Practise deciding how CSR, community needs and social expectations influence business decisions, reputation and expansion choices using exam-style evidence.
Evaluate whether DL should consider corporate social responsibility in its decision-making.
Use Table B to mark candidate responses to this question.
AO1 out of 2 marks.
AO2 out of 2 marks.
AO3 out of 2 marks.
AO4 out of 6 marks.
Indicative content
Responses may include:
A01 Knowledge and understanding
- Definition of CSR: considering the interests of society by taking responsibility for the impact of decisions and activities on stakeholders not only shareholders.
- Benefits and limitations of CSR approach:
Improved public image
Impact on costs of production
Impact on pricing - higher prices possible
Use as a promotional tool - unique selling point (USP) for business
Impact on employee recruitment and labour turnover
Reduces risk of legal action.
AO2 Application
- DL donates a share of profits to environmental charities.
- Use of palm oil in producing ice cream.
- High sugar content of ice cream and health issues in country Y .
- Pressure group activity.
- Likely government response to health problems and pressure groups.
- PED estimated to be elastic.
- DL uses school sponsorship as a form of promotion.
- New production line project might lead to redundancies.
5
AO3 Analysis
- CSR can enhance brand image and therefore gain control over pricing to consumers enabling an increase in profit in the long term.
- Greater brand loyalty from consumers can increase sales and profit.
- It differentiates DL from competitors therefore protecting sales from activities of global brands in country Y.
- Reducing sugar content now, could give DL a first mover advantage in the market ahead of any government regulation or avoid negative impact of tax if introduced.
- Removing palm oil from ingredients could give a USP to DL and boost sales.
- If alternatives to palm oil are used then this will increase cost of production and reduce the profit margin of DL. Intense competition may prevent an increase in price (note that PED estimated to be elastic).
- Using different ingredients might affect the taste of the ice cream and consumers could switch to competitors' products.
AO4 Evaluation
Overall supported judgement based on a balance of arguments, including:
- How important is CSR to consumers? Will they care more about taste and price rather than the impact of the palm oil industry on deforestation?
- Businesses do not operate in a vacuum and must take account of impact of decisions on society to avoid negative publicity and harm to image.
- Increased costs in the short term may reduce profit but in the long term increased brand loyalty will enable a higher price to be charged.
- DL might benefit from responding to pressure group activity in the short term rather than being forced to make changes in response to government action.
Accept all valid responses.
AO1
AO2
AO3
AO4