Nature and purpose of key concepts:
Analyzing CSR: The CSR denotes an approach often used by the businesses in order to deliver the social and economical benefits to all the stakeholders. CSR also helps the organization to check the impacts of its activities on the environment. In other words, a focus on CSR helps the businesses to operate in a sustainable manner while contributing to the community development.
The concept of CSR has a number of aspects (Rangan et al.2015; Venger and Pomirleanu, 2017). However, the way an organization realizes the concept of CSR and incorporates it, depends upon its own culture and the market where the organization operates. Each country has separate environmental guidelines. While developing the CR policies, the organizations have to consider the policies. The Concept of CSR covers a number of topics including the health and safety of employees, their working condition, their contribution to the economic development. In addition, the CSR also covers the concepts like the human rights. However, every aspect of CSR focuses on driving change in the organization and help businesses to attain sustainability.
In broader terms, CSR can be described as a model that reflects relationships between the organizations, governments of the countries and the individual citizens. The CR activities help the businesses to shape relationship between an organization and the community where the business operates.
Caroll’s model of CSR:
The responsibilities an organization has to bear as part of the CSR activities. The key responsibilities an organization needs to bear as part of the CSR activities are described in Caroll’s model.
Figure 1: Caroll’s model of CSR
(Source: Hosoda & Suzuki,2015, pp-640)
The four main responsibilities as described in the pyramid are as follow:
Economic: As mentioned in the Caroll’s model, the first step of undertaking the CR activities successfully is fulfilling the economic responsibilities (Hur et al.2014; Sakunasingha et al. 2018). As per the model suggested by Caroll, an organization is responsible for running in a profitable manner and meeting expectations of the shareholders. In addition, running profitably also ensures that the business is able to survive in the market for long term and provide the society with multiple benefits.
Legal responsibilities: While operating in a country, the businesses have to follow the rules and regulations (Mostafa and ElSahn, 2016). Incorporating the rules and regulations in business policies ensures that there is no adverse impact of the organizational activities on the society or the environment. For instance, incorporation of the health and safety or employment regulations in the corporate policies indicates that the organization is providing the employees with a healthy and safe working environment.
Ethical responsibilities: The Caroll’s model of CSR considers that acting ethically is the responsibility of an organization. In other words, meeting the legal requirements only is not the sole responsibility of a business (Patil et al.2017). Rather for taking part in the community development process, a business has to act beyond the legal requirements. For example, the organization needs to focus on development of other stakeholders such as the suppliers for posing itself as an responsible organization.
Philanthropic responsibilities: The businesses operate within the society. Without the resources and co-operation obtained from the society it would not be possible for the organizations to carry out its activities. Therefore, it is the responsibility of a business is giving back to the community within which it operates (Aksak et al.2016). The philanthropic responsibilities of an organization are often considered as discretionary. However, bearing these responsibilities also is important for the businesses if it truly wants to take part in the social development process.
Nature and purpose of IFRS( International Financial Reporting System): The financial reporting is a crucial task for the organization (Chung et al.2015). From the financial reports, the stakeholders of an organization become able to aware of the financial status. The financial information as revealed in the financial reports are used as the basis of decision making for the investors. However, while sharing financial information, an organization needs to focus on the accuracy as providing the accurate information in the financial status increases trustworthiness of the organization. It, in turn, provides the business with long term benefits.
Importance of incorporating IFRS in the financial reporting practices:
Incorporation of the IFRS in financial reporting practices benefits the organizations in a number of ways. The benefits that a business obtains from the accurate financial reporting n practices are as follow:
Maintaining financial transparency: Every figure presented in the balance sheet is impact for the business. The value of assets possessed by a business also continues to change over time with depreciation (Scott, 2015). The accurate financial reporting practices facilitate the organization to inform the investors and other stakeholders regarding the actual amount of cash liability , amount of receivable account , depreciation rate . As a result, taking investment decisions becomes easier for the businesses.
Building Trust among the stakeholders: In addition to informing stakeholders about the financial data, an accurate financial statement creates a relationship of trust also (Francis et al.2015). A strong finial status helps the investors to know that the organization is running profitably and therefore, they would get adequate return on their investment. It indicates that the accurate financial reports increase the confidence of the investors. As a result, attracting the investors becomes easier for the organizations.
Before making decisions regarding an organization, the stakeholders require assessing the financial statements. However, the financial reports help the organizations to make own decisions also. For instance, the financial report can provide the managers with information regarding the any purchase or investment.
Improving the payment cycles: Analyzing the financial statements is crucial for making the payment and account receivable cycles (Amiram et al.2017). The outgoing payments in an organization include the salaries and the wages of employees. The dividends which should be paid to the shareholders also fall into the category of outgoing payments. In addition, a business has to meet its inventory needs and paying the creditors. If the company is under debt, financial reports also reveal the data regarding how much of the loan has been paid and the interest associated with the loan.
Identifying the tax liability: The corporate organizations have to pay a number of taxes. Usually, the amount of payable tax increases with the profit earned by the business. The accurate financial report helps the organizations to determine the amount of taxable earning.
Advantages and limitations of key concepts:
Advantages of CSR: The CSR activities of an organization strengthen its relationship with the community. The advantages obtained from the CSR activities are mentioned here.
Positive impact on the community: A focus on CSR encourages the businesses to conduct the business activities ethically. A CSR-focused organization considers then environmental and social impacts of any decision before implementing it (Gigler et al.2014). Working in this way, the businesses can mitigate the adverse impacts of their activities on the society. Even, the focus on corporate social responsibilities assists the organizations to alter their processes and the other activities so that they can deliver value to the society. Reducing the adverse impacts on community and operating in a sustainable way create unique image for the businesses in the minds of customers. In case of the construction industry, the activities of the organizations have many adverse effects in the industry. Therefore, attracting the customers becomes easier when an organization in the construction industry tries to reduce the negative impacts on the environment. It indicates that the management of Anniben would be able to create a unique image in the community by reducing the environmental impacts. It , in turn, can help the organization to expand business faster in a market.
Enhances the public value: Public value, denotes the value that a business delivers to the society. If an organization has well-defined framework for the CSR, delivering higher public value becomes possible (Jung et al.2014). Such frameworks help the businesses to identify the changes need to bring for delivering contributing more to the society. Then organization can take direct efforts such as undertaking volunteering works to create direct impact on the society. In addition, it can create value for the society in an indirect way also. It means, the organization can undertake the initiatives of employee or supplier development and it also creates value for the society.
Emphasizing on the public value can help the Anniben management to increase their contribution to the society. It is also effective for creating a unique image for the organization . As a result, expanding business in a new country becomes easier for the organization.
Makes the organization an employer of choice: Getting employees in the new country is always a challenging task for an organization (Frias?Aceituno et al.2014). However, developing an efficient workforce is necessary to operate sustainably in a market. So, while expanding business to a new market, it is necessary for the organizations to put stress on posing itself as an employer of choice. There are multiple ways using which an organization becomes able to be a preferred employer among the efficient staffs. Providing the employees with adequate monetary benefits, the work-life balance, continuous learning and growth opportunities help businesses to attract the best talents. Therefore, focusing on the legal and ethical corporate social responsibilities facilitates the businesses to operate as a preferred employer. It is evident that getting the best employees becomes easy for the business under such circumstances.
In case of Anniben also, getting the new staffs in a new country would be difficult. However , if the organization focuses on undertaking CSR initiatives to make it attractive to the potential employees. Development of the workforce would be effective for operating smoothly in a new market.
Encouraging then professional and personal development: Offering the staffs with the scope of getting involved to the CSR activities of the organization makes the business more attractive to the potential employees (Ndofor et al.2015). If the employees get scope to take part in the CSR activities, developing new skills becomes easier for them. The new skills acquired by the staffs can be used by the organization and it may benefit the business to a great extent. In addition, by facilitating the employees to participate in the activities beyond their regular works. As they get scope to involve into something as per their passion or get the chance to learn new things, the workplace becomes more interesting to them. In other word, by taking CSR initiatives, the businesses become able to foster growth of the employees.
In case of Anniben also, focusing on the CSR activities would help the management to create an interesting working environment of the employees. As the workplace becomes attractive for the organization, retaining the best talents would be easier for the management.
Improving the relationship with clients: The CSR framework is essential not only for creating value for the society, but these activities help the businesses to develop a trusted relationship between the business and its clients (?urkovi? et al.2017). While expanding the business in a new country, the organizations need to work with new clients. For utilizing the maximum growth opportunities, creating a stable relationship with the business is necessary. Focusing on the ethical and philanthropic responsibilities of a business, help the organizations to increase their trustworthiness to the clients. In case of limited resources, the organizations can partner with any other company for undertaking the CSR activities.
As Anniben is focusing on expanding its business to a new market, it requires putting stress on creating relationship with the new clients also. Therefore, emphasizing on the CSR activities can help the management from this perspective also.
Limitations of CSR: The CSR creates a strong relationship among the business and its stakeholders. In a new market, focusing on these activities can help the organization to make it trustworthy among the customers, clients and employees (Hoyle et al.2015). However, apart from strengthening the relation between the business and its stakeholders, attracting the investors is also important for the organizations in a new market. The CSR activities do not provide any solid proof of the financial status of the organization. Therefore, focusing on the CSR activities may not be effective to attract investments in a new market. After reaching a new market, the Anniben management needs to attract the investors. Discussion on the limitation of CSR activities indicates that the organization may not be able to attract the investors effectively by depending on the CSR activities only. So, it can be stated that depending on the CSR activities only is not effective if the organization is in need of increasing its finance in the new market.
In case of Anniben, the organization is focusing on going beyond the domestic market. It indicates that the management may need to set up completely new infrastructure in the new destination. As a result, the organization will require significant amount of money after stepping into the new country. It will not be possible unless the organization becomes able to attract the investors. The CSR activities may help the business to create a trusted image which can make the organization easy to differentiate from other businesses in the industry. However, the invertors take their decisions after analyzing the financial data only and the CSR activities may not reflect the financial information in detailed manner. So, it can be stated that emphasizing on the CSR activities only may not be effective to raise money for the new market.
Advantages of IFRS: The IFRS helps the organizations to share their financial information accurately with the stakeholders (Feng et al.2015). The benefits obtained from creating accurate financial statement while expanding the businesses into a new market are as follow:
Showing the investors and lenders with accurate data: Attracting the investors is an important task for the businesses. Without adequate fund from the investors, carrying out the organizational activities in an uninterrupted way is not possible for businesses. However, the investors invest money on a business after they get ensured that proper return on the investment will be obtained. The investors focus on financial statements of the organization to make the investment decisions. So, providing the investors with accurate financial data helps businesses to enhance their trustworthiness. It indicates that creating the financial reports in accordance with the IFRS is effective for attracting the investors.
In case of lenders also, showing the financial data in an accurate manner is necessary. For financing, the businesses may need loan. In that case, attracting the lenders would be easier with the right financial information. In this case also, providing the lenders with accurate data n would help the management to ensure smooth flow of cash.
Limitations: Although the financial reports create a trustworthy image of the organization to the investors and lenders, it cannot build the relationship with other stakeholders (Hoyle et al.2015). For instance, depending on the financial report only, the organization cannot win trust of the customers. Rather it has to show its commitment to the community for strengthening the relationship. Similarly, for attracting the employees also , use of the financial data only may not be effective. Instead, the business requires focusing on creating an attractive working environment where the employees are able to learn new things and develop new skills. Discussion on the limitation of IFRS only indicates that depending on this technique solely may not be effective to expand the business successfully in the new market.
Strengths and weaknesses of the arguments:
To operate in a market effectively, the business has to use its sources of competitive advantages effectively. The competitive advantages allow an organization to create greater value for a product or the service (Frias?Aceituno et al.2014) . The competitive advantages also allow the businesses to generate more sales margin than the other organizations in the industry. An organization can obtain the competitive advantage in various forms such as its branding, product or service design or the cost structure. Before taking a decision for the organization, it is necessary to check whether the decision would be able to provide any competitive advantage to the business. In case of the current case study, before adopting any one approach of market expansion for Anniben, the management requires assessing the competitive advantages obtained from them.
VRIO analysis is an effective tool that helps the management to determine the sources of competitive advantages for the organization (?urkovi? et al.2017). Here also, the VRIO analysis is done to identify which one of the two suggested approaches is more advantageous for the business. On basis of the findings, the strengths and weaknesses of each approach are identified.
Table 1: VRIO analysis
Source: Created by the researcher
The VRIO framework indicates that focus on the CSR activities is able to provide the organization with long term competitive advantage. The CSR activities add value for the organization as these activities facilitate the business to contribute for the society However, carrying out the CSR activities is not easy (Ndofor et al.2015). The businesses need to put n huge amount of resources which is not possible for all organizations. So, it can be stated that imitating the CSR activities is not easy for other organizations in the Construction industry. In addition, CSR does not indicate doing charity works in the society. Instead, the businesses need to incorporate the CSR policies in al business activities, from employee development, stakeholder management to community development. It is evident that focusing on CSR activities and managing the efforts successfully, make the organizations different from others in the industry. Therefore, by investing on the CSR activities, Anniben management can obtain long-term competitive advantage.
On the other hand, the financial reporting by incorporating the IFRS is valuable for the organization. But, it is not rare. There are many other organizations in the construction industry which follow the right financial reporting practices. Furthermore, it is not difficult to imitate the reporting practices as the IFRS standards are available worldwide and businesses can easily incorporate these with minimum resources. Finally, organizing the financial reporting standards is not difficult. Therefore, it can neb stated that incorporating the financial standards is not difficult for any organization. So, implementing these standards create competitive equality only.
On basis of the findings, strengths and weaknesses are assessed.
Strength of CSR approach: The findings indicate that CSR approach is effective for providing long-term competitive advantages.
Weakness on CSR approach: The CSR activities do not facilitate the organizations to share their financial data in detail.
Strength of IFRS: The IFRS financial reports provide competitive equality with other organizations in the industry.
Weakness of IFRS: The IFRS approach is not able to strengthen the relationship with all the stakeholders.
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