CHAPTER 1

INTRODUCTION

1.1 Chapter Introduction

Today Corporate Social Responsibility (CSR) is become as a vital phenomenon in
business environment.As well as customer purchasing intention is also a key factor
for an organization. Therefore by linking CSR practices and customer purchasing
intention, research introduction is described the background of the study, problem
statement, research questions, objectives, significance and limitations of the study.

1.2Background of the Study

According to the Strategic Management aspects, every organization takes strategically

decisions for their ultimate objective of survival in the market. By today business
world has become very competitive. Thus every organization tries to gain competitive
advantages over their rivals in order to become market leaders. For this purpose they
use various strategies where Corporate Social Responsibility takes considerable place
in this regard. The emergence principles of sustainable development have an
important impact on the concept of Corporate Social Responsibility.

CSR means firm’s responsibility for improvement and protection of welfare of society
as well as for organization in future sustainable benefits for all stakeholders and also
CSR as social actions whose purpose is to satisfy social needs. [ CITATION Ang93 \l
1033 ]

Though this concept of CSR has run for early 1950s, its importance has been realized
in later. But by today this has become high acceptable and high valuable strategy or
tool over the day today business operations with the long run perspective. An
organization involves in CSR activities with mainly two aims which are profit
maximization and social wellbeing. [ CITATION Set03 \l 1033 ]. Corporate Social
Responsibility can also be explained as an organization’s responsibility for
development, progress and security of welfare towards both society and organization
in future sustainable benefits for every stake holders and CSR projects
implementations as “corporate social action” whose objective is to fulfill the social
needs. [ CITATION Ang93 \l 1033 ].

At the same time, for every organization their most valuable asset is their customers.
Japanese people do their businesses in according to the term of “Customer is the
king”. Therefore it is obvious that a firm wants to retain its customers as well as they
want to make customers revisit the firm to make purchases which means that an every
organization needs to make customers loyal to their companies which ensure that they
do not shift to other companies. Thus this study will focuses on the impact of
Corporate Social Responsibilities towards the customers purchasing intentions.

Today most of businessesspecially multinational companies use Corporate Social

Responsibility projects as a powerful strategy towards their survival in the business
world and they use this CSR projects as a tool for winning the competitive business
operations. CSR can be depicted as a business’ focus on the “triple bottom line”,
which comprises economic, social and environmental goals as measures of
organization’s success.

Purchasing intention can be defined as a plan to purchase a particular good or service

in the future. [ CITATION LaB83 \l 1033 ]. Customers’ intention towards purchasing
product and services from particular organization can be measured by frequency of a
customer visits for a particular organization. Normally consumers tempt to make
purchases on the base of particular organizations’ behavior in the business as well as
in society. Consumers’ purchasing behavior plays as an intermediation between their
attitude and perception towards the particular product and their real purchasing
behavior.

Always customers expect from organizations to be transparent with the society and
also they prioritized the firms on the base on their perception which are demand for
organization to do something towards the society. When a customer believes that an
organization does something for wellbeing of the society, he automatically tempts to
repurchase or revisit and he will become loyal to the particular organization.

Customers can help the firm to generate the profit in long run through their buying
behavior. CSR’s capability to make positive attitudes and perceptions towards the
organization which increase customer purchasing intention has been discussed in this
study.

1.2 Problem Statement

Every organization tries to follow sundry experiments to distinguish them from others
and to become market pioneers. These strategies are undertaken with various purposes
while main reason is sustainability. Business environment has ever changing nature.
Hence every organization has to make strategic decisions in order to remain in the
market. They need to continue their business journey and also they want to earn
reputation or create loyalty among their customers. Thus by today CSR has become
more significant, because business’s existence is rely on the customer trust, customer
loyalty towards the organization and customer satisfaction through the company
products and services. However this requires more time, more wealth and more
resources. Although it must be incurred capital, definitely it can be gained goodwill in
long run as a result of those CSR implementations. This is not an easy task and also
this can be easily damaged and it may directly affect to the company’simage badly.

CSR is one of the prominent topics for a research on Strategic Management. Number
of studies can be found on the topic of CSR. These studies have been recognized the
various relationship base on the number of perspective of the CSR concept. To Sri
Lankans CSR concept is still genuine and new. Therefore in Sri Lankan Context there
are very few studies have been done on CSR concept. Though CSR projects are still
not much popular in Sri Lanka, it has major influence in Western countries. The main
reason for that is lack of money, because it must be incurred huge amount of capital
on the CSR project and most of Sri Lankan organizations are not pay their attention
on long term benefits through the CSR activities, they only concern about the short
term outflows. Many of those studies are recognized a relationship between social
initiatives and improved financial performance. [ CITATION Mar01 \l 1033 ], [ CITATION
Sta98 \l 1033 ]. All these studies have tried to depict what can a company gain in return
when it involves in CSR activities. All past literature also was discussed on CSR
mainly on the corporate side. [ CITATION Har06 \l 1033 ] . In this situation, this study
will discuss the CSR concept from not only corporate perspective, but also from
customer perspective such as customer satisfaction, customer trust, and customer
loyalty.
The importance of CSR as an acceptable activity of the businesses doing in the private
sector in Sri Lanka has been improving central skepticism of the public towards the
organization [ CITATION Kum03 \l 1033 ]. To protect customer intention towards the
particular company, the company must do something that go beyond the customer
expectations. Most of Sri Lankans think that CSR is related only to the sponsorship of
social activities and donations to good causes, but CSR concept is much more than
mere sponsorships and donations. Business environment has dynamic nature. It is true
that doing something is better than doing nothing, and then doing it proper is better
than just doing something. Hence every organization has to make some strategic
decisions to do something that go beyond the customer expectations. More awareness
on organization’s social and ethical behavior would influence customers’ purchasing
intentions[ CITATION Daw04 \l 1033 ].

Business organizations in Sri Lanka still know very little about what to do and how to
do CSR practices strategically. [ CITATION Moh01 \l 1033 ]. As well as customers are
also little confused by CSR [ CITATION Car01 \l 1033 ]. Studies on how consumers
judge various CSR practices and how they react to them initiated by organizations are
very limited [ CITATION Bha04 \l 1033 ]. Therefore there is an emergent necessity and
space to investigate the various perspectives of CSR. Hence this study will examine
the impact of CSR practices towards the customer purchase intention under the
variables of customer trust, customer loyalty and customer satisfaction.For that this
study willfocus to identify the“Relationship between Corporate Social
Responsibility and customer purchase intention”

This study is focusing on the Corporate Social Responsibility and Customer

Purchasing Intention based on the evidences which are taken from North Western
Province in Sri Lanka.

1.3 Research Questions

This study will investigate to find answers for following questions.

 Do CSR practices affect Customer Satisfaction?

 Do CSR practices affect to the Customer Trust?
 Do CSR practices have any effect on Customer Loyalty?
1.4Research Objectives

1.4.1 General Objective

General objective of this study is to examine how consumers’ purchase intentions and
buying behaviors are affected by CSR practices conducted by organizations in Sri
Lanka.

1.4.2 Specific Objectives

 To investigate the relationship between Economic Responsibilities and

Customer Satisfaction?
 To investigate the relationship between Legal Responsibilities and Customer
Satisfaction?
 To investigate the relationship between Ethical Responsibilities and Customer
Satisfaction?
 To investigate the relationship between Philanthropic Responsibilities and
Customer Satisfaction?
 To examine the relationship between Economic Responsibilities and Customer
Trust?
 To examine the relationship between Legal Responsibilities and Customer
Trust?
 To examine the relationship between Ethical Responsibilities and Customer
Trust?
 To examine the relationship between Philanthropic Responsibilities and
Customer Trust?
 To determine the relationship between Economic Relationship and Customer
Loyalty?
 To determine the relationship between Legal Relationship and Customer
Loyalty?
 To determine the relationship between Ethical Relationship and Customer
Loyalty?
 To determine the relationship between Philanthropic Relationship and
Customer Loyalty?
1.5Significance of the study

The concept of CSR has gain important consideration by today. Carroll has described
organizations’’ duties under four categories which are economic, legal, ethical and
philanthropy. Organizations also have realized that they have some obligations to the
economy, society and environment. On the other hand when the number of CSR
practices which are implemented by a particular organization is increasing, numbers
of customers who are visiting the particular company also increase.

Normally, general tendency and the typical Sri Lankan style is to take barrel of any
western method by trusting upon the system. Therefore it is more important for Sri
Lankan people to redefine the CSR concept in accordance with the Sri Lankan
context. Then it can be identified priorities which must be given the more
consideration and then it can give the focus on real burning issues in Sri Lanka. Hence
this study will help to redefine the CSR practices in accordance with the country
needs.

This study will help to bridge the gap between literature of CSR practices and
customer purchase intention.

There are number of organizations which are engaging in the CSR practices but not in
the proper understanding or they do not enjoy enough benefits through them due to
this lack of understanding. Therefore this study will help to widen the knowledge of
CSR practices of organization managements.

Most specially this study will also address the CSR practices through the customer
point of view, therefore it will be important for understanding the value and necessity
of the social activities and how far customers’ loyalty will encourage a company to
involve in more social services.

Ultimately this study will help organizations to earn more profit and achieve
sustainability, society to gain more advantageous practices towards and customers to
enjoy both social welfare as well as organizational best practices. For gain all these
benefits, first of all organizations, society and customers must understand the value of
the CSR and true meaning of the CSR, because it is not mere donations or
sponsorships. For all these aspects this study will be a best solution.
1.6Methodology

This study will focus the attention on Corporate Social Responsibility in customer
perspective toward their purchasing behavior. Therefore to find the effect of CSR on
the purchase intentions,researcher will take the evidences from North- Western
province, Sri Lanka.To measure the effects of CSR, it will be discussed four
independent variables, Economic Responsibilities, Legal Responsibilities, Ethical
Responsibilities and Philanthropic Responsibilities [ CITATION Car99 \l 1033 ] . With the
purpose to examine customer purchase intention, researcher has identified three
dependent variables which are customer trust [ CITATION Ken08 \l 1033 ], [ CITATION
Rom03 \l 1033 ], customer satisfaction and customer loyalty [ CITATION And98 \l 1033 ],
[ CITATION Bha04 \l 1033 ].

This study is trying to find the relationship between CSR and customer purchase
intention in Sri Lanka. For the study a sample of 384 people were selected from the
North- Western Province base on the simple random sampling method. The sample
was selected out of the 2,000,000 people from the North- Western Province as
covering the people from all the electoral divisions in the province.

1.6.1 Data Collection

Data for the study are collected as primary data. The reason for moving to primary
data is to measure customer perspectives, it should be gathered data through
customers themselves. There is no way to get information through secondary data.
Primary data for this study is gathered through the survey method. Structured
questionnaire was distributed among the people with both open ended and close ended
questions to collect the data.

1.6.2 Data Analysis

The quantitative data was analyzed by using the SPSS 16.0 analytical tool. The
existing situation and relationship between variables are measured by using
descriptive analysis and correlation analysis.
1.8 Limitations of the study

 There are about 2Million population in the North Western province and then
sample must be around 384 respondents. But the sample size may not enough
to give the complete picture of the customers in the population as well as total
country.
 Time factor which is given for the research process is very limited. It has
given about 15 weeks for entire research and it is difficult to achieve best
result through a research within such a short period of time.
 CSR concept is still new for organizations as well as customers. Therefore it is
hard to get accurate information when particular respondents are unaware of
the basic of the concept. So this is affect to the reliability of information.
 This study examines the customer purchase intention linking with the CSR
practices which organizations have done. Here other stakeholders beside
customers are not taken to the concern though they also motivated by the CSR
practices.

1.9Chapter Framework

1.9.1 Introduction

First chapter is the introduction to the study. Under this chapter, researcher has
depicted the initial introduction for the study. Here research problem has identified,
objectives have developed and also the significance of the study and the limitations
have mentioned.

1.9.2 Literature Review

The second chapter is the literature review. This chapter shows the previous studies
regarding the CSR and Customer Purchase Intention. For doing the literature review,
previous research articles, research journals, books and web sites have been referred.
Under this part, researcher’s main consideration has given to the variables that show
in the conceptual framework. Base on this section, conceptual framework has been
developed.
1.9.3 Conceptual Framework & Methodology

Third chapter is regarding the methodology of the study. This chapter focuses on how
the study is executed and how the design of the study is developed, conceptual frame
work, data collection, sampling methods and methods of data analysis.

1.9.4 Data Presentation, Data Analysis and Discussions

Forth chapter presents the analysis of the primary data using quantitative tools. Here it
has depicted the results of the data analysis and interpret them with the comments for
the results which have gathered.

1.9.5Conclusion and Recommendations

Chapter fifth has clearly shows the major findings of the study and mainly it has
stated whether the study has achieved research objectives or not and also are
hypothesis being supported by the data. Finally the study is able to present
researcher’s opinion and possible recommendations with help of the findings of the
study.

1.9.6 References

This section presents the literature that has been referred in writing the report of the
study would be made based on the test results accordingly.