UNIVERSITY OF LJUBLJANA FACULTY OF ECONOMICS MASTER THESIS CORPORATE SOCIAL RESPONSIBILITY AND THE EFFECT OF PRODUCT RECALLS ON BRAND LOYALTY (DRUŽBENA ODGOVORNOST PODJETIJ IN VPLIV ODPOKLICEV IZDELKOV S TRGA NA ZVESTOBO BLAGOVNI ZNAMKI) Ljubljana, February 2008 SABINA SULER IZJAVA Študentka Sabina Suler izjavljam, da sem avtorica tega magistrskega dela, ki sem ga napisala pod mentorstvom prof. dr. Žabkar in somentorstvom dr. Pahor in skladno s 1. odstavkom 21. člena Zakona o avtorskih in sorodnih pravicah dovolim objavo magistrskega dela na fakultetnih spletnih straneh. V Ljubljani, dne___________________ Podpis:_______________________ Table of Contents 1. Introduction.............................................................................................................................................................. 1 1.1 Problem Description ........................................................................................................................................... 1 1.2 Purpose and Hypothesis of the Master Thesis..................................................................................................... 2 1.3 Methods of Analytical Approach......................................................................................................................... 3 1.4 Master Thesis Structure....................................................................................................................................... 4 2. Conceptual Review on Corporate Social Responsibility....................................................................................... 4 2.1 Definition of CSR ................................................................................................................................................ 4 2.2 Components of CSR............................................................................................................................................. 6 2.3 Drivers of CSR .................................................................................................................................................... 8 2.4 Social Performance and Effect on Financial Performance................................................................................. 9 2.5 Theoretical Models of CSR................................................................................................................................10 2.6 Developing a CSR Strategy ............................................................................................................................... 12 2.7 Arguments for and Against CSR........................................................................................................................ 14 2.8 Future of CSR.................................................................................................................................................... 17 2.9 Examples of CSR and Marketing Strategy ........................................................................................................ 18 3. CSR and Brand Loyalty ........................................................................................................................................ 19 3.1 Definition of Brand Loyalty............................................................................................................................... 20 3.2 Components of Brand Loyalty........................................................................................................................... 20 3.3 Advantages and Disadvantages of Brand Loyalty............................................................................................. 21 3.4 CSR and its Effects on Brand Loyalty ............................................................................................................... 22 4. Analysis of Effects of Product Recalls on Brand Loyalty................................................................................... 23 4.1 Research Purpose and Objectives..................................................................................................................... 23 4.2 Qualitative Analysis: Case Studies.................................................................................................................... 23 4.3 Quantitative Analysis and Methodology............................................................................................................ 28 4.4 Research Hypotheses......................................................................................................................................... 29 4.5 Main Findings ................................................................................................................................................... 31 4.6 Research Limitations and Future Research Direction ...................................................................................... 46 4.7 Recommendations.............................................................................................................................................. 46 5. Conclusion .............................................................................................................................................................. 48 6. Literature and Sources .......................................................................................................................................... 51 Appendices List of Figures: Figure 1: The Three-Domain Model of CSR .................................................................................11 Figure 2: Citizenship and Loyalty Model ......................................................................................22 Figure 3: Mattel's Total Recall of Chinese Made Toys..................................................................26 Figure 4: Gender.............................................................................................................................31 Figure 5: Country of Residence .....................................................................................................32 Figure 6: Brand Position in Slovenia .............................................................................................32 Figure 7: Pyramid of Toothpaste Brands in Slovenia ....................................................................33 Figure 8: Area of Residence...........................................................................................................33 Figure 9: Age of Respondents........................................................................................................34 Figure 10: Highest Level of Education ..........................................................................................35 Figure 11: Corporate Social Responsibility and Company Ability................................................36 Figure 12: Opinions on CSR Dimensions Regarding Colgate.......................................................37 Figure 13: Brand Loyalty ...............................................................................................................38 Figure 14: Fabricated Article .........................................................................................................39 Figure 15: Product Recalls .............................................................................................................40 Figure 16: Trust in Organization Pre-Recall..................................................................................41 Figure 17: Trust in Organization Post-Recall ................................................................................42 Figure 18: Trust in the Organization..............................................................................................42 Figure 19: Trust in Brand Pre-Recall .............................................................................................43 Figure 20: Trust in Brand Post-Recall............................................................................................44 Figure 21: Trust in Brand...............................................................................................................44 Figure 22: Group #1 North Americans ..........................................................................................45 Figure 23: Group #2 Europeans .....................................................................................................45 List of Tables: Table 1: Regression-CSR Issues and Brand Loyalty .....................................................................37 Table 2: Demographics ................................................................................................................ VII Table 3: One-Sample Statistics –Testing Ambivalences for Brand Loyalty ............................... VII Table 4: One-Sample Test...........................................................................................................VIII Table 5: One-Sample Statistics-Testing Ambivalences for Product Recalls ..............................VIII Table 6: One-Sample Test...........................................................................................................VIII Table 7: Model Summary.............................................................................................................. IX Table 8: Anovab............................................................................................................................. IX Table 9: Coefficientsa ...................................................................................................................