Business Ethics - A Look Into CSR

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PROJECT REPORT ON

BUSINESS ETHICS A LOOK INTO

CSR

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A PROJECT REPORT ON

BUSINESS ETHICS A LOOK INTO CSR

SUBMITTED BY

MS. _______FOR THE DEGREE OF

THE BACHELOR OF MANAGEMENT STUDIES

UNDER THE GUIDANCE OF

MISS _____________

_______ COLLEGE OF COMMERCE AND ECONOMICS

_________, MUMBAI 4000____

ACADEMIC YEAR 2012 - 2013

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DECLARATION

I, ________, OF THE _________ COLLEGE OF COMMERCE AND ECONOMICS,

___________( E ) , HEREBY DECLARE THAT I HAVE COMPLETED THE

PROJECT ENTITLED BUSINESS ETHICS A LOOK INTO CSR IN PARTIAL

FULFILLMENT OF THE REQUIREMENT FOR THE THIRD YEAR OF THE

BACHELOR OF MANAGEMENT STUDIES COURSE FOR THE ACADEMIC YEAR

2012-2013

I FURTHER DECLARE THAT INFORMATION SUBMITTED BY ME IS TRUE AND

ORIGINAL TO THE BEST OF MY KNOWLEDGE.

DATED: _________

Name of the student

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CERTIFICATE

I MISS ______________ HEREBY CERTIFY THAT __________ STUDYING IN

TYBMS AT ________ COLLEGE OF COMMERCE AND ECONOMICS, HAS

COMPLETED A PROJECT ON BUSINESS ETHICS A LOOK INTO CSR IN THE

ACADEMIC YEAR 2012-2013 UNDER MY GUIDANCE.

I FURTHER CERTIFY THAT THE INFORMATION SUBMITTED IS TRUE AND

ORIGINAL TO THE BEST OF MY KNOWLEDGE.

DATED:

Place:

Name of the guide

Examiners Sign &Date PROJECT GUIDE

_____________________

College Seal PRINCIPAL

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ACKNOWLEDEGEMENT

I EXPRESS MY SINCERE THANKS TO MISS ______________FOR HER

VALUABLE GUIDANCE IN DOING THIS PROJECT.

I WISH TO TAKE THE OPPORTUNITY TO EXPRESS MY DEEP SENCE OF

GRATITUDE TO PRINCIPAL ___________________________ AND PROF. (Mr.)

________________________ FOR THEIR INVALUABLE GUIDANCE AND

SUPPORT IN THIS ENDEAVOUR. THEY HAVE BEEN A CONSTANT SOURCE

OF INSPIRATION.

FINALLY IT IS THE FOREMOST DUTY TO THANK ALL MY RESPONDENTS,

FAMILY & FRIENDS WHO HAVE HELPED ME DIRECTLY OR INDIRECTLY IN

COMPLETING MY FIELD WORK, WITHOUT WHICH THIS PROJECT WOULD

NOT HAVE BEEN SUCCESSFUL.

Name of the student

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CHAPTER 1

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1.1 SYNOPSIS

CSR is often understood only from the perspective of business generosity to community

projects and charitable donations. This perspective however fails to capture the valuable

contributions organizations can otherwise make. In a 1987 empirical study by Khan and

Atkinson it was found that a large percentage of the Indian executives studied agreed that

CSR was relevant to business and felt that business had responsibility not only to the

shareholders and employees but also to customers, suppliers, society and to the State.

Both the Indian and UK respondents felt that CSR eventually promotes a better

relationship between industry and people, a good work environment, enhanced customer

relationships and enhanced corporate image of the company.

European Commission defines CSR as a concept whereby companies decide voluntarily

to contribute to a better society and cleaner environment and as a process by which

companies manage their relationship with stakeholders. In a study of German and UK

companies it was found that the largest corporations project CSR as a comprehensive,

sustainable business strategy and recognizes the business-society interdependence.

Governments CSR public policies and the relationships between government, businesses

and civil society stakeholders have also known to impact the CSR initiatives. It is alsoobserved that large firms are more likely to identify relevant stakeholders and meet their

CSR requirements through specific and formal CSR strategies. Firms with a high value

for social responsibility are much more likely to engage in traditional kinds of plans for

social strategy. The use of social strategy depends upon the presence of specific

configurations of industry environment, resources and values.

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CHAPTER 2

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2.1 INTRODUCTION

Business as it is said, is a product of environment. The environment in which the business

operates determines the nature of business, location, the product to be manufactured, the

size, volume of operation, etc. Similarly it has an impact on the environment in which it

exists. The business decisions in an organization completely depend upon the

environment and their impact. The environment can be divided into:

Internal Environment

External Environment

Social Responsibility of business refers to what business does over and above the

statutory requirement for the benefit of the society. The word responsibility emphasizesthat the business has some moral obligations towards the society. The term corporate

citizenship is also commonly used to refer to the moral obligations of the business

towards the society. It implies that like individuals, corporations are also the part of the

society and their behavior shall be guided by the social norms.

Davis has defined social Responsibility as follows:

Social responsibilities refer to businessmans decision and actions taken to reason at

least partially beyond the firms direct economic or technical interest.

Andrews have suggested still broader view when he says that:

By social responsibility, we mean the intelligent and objective concern for the welfare

of the society that restrains individual and corporate behavior from ultimately

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Internal

Environm

ent

Business

Decision

External

Environment


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destructive activities, no mater how immediately profitable, and leads in the direction of

positive contributions to human betterment, variously as the latter may be defined.

There has been a growing acceptance of the plea that business should be socially

responsible i.e. it should discharge its duties and responsibilities in enhancing the welfare

of the society of which it is an integral part.

H. S. Singhania classifies CSR into two categories:

The manner in which a business carries out its own business activity.

The welfare activity that it takes upon itself as an additional function.

Corporate social responsibility (CSR, also called corporate responsibility, corporate

citizenship, and responsible business) is a concept whereby organizations consider the

interests of society by taking responsibility for the impact of their activities on customers,

suppliers, employees, shareholders, communities and other stakeholders, as well as the

environment. This obligation is seen to extend beyond the statutory obligation to comply

with legislation and sees organizations voluntarily taking further steps to improve the

quality of life for employees and their families as well as for the local community and

society at large.

The practice of CSR is subject to much debate and criticism. Proponents argue that there

is a strong business case for CSR, in that corporations benefit in multiple ways by

operating with a perspective broader and longer than their own immediate, short-term

profits. Critics argue that CSR distracts from the fundamental economic role of

businesses; others argue that it is nothing more than superficial window-dressing; still

others argue that it is an attempt to pre-empt the role of governments as a watchdog over

powerful multinational corporations.

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2.2 OVERVIEW

Business ethics reflects the philosophy of business, one of whose aims is to determine the

fundamental purposes of a company. If a company's purpose is to maximize shareholder

returns, then sacrificing profits to other concerns is a violation of its fiduciary

responsibility. Corporate entities are legally considered as persons in USA and in most

nations. The 'corporate persons' are legally entitled to the rights and liabilities due to

citizens as persons.

Economist Milton Friedman writes that corporate executives' "responsibility... generally

will be to make as much money as possible while conforming to their basic rules of the

society, both those embodied in law and those embodied in ethical custom". Friedman

also said, "the only entities who can have responsibilities are individuals ... A business

cannot have responsibilities. So the question is, do corporate executives, provided they

stay within the law, have responsibilities in their business activities other than to make as

much money for their stockholders as possible? And my answer to that is, no, they do

not." A multi-country 2011 survey found support for this view among the "informed

public" ranging from 30 to 80%. Duska views Friedman's argument as consequentiality

rather than pragmatic, implying that unrestrained corporate freedom would benefit themost in long term. Similarly author business consultant Peter Drucker observed, "There is

neither a separate ethics of business nor is one needed", implying that standards of

personal ethics cover all business situations. However, Peter Drucker in another instance

observed that the ultimate responsibility of company directors is not to harmprimum

non nocere. Another view of business is that it must exhibit corporate social

responsibility (CSR): an umbrella term indicating that an ethical business must act as a

responsible citizen of the communities in which it operates even at the cost of profits or

other goals. In the US and most other nations corporate entities are legally treated as

persons in some respects. For example, they can hold title to property, sue and be sued

and are subject to taxation, although their free speech rights are limited. This can be

interpreted to imply that they have independent ethical responsibilities. Duska argues that

stakeholders have the right to expect a business to be ethical; if business has no ethical

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obligations, other institutions could make the same claim which would be

counterproductive to the corporation.

Ethical issues include the rights and duties between a company and its employees,

suppliers, customers and neighbors, its fiduciary responsibility to its shareholders. Issues

concerning relations between different companies include hostile take-overs and

industrial espionage. Related issues include corporate governance; corporate social

entrepreneurship; political contributions; legal issues such as the ethical debate over

introducing a crime of corporate manslaughter; and the marketing of corporations' ethics

policies.

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2.3 DEVELOPMENT

Business ethics is a form of the art of applied ethics that examines ethical principles and

moral or ethical problems that can arise in a business environment.

In the increasingly conscience-focused marketplaces of the 21st century, the demand for

more ethical business processes and actions (known as ethicism) is increasing.

Simultaneously, pressure is applied on industry to improve business ethics through new

public initiatives and laws (e.g. higher UK road tax for higher-emission vehicles).

Business ethics can be both a normative and a descriptive discipline. As a corporate

practice and a career specialization, the field is primarily normative. In academia,

descriptive approaches are also taken. The range and quantity of business ethical issues

reflects the degree to which business is perceived to be at odds with non-economic socialvalues. Historically, interest in business ethics accelerated dramatically during the 1980s

and 1990s, both within major corporations and within academia. For example, today most

major corporate websites lay emphasis on commitment to promoting non-economic

social values under a variety of headings (e.g. ethics codes, social responsibility charters).

In some cases, corporations have redefined their core values in the light of business

ethical considerations (e.g. BP's "beyond petroleum" environmental tilt).

The term CSR itself came in to common use in the early 1970s although it was seldom

abbreviated. The term stakeholder, meaning those impacted by an organization's

activities, was used to describe corporate owners beyond shareholders from around 1989.

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2.4 GROWTH OF CSR

Corporate social responsibility (CSR) till very recently was viewed as a philanthropic

activity indulged into only when the firms were in jeopardy. Though the earlier decades

are referred to as false dawns wherein CSR had a regional, person centered

philanthropic focus, it is now viewed to be inclusive, broad and diverse. It is not only

used for fulfilling legal expectations but also for investing more into human capital, the

environment and the relations with stakeholders. Companies facing the challenges of

globalization are aware that CSR can be of direct economic value. They view these

activities not as a cost but an investment, as a long term strategy minimizing risks linked

to uncertainty. According to Sacconi, (2007) when firms fulfill their fiduciary duties to

their stakeholders, they benefit from reputation and the positioning of the firm withrespect to social issues is clearly a way to differentiate the firm and its products and

services in ways that creates value

Developed countries like USA and UK have long seen CSR as a practice that benefits

both organizations and society. Marketing communications of companies are also

focusing on the communication of their CSR initiatives (e.g. Sunfeast). It has also been

studied that the composition of the board of directors also influences the CSR as outside

directors appear more concerned about CSRs and hence the firm are more likely to

engage in socially responsible activities.

Increased globalization along with increasing the opportunities for business has also

brought the businesses under the scrutiny of different audiences, NGOs and media. It is

predicted that in the times to come companies will be judged more by their social

policies than on their delivery of products and services. Debacles like Enron and

Worldcom did cause a slew of critiques against the CSR initiatives but these critiques

were largely ill founded Many theorists have also argued about the economic impact of

CSR, some relating it positively with the profit and some feeling that no such relationship

exists. Bird et al., 2007 studied that the market is influenced by the independent CSR

activities and also by the totality of these activities and the gains can be in terms of

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economic performance or social performance. Since CSR and corporate reputation are the

two sides of the same coin the current paper examines how corporate enterprises are

currently using CSR initiatives as a part of their corporate strategy and public relations

pertaining to the same.

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2.5 APPROACHES TO CSR

Some commentators have identified a difference between the Continental European and

the Anglo-Saxon approaches to CSR. And even within Europe the discussion about CSR

is very heterogenous.

An approach for CSR that is becoming more widely accepted is community-based

development projects, such as the Shell Foundation's involvement in the Flower Valley,

South Africa. Here they have set up an Early Learning Centre to help educate the

community's children, as well as develop new skills for the adults. Marks and Spencer is

also active in this community through the building of a trade network with the

community - guaranteeing regular fair-trade purchases. Often alternative approaches to

this is the establishment of education facilities for adults, as well as HIV/AIDS education

programmes. The majority of these CSR projects are established in Africa. A more

common approach of CSR is through the giving of aid to local organizations and

impoverished communities in developing countries. Some organizations do not like this

approach as it does not help build on the skills of the local people, whereas community-

based development generally leads to more sustainable development.

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2.6 INTEREST GROUPS

Social Responsibility requires the identification of various interest groups, which may

affect the functioning of a business organization and may also be affected by its

functioning. Normally various groups associated with a business organization are

shareholders, workers, customers, creditors, suppliers, government and society in general.

The management owes responsibility towards all these groups. Therefore, management

should show a standardized norm of behavior.

Shareholders

The first responsibility of the management is to protect the interest of shareholders. The

interests of majority of shareholders and large minority of shareholders are generally well

protected through either direct participation in the management actions or they have real

power to intervene, if necessary. They should be informed about the functioning of the

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organization adequately and timely. Therefore, management has a responsibility to

provide proper safeguard to the money invested by shareholders.

Workers

Workers have direct interest in an organization because by working there, they satisfy

their needs. Thus, it is the managements responsibility to protect the interest of workers

in the organization. The management can do this in the following ways:

Management should treat workers as another wheel of the cart

Management should develop administrative process in such a way that promotes

cooperative endeavor between employers and employees.

The management should adopt a progressive labor policy based on recognition ofgenuine trade union rights participation of workers in management, creating a

sense of belongingness, improving their living and working conditions

Management should pay fair and reasonable wages and other financial benefits to

workers.

Customers

Management owes a primary obligation to give a fair deal to the customers. This canbe

done in the following ways:

Customers should be charged a fair and reasonable price

The supply of goods and services should be of uniform standard and of reasonable

quality

Management should not indulge in profiteering, hoarding, or creating artificial

scarcity.

Management should not mislead the customers by false, misleading andexaggerated advertisements.

Creditors, Suppliers and Others

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They affect the organization in various ways. Therefore, the management is responsible

to fulfill its obligations towards them. This can be done in the following ways:

Management should create healthy and cooperative inter business relationship

between different businesses.

Management should provide accurate and relevant information to creditors and

suppliers.

Payments of price of materials, interest on borrowings, other charges should be

prompt.

Government

It is very closely related with the business system of the country. It provides various

facilities for the development of business. Government, no doubt, exercises control over

business, but these controls are meant for overall development of business. Management

can discharge its obligation to government by:

Management should be a law-abiding citizen

Management should pay taxes and other dues fully, timely & honestly

It should not corrupt government workers and public servants and the democratic

process It should not buy political favors by any means

Society

Organizations exist within a social system and get facilities from the system. Therefore,

they owe obligations to the society as a whole. This can be done by:

Management should maintain fair business policies and practices

It should play a proper role in civic affairs

It should provide and promote general amenities and help in creating better living

conditions in general.

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2.7 CSR BENEFITS

Social responsibility of a business refers to what the business does, over and above the

statutory requirement, for the benefit of the society. The term corporate citizenship is also

commonly used to refer to the moral obligations of the business to the society. This

implies that just as individuals, corporates are also integral part of the society and their

behaviour shall be guided by certain social norms. The operations of business enterprises

affect a wide spectrum. The resources they make use of are limited to those of the

proprietors and the impact of their operations is felt also by many a people who are in no

way connected with the enterprise.

The scale and nature of the benefits of CSR for an organization can vary depending on

the nature of the enterprise, and are difficult to quantify, though there is a large body of

literature exhorting business to adopt measures beyond financial ones. The definition of

CSR used within an organisation can vary from the strict "stakeholder impacts" definition

used by many CSR advocates and will often include charitable efforts and volunteering.

CSR may be based within the human resources, business development or public relations

departments of an organisation, or may be given a separate unit reporting to the CEO or

in some cases directly to the board. Some companies may implement CSR-type values

without a clearly defined team or programme.

The business case for CSR within a company will likely rest on one or more of these

arguments:

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Human resources

Risk management

Brand differentiation

License to operate

2.7.1 Benefits for businesses

Being socially responsible is not just good business practice but also makes good

business sense. CSR has positive effects on the economics of the company, its publicrelations, customers, employees and shareholders. If integrated into the business strategy,

CSR is a potent business tool. There are several benefits to companies:

Getting license to operate from key stakeholders not just shareholders:

Certain industries like mining etc that displace people or have environmental impact

require a license to operate from the community whom they impact by their operations.

Failure to do so could not only make the operations difficult, but the hostility can

sometimes make the operations even unviable in extreme cases.

Enhanced reputation and brand value:

The business environment is increasingly sensitive to a companys social, ethical, and

environmental performance due to globalization, the communication revolution, and

mobility of customers and suppliers. Reputation is an important sustainable competitive

asset, because it is difficult and time consuming to develop and cannot be easily

mimicked by competitors. Brand identity is also growing in importance. Interbrand, a

leading international branding consultant predicts that the brand worth of companies will

rise to 45 percent of stock market capitalization by 2010. This is up from five percent in

1960 to 30 percent in 2000.

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Increased efficiency in operations:

Using the CSR framework in corporate business strategy can result in high efficiency in

operations, for instance, improved efficiency in the use of energy and natural resources;

reduced waste such as reducing emissions of gases; and selling recycling materials.

Better human resources also benefit business. Work-life programs that result in reduced

absenteeism and increased retention of employees often save companies money through

increased productivity and by a reduction in hiring and training costs. For example,

companies that improve working conditions and labor practices among their offshore

suppliers often experience a decrease in defective or unsalable merchandise. A study of

15 large employers conducted by the Medstat Group and the American Productivity and

Quality Center found that health benefit programs can increase productivity and decrease

company costs related to absenteeism, turnover, disability and health-care claims by 30

percent.

Increased sales and customer loyalty:

According to the Millennium Poll on Corporate Social Responsibility, the majority of

25,000 people interviewed in 23 countries want companies to contribute to society

beyond making a profit. While businesses must first satisfy customers key buying

criteria such as price, quality, appearance, taste, availability, safety and convenience

studies also show a growing desire to buy based on other values-based criteria, such as

sweatshop-free and child-labor-free clothing, smaller environmental impact.

Increased ability to attract and retain quality employees:

In interviewing 150 top employees in 24 organizations, the UK consulting firm, Stanton

Marris, learned that employer reputation was a key factor in accepting a job offer.

Seventy-six percent of those polled by the Cone/Roper Corporate Citizenship Study saida company's "commitment to causes" was an important consideration in deciding where

to work. Attracting and retaining a committed and skilled workforce is vital to business

success.

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Innovation in market and product development through cooperation with local

communities:

Cooperation with local communities helps in tailoring products and services to local

markets. For e.g. IBM's community partnership programs have produced six new

products for market and 15 patent applications in 2000 alone.

2.8 CRITICAL ANALYSIS

CSR is entwined in the strategic planning process of many multinational organizations.

The reasons or drive behind social responsibility towards human and environmental

responsibility whether driven by ulterior motives, enlightened self-interest, or interests

beyond the enterprise, is subject to much debate and criticism.

Some critics argue that corporations are fundamentally entities responsible for generating

a product and/or service to gain profits to satisfy shareholders. Milton Friedman and

others argue that there is no place for social responsibility as a business function. These

critics point to the rule of corporate law that prohibits a corporation's directors from any

activity that would reduce profits.

Other critics argue that the practice cherry-picks the good activities a company is

involved with and ignores the others, thus 'greenwashing' their image as a socially or

environmentally responsible company. Still other critics argue that it inhibits free markets

or seeks to pre-empt the role of governments in controlling the socially or

environmentally damaging effects of corporations' pursuit of self-interest.

Disputed business motives

Some critics believe that CSR programmes are often undertaken in an effort to distract

the public from the ethical questions posed by their core operations. Examples of

companies that have been accused of this motivation include British American Tobacco

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(BAT), which produces major CSR reports, and the petroleum giant BP, which is well-

known for its high-profile advertising campaigns on environmental aspects of its

operations.

Self-interest

Some CSR critics argue that the only reason corporations put in place social projects is

for the commercial benefit they see in raising their reputation with the public or with

government. They suggest a number of reasons why self-interested corporations, solely

seeking to maximise profits, are unable to advance the interests of society as a whole.

They point to examples where companies have spent a lot of time promoting CSR

policies and commitment to Sustainable Development on the one hand, whilst damaging

revelations about business practices emerge on the other.

Other views from this perspective include:

Corporations really care little for the welfare of workers or the environment, and

given the opportunity will move production to sweatshops in less well-regulated

countries.

Companies do not pay the full costs of their impact. For example, the costs of

cleaning pollution often fall on society in general. As a result profits of

corporations are enhanced at the expense of social or ecological welfare.

Hindrance of free trade

These critics are generally supporters of Milton Friedman, who argued that a

corporation's principal purpose is to maximize returns to its shareholders, while obeying

the laws of the countries within which it works. Friedman argued that only people can

have responsibilities. Because of this, moderate critics suggest that CSR activity is most

effective in achieving social or environmental outcomes when there is a direct link to

profit. This approach to CSR requires that the resources applied to CSR activities must

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have at least as good a return as these resources could generate if applied anywhere else.

This analysis drastically narrows the possible scope of CSR activities.

2.9 DRIVERS

Corporations may be influenced to adopt CSR practices by several drivers.

Ethical consumerism

The rise in popularity of ethical consumerism over the last two decades can be linked to

the rise of CSR. As global population increases, so does the pressure on limited natural

resources required to meet rising consumer demand. Industrialization in many developing

countries is booming as a result of technology and globalization. Consumers are

becoming more aware of the environmental and social implications of their day-to-day

consumer decisions and are beginning to make purchasing decisions related to their

environmental and ethical concerns. However, this practice is far from consistent or

universal.

Globalization and market forces

As corporations pursue growth through globalization, they have encountered new

challenges that impose limits to their growth and potential profits. Government

regulations, tariffs, environmental restrictions and varying standards of what constitutes

labour exploitation are problems that can cost organizations millions of dollars. Some

view ethical issues as simply a costly hindrance. Some companies use CSR

methodologies as a strategic tactic to gain public support for their presence in global

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markets, helping them sustain a competitive advantage by using their social contributions

to provide a subconscious level of advertising. Global competition places particular

pressure on multinational corporations to examine not only their own labour practices,

but those of their entire supply chain, from a CSR perspective.

Social awareness and education

The role among corporate stakeholders to work collectively to pressure corporations is

changing. Shareholders and investors themselves, through socially responsible investing

are exerting pressure on corporations to behave responsibly. Non-governmental

organizations are also taking an increasing role, leveraging the power of the media and

the Internet to increase their scrutiny and collective activism around corporate behavior.

Through education and dialogue, the development of community in holding businesses

responsible for their actions is growing.

Ethics training

The rise of ethics training inside corporations, some of it required by government

regulation, is another driver credited with changing the behaviour and culture of

corporations. The aim of such training is to help employees make ethical decisions when

the answers are unclear. Tullberg believes that humans are built with the capacity to cheat

and manipulate, a view taken from, hence the need for learning normative values and

rules in human behaviour. The most direct benefit is reducing the likelihood of dirty

hands, fines and damaged reputations for breaching laws or moral norms. Organizations

also see secondary benefit in increasing employee loyalty and pride in the organization.

Government laws and regulation

Another driver of CSR is the role of independent mediators, particularly the government,

in ensuring that corporations are prevented from harming the broader social good,

including people and the environment. CSR critics such as Robert Reich argue that

governments should set the agenda for social responsibility by the way of laws and

regulation that will allow a business to conduct themselves responsibly.

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Crises and their consequences

Often it takes a crisis to precipitate attention to CSR. One of the most active stands

against environmental management is the CERES Principles that resulted after the Exxon

Valdez incident in Alaska in 1989. Other examples include the lead poisoning paint used

by toy giant Mattel, which required a recall of millions of toys globally and caused the

company to initiate new risk management and quality control processes. In another

example, Magellan Metals in the West Australian town of Esperance was responsible for

lead contamination killing thousands of birds in the area. The company had to cease

business immediately and work with independent regulatory bodies to execute a cleanup.

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2.10 DIMESIONS OF CSR & RELEVANCE

The Green Paper by the Commission of the European Communities identifies two main

dimensions of CSR, an internal dimension relating to practices internal to the company

and an external dimension involving the external stakeholders.

2.10.1 Internal Dimension

This relates to practices internal to the company, which need to be modified to

incorporate CSR practices. The various components of the internal dimension of CSR are

shown below:-

Human Resources Management

CSR can be successfully implemented in an organization through precise management of

its own work force. The internal dimension of CSR includes elements like providing an

environment for life long learning for employees, employee empowerment, better

information flow, improving the balance between work, family, and leisure, diversified

work force, profit sharing and share ownership schemes, concern for employability as

well as job security among others. Active follow up and management of employees who

are off work due to disabilities or injuries have also been shown to result in cost savings

for the companies. Molding of recruitment policies to include people from ethnic

minorities, older workers, women and the long-term unemployed would be a significant

step forward to incorporating CSR practices in Human Resources Management.

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In the context of emerging markets, the availability of cheap labour is an encouraging

factor for companies. Developed markets have clearly moved towards heavily capital-

intensive distribution with the introduction of electronic data interchanges, mechanized

movement and monitoring of goods, and vending machines that replace salespeople. By

contrast labour-intensive distribution remains economical in emerging markets. For

example, in emerging markets, Coca-Cola has not invested in vending machines. These

are too expensive relative to salespeople.

Work Safety and Health Measures

Worker safety and labour health have been documented to be having a direct impact on

productivity of the labour force. Although legal measures exist in most nations on

maintaining standards for ensuring worker safety and providing health benefits, recent

trends have made it imperative for companies to adopt a proactive approach to this issue.

In emerging markets having significant cost advantages in labour, outsourcing of labour

and processes have led to the situation where companies not only need to maintain high

safety levels in their own premises but also ensure that their suppliers and other

connected parties comply with these principles. The increased focus on safety standards

and employee welfare has led to the development of standards across industries.

Mechanisms are being designed especially in emerging markets for measuring,

documenting and communicating these qualities thereby saving time, work and costs in

the purchasing process.

Adaptation to change

A recent trend in the global business scenario has been the wide spread use of mergers

and acquisitions for business expansion. Also downsizing has been used, often

ineffectively, as a cost cutting measure by firms in their relentless push for profits.

Management of Environmental impacts

The importance of this aspect of CSR cannot be overemphasized. Optimization of

resource utilization and reducing environmentally damaging effluents can reduce the

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environmental impact. This will also enable the firms to affect significant cost savings in

energy bills and pollution costs. Many firms in emerging markets have had to face

serious repercussions from the state and society for over exploitation of natural resources

and disregard for environmental safety measures. Many multinational companies are

realizing to their cost that early compliance with accepted standards will provide strategic

advantages in the long run even though cost inefficient in the near future.

2.10.2 External Dimension

This dimension relates to practices concerning external stakeholders. The significance of

this dimension of CSR has come to the forefront with the advent of globalization leading

to the development of international standards for business practices.

Local Communities

The development of positive relations with the local community and thereby the

accumulation of social capital is particularly relevant for non-local companies. These

relations are being increasingly used by multinational companies to support the

integration of their subsidiaries into various markets in which they are present. Deep

understanding of the local community and social customs is an asset, which can be

utilized by the companies to gain strategic advantage.

In emerging markets, this is more relevant than ever because of the availability of

cheaper labour from the local communities. Companies would find it in their interest to

substitute capital substitution with labour and reap the cost benefits. For example,

Whirlpool discovered that it was unable to sell its high priced, fully automatic machines

in the emerging markets. It was only after it introduced twin-tub machines that were

cheaper and utilized the consumers labour rather than electronics to complete the entire

washing cycle that sales took off. Interestingly, due to the fact that these machines had

long disappeared in the developed markets, Whirlpool had to acquire the obsolete

technology from Korea.

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Business Partners

Building long-term relationships of sound ethical foundation with suppliers, customers

(and even competitors in rare occasions) will enable companies to meet customer

expectations better while reducing complexity and costs. Companies should realize their

CSR practices would be judged taking into account the practices of their partners and

suppliers throughout the supply chain. The effect of corporate social responsibility

activities will not remain limited to the company itself, but will also touch upon their

economic partners.

Companies in emerging markets actually take on additional CSR responsibilities because

of the existence of outsourcing opportunities in the form of suppliers and outsourcing

agents. Also as part of their social responsibility companies are expected to provide high

quality products and services, which meet customer expectations in a manner reflecting

the companys concern for the environment and the local conditions. Thus in emerging

markets, consumer based business strategies would enable companies to build long

lasting relationships with consumers based on trust.

Human Rights

Companies operating in countries where human rights are regularly violated may

experience a climate of civil instability and corruption that makes for uneasy relations

with government officials, employees, local communities and shareholders. They also

have a responsibility to use their influence to mitigate the violation of human rights by

governments, the forces of law and order or opposition groups in the countries in which

they operate. In the context of emerging markets, operations of companies should not

impinge on the land rights of the local community. In particular, the company needs tomake sure that people are not forcibly removed from their homes and their livelihoods are

not endangered. There is the growing need to develop proper consultative processes with

local groups protesting against projects or operations in which they are involved. Firms

also need to build confidence in the local community that people (including union

members) participating in peaceful protests against company operations are not

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intimidated, arrested or in any other way threatened. Also, companies can take steps to

ensure forced labour is not used in their own, or their suppliers operations.

2.11 CUSTOMER SEGMENTATION & DISTRIBUTION

There is an urgent need for modifying currently existing customer segmentation

techniques. While segmentation based on finer product features may have been

successful in the industrially advanced nations, such fine distinctions may not strike a

cord with consumers in the emerging markets. This is amply demonstrated in the case of

consumer products like toilet soaps where market segmentation techniques in the

developed nations are based on value provided by products, like fragrance, anti-aging etc.

However the mass market in emerging economies with lesser-sophisticated consumers

may not be compliant to such fine segmentation.

Segmentation

Segmentation techniques will need more careful analysis of consumer behaviour with

significant input from demographic data. Here, consumers dislike products that evolve

too rapidly, making their recent purchases obsolete. Instead, the need is for basic,

functional, long lasting products. The Volkswagen Beetle remained the largest selling car

in Brazil long after other manufacturers with newer models had phased it out of the

affluent markets and despite competitive assaults. The largest selling car in China is still

the Volkswagen Santana, a model that was phased out of developed markets 15 years

ago. Thus clearly, in depth analysis of consumer behaviour is necessary in emerging

markets although the level of customer sophistication may be less. Here CSR has an

important role to play especially in building up trust in the minds of the consumers. In an

emerging market where consumers are looking for functional products which last longer

and accelerated obsolescence is not a problem like in developed markets, the consumer

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perception about the company brand assumes significance. A company, which builds the

image of producing quality products that last longer though they may not be on the

cutting edge of technology will actually be able to gain strategic advantage in emerging

economies.

Distribution

Emerging markets, especially those in Asia have posed significant distribution challenges

to multinational companies. Often companies have had to abandon distribution systems

tried and tested in developed nations and start developing a customized distribution

mechanism specific to the country of operation. CSR is instrumental in relationship

building with retailers. Building relationships in a fragmented retail environment requires

an understanding of retailers interests. Successful manufacturers creatively develop new

revenue activities for the retailer.

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CHAPTER 3

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3.1 ABOUT HUL

The Hindustan Unilever Ltds (HUL) Inc has taken the opportunity to offer us a broader

view of FMCG category. The Hindustan Unilever Ltd (HUL) is Indias no.1 FMCG is

able to share with their market insights based upon unparalleled breath of consumer

goods experience.

Hindustan Unilever Ltd (HUL) has grown from strength to strength with new

technologies being introduced to make the HUL consumer goods business, one of the

most efficient in the world. The companys history dates back to 1931 when Unilever set

up its first Indian subsidiary, Hindustan Vanaspati Manufacturing Company, followed by

Lever Brothers India Limited (1933) and United Traders Limited (1935). These three

companies merged to form Hindustan Lever Limited in November 1956. Effective July

19, 2007 the company has changed the name to Hindustan Unilever Limited.

Hindustan Unilever Limited (HUL), a subsidiary of Unilever, is a fast moving consumer

goods (FMCG) company based in India. The company focuses on efficient delivery to

consumers with an improved supply chain, brand building initiatives and innovation,

which has helped the company to sustain its leadership position in the overall FMCG

category in India.

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Hindustan Unilever is Unilever's main operating business in India. It is the country's

biggest consumer goods company, and far and away the leading advertiser. HUL inhabits

virtually every sector of the consumer goods market, including several not occupied by

Unilever in other markets such as preserves and bakery products, and is also one of the

countrys top five exporters. In addition to FMCG products it is the country's biggest

exporter of tea. It is generally acknowledged to be one of India's best-run businesses,

although performance slowed dramatically between 2000 and 2004, prior to restructuring.

Unilever, which sells soap to more than 500 million Indians, may see global revenue

growth slow in 2010 as Procter & Gamble Co. and ITC Ltd. step up marketing in Asia's

third-biggest economy.

The world's second-largest consumer products maker has relied on accelerating

shipments of Surf Excel detergent in India to make up for sluggish sales in Europe.Now

Cincinnati- based Procter & Gamble is stocking Indian stores with Olay skin- care

products after nearly halving the local prices of Ariel and Tide detergents in 2004.

Asia and Africa, which make up about a third of Unilever's worldwide sales, will see

their share of the company's growth fall to 2 percent in 2010 from 3.3 percent in 2007,

according to Brussels-based brokerage Petercam SA. Revenue from the two continentsrose 11.4 percent in the first nine months of last year, helping offset 1.9 percent growth in

Europe and 4.2 percent in North and South America.

Unilever's overall sales growth will slow to 4.9 percent in 2010 from an estimated 5.3

percent in 2007, according to the median of five analysts in a Bloomberg survey.

Hindustan Unilever A 75 Year Commitment

15,000 employees

1,200 managers

2,000 suppliers & associates

75 Manufacturing Locations

45 C&FAs, 4,000 Stockists

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Total Coverage 6.3 Mln Outlets

Direct Coverage 1 Mln outlets

Population of INDIA: 1027 Mln

5,545 Towns

2.5 Mln outlets

6,38,000 Villages

5.0 Mln outlets

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3.2 HUL HISTORY

It was in the summer of 1888 that Unilever of England first marketed Sunlight soap in

India. This was followed by brands like Pears and Vim. Vanaspati was launched in 1918

and Dalda came to the market in 1937.

In 1931, Unilever set up its first Indian subsidiary, Hindustan Vanaspati

Manufacturing Company, followed by Lever Brothers India Limited (1933) and

United Traders Limited (1935). These three companies merged to form HUL in

November 1956.

A number of prominent companies came into the HUL fold as result of Unilevers

international acquisitions. These included Brooke Bond (1984), Lipton (1972) and

Ponds (1986).

In 1993, Tata Oil Mills Company (TOMCO) merged with HUL. Two years later,

HUL and yet another Tata company, Lakme Limited, formed a 50:50 joint venture,

Lakme Lever Limited.

Subsequently in 1998, Lakme Limited sold its brands to HUL and divested its 50 per

cent stake in the joint venture to the FMCG giant.

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HUL formed a 50:50 joint venture with the US-based Kimberly Clark Corporation in

1994, Kimberly-Clark Lever Ltd, which markets Huggies diapers and Kotex sanitary

pads.

HUL has also set up a subsidiary in Nepal, Nepal Lever Limited (NLL), and its

factory represents the largest manufacturing investment in the Himalayan kingdom.

In a historic step, HUL picked up 74 per cent of the equity of Modern Foods from the

Indian government.

In 2002, HUL acquired the government s remaining stake in Modern Foods.

FMCG major Hindustan Unilever Limited (HUL), formerly known as Hindustan

Lever Limited, employs 36,000 people, including over 1,350 managers. It is one of

the earliest MNCs to have entered India

3.3 ORGANIZATIONAL STRUCTURE

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ManagingDirector

GeneralManager

Vice President


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3.4 PRESENT STATUS

Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods

company, touching the lives of two out of three Indians with over 20 distinct categories in

Home & Personal Care Products and Foods & Beverages. They endow the company with

a scale of combined volumes of about 4 million tonnes and sales of Rs.10,000 crore.

HUL is also one of the country's largest exporters; it has been recognised as a Golden

Super Star Trading House by the Government of India. The mission that inspires HUL's

over 15,000 employees, including over 1,300 managers, is to "add vitality to life."

HUL meets everyday needs for nutrition, hygiene, and personal care with brands that

help people feel good, look good and get more out of life. It is a mission HUL shares

with its parent company, Unilever, which holds 51.55% of the equity. The rest of the

shareholding is distributed among 380,000 individual shareholders and financial

institutions.

HUL's brands - like Lifebuoy, Lux, Surf Excel, Rin, Wheel, Fair & Lovely, Pond's,

Sunsilk, Clinic, Pepsodent, Close-up, Lakme, Brooke Bond, Kissan, Knorr-Annapurna,

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Marketing Manufacturing

Sales Finance Distribution


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Kwality Wall's are household names across the country and span many categories -

soaps, detergents, personal products, tea, coffee, branded staples, ice cream and culinary

products. They are manufactured over 40 factories across India. The operations involve

over 2,000 suppliers and associates. HUL's distribution network, comprising about 4,000

redistribution stockiest, covering 6.3 million retail outlets reaching the entire urban

population and about 250 million rural consumer.

HUL has traditionally been a company, which incorporates latest technology in all its

operations. The Hindustan Unilever Research Centre (HLRC) was set up in 1958, and

now has facilities in Mumbai and Bangalore. HLRC and the Global Technology Centres

in India have over 200 highly qualified scientists and technologists, many with post-

doctoral experience acquired in the US and Europe.

3.5 PRODUCT PROFILE

HULs business activities are divided into four broad areas:

Home and personal care

Personal wash, fabric wash, home care, oral care, skin care, hair care, deodorants

and talcs, colour cosmetic

Foods

tea, coffee, branded staples, culinary products, ice creams, Modern Foods ranges

New Ventures

Hindustan Lever Network, Ayush ayurvedic products and services, Sangam,

Pureit water purifiers.

Exports

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HPC, beverages, marine products, rice

3.6 BRANDS

HUL s brands are household names across the country. They include:

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Lifebuoy, Lux, Surf Excel, Rin, Wheel, Fair & Lovely, Pond s, Sunsilk, Clinic,

Pepsodent, Close-up, Lakme, Brooke Bond, Kissan, Knorr-Annapurna and Kwality

Walls.

3.7 HUL NEW GROWTH STRATEGY

After having fought a bitter price battle for market share

with its rivals, Hindustan Unilever Ltd (HUL), Indian

subsidiary of the Anglo-Dutch consumer goods company

Unilever Plc, is now working on a new growth strategy for

its laundry business. Price cut or hike is not a long-term

growth strategy. Pricing, in fact, is now pass. Their strategy

for growth, now is focused on product innovation, new

consumer and retail trends and aggressive marketing and

promotions. This comes even as Unilever is scouting for a potential buyer for its laundry

business in the US.

HUL says it is quite upbeat about the segment and says the laundry segment is one of its

key growth areas. They have done key innovations across the product portfolio and it is

working for them. They have successfully migrated from Rin Supreme to Surf Excel and

Wheel Smart Srimatiwhich was rolled out in 2006is also on the right track. HULs

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market share in the laundry segment grew to around 37.8% in the quarter ended June

from 35.5% in the same period last year, according the market research firm ACNielsen.

However, this time, the increase was not at the expense of price war with its

multinational rival Procter & Gamble Co. P&G also gained 0.5 percentage points, up to a

7.6% share. Nirma Ltd, the Ahmedabad-based manufacturer, however, saw its market

share dip by 1.7% percentage points to 13.5%.

Wheel, a value brand that, according to Vats contributes around 50% of HULs laundry

segment revenues, increased its market share by 2 percentage points in the same period,

with a total share of about 18%.

According to ACNielsen, the

laundry industry in India was worth

Rs7,908 crore in 2006 and rose 8.4% over

2005. HUL doesnt report its laundry

revenues separately but puts them under

the soaps and detergent category.

In 2006, HULs soaps and detergents segment contributed around Rs5,596 crore to the

companys total sales of Rs12,103 crore.

Laundry has been an attractive segment in the past and is likely to keep growing in the

near future. The recent price war between companies led to erosion in their profitability

but now, the industry is stabilizing, says Unmesh Sharma, an analyst at Macquarie

Securities here. According to Vats, the laundry business is witnessing a surge in demand

from cities and HUL is focusing on Tier I and II cities to tap that demand.

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Consumers today are buying more clothes. Trends suggest that the usage of detergents

has gone up as a result. Also, with premium quality of clothes, people want to use better

and branded products. Still, some of HULs recent moves, such as promotional

campaigns and advertising, seem right. Still, it is too early to say what result their new

strategies will yield.

3.8 SWOT ANALYSIS

Strength

1. Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods

company, touching the lives of two out of three Indians with over 20 distinct

categories in Home & Personal Care Products and Foods & Beverages..

2. Due to its long presence in India has deep penetration 20 consumer product

category, over 15,000 employees, including over 1,300 managers, is to "add vitality

to life."

3. The company derives 44.3% of its revenues from soaps and detergents, 26.6% from

personal care products, 10.5% from beverages, and the rest from foods, ice creams,

exports, and other products.

4. Low cost of production due to economic of scale. That means higher profits and / or

more competitioners. Better market penetration.

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5. HUL is also one of the country's largest exporters; it has been recognized as a Golden

Super Star Trading House by the Government of India.

Weakness

1. Continuous threat from other competitors.

Opportunities

1. Increasing per capita national income resulting in higher disposable income.

2. Growing middle class and growing urban population.

3. Increasing gifts cultures.

4. Increasing departmental stores concept impulse @ at cash counters.

5. Globalization.

Threats

HUL's tea business has declined marginally, reason is that, cost pressure is likely due

to rising crude and freight costs.

3.9 PEST ANALYSIS

Political

Since the budget range is decontrolled, no political effects are envisaged.

Economical

1. Increasing per capita income resulting in higher

2. Disposable income

3. Growing middle class/urban population increase in demand

4. Low cost of production better penetration

Social

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1. Per capita consumption expected to increase fashion

2. Increasing gifts culture increase in demand

Threats

Will have to reinforce technology to international levels. Once India is a fully free

economy.

3.10 MARKETING MIX

Product

Satisfaction suffices. But delight dazzles the average company will compete for customer

by conforming to her expectation consistently. But the winner will surpass them by

constantly exceeding her expectation, delivering to her door step additional benefits

which she would never have imagined possible. Hindustan Unilever Ltd(HUL) offer such

product. The wide variety products offered by the company include:

Bathing soaps: Lux, Lifebuoy, Liril, Hamam, Breeze, Dove, Pears and Rexona

Laundry items: Surf Excel, Rin and Wheel

Skin care: Fair & Lovely, Ponds and Vaseline

Hair care: Sunsilk and Clinic

Oral care: Pepsodent and Close up

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Deodorants: Axe and Rexona

Colour cosmetics: Lakme

Ayurvedic: Ayush

Tea: Brooke Bond and Lipton

Coffee: Bru

Foods: Kissan, Annapurna and Knorr

Ice cream: Kwality Walls .

Pricing

Make no mistake. Second P of marketing is not another name for blindly lowering prices

and relying on this strategy alone to increase sales dramatically. The strategy used by

Hindustan Unilever Ltd(HUL) is for matching the value that customer pays to buy the

product with the expectation they have about what the production is worth to them.

Hindustan Unilever Ltd(HUL) has launched various products which cater to all customer

segments. So every customer segment has different price expectation from the product.

Therefore maximizing the returns involves identifying right price level for each segment,

and then progressively moving through them.

Physical Distribution Place

BRAND ISNT THE ONLY ANY MORE. Marketers and finance manager need a new

term to evaluate their business:

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Distribution Equity. It takes much more time and effort to build, but once built,

distribution equity is much together to erode.

The fundamental axiom of Indian consumer market is this:

You can set up a state-of the-art manufacturing facility, hire the hottest strategies on the

block, swamp prime television with best Ads, but the end of it all, you would be know of

selling your products. The cardinal task before the Indian market is managing is to shoe-

horn its product on retail shelves. Buyers are paying for distribution equity not brand

equity and market shares.

Why does the company need distribution equity more anything in India? With technology

and competitive pressure slash in it is becoming increasing difficult for marketers to

retain a unique product differentiation for ling period. In a product and price parity

situation, the brand that sells more is the one that reaches the highest number of

customers.

India The operations involve over 2,000 suppliers and associates. HUL's distribution

network, comprising about 4,000 redistribution stockists, covering 6.3 million retail

outlets reaching the entire urban population, and about 250 million rural

consumers.television has already primed and population for consumption, and the

marketer who can get to the to the consumer ahead of competition will give a hard to overtake lead. But getting their means managing wildly different terrains-climate,

language, value system, life style, transport and communication network. And your brand

equity isnt going to help when it comes to tackling these issues.

Own distribution network consist of clearing and forwarding (C&F) agents & distribution

stockiest. This network of distribution can either contact wholesalers and which in turn

retailers or the distributors can contact to the retailers directly.

Once the stock product reaches retailers, the prospective customers can have access to the

product.

Hindustan Unilever Ltd(HUL) distributes the product in the manner stated above.

Hindustan Unilever Ltd(HUL) distribution network has expanded. Beside use of

improved logistics, Hindustan Unilever Ltd(HUL) is also attempting to improve the

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distribution quality. To address the issue of product stability, it has installed visi colors at

several outlets. This helps in maintaining consumption in summer when sales usually

drops due to the fact that the heal effects product quality and thereby off takes.

Looking at the low penetration of few products, a distribution expansion would itselfbeing incremental volume. The other reason is arch rival Procter & Gamble Co. reaches

more than a million retailers.

This increase in distribution is going to be accompanied by reduction in channel costs.

Hindustan Unilever Ltd(HUL) marketing costs, at 18% of total costs, is much higher than

Procter & Gamble Co. The company is looking to reduce this parity level. At Hindustan

Unilever Ltd(HUL), they believe that selling FMCG is it like selling soft drinks.

Promotion

If an advertisement is to communicate effectively, the receiver must at least half want it

to, and be prepared too take step toward the sender. Effective advertising is rarely

hectoring or loudly explicit. It often both attracts and generates arm feelings. More

often than not, a successful campaign has a stronger element of the unexpected a quality

that good advertising shares with much worthwhile literature.

To penetrate into the inner recesses of her memory, communication must first ensure

exposure, grab her attention evoke her comprehension, grab her acceptance and then

extract retention competing with thousands of other units of communication trying to do

the same.

Finding showed that the adults felt too conscious to be seen consuming a product actually

meant for children. The strategic response address the emotional appeal of the band to the

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child within the adult. Naturally, that produced just the value vacuum that Hindustan

Unilever Ltd(HUL) was looking to fill. Thereafter it was the job of the advertising to

communicate customer the wonderful feeling that he could experience by re-discoursing

the careful, unself conscious, pleasure seeking child within himself a graft these

feeling onto the Ad campaign like hasso to khul k hasso for close up, cream

bathing bar for dove soap and daag ache hai for surf excel have been sure shot

winner with the audience.

It has also launched Pureit, a home water purifier which supplies drinking water without

boiling/need of electricity , As well as outdoor and radio ads, ad agency contract has

created communication for cinemas and even ATM machines for the brand.

All ICICI s ATM a message flashes on the screen as soon as customer insert his ATM

card. Something familiar is planned for phone-book as well. In cinemas, Hindustan

Unilever(Ltd)has a message on-screen just before the lights are dimmed to give them a

chance to get their product There will also be after dinner sampling in restaurants to

begin with, 30 catteries in Mumbai have been selected.

Ad spend in 2000 was about 14% of sales and the management said that plans to maintain

as spend at this level in the current year also.

Ad since any discussion today would be incomplete without mention e word, themanagement plans to tap this new channel of marketing. Beside the company website

(i.e. www.unilever.com), that the company has launched, it had also entered into various

marketing relationship with other portals, specially targeted during festivals and events

such as Valentines day, etc.

Its a combination of spiffing up its key brand, researching and improving the newer

products that havent taken off, supported with high ad spends that Hindustan

Unilever(Ltd) hopes will see it emerges stronger after the current slowdown, as well asexpand the market.

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Positioning

In the 1970s consumers were ready to pay more for more, and luxury goods flourished.

In the 1980s, consumers began to demand more for same, and the discounting era grew

strong. Todays consumer demanding more for less, and the winner will be that super

value marketers. Some of todays most successful companies recognize those

customers are more educated and able to recognize true customer value

Positioning is simply concentrating on an idea or even a word defines that company

in the mind of the consumer. It is more efficient to market one successful concept to one

large group of people than 50 product or service ideas to 50 separate group

repositioning is a must when customer attitude have changed and product have strayed

away from the consumers long standing perception of them

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Hindustan Unilever (Ltd) is an anchor in sea of consumer products. As a variety of

competitive claims assails her senses, today customer uses complicated decision making

process to assess the alternative before making a purchase. Since Hindustan

Unilever(Ltd) is more clearly associated with a particular set of attributes in terms of

benefits and prices, the quicker becomes her search process.

Positioning of individual product:

1) Lifebuoy is one of Unilevers oldest brands with more than a hundred-year

history, as www.unilever.com informs. Lifebuoy has become more than just a

red bar of soap today the brand provides hygiene and health solutions for

families

2) Fair & Lovely, a hot-selling fairness cream, which promises a lighter skin tone

for many of Indias complexion-conscious consumers

.

3.11 MARKET SEGMENTATION

Market place for any product is comprised of many different segments of consumers,

each with different needs and wants. Markets segmentation can be defined in a number of

ways such as:

Demographic variables (e.g. Consumers are groups, gender, material states incomeetc)

The lifestyle of consumers (i.e. their interests and activities) the benefits whichconsumers look for in a product or on the occasions when the product might be

consumed.

Hindustan Unilever (Ltd) takes into account all these factors when producing a rangeof products. It targets different segments within the market, such as the:

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Break segment products which are normally consume as a snatched break and oftenwith tea and coffee.

Impulse segment these products are often purchase on impulse, used these and then.They include product such as close up.

Take home segment this describes product that are normally purchased insupermarkets, taken home consumed at a later stage.

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CHAPTER 4

4.1 HUL SERVICE TO SOCIETY

HUL believes that an organisation's worth is also in the service it renders to the

community. HUL is focusing on health & hygiene education, women empowerment, and

water management. It is also involved in education and rehabilitation of special or

underprivileged children, care for the destitute and HIV-positive, and rural development.

HUL has also responded in case of national calamities / adversities and contributes

through various welfare measures, most recent being the village built by HUL in

earthquake affected Gujarat, and relief & rehabilitation after the Tsunami caused

devastation in South India.

In 2001, the company embarked on an ambitious programme, Shakti. Through Shakti,

HUL is creating micro-enterprise opportunities for rural women, thereby improving their

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livelihood and the standard of living in rural communities. Shakti also includes health and

hygiene education through the Shakti Vani Programme, and creating access to relevant

information through the iShakti community portal. The program now covers 15 states in

India and has over 31,000 women entrepreneurs in its fold, reaching out to 100,000

villages and directly reaching to 150 million rural consumers. By the end of 2010, Shakti

aims to have 100,000 Shakti entrepreneurs covering 500,000 villages, touching the lives

ofover600 million people.

HUL is also running a rural health programme Lifebuoy Swasthya Chetana. The

programme endeavors to induce adoption of hygienic practices among rural Indians and

aims to bring down the incidence of diarrhoea. It has already touched 70 million people

in approximately 15000 villages of 8 states. The vision is to make a billion Indians feel

safe and secure.

If Hindustan Unilever straddles the Indian corporate world, it is because of being single-

minded in identifying itself with Indian aspirations and needs in every walk of life.

4.2 HUL CSR CONTRIBUTIONS

4.2.1 CSR philosophy

Their approach to Corporate Social Responsibility (CSR) is rooted in the belief that to succeed

requires the highest standards of corporate behaviour towards our employees, consumers and the

societies and world in which we live. Their growth and profitability are sustained by adherence

to corporate purpose and to code of business principles.

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Their CSR philosophy is embedded in their commitment to all stakeholders - our consumers,

employees, the environment and the society that they operate in. It is this commitment they

believe, that will deliver sustainable profitable growth.

4.2.2 The CSR policy of HUL is to

Be a socially responsible corporate entity with thrust on three pillars of sustainable

development-Social, Environmental & Economic.

4.2.3 CSR communication-The United Nations Global Compact - Reaffirmation of

Commitment

HUL s chairman MR.RS BANGA had written on May 15, 2001 to the UN Secretary

General, Mr. Kofi Annan, confirming Hindustan unilever Limited (HUL) s support of theUN Global Compact, while welcoming its recognition of the positive contribution that

business has to make to a more prosperous and sustainable world. He wished to confirm

that as the Unilever Company in India, HUL reaffirms its commitment to the principles

of the UN Global compact.

4.3 CSR PRIME INITIATIVES

IT-powered system has been implemented to supply stocks to redistribution stockists on a

continuous replenishment basis. The objective is to catalyse HULs growth by ensuring

that the right product is available at the right place in right quantities, in the most cost-

effective manner. For this, stockists have been connected with the company through an

Internet-based network, called RSNet, for online interaction on orders, despatches,

information sharing and monitoring. RS Net covers about 80% of the company's

turnover. Today, the sales system gets to know every day what HUL stockists have sold

to almost a million outlets across the country. RS Net is part of Project Leap, HULs end-

to-end supply chain, which also includes a back-end system connecting suppliers, all

company sites and stretching right upto stockists.

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4.3.1 Project Shakti

HULs partnership with Self Help Groups of rural women, is becoming an extended arm

of the company's operation in rural hinterlands. Started in 2001, Project Shakti has

already been extended to about 50,000 villages in 12 states - Andhra Pradesh, Karnataka,

Gujarat, Madhya Pradesh, Tamil Nadu, Chattisgarh, Uttar Pradesh, Orissa, Punjab,

Rajasthan, Maharashtra and West Bengal. The respective state governments and several

NGOs are actively involved in the initiative. The SHGs have chosen to partner with HUL

as a business venture, armed with training from HUL and support from government

agencies concerned and NGOs.

4.3.2 Empowerment of Women

Creating income generating opportunities for women

They seek to empower underprivileged rural women by providing them the opportunity

to generate income. But as importantly, what it provides them is newfound dignity and

self-respect.

Supported by micro-credit, these women from Self Help Groups (SHGs) are HULs

rural direct-to-home distributors. This in turn helps us increase our reach, penetration and

communication with rural consumers. This initiative has so far benefited women in 4750

villages in Andhra Pradesh, Karnataka & Gujarat touching about 7.5 million rural people.

It has been widely supported by various developmental bodies and the government.

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Their vision is to change the lives of women in one lakh villages by making them Shakti

dealers. This provides economic opportunities for the underprivileged while creating a

distribution and communication channel for our brands to access untapped rural markets

with a consumer base of over 100 million rural Indians.

4.3.3 Rehabilitation

Helping the underprivileged and specially challenged children lead a normal life

ASHA DAAN in Mumbai is a home for the poorest of the poor. Managed by the

Missionaries of Charity, it is actively supported by and operates from premises given by

us. It has been home to over 20,000 people since 1976. It provides care and compassion

as well as food, shelter and medication to the homeless, sick, infants and HIV +ve

patients.

Their projects - ANKUR in Doom Dooma Plantations - Assam, KAPPAGAM and

ANBAGGAM in our Tamil Nadu plantations are aimed at physically and mentally

challenged children. The projects provide educational, therapeutic, vocational and

recreational inputs which help the children to be self-reliant and engage in some fruitful

occupation.

Their projects have been widely appreciated and ANKUR has also received the Lawrie

Group Worldaware Award for Social Progress from HRH Princess Royal in London.

4.3.4 Greening barrens

HUL's Water Conservation and Harvesting project is committed to extending its efforts

on water management to the larger community, and has engaged in community projects

in water adjacent to manufacturing sites. HUL's vision is to continuously innovate

technologies to further reduce water consumption and further increase conservation in its

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operations. Simultaneously, HUL sites will progressively help communities, wherever

required, to develop watersheds.

4.3.5 Relief and Reconstruction

Rebuilding lives reconstructing an entire village

The earthquake in Gujarat in 2001 was devastating, affecting many people and also our

factory at Kandla. The immense magnitude of the tragedy provoked them to extend help

beyond their own operations in Kandla and they chose Nani Chirai, a completely wrecked

village in Kutch district, for reconstruction.

They built YASHODADHAM with the help of NGOs and the villagers, with their

financial assistance and their managers implementing the project on site. Spread over 26

acres, this new village is fully equipped with piped water, sanitation, underground

drainage and electricity. It also has a school, a playground and a community centre. In

Yashodadham, they have gone beyond financial help into active involvement in the

design and construction of the new village. Yashodadham is today a vibrant rural

community with happy people secure in the comfort of their new homes.

Responding when a community is in adversity, they believe, is the duty of a good

corporate citizen.

4.3.6 Integrated Rural Development

Improving the quality of life in backward areas

Providing development opportunities in backward areas is an important part of their

philosophy. 28 of their plants are located in the most underdeveloped regions of India

spread across 11 political states. Apart from providing local employment they have also

made efforts in the development of surrounding villages through their INTEGRATED

RURAL DEVELOPMENT (IRD) program.

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Communities in over 500 backward villages adjacent to their plants in locations like

ETAH and ORAI in Uttar Pradesh, have benefited through IRD. Their initiatives span

adult literacy, animal husbandry, modern farming, infrastructure development, education

and medical care. IRD is also an integral part of their Business Leadership Training

Program, enabling every trainee to get an in-depth understanding of rural lifestyles,

conditions, opportunities and challenges. Their involvement through this has made all

managers more sensitive to the needs and aspirations of rural India.

4.3.7 Lifebuoy swasthya chetna

Lifebuoy Swasthya Chetana is the single largest rural health and hygiene educational

programme ever undertaken in India. Its objective is to educate people about basic

hygienic habits.

Started in 2002, the programme has as of now covered about 15000 villages. It has

already touched about 70 million people, imparting hygiene education to over 25 million

children. The vision of this on-going project is to make a billion Indians feel safe and

secure by focusing on their health and hygiene needs.

4.3.8 Happy homes

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Under the Happy Homes initiative, HUL supports special education and rehabilitation of

children with challenges. Over 20,000 individuals have benefited from the Happy Homes

initiatives since inception. HUL is wholeheartedly involved with all four centers and will

continue to be involved in the future. The four happy homes centers are-ASHA DAAN,

ANKUR, KAPPAGAM & ABAGAM. Ankur received the Lawrie Group World Aware

Award for Social Progress in 1999 from HRH Princess Royal in London. These centres

have taught the children the self-help skills, useful vocational activities Infact, some of

the children have become relatively self-reliant by earning through crafts learnt at the

center.

4.3.9 Fair & lovely foundation - economic empowerment of women

The Fair & Lovely Foundation is HUL's initiative which aims at economic empowerment

of women across India. It aims to achieve this through providing information, resources,

inputs and support in the areas of education, career and enterprise. It specifically targets

women from low-income groups in rural as well as urban India. Fair & Lovely, as a

brand, stands on the economic empowerment platform and the Foundation is an extension

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of this promise. The Foundation has renowned Indian women, from various walks of life,

as its advisors.

The support provided by Fair & Lovely Foundation will help girl children avail

opportunities of higher education and acquire skills in appropriate professions. The series

of projects that have been drawn up to achieve the vision include EDUCATION,

CAREER and ENTERPRISE.

4.3.10 Yashodadham

HUL has reconstructed a village in the Bhachau Taluka of Gujarat's Kachch district. The

village, which has been named Yashodadham, was dedicated to its 1100 residents in

December 2002. The residents belong to Nani Chirai village, which was completely

wrecked by the devastating earthquake of January 2001.HUL, which had launched

immediate relief after the quake in areas adjacent to its Kandla Exports factory,subsequently decided to reconstruct a village, which was completely wrecked. The

objective was to help a completely wrecked village, because such settlements had the

greatest need for help.

4.3.11 Energy Management

Conserving energy through innovative thinking and efficient process

Their efforts focused on energy conservation as well as use of renewable energy have

resulted in a reduction of their energy consumption by 61% since 1996. It has also led to

a 58% reduction of emission of Green House gases.

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They have taken several initiatives including process redesign, fuel substitution,

rationalizing equipment and productivity improvement. They have deployed new

technologies to optimize electrical energy inputs and heat recovery while plugging

atmospheric energy losses. This has reduced the global warming potential as well as

saved energy.

Their En

Business Ethics - A Look Into CSR

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