against   problems  with   the   peripheral   nervous   system),  Difulcan   (treatment   of   fungal   infec-­‐

tions),  Zithromax  (one  of  the  world’s  bestselling  antibiotics),  Viagra  (treatment  of  erectile  dys-­‐

function)  and  Celebrex   (an  inflammatory  drug).   Interestingly,  Pfizer  Inc.  also  engaged  the  ani-­‐

mal  health  care  industry.  (Pfizer  Inc.,  2012)  In  1849,  Charles  Pfizer  and  Charles  Erhart  founded  

           

50    

the  company  and  their  development  of  citric  acid  raised   its  awareness.   In  1906,  sales   figures  

nearly  reached  the  $3  million   label.  Since  then,  Pfizer   Inc.  undertook  a  massive  development  

including   several   milestones   such   as   mergers   and   acquisitions   of   Warner-­‐Lambert,   market  

leader  in  the  UK  for  consumer  healthcare,  during  the  1990’s  and  Pharmacia  in  2003.  Further,  

Pfizer   Inc.   started   to   focus  more  and  more  on   research  and  development  and  built   research  

laboratory  facilities  in  Groton,  Connecticut.  (Pfizer  Inc.,  2012)    

More  recently,  Pfizer  Inc.  acquired  Wyeth  in  2009  for  $  68  billion,  having  the  advantage  of  cost  

savings   through  combining  operations  but  being  disadvantaged  by  higher   taxes.   In   the   same  

year,   Pfizer   Inc.   had   to   face   lawsuits   and  being   accused  of   illegal   drug  marketing   for   four  of  

their  products,  such  as  pressuring  doctors  to  increase  sales  of  their  products.  Besides  all  accu-­‐

sations,   Pfizer   Inc.   itself   positions   itself  with   nine   different   values,  which   are   ‘collaboration’,  

‘leadership’,   ‘community’,   ‘performance’,   ‘customer  focus’,   ‘quality’,   ‘innovation’,   ‘respect  for  

people’  and  ‘integrity’.  (Pfizer  Inc.,  2012)  

Johnson  &  Johnson  was  the  only  pharmaceutical  firm  listed  in  the  top  50  of  the  World's  Most  

Admired   Companies   according   to   a   FORTUNE  magazine   and   Haygroup   survey.   The   firm  was  

founded   in   1886   and  besides   producing   pharmaceuticals,   it   is   nowadays   the  worlds’   leading  

manufacturer  of  medical  devices  and  consumer  packaged  goods.  Although  a  Harris  Interactive  

poll  of  U.S.  adults  in  2005  showed  that  the  public  perception  of  pharmaceutical  companies  is  

rapidly  declining,  Johnson  &  Johnson  managed  to  rank  first  in  this  global  reputation  survey  for  

the  seventh  year  in  succession,  leaving  Coca  Cola  second  and  Google  on  the  third  place.  As  of  

other  pharmaceutical  companies,  only  Merck  &  Co.  succeeded  to  be  listed  in  the  top  50,  with  a  

rather   humiliating   rank   of   45.   In   2010   however,   Johnson   &   Johnson’s   reputation   started   to  

struggle.  The  Washington  Post  reported  that  the  company  was  accused  by  an  Omnicare  whis-­‐

tle-­‐blower  of  illegally  enforcing  doctors  and  pharmacies  including  Omnicare  to  use  Johnson  &  

Johnson  products  (Hilzenrath,  2010).  At  any  rate,  Johnson  &  Johnson  tried  to  reject  this  accu-­‐

sation   by   confirming   that   all   payments   made   to   doctors   and   others   were   legal   (Johnson   &  

Johnson,  1997-­‐2010,  Sustainability  Report  2009)  and  emphasizing   their   credo   that   their   ‘first  

responsibility  is  to  the  doctors,  nurses  and  patients,  to  mothers  and  fathers  and  all  others  who  

use   our   products   and   services’   (Johnson   &   Johnson,   1997-­‐2010,   p.1,   Company   Credo).   The  

company’s  headquarter  is   located  in  New  Brunswick,  New  Jersey.  Chairman  of  the  board  and  

CEO   of   the   firm   is   currently  William  Weldon   managing   a   wide   production   line.   (Johnson   &  

Johnson,  2012)  

                 

51  

6.6.2 The  Swiss  corporations  

Headquartered   in  Basel,  Novartis  AG   has   been   formed  out  merging   two   companies,   namely  

Ciba-­‐Geigy  and  Sandoz.  The  corporation  focuses  on  healthcare,  agribusiness  and  nutrition  be-­‐

ing  listed  on  the  New  York  stock  exchange  as  a  joint  stock  company.  In  2000,  the  company  lists  

being  one  of  the  first  corporations  to  sign  the  UN  Global  Compact,  thereby  agreeing  to  the  ten  

principles  regarding  human  rights  and  socially  responsible  policies.  2001,  Novartis  AG  acquired  

a   stake   in   Roche,  which   expanded   to   33  %   to   date.  One   year   after,  Novartis   AG   invested   in  

building  biomedical   research   institutes  and  acquired  with   the  generics  company  Lek.  The  ac-­‐

quisition  period  continues  in  2005,  by  purchasing  the  generic  pharmaceutical  companies  Hexal  

AG  and  Eon  Labs,  Inc.  and  is  followed  by  building  vaccine  laboratories  in  2008  to  research  ac-­‐

tive  ingredients  against  life-­‐threatening  diseases.  In  2010,  Novartis  AG  managed  to  merge  with  

Alcon   Inc.,   a   leader   in   eye   care   provision.   (Novartis   AG,   2012)   Presently,   Novartis   AG   has   a  

brand   image  of  being  a   leader   in  pharmaceuticals  and  other  consumer  health  products.  Only  

recently   Novartis   AG   achieved   the   award   of   ‘#3   Most   Valuable   Swiss   Brand   2012   by   Inter-­‐

brand/Bilanz  with  a  brand  value  of  CHF  6.8  billion’  (Interbrand  AG,  2012)  The  survey  from  In-­‐

terbrand   AG   (2012)   recommends   Novartis’   high   quality   values   and   scores   in   reliability   and  

trustworthiness.  Further,   the  survey  shows  the   firm’s  strive   for   innovation  and  sustainability,  

trying   to   differentiate   itself   through   constantly   reviewing   their   portfolio   as  well   as   trying   to  

acquire  new  segments  to  keep  up  a  leading  position  in  various  fields  and  also  learn  from  other  

company  processes.  

Hoffmann-­‐La  Roche  Ltd.  was  founded  by  Fritz  Hoffmann-­‐La  Roche  in  1896  and  has  ever  since  

focused   on   innovation   to   foster   quality   and   stakeholder   satisfaction.   Interbrand’s   survey   on  

the  Most  Valuable  Swiss  Brand  2012  leaves  Roche  in  a  very  good  position,  namely  on  the  se-­‐

cond   place,   beating   its   strongest   national   competitor   Novartis   AG.   Interbrand   AG   (2012)  

stresses   key   issues   such   as   quality   through   innovativeness   and   high   amounts   of   investment  

floating  in  to  R&D  practices,  for  example  their  latest  innovative  skin  cancer  medicine  Zelboraf.  

Amongst   customers,   Roche   is   constantly   gaining   reputation   with   products,   such   as   Valium,  

Dormicum  and  Xenical.  The  only  company  Interbrand  AG  identified  to  be  better  in  the  ranking  

in  terms  of  ‘value  added’  is  Nescafé  run  by  NESTLÉ  GmbH  attracting  customers  in  various  age  

segments  stressing  their  most  important  value,  namely  responsibility  (Interbrand  AG,  2012).    

           

52    

6.7 Data  Analysis  and  Results  

This   section  will   elucidate   the   findings  of   frequency  counts  and  selected  direct  quotes  of   re-­‐

spective   categories   applied   to   each   pharmaceutical   company’s   annual   review   of   2010.   Con-­‐

cerning  the  structure,  the  researcher  will  approach  the  results  as  such  this  section  will  be  split  

up  according   to   the  companies,   including   findings  on  each  category,   in  order   to  get  a  better  

effect  of  comparison  between  the  corporations.  For  the  data  analysis  annual  reviews  2010  of  

each  pharmaceutical  company  have  been  used.  The  following  Table  5  represents  the  compa-­‐

nies’   financial   positions,   which   have   been   adapted   from   respective   financial   reports   2010.    

   

Company   Country   Total   Reve-­‐

nues   (USD  millions)  

Pharmaceutical  

R&D   2006  (USD  millions)  

Net   Income  

2010   (USD  millions)  

Employees  

2010  

Pfizer  Inc.     USA   67,809     7,599   19,337   81,800  

Johnson   and  Johnson  

USA   61,897   6,986   12,266   118,700  

Novartis  AG   Switzerland   53,324   7,125   9,969   96,717  

Hoffmann-­‐La  

Roche  Ltd.  

Switzerland   49,051   CHF  

(appr.  51,079)  

9,874   CHF  

(appr.  10,282)  

8,510   CHF  

(appr.  8,861)  

80,080  

Table  5  Comparison  of  discussed  pharmaceutical  firms,  adapted  from  company  financial  reports  2010  

6.7.1 Pfizer  Inc.  

Economic  or  profit-­‐driven  responsibilities  refer  to  a  firm’s  position  in  the  industry  according  to  

their  financial  position.  This  category  is  the  starting  point  of  Carroll’s  (1991)  4-­‐  part  model  and  

needs   to  be   fulfilled   in  order   to  base  other   categories  upon   it.   Table  5   tries   to  elucidate   the  

companies’  positions  in  2010.  As  visible  in  Table  5,  Pfizer  Inc.  is  the  leader  of  the  four  firms  in  

terms  of   total   revenue  and  net   income.  The   company   currently  employs  122,200  people.   Its  

‘revenues  increased  36%  in  2010  to  $67.8  billion,  compared  to  $50.0  billion  in  2009’  (Pfizer  Inc.,  

2010,  financial  statement,  p.2).  This  increase  was  partly  driven  by  the  acquisition  of  Wyeth  in  

2009,  as  the  firm  restructured.    

The  author  added  the  category  ‘strategic  responsibilities’,  as  the  model  of  Carroll  (1991)  was  

lacking  a   strategic  approach   to  decision-­‐making.   In   fact,   research  and  development   is  one  of  

Pfizer’s  key  performance  indicators,  ‘designed  to  strengthen  [their]  engine  for  innovation,  pro-­‐

                 

53  

vide   a   better  mix   of   therapeutic   approaches,   deliver   greater   numbers   of   differentiated   prod-­‐

ucts,  yield  a  higher   return  on  R&D   investment,  and  build  a  culture   focused  more   intensely  on  

ownership  and  accountability’   (Pfizer   Inc.,  2010,  annual  report,  p.  6).  Although  R&D  activities  

provide   a   benefit   for   society,   these   have   been   classified   as   strategic   responsibilities,   since  

whether   and   how  much   the   company   is   investing   in   R&D   is   surely   strategic   stroke.   Another  

policy   stroke   is   recognizing   customer   needs   and   wants   through   sufficient   research,   so   the  

company  ensures   its  position  to   ‘become  an   industry   leader   in  emerging  markets  and  remain  

competitively   positioned   in   the  mature   European  Union   and  U.S.  markets’   (Pfizer   Inc.,   2010,  

annual  report,  p.  7).  Emerging  markets  include  for  example  Asia  and  the  Middle  East.      

Legal  responsibilities  refer  to  whether  the  companies  mention  information  regarding  the  ful-­‐

filment  of   legal  obligations  and  comply  with  regulations  on  various   levels.  The  annual  review  

2010  of  Pfizer  Inc.  didn’t  focus  much  on  legal  responsibilities  and  information  on  handling  laws  

and  regulations.  There  is  one  statement  incorporated:  ‘we  strive  to  ensure  that  all  Pfizer  prod-­‐

ucts   are   quality-­‐made,   manufactured   and   distributed   in   compliance   with   applicable   regula-­‐

tions,  and  available  when  needed  by  patients’  (Pfizer  Inc.,  2010,  annual  report,  p.  19).  Here,  the  

reader   is   left  without  any  particular  evidence.  Apart   from  regulation  specifications,   the  com-­‐

pany  focuses  on  strong  quality  assurance  measures  by   ‘building  quality  into  processes  [...]  as-­‐

suring  that  there  are  both  standard  operating  procedures  and  redundant  systems  in  place,  and  

nurturing  a  culture  of  quality  throughout  the  company’  (Pfizer  Inc.,  2010,  annual  report,  p.  18).  

Ethical  responsibilities   identify  a  company’s  approach  towards  social  welfare,  employee  rela-­‐

tionships  and  ethical   core  values.  Concerning   the   improvement  of  Pfizer   Inc.  as  a  workplace,  

the  president  and  CEO  Ian  Read  emphasises  on  happy  employees,  trying  to  make  them  aware  

that  they  are  working  for  a  good  cause.  Read  tries  to  ‘encourage  and  maintain  a  culture  where  

colleagues  share  their  diverse  ideas,  take  initiative,  act  with  an  entrepreneurial  spirit,  give  their  

best  each  day  and  believe  Pfizer  is  a  great  place  to  work’  (Pfizer  Inc.,  2010,  annual  report,  p.  7).  

By  building  a  culture  of   trust  and  focusing  on  an   intelligent  strategy  of   job  enrichment  by  al-­‐

lowing   employees   to   get   involved   and   share   their   thoughts,   he   generates   a   workforce   that  

feels  comfortable  at  their  workplace  thereby  reinforcing  employee  retention  at  the  same  time.  

‘They  have  the  opportunity  to  make  a  difference  in  the  lives  of  millions  of  people  while  shaping  

the  future  of  a  world-­‐class  organization’  (Pfizer  Inc.,  2010,  annual  report,  p.  7).  Employee  moti-­‐

vation  and  productivity  are  seen  as  ‘intangible  assets’,  which  are  measured  by  continuous  sur-­‐

veys  ‘to  assess  and  address  colleague  concerns  and  to  compare  Pfizer’s  performance  with  that  

of  other  top  employers’  (Pfizer   Inc.,  2010,  annual  report,  p.  15).  Surveys  and  online  reporting  

           

54    

tools   ensure   anonymity   amongst   employees   and   help   raise   questionable   topics   that   might  

have  otherwise  not  been  discovered.    

Pfizer  Inc.  addresses  philanthropic  activities,  namely  actions  that  go  beyond  ethical  and  legal  

concerns  in  one  of  their  credos:  ‘We  will  take  the  actions  that  maximize  the  value  created  by  

the  business  units  so   that   the  whole  of  Pfizer   is  greater   than  the  sum  of  our   individual  parts’  

(Pfizer   Inc.,   2010,  annual   report,  p.  7).   This  holistic   approach   is   indeed  very   important,   since  

the   company   sees   itself   as   the   interaction   of   all   departments   and   cannot   be   understood   by  

considering   only   the   company’s   individual   parts.   This   means   the   company   is   going   beyond  

business  practices,  doing  something   for   the  benefit  of  society  and  the  environment  while   in-­‐

cluding  this  opinion   in  their  business  strategy.  Further,   the  company  stresses  the   importance  

of  gaining  stakeholder  respect  through  enhancing  ‘credibility—doing  what  we  say  we  will  do,  

and  integrity—  doing  the  right  things’  (Pfizer  Inc.,  2010,  annual  report,  p.  7).  As  for  integrity  or  

‘doing  the  right  things’  the  company  has  implemented  a  help-­‐platform  Pfizer  Helpful  Answers,  

which  ‘has  helped  nearly  6  million  patients  in  the  US  get  48  million  Pfizer  prescriptions  for  free  

or  at  a  savings’  (Pfizer  Inc.,  2010,  annual  report,  p.  23).  Also,  the  firm  tries  to  be  more  sustain-­‐

able  by  reducing  greenhouse  gas  emissions  up  to  2012.  Impressively,  Pfizer  Inc.  is  also  award-­‐

ing  scholarships  to  veterinary  students,  thereby  focusing  on  the  future  of  the  young  generation  

and  strategically  thinking  of  these  as  potential  new  employees.  

Categories   Phrases  used  for  frequency  count   Actual  counts  Pfizer  Inc.  

1. Philanthropic  responsibilities  

‘research':  19,  'development':  15,'donate':    0,  'responsible':  4,  'free':  2  40  

2. Ethical    responsibilities  

 'environment':  16,  'employee’  or  'workforce':  0,  'encourage':  2,  'cul-­‐ture':  9,  'impact':  11,  'colleagues':  15   53  

3. Legal    responsibilities  

‘legal':  2,  'regulatory':  13  15  

4.  Strategic    responsibilities  

‘innovative':  15,  'authentic':  0,  'transparent':  0,  'unique':0  ,  'differenti-­‐ate':  4,  'competitive':  4,  'strategic':  19  

42  

5.  Economic  re-­‐sponsibilities  

‘income':  14,  'growth':  7,  'earnings':  8,  'profit':  2,  'price':  2   33  

Table  6  Outputs  of  Frequency  Counts  Pfizer  Inc.  

All  five  researched  categories  indicate  that  the  company  is  doing  well  socially  while  doing  well  

economically,  presuming  good  management  is  in  place.  This  is  definitely  underpinned  by  their  

business  strategy,  namely  combining  strengths  from  all  departments  and  ensuring  good  com-­‐

munication  is   in  place,  so  that  internal  cooperation  will  deliver  the  best  outcome.  This   is  also  

                 

55  

visible   from  the  executed   frequency  counts,   showing   that  Pfizer   Inc.   focuses  most  on  ethical  

responsibilities,  strategic  responsibilities  and  philanthropic  responsibilities.    

6.7.2 Johnson  &  Johnson    

In  the  economic  year  2010,  Johnson  &  Johnson  accounted  $61.6  billion  in  sales,  which  repre-­‐

sented  a  decrease  in  0.5%  to  the  previous  year  caused  by  multiple  factors  such  as  product  re-­‐

calls,  economic   slowdown  and   increased  competition.   Yet,   as  visible   in  Table  5   the  company  

was  able  to  keep  its  total  revenue  in  the  top  league  amongst  its  competition.  Despite  the  de-­‐

cline   in   sales,   the   company   proceeded   to   invest   in   R&D   activities   and   continued   to   develop  

new   products.   To   keep   their   position   in   the   constantly   changing   business   environment,   the  

firm  will  ‘continuously  review  [their]  business  results  and  strategic  choices,  and  focus  on  finan-­‐

cial  stewardship’  (Johnson  &  Johnson,  2010,  annual  report,  p.  29).  Special  concern  is  given  to  

financial  stewardship  to  achieve  sustainable  growth.    

 

Strategically,   Johnson  &   Johnson   launched  new  products,  which  address  consumer  wants  by  

focusing  on   innovativeness  and  usability   such  as   ‘JOHNSON’S®  NATURAL®  baby  products  and  

LISTERINE®  ZERO™  mouthwash’  (Johnson  &  Johnson,  2010,  annual  report,  p.  2).  The  company  

is  concentrating  on  emerging  markets  in  order  to  best  cater  the  mass  market.  Emerging  mar-­‐

kets   include   India   and   China,   whereby   the   company   wants   to   produce   affordable   products  

such  as  medical  devices  and  pharmaceuticals  focusing  more  on  the  needs  of  these  countries.  

‘The  objective  is  superior  outcomes  for  patients  who  may  not  have  had  access  to  such  technol-­‐

ogies  or  products’  (Johnson  &  Johnson,  2010,  annual  report,  p.  3).  Surely,  it  is  not  only  the  eth-­‐

ical  motivation,  which   strives   the   concentration   on   emerging  markets,   which   is   why   the   re-­‐

searcher  considers  this  a  strategic  responsibility.    Further,  according  to  their  review,  the  com-­‐

pany   is   aware   of   growing   competition   within   the   industry   and   needs   to   find   ways   to   keep  

stakeholders   interested.  Concerning  shareholders,   the  company  places  high  emphasis  on  val-­‐

ues  such  as  transparency  and  comprehensibility  in  their  annual  and  financial  reports,  which  is  

why  they  also  present  to  shareholders  regularly  ‘to  provide  timely,  comprehensive  and  under-­‐

standable  information’  (Johnson  &  Johnson,  2010,  annual  report,  p.  29).  

 

 ‘In  determining   investment  policies,  strategies  and  goals,  each  committee  or  board  considers  

factors  including,  local  pension  rules  and  regulations’  (Johnson  &  Johnson,  2010,  annual  report,  

p.  56).  This  phrase  shows  the  company’s  commitment  to  legal  responsibilities,  whereby  John-­‐

son  &  Johnson  requires  each  business  unit  to  comply  with  their  policy  to  ‘conduct  its  business  

           

56    

affairs  with  integrity  and  comply  with  the  governing  laws  and  regulations’  (Johnson  &  Johnson,  

2010,  annual  report,  p.  29).    

 

Despite   the  previously   identified  assurance   that  business  activities  need  to  comply  with  gov-­‐

erning  regulations,   the  company’s  ethical  policy   ‘We  are  not  perfect;  we  will  make  mistakes.  

And  when  we  do,  we  hold  ourselves  accountable  to  correct  them’   (Johnson  &  Johnson,  2010,  

annual  report,  p.  5)  makes  their  intentions  clear.  The  company  for  example  had  to  recall  prod-­‐

ucts   in   2010   because   of   safety   issues,   which   negatively   impacted   their   sales   value.   Besides  

fostering  accountability,   ‘the  company  sponsors  various  retirement  and  pension  plans,   includ-­‐

ing   defined  benefit,   defined   contribution   and   termination   indemnity   plans,  which   cover  most  

employees  worldwide’   (Johnson  &   Johnson,  2010,  annual   report,  p.  39).  This   shows   that  em-­‐

ployee  engagement  and  productivity  will  be  rewarded,  as  the  company  thinks  employee  rela-­‐

tionships   are   important.   The   company   includes   a   ranking   for   responsible   behaviour,   namely  

‘first  to  patients  and  customers,  then  to  our  employees,  our  communities  and  our  shareholders’  

(Johnson  &  Johnson,  2010,  annual  report,  p.  5).    

Johnson   &   Johnson   also   offers   an   interesting   service,   which   is   free   to   all   pregnant   women,  

namely  ‘Text4baby  offers  free  health  information  for  expectant  mothers  and  through  a  baby’s  

first   year  of   life,   easily  accessible   through   cell   phones’   (Johnson  &   Johnson,  2010,   annual   re-­‐

port,  p.  24).  This  philanthropic  activity  provides  an  important  customer  segment  with  free  in-­‐

formation  and  encourages  the  customer  to  stay  in  touch  with  the  company,  thereby  reinforc-­‐

ing  brand  awareness  and  the  possibilities  to  obtain  important  feedback.  Further,  the  company  

declares  that  it  ‘provided  more  than  $4.3  billion  in  grants,  product  donations  and  patient  assis-­‐

tance,  touching  lives  around  the  world’  (Johnson  &  Johnson,  2010,  annual  report,  p.  24)  over  a  

time  period  of  ten  years  to  date.    

Categories   Phrases  used  for  frequency  count   Actual  counts  Johnson  and  Johnson  

1. Philanthropic  responsibilities  

‘research':  80,  'development':  87,'donate':    1,  'responsible':  22,  'free':  0   190  

2. Ethical    responsibilities  

 'environment':  12,  'employee’  or  'workforce':  62,  'encourage':  3,  'culture':  0,  'impact':  57,  'colleagues':  1   135  

3. Legal    responsibilities  

‘legal':  11,  'regulatory':  30  41  

4.  Strategic    responsibilities  

‘innovative':  38,  'authentic':  0,  'transparent':  1,  'unique':  7  ,  'differ-­‐entiate':  2,  'competitive':  21,  'strategic':  24   93  

5.  Economic  re-­‐sponsibilities  

‘income':  44,  'growth':  10,  'earnings':  8,  'profit':  10,  'price':  5   77  

Table  7  Outputs  of  Frequency  Counts  Johnson  and  Johnson  Public  

                 

57  

 

All  in  all,  Table  7  shows  the  frequency  counts  in  their  annual  review  2010,  where  the  company  

stresses   issues  such  as  R&D  and  economic   factors.  This   is  also  consistent  with  the  ranking  of  

Haygroup  &  Fortune  (2011),  where  the  company  reached  remarkably  high  ranks  for  the  attrib-­‐

utes  ‘financial  soundness’  and  ‘long-­‐term  investment’.  

The   frequencies   of   Johnson  &   Johnson   in   comparison   to   Pfizer   Inc.   appear   to   be   of   double  

length,  which  is  reasonable  since  Johnson  &  Johnson  provides  a  report  with  80  pages  including  

extracts  from  their  financial  statements  as  opposed  to  28  pages  with  Pfizer  Inc.    

6.7.3 Novartis  AG    

As  mentioned  earlier  in  this  paper,  Novartis  AG  has  a  brand  image  of  being  a  leader  in  pharma-­‐

ceutical  production  and  other  consumer  health  products.  The  company  successfully  manages  

its   product   pipeline   through   rigorous   investments   in   R&D   activities,   amounting   to   ‘USD   6.2  

billion  in  core  R&D,  or  20.1%  of  net  sales’  (Novartis  AG,  2010,  annual  report,  p.  138).  Although  

the  company  has  agribusiness  and  nutrition  pipelines,   the  manufacturing  of  pharmaceuticals  

‘is   the   largest   contributor   among   the   segments,   accounting   in   2010   for   USD   30.6   billion,   or  

60.3%,  of  net  sales  and  for  USD  8.8  billion,  or  72.3%,  of  operating  income’  (Novartis  AG,  2010,  

annual  report,  p.  158).  In  2010,  the  company  employed  approximately  96,717  people  as  visible  

in  Table  5.  In  order  to  sustain  economic  responsibilities,  the  company  announced  new  product  

launches  as  well  as  consistent  investments  in  market  research  and  R&D.  

Strategically,  Novartis  AG  is  focusing  on  sustainable  growth  and  risk  management,  seeing  itself  

‘to   develop   in   a   more   stable   way   than   several   of   our   important   competitors’   (Novartis   AG,  

2010,   annual   report,   p.   8)   The   firm  understands   the   challenges  of   a   changing  business   envi-­‐

ronment  and  tries  to  satisfy  both  shareholders  and  stakeholders  by  incorporating  a  ‘strategy  of  

focused  diversification’   (Novartis  AG,  2010,  annual   report,  p.  8).  Based  on   their   strategy,  No-­‐

vartis  AG  is  differentiating  itself  from  competitors  by  developing  new  products  (also  for  emerg-­‐

ing  markets),  improving  existing  products  and  steadily  investing  in  R&D.  The  company  prevails  

against   its   competitors,   stating   that   ‘in  view  of   [their]   sustainable  success,   it   is  not   surprising  

that  [their]  strategy  is  imitated  today’  (Novartis  AG,  2010,  annual  report,  p.  8)  and  ‘for  several  

years  Novartis  has  received  more  approvals  for  new  medicines  than  competitors’  (Novartis  AG,  

2010,   annual   report,   p.   9).   These   statements   show   their   strong   conviction   in   their   business  

strategy,   which   can   definitely   help   to   win   over   stakeholders,   as   it   seems   the   company   has  

nothing  to  hide.  

 

           

58    

Reinforcing   transparency,   Novartis   AG   is   constantly   reviewing   their   processes   and   updating  

procedures  according  to  regulatory  issues.  Targets  to  meet  regulatory  objectives  are  identified  

in   their   annual   review   such   as   providing   stakeholders   with   transparent   information.   New  

products  run  through  clinical  studies  to  guarantee  safety  and  effectiveness  of  the  pharmaceu-­‐

tical  product.    

 

Novartis  AG’s  business  model  is  named  ‘Arogya  Parivar’  a  Hindi  expression  meaning  translated  

‘healthy  family’.  With  the  use  of  this  model  the  firm  tries  to  ‘reach  millions  of  patients  in  rural  

India  with  health  education  and  affordable  products  –  expanding  access  in  a  way  that  is  both  

socially   responsible   and   sustainable’   (Novartis   AG,   2010,   annual   report,   p.   78).   Their  ethical  

standpoint   is   crucial   to   the   firm’s   corporate   culture,   as   ‘engaging   with   society   to   improve  

healthcare  is  integral  to  how  Novartis  operates’  (Novartis  AG,  2010,  annual  report,  p.  5).  As  for  

internal  procedures,  the  company  is  undertaking  improvements   in  business  operations  based  

on   survey   results   of   employed  people  worldwide.   Further,  Novartis  AG   is   committed   to   em-­‐

ployee  health,  as  ‘a  ban  on  smoking  had  already  been  adopted  by  Novartis  sites  in  many  parts  

of  the  world’  (Novartis  AG,  2010,  annual  report,  p.  69)  thereby  also  reinforcing  their  sustaina-­‐

ble  and  responsible  strategy  and  influencing  brand  image.    

 

Further  to  ethical  responsibilities,    ‘Novartis  provides  fellowships  for  students  working  toward  a  

master’s  degree  in  clinical  epidemiology  at  Stellenbosch  University’  (Novartis  AG,  2010,  annual  

report,   p.   68).   Comparable   to   Pfizer   Inc.,   the   company   sees   the   high   potential   of   the   young  

generation,  both  philanthropically  and  strategically.  As  a  result,  Novartis  AG  is  praised  in  rank-­‐

ings  on  corporate  citizenship  or   in  Fortune  magazine’s   list  of   ‘World’s  Most  Admired  Compa-­‐

nies’  (scoring  #  3)  in  the  pharmaceutical  industry  (Haygroup  &  Fortune,  2011).    

Categories   Phrases  used  for  frequency  count   Actual  counts  Johnson  and  Johnson  

1. Philanthropic  responsibilities  

‘research':  150,  'development':  132,'donate':    6,  'responsible':  73,  'free':  2   363  

2. Ethical    responsibilities  

 'environment':  73,  'employee’  or  'workforce':  38  +  6,  'encourage':  19,  'culture':  20,  'impact':  69,  'colleagues':  4   229  

3. Legal    responsibilities  

‘legal':  62,  'regulatory':  90  152  

4.  Strategic    responsibilities  

‘innovative':  83,  'authentic':  0,  'transparent':  6,  'unique':  4  ,  'differ-­‐entiate':  19,  'competitive':  53,  'strategic':  34   199  

5.  Economic  re-­‐sponsibilities  

‘income':  145,  'growth':  162,  'earnings':  62,  'profit':  55,  'price':  95   519  

Table  8  Outputs  of  Frequency  Counts  Novartis  AG  

 

                 

59  

Summarizing,   it  can  be  said,  that  Novartis  AG  definitely  aims  for  a  strategic  approach  to  CSR.  

The   company   identifies   targets   according   to   their   long-­‐term   strategy,   keeping   stakeholders  

updated  with  goals  and  deficiencies.    

6.7.4 Hoffmann-­‐La  Roche  Ltd.  

As   Interbrand’s   2012   survey   on   the  Most   Valuable   Swiss   Brand   2012   showed,   Hoffmann-­‐La  

Roche  Ltd.  strikes  against   its  strongest  national  competitor  Novartis  AG.  Not  only   in  terms  of  

brand  management,  but  also  in  terms  of  economic  drivers,  the  company  was  able  to  increase  

core  operating  profit  and  net  income  in  2010.  Concerning  sales  in  various  regions,  sales  in  Ja-­‐

pan  and  Western  Europe  dropped  around  3%,  whereas  sales  in  the  United  States  rose  3%  and  

international  sales  rose  up  to  7%.  ‘Core  Earnings  per  Share,  a  key  indicator  of  underlying  busi-­‐

ness  performance,  increased  10%  in  local  currencies  (4%  in  Swiss  francs)’  (Hoffmann-­‐  La  Roche  

Ltd.,  2010,  annual  report,  p.  5).    

 

The  main  focus  of  the  company’s  strategy  is  given  to  stakeholders,  who  will  be  included  in  the  

formulation  of  their  business  strategy  so  that  priorities  are  set  accordingly.  This  means  stake-­‐

holders  are  able  to  bring   in  their  thoughts  on  topics   like  CSR.  Through  the  use  of  key  perfor-­‐

mance   indicators   (KPIs)   the   company   tries   to   break   down   business   strategy   into   most   im-­‐

portant  deliverables  and  make  sure  they  will  be  achieved  throughout  the  year.  Hoffmann-­‐  La  

Roche  Ltd.  was  able  to  achieve  the  award  of    ‘‘Supersector  Leader’  in  healthcare  for  the  second  

year  running  in  the  Dow  Jones  Sustainability  Indexes  (DJSI)  in  recognition  of  [their]  commitment  

to  sustainable  practices’  (Hoffmann-­‐  La  Roche  Ltd.,  2010,  annual  report,  p.  6).    

 

Hoffmann-­‐  La  Roche  Ltd.  mentions  the  increasing  pressure  of  American  and  European  regula-­‐

tors,   as   they   ‘significantly   raised   the  bar   for  approval  of  new  products’   (Hoffmann-­‐   La  Roche  

Ltd.,  2010,  annual  report,  p.  16).  Therefore,  clinical  trials  are  in  place  ‘to  demonstrate  that  new  

medicines  are  safe  and  effective  and  that  diagnostic  tests  provide  useful  data’   (Hoffmann-­‐  La  

Roche  Ltd.,  2010,  annual  report,  p.  109).    

 

An  outstanding  aspect  of  Hoffmann-­‐  La  Roche  Ltd.  is  their  focus  on  female  workforce  in  man-­‐

agement   positions.   In   2010,   the   company   ‘increased   percentage   of   women   in   key   positions  

from  13%  to  16%’  (Hoffmann-­‐  La  Roche  Ltd.,  2010,  annual  report,  p.  15).  By  valuing  employee  

commitment  through  recognition  and  remuneration  schemes,  Hoffmann-­‐  La  Roche  Ltd.  wants  

to  ‘make  sure  that  Roche  remains  an  employer  of  choice’  (Hoffmann-­‐  La  Roche  Ltd.,  2010,  an-­‐

nual  report,  p.  11).  Recently,  ‘Genentech  voted  Science  magazine’s  top  employer  for  the  eighth  

           

60    

time,  Roche  rose  from  17th  to  5th  place’  (Hoffmann-­‐  La  Roche  Ltd.,  2010,  annual  report,  p.  15)  

showing  the  company’s  concern  for  employee  satisfaction.      

Concerning  the  environmental  approach,  the  company  ‘reduced  [their]  eco-­‐balance  measure  of  

total   environmental   impact   by   10%,   five   years   ahead   of   target’   (Hoffmann-­‐   La   Roche   Ltd.,  

2010,   annual   report,   p.   15)   although   significant   growth   through   acquisition   has   taken   place.  

The  firm  tries  to  combat  the  negative  aspects  of  a  changing  market  environment  by  focusing  

on  an  ethical  policy  of  employee  engagement  and  environmental  impact  reduction.    

 

Philanthropically,   Hoffmann-­‐La   Roche   Ltd.   is   showing   engagement   for   various   stakeholder  

groups,  such  as  local  communities  in  emerging  countries,  whereby  the  firm  is  involved  in  dona-­‐

tions   to   increase   water   cleanliness   and  monetary   donations   to   help   AIDS   affected   children.  

Further,   the   firm  established  an  education  programme,   trying   to   support   future   researchers.  

Additionally,   Hoffmann-­‐La   Roche   Ltd.   is   focusing   on   strategic   relationships   with   non-­‐

governmental  organisations,  patronising  initiatives  such  as  a  ‘project  with  the  Chinese  Ministry  

of  Health  to  establish  an  organ  donation  system’   (Hoffmann-­‐  La  Roche  Ltd.,  2010,  annual   re-­‐

port,  p.  104).    

Categories   Phrases  used  for  frequency  count   Actual  counts  Johnson  and  Johnson  

1. Philanthropic  responsibilities  

‘research':  110,  'development':  139,'donate':    9,  'responsible':  97,  'free':  7   362  

2. Ethical    responsibilities  

 'environment':  53,  'employee’  or  'workforce':  123,  'encourage':  6,  'culture':  9,  'impact':  46,  'colleagues':  4   241  

3. Legal    responsibilities  

‘legal':  7,  'regulatory':  48  55  

4.  Strategic    responsibilities  

‘innovative':  53,  'authentic':  1,  'transparent':  5,  'unique':  6  ,  'differ-­‐entiate':  8,  'competitive':  15,  'strategic':  40   128  

5.  Economic  re-­‐sponsibilities  

‘income':  13,  'growth':  110,  'earnings':  17,  'profit':  35,  'price':  40   215  

    Table  9  Outputs  of  Frequency  Counts  Hoffmann-­‐  La  Roche  Ltd.    

As  a  result,  the  company’s  ethical  policy  and  their  philanthropic  strategy  secure  positive  brand  

awareness  and  show  commitment  to  various  stakeholder  groups.  The  company  is  following  a  

detailed  stakeholder  plan,  to  ensure  objectives  are  met.  This  procedure  also  allows  stakehold-­‐

ers  to  raise  concerns  and  formulate  the  business  strategy  mutually  with  the  company.    

                 

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7 DISCUSSION  AND  INTERPRETATION  OF  FINDINGS  

This  chapter  will  evaluate  the  data  obtained  through  qualitative  content  analysis  and  deal  with  

the   interpretation   of   finings   according   to   prior   established   categories   based   on   the   4-­‐part  

model  (Carroll,  1991).  Further,  this  chapter  will  elucidate  major  strengths  and  priorities  of  the  

four  different  pharmaceuticals,  allowing  for  comparisons  between  them.  An  overall  summary  

and  a  general  assessment  of  the  findings  will  be  presented  in  Chapter  8.      

The   first   evaluated   company,   namely   Pfizer   Inc.   provides   the   reader  with   a   short   and   clear  

presentation  of  information  about  the  company’s  activities  in  2010.  The  report  is  precise  and  

stakeholder   friendly   in   terms   of   readability   and   size.   As  mentioned   earlier,   Pfizer   Inc.   is   the  

leader  of  the  four  observed  firms  in  terms  of  total  revenue  and  net  income.  In  order  to  sustain  

their   economic  position,   the   company   focuses  on   innovation  and  high   investments   in  R&D.  

Further   to   the   research  question,  R&D   investments   are  highly  beneficial   to   the   firm  and   the  

society  as  the  firm  will  profit  in  terms  of  revenue  and  society  from  newly  invented  pharmaceu-­‐

ticals,   such   as  medication   against   AIDS   or   cancer.   The   firm   gives  weight   to   establishing   and  

formulating  a  corporate  culture  of  trust  by  allowing  employees  to  get  involved  and  foster  job  

enrichment  by  sharing  their  thoughts.  Although  the  theoretical  outlook  of  this  thesis  suggested  

that  it  might  be  hard  to  achieve  competitive  advantage  by  the  means  of  CSR,  the  author  be-­‐

lieves  that  creating  a  culture  where  employees  are  willing  to  work  can  definitely  be  a  differen-­‐

tiating   factor  and  help   to   create   competitive  advantage.   In   fact,   Laimbach   (2006)   found   that  

employee  satisfaction  might  be  a  driver  of  competitive  advantage,  as  ‘there  is  a  direct  correla-­‐

tion  between  employee  Fulfillment   Satisfaction  and   job  performance’   (Laimbach,  2006,  p.   1).  

Further,   Laimbach   (2006)   sees   employee   satisfaction   as   a   sustainable   factor   of   competitive  

advantage,  since  other  variables  such  as  downsizing  and  outsourcing  might  only  give  a  tempo-­‐

rary  advantageous  position.    

All   in   all,   Pfizer   Inc.   manages   to   integrate   responsible   practices   into   its   business   strategy,  

thereby   leaving   various   stakeholder   groups  with   a   benefit   from   the   company.   Strengths   are  

definitely  the  approach  of  a  corporate  culture,  helping  the  company  to  maintain  their  competi-­‐

tive  position  not  only  in  terms  of  economic  drivers,  but  also  in  terms  of  employee  satisfaction.  

By  managing   all   of   Carroll’s   (1991)   responsibilities   successfully,   the   firm   is   serving   as   a   role  

model  for  the  overall   industry,   incorporating  CSR  as  a  common  golden  thread  into  their  busi-­‐

           

62    

ness   strategy.   This  might   be   an   indicator,  why   the   company   does  well   financially   as  well   as  

socially.      

Johnson  &  Johnson  provides  the  reader  with  an  enormous  amount  of  information  in  compari-­‐

son  to  the  previously  evaluated  report  of  Pfizer  Inc.  The  main  part  covers  detailed  description  

of   financial   statements,  which   is   consistent  with   the   ranking   of  Haygroup  &   Fortune   (2011),  

where  the  company  reached  remarkably  high  ranks  for  the  attributes  ‘financial  soundness’  and  

‘long-­‐term  investment’.   ‘People  management’  and     ‘social  responsibility’  represent  two  other  

variables  that  have  been  evaluated  by  Haygroup  &  Fortune  (2011)  to  be  outstanding  concern-­‐

ing  Johnson  &  Johnson.  In  this  case,  after  thoroughly  reviewing  the  business  report  of  Johnson  

&  Johnson,  the  author  was  not  able  to   identify  a  holistic  approach  to  CSR,  as  this  was  visible  

with  Pfizer  Inc.  CSR  is  rather  seen  as  a  isolated  part  of  the  whole  strategy.  Therefore,  the  au-­‐

thor  concludes  that  these  two  variables  are  not  addressed  appropriately  in  the  annual  report.  

The  firm  tries   to  meet  stakeholder  needs,  but  specifically   ranks  these  according  to  a  scale  of  

importance,   first   customers,   second   employees,   third   communities   and   shareholders.   Alt-­‐

hough   it  might   be   true   for   the   company   that   they   have   identified   some   stakeholders   to   be  

more  important,  the  wording  seemed  slightly  inappropriate.  To  be  true,  focus  should  be  given  

on  satisfying  all  of  these  mutually,  the  author  believes  that  there  is  a  lack  of  strategic  focus  or  

a  golden  thread  comparable  to  Pfizer  Inc.    

Further,  the  company  focuses  on  grants,  product  donations  and  patient  assistance,  but  is  lack-­‐

ing  more  detailed  information  on  philanthropical  activities,  which  is  why  the  company  should  

improve  its  presentation  in  its  annual  report,  going  beyond  economic  and  ethical  responsibili-­‐

ties.   Concluding,   it   can  be   said   that   Johnson  &   Johnson  might   place   shareholders   on   a   third  

position  regarding  their  priorities,  leaving  the  reader  in  doubt  why  so  much  weight  is  given  on  

financial  statements  and  the  financial  soundness  of  the  company  within  its  report.  Therefore,  

the   author   believes   that   philanthropy,   as   a   category   hasn’t   been   fulfilled   to   its   potential.   In  

fact,  Johnson  &  Johnson  conveys  their  meaning  of  CSR  to  be  rather  a  measure  of  risk  manage-­‐

ment  than  a  strategic  measure  where  both  parties  would  profit  most.  

Concerning  the  Swiss  pharmaceutical  providers,  Novartis  AG  pushes   its  brand   image  through  

rigorous  R&D  investments  amounting  up  to  20%  of  net  sales.  More  importantly,  the  company  

is  aware  of  its  high-­‐class  reputation  and  formulates  this  in  its  annual  report.  Interestingly,  the  

emphasis  of   their   strong  position   in   their  competitive  set  shows  their  confidence  and  causes  

readers  to  be  affected  by  their  positive  ‘marketing’.  This  procedure  can  be  explained  by  a  psy-­‐

chological   phenomenon,   namely   developing   a   cognitive   bias.   Saying   and   repeating   goals   or  

                 

63  

good  attributes  is  more  likely  to  get  you  towards  a  good  outcome,  which  in  this  case  would  be  

to  convince  stakeholders.  Baron   (2000)  was   researching   the   influence  of  cognitive  and  social  

factors   in  relation  to  entrepreneur’s  success,   finding  that   ‘successful  entrepreneurs  appear  to  

think  differently   than  other  persons   in   several   respects   (e.g.,   they  are   less   likely   to  engage   in  

counterfactual   thinking   but   more   likely   to   show   overconfidence   in   their   judgments)’   (Baron,  

2000,  p.  15).  Although  this  statement  might  hold  for  entrepreneurs,  meaning  people  who  en-­‐

gage  in  start-­‐ups  through  their  innovative  business  ideas,  the  author  believes  this  statement  to  

be  applicable  to  Novartis  AG  too.  The  company  engages  itself  in  an  over-­‐confidential  approach  

towards  stakeholders,  where  there  is  no  sign  of  ‘counterfactual  thinking’  visible  thereby  man-­‐

aging   to   get   the   readers’   attention  and  evoking  a  positive  attitude   towards   the   company.   In  

comparison,   Johnson  &  Johnson  already  mention   in  their  annual  report  that  once  they  make  

mistakes,  they  will  hold  themselves  accountable  for  them.  This  approach  seems  rather  coun-­‐

terproductive,   as   it   implies   that   the   company  will   certainly  make  mistakes   and   doesn’t   talk  

about  risk  management  in  the  first  place.  As  a  result,  in  both  cases  the  reader  already  gets  two  

very  different  perceptions,  whereby  Novartis  AG  manages   to   change  a  person’s  mind-­‐set  by  

reading  its  annual  report.  All  in  all,  the  company  manages  to  fulfil  every  layer  of  responsibilities  

scoring  high   in  ethical  management,  namely  by   implementing   surveys  on  employee   satisfac-­‐

tion  and  fostering  job  enrichment.      

As   for  Hoffmann-­‐   La   Roche   Ltd.,   the   structure   of   the   annual   report   2010   is   quite   similar   to  

Novartis  AG,  as  these  are  direct  national  competitors.  The  main  focus  is  given  to  stakeholders,  

who  will  be  included  in  the  formulation  of  their  business  strategy  so  that  priorities  are  set  ac-­‐

cordingly.  This  strategic  approach  ensures  that  social  welfare  is  met,  while  the  company  itself  

can  focus  on  economic  factors  and  engage  in  a  negotiating  process  with  stakeholders.  Further,  

the  company  draws  on  an   important  factor,  namely  the  focus  on  women  in  managerial  posi-­‐

tions,  which  helps  to  raise  brand  perception  and  shows  the  company’s  commitment  to  social  

problems.   ‘Employer   of   choice’-­‐   Hoffmann-­‐   La   Roche   Ltd.   wants   to   sustain   competitive   ad-­‐

vantage  by  manages  its  employee  relationships  through  a  remuneration  strategy.  The  compa-­‐

ny  is  not  only  successfully  managing  ethical  responsibilities,  but  also  philanthropical  activities  

by  showing  engagement  for  various  stakeholder  groups,  such  as   local  communities   in  emerg-­‐

ing   countries,   whereby   the   firm   is   involved   in   donations   to   increase   water   cleanliness   and  

monetary   donations   to   help   AIDS   affected   children.   The   firm   established   an   education   pro-­‐

gramme,  trying  to  support  future  researchers.  Summarizing,  the  company  draws  on  important  

aspects  such  as  women  in  managerial  positions  and  engagement  in  projects  of  emerging  coun-­‐

           

64    

tries.  Stakeholders  are  kept  in  the  communication  loop  to  make  sure  transparency  is  the  major  

strength  of  Hoffmann-­‐La  Roche  Ltd.    

                 

65  

8 CONCLUSION  

The  interpretation  of  the  obtained  results  showed  interesting  differences  between  the  compa-­‐

nies’   approach   to   implementing  CSR   into   their  business   strategy.   The   following   chapters  will  

summarize  major  points  (Chapter  8.1)  and  declare  the  contribution  to  knowledge  made  (Chap-­‐

ter  8.2).   To   conclude,  Chapter  8.3  pinpoints   significant   limitations   to   the  methodological   ap-­‐

proach  and  determines  implications  for  future  research  to  be  made.      

8.1 Summary  

Smith   (2003)  tried  to  develop  a  definition  of   the  right  CSR  strategy,  which   ‘should  reflect   the  

individual  company’s  mission  and  values—what   it   stands   for—and  thus  be  different   from  the  

CSR  strategy  of  even   its  closest  competitors’   (Smith,  2003,  p.27).   In  times  of  high  demand  on  

transparency  it  might  be  hard  to  differentiate  from  competitors.  However,  the  analysis  showed  

that   there   are   different   approaches   to   CSR,   where   some   factors   might   definitely   help   to  

achieve  competitive  advantage.    

In   general,   all   four   companies   try   to   include   CSR   into   their   business   strategy,   but   Pfizer   Inc.  

seems  to  stand  out  in  terms  of  identifying  a  common  golden  thread.  The  author  believes  that  

all  five  responsibilities  have  been  met,  resulting  in  benefits  for  the  company  and  the  society.  A  

direct  competitor   in  terms  of  the   integration  of  CSR   into  business  strategy  might  be  Novartis  

AG,  scoring  with  regards  to  their  over-­‐confidentiality,  managing  to  influence  the  reader’s  per-­‐

ception,  namely  to  believe  and  trust  the  goal  of  the  company.  Johnson  &  Johnson  seem  to  be  

honest  to  their  stakeholders,  as  their  credo  states  that  mistakes  will  happen,  but  the  company  

will  hold  themselves  accountable  to  correct  them.  The  author  believes  that  this  might  be  the  

wrong  approach  to  satisfying  stakeholders,  as  it  doesn’t   indicate  that  the  company  will  try  to  

mitigate   these  mistakes.   In   comparison,  Hoffmann-­‐   La  Roche   Ltd.   strives   to  be   the  best   em-­‐

ployer  among   those   four  by   focusing  on  different  groups,   such  as   the  minority  of  women   in  

managerial   positions   and   establishing   a   communication   system  with   various   stakeholders   to  

ensure   high   levels   of   transparency.   Table   10   shows   the   most   important   statements,   which  

summarize  the  company’s  attitude  and  approach  to  CSR.    

 

 

           

66    

Company   Top  statement  annual  report  2010  

Pfizer  Inc.     ‘…  so  that  the  whole  of  Pfizer  is  greater  than  the  sum  of  our  individual  parts’  (Pfizer  Inc.,  2010,  annual  report,  p.  7)  

Johnson  &  Johnson     ‘We  are  not  perfect;  we  will  make  mistakes.  And  when  we  do,  we  hold  our-­‐selves  accountable  to  correct  them’  (Johnson  &  Johnson,  2010,  annual  re-­‐port,  p.  5)  

Novartis  AG   ‘…  engaging  with  society  to  improve  healthcare’  (Novartis  AG,  2010,  annual  report,  p.  5)  

Hoffmann-­‐  La  Roche  Ltd.     ‘…  making  sure  that  Roche  remains  an  employer  of  choice’  (Hoffmann-­‐  La  Roche  Ltd.,  2010,  annual  report,  p.  11)  

      Table  10  Top  statements  from  annual  reports  2010  

All  four  companies  are  incorporating  CSR  into  their  business  strategies.  The  statements  in  Ta-­‐

ble  10  correspond  to  the  ethical  layer  of  responsibilities  when  compared  to  Carroll’s  (1991)  4-­‐

part   model.   Pfizer   Inc.   and   Hoffmann-­‐   La   Roche   Ltd.   both   focus   on   employee   satisfaction,  

which  seems  to  be  one  of  the  most  important  strategic  variables  in  relation  to  CSR  and  might  

help  to  sustain  competitive  advantage  in  a  challenging  business  environment.  Carroll  and  Sha-­‐

bana  (2010)  identify  that  ‘by  adopting  certain  CSR  activities,  a  firm  may  be  able  to  build  strong  

relationships  with  its  stakeholders  and  garner  their  support   in  the  form  of   lower  levels  of  em-­‐

ployee  turnover,  access  to  a  higher  talent  pool,  and  customer  loyalty’  (Carroll  &  Shabana,  2010,  

p.  102).    

Concerning   the   outcomes  of   this   paper   this  means   that   stakeholder  management   and  more  

specifically   employee   relationships   are   significant   CSR   variables   when   a   company   wants   to  

sustain  its  competitive  advantage  and  benefit  from  employee  retention  or  skilled  people  who  

want   to  work   for   the   company   in   consequence  of   their   approach   to   CSR.  Most   importantly,  

companies  have  to  see  that  there  are  different  approaches  to  implementing  CSR  and  might  not  

give  the  anticipated  results  if  implemented  loosely.  Pfizer  Inc.  gives  a  good  example  on  how  to  

integrate  CSR  holistically,  meaning  implementing  CSR  a  common  golden  thread  throughout  the  

business’  strategy.    

 

 

                 

67  

8.2 Contribution  to  knowledge  

Although  CSR  is  nowadays  a  widely  known  issue,  there  are  different  approaches  to  implement-­‐

ing  CSR.  The  definition  of  the  right  CSR  strategy,  which  ‘should  reflect  the  individual  company’s  

mission  and  values—what  it  stands  for—and  thus  be  different  from  the  CSR  strategy  of  even  its  

closest  competitors’  (Smith,  2003,  p.27),  needs  to  be  found  through  thoroughly  reviewing  and  

constantly  adapting  business  strategy  by  including  stakeholders  in  the  formulation.    

From  the  given  results,  the  researcher  gained  an  insight  into  business  practices  of  four  leading  

pharmaceutical  firms.  Although  some  approaches  tend  to  better  than  others  within  the  indus-­‐

try,  there  is  a  general  consensus  on  a  strategic  approach  to  CSR.  However,  the  author  identi-­‐

fied  that  CSR  might  not  be  a  tool  for  differentiation  if  implemented  loosely.  Pfizer  Inc.  can  be  

taken   as   a   role  model,   adopting   a   strategic   approach   to   CSR   by   showing   strong   concern   for  

employee  engagement.  Pfizer  Inc.  is  therefore  able  to  take  a  favouring  position  and  sustain  its  

competitive  advantage.  In  general,  there  is  the  trend  to  see  CSR  as  a  question  of  stakeholder  

management   and   risk  mitigation.  Most   of   the   evaluated   companies   see   CSR   as   a  matter   of  

stakeholder  management,  ensuring  their  objectives  are  met.  

Managers  of   large  corporations  have   to  be  aware  of   the   implications  of   integrating  CSR   into  

their  business  strategy.  When  having  the  right  approach  at  hand,  a  firm  might  be  able  to  signif-­‐

icantly  differentiate  itself  from  its  competitors,  fulfilling  the  needs  of  stakeholders  at  one  hand  

and  pursuing  profit   at   the  other.  Within   such  a   strategic  approach   to  CSR,   transparency  and  

involvement   throughout   all   departments   should   be   embedded   as   an   integral   part   and   bal-­‐

anced   approach   between   satisfying   shareholders   and   stakeholders.   Establishing   key   perfor-­‐

mance  indicators  (KPIs)  and  specific  goals  or  milestones  might  help  employees  to  identify  with  

the  company’s  strategy.  At  its  best,  CSR  is  included  in  all  company  procedures  through  estab-­‐

lishing   a   certain   corporate   culture.   In   order   to   tackle   the   challenge   of   satisfying   both   share-­‐

holder  and  stakeholders,   it   is   important  for  managers  to  focus  on  employee  commitment,  as  

‘there   is  a  direct   correlation  between  employee  Fulfillment  Satisfaction  and   job  performance’  

(Laimbach,  2006,  p.  1).    

 

 

 

           

68    

8.3 Limitations  and  Future  research  

It   is   important   to   realize   that  CSR,   if  managed   in  a  good  way,  can  definitely   lead  to   firm  and  

social  welfare  at  the  same  time.  Although  CSR  has  become  very  popular  these  days,  there  still  

is  a  need  for  a  common  approach  to  implement  it  into  business  strategy.  There  has  to  be  more  

than  one  isolated  part  on  CSR  in  the  annual  report,  it  should  be  integrated  as  a  golden  thread  

throughout  the  strategy.  Although  CSR  is  an  issue  being  highly  talked  of,  it  is  important  to  con-­‐

sider  that   ‘a  best-­‐practice  business  model  has  not  yet  evolved’  (Esteban,  2008,  p.78).  This  au-­‐

thor  further  mentions  that  most  businesses  that  try  to  follow  a  strategic  approach  to  CSR  try  to  

combine  it  with  their  Public  Affairs  department  (Esteban,  2008).  This  approach  would  be  best  

implemented  by   focusing  on  stakeholder   relationships  but   internal  departments  at   the  same  

time.    

Concerning   the   research   method   used,   ‘qualitative   research   is   usually   most   effective   when  

used  as  a  multidisciplinary  process,  meaning  by  using  at  least  two  different  procedures  to  verify  

results’  (Bowen,  2009,  p.  27).  For  credibility  purposes  Bowen  (2009)  suggests  to  use  interviews  

as  a   technique   to  probe  and  verify   the   results   that  were  obtained.   Thomas   (2003)  mentions  

‘consistency  checks’  by  including  another  researcher  into  methodological  procedure  or  ‘stake-­‐

holder   checks’   by   affected   parties   to   ensure   the   credibility   of   the   outcomes.   ‘Stakeholder  

checks  enhance   the   credibility  of   findings  by  allowing   research  participants  and  other  people  

who  may  have  a  specific  interest  in  the  research  to  comment  on  or  assess  the  research  findings,  

interpretations,  and  conclusions’  (Thomas,  2003,  p.7).  

All  in  all,  the  sample  was  not  representative  for  the  whole  market,  but  allowed  for  significant  

and  informative  comparison  between  two  leading  pharmaceutical  sectors  and  their  approach  

to  integrating  CSR  into  business  strategy.  The  author  concludes  that  CSR  should  be  implement-­‐

ed  as  a  golden  thread  throughout  business  strategy,  which  so  far  has  only  been  addressed  by  

Pfizer  Inc.  experiencing  the  potential  benefits  of  a  well-­‐planned  CSR  strategy.  Furthermore,  on  

a  global  scale,  there  is  definitely  a  need  for  establishing  detailed  guidelines  on  how  to  imple-­‐

ment  CSR  procedures  and  measure  CSR  performance.  

 

                 

69  

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