Abdul Latif Jameel Co.: Corporate Social Responsibility

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Introduction

Advanced globalization and expanse of multinational corporations has made it necessary to understand the cultural differences that arise in various management arenas. As it has been argued that corporate social responsibility (CSR) and citizenship are affected due to change in culture and region, therefore, it is imperative to find the kind of difference that arises (Cone 2003). Further CSR usually refers to the activities undertaken by the business houses in accordance with the government in order to enhance the society. These acts are supposed to be voluntary and thus are not usually required by law.

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Thus, CSR is marked by its responsiveness and voluntariness in order to foresee the social schema and thus redirecting the company’s attention on social performances (Fukukawa & Moon 2004). Further, many companies have started to report their CSR on internet (Fukukawa & Moon 2004).

With the internet, there have become different scopes and methods, which are adopted by companies to undertake reporting of the social responsibility initiatives. CSR initiatives in different areas like finance, auditing, human resources, environment, etc. are undertaken by the companies in order to maintain their social responsibilities. In this paper, a thorough study of the website is done in order to see how an organization can be socially responsible in a non-Western organizational setting.

This study presents a case study analysis of the CSR responsibilities undertaken by Abdul Latif Jameel Co. based on the website reporting done by the company (Abdul Latif Jameel Co. 2010). The study will aim at understanding the CSR initiatives undertaken by the company and the different ways in which the CSR initiative undertaken in traditional, westerner environments. This paper will study the company website and gather information regarding the CSR initiatives undertaken by the company.

Literature Review

As CSR has been a budding issue in management studies, there is available a plethora of theoretical perspective on the issue. A brief understanding of the theoretical perspective is necessary in order to undertake a practical study. The issue of social responsibility was started by an article published in Harvard Business review by Theodore Levitt when he states, “government’s job is not business, and business’s job is not government” (1958, p.47).

Agency theory of CSR implies that a corporate will act unethically if it used its resources to make personal gains robbing value from the shareholders. Further, there has been increased concern regarding environmental social responsibility. Hart (1995) pointed out that there must be environmental social responsibility must be concern of the organizations. Further, it has also been asserted that CSR can be a source of competitive advantage for the companies.

Further it has been also been asserted by researchers that firms with higher level of environmental accountability are found to have a higher level of financial performance. Firm level CSR has strategic implication for the companies. CSR can become the source of a differentiation strategy for the company on a corporate level. Therefore, companies consider CSR from this aspect as a form of investment rather than a liability. CSR provides the essential basis for the differentiation strategy employed by organizations.

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CSR becomes an integral part of the organizations today, and all companies fallow CSR in various forms and shapes. Corporate communication of CSR has evolved in order to make the stakeholders aware of the initiatives undertaken by the company. Thus, it is important to understand the various aspects and how internet is used as a tool for CSR communication.

CSR in Saudi Arabia

The Harvard Kennedy School has presented a report on CSR in Saudi Arabia, which outlined the key trends of CSR activities in the country (SAGIA 2008). There report pointed out that the CSR activity in Saudi Arabia not only compromised of what the organizations did with the profits they earned, but it also extended to how they could generate more profit. In other terms, it implied that CSR is used as a tool to enhance the competitive advantage of the company. Therefore, CSR is not constricted to philanthropy. The philanthropic activities that the companies undertake have a strong underpinning for national and social development. Jane Nelson points out:

As such, it goes far beyond philanthropy to include issues of corporate risk management and competitiveness. At the same time, what companies do through their philanthropic programs can make a meaningful contribution to achieving community and national development goals, in developed as well as developing countries.” (SAGIA 2008, p.4)

Nelson presented a matrix showing the different forms of CSR activities undertaken by a company (SAGIA 2008). As is shown in figure 1, a company can be a philanthropist, and undertake charity related CSR activities. However, these activities are believed not to generate any additional competitiveness for the company (SAGIA 2008). Similarly, mere compliance to the laws and regulations do not create any company differentiator. Thus, the best way is to create a new method of positive value for the company as well as the society through socially and environmentally responsible products, technologies, alliances, etc. therefore, when a company uses this strategy of creating new value, the company is believed to have used CSR for its own as well as good.

Different approaches to CSR
Figure 1: Different approaches to CSR (SAGIA, 2008).

Further, disclosure of the CSR activities is important as they provide a sound ground for dialogue with the stakeholder (Clikeman 2004). One of the most important forms of disclosure used by companies is the Internet (Paul 2008).

Another important aspect of CSR today is building human capital. Increasing capacity to employ more people, and develop human capital is beneficial for both the company as well as the government (SAGIA, 2008). Thus as noted by the Saudi Arabian General Investment Authority “Education drives our economic diversification away from oil, providing the human capital to attract foreign investment, build an innovation based economy, and redefine Saudi Arabia’s position in the world.” (SAGIA 2008, p.10) Therefore, one of the main emphases placed by the government authorities in terms of CSR in Saudi Arabia is developing human capital. The focus of CSR in Saudi Arabia is human capital development and creative competitive advantage through CSR activities.

Methodology

This study is an exploratory study aiming to understand the CSR initiatives undertaken by ALJ and how the employees of the company perceive the CSR activities undertaken by the company. The study will be an exploratory case study analysis, which will employ both qualitative as well as quantitative data following Cetindama & Husoy’s (2007) usage of a case study methodology along with survey method ofcollecting primary data. Therefore, the methodology that will be used is that of case survey method. Larsson points out that this method is particularly useful while the “unit of analysis” is an organization (1993 p.1516).

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Thus, method is stranger than a case study methodology because they allow researchers to identify “cross-sectional patterns and to generalize large populations” (Larsson 1993, p.1516). Further, a case survey method allows multisource data collection. Further, it allows to get a better glimpse of “multiple stakeholder perspective” (Larsson 1993, p.1517). Therefore, this method allows better understanding of the CSR situation at ALJ.

Research Questions

The main forte for the government in Saudi Arabia is to develop human capital. Therefore, in terms of CSR, development of human capital becomes a very important function for the companies. Therefore the research questions that arises for the study are –

  1. Are the CSR activities of ALJ aligned to the government initiative to develop human capital in Saudi Arabia?
  2. Does CSR activities undertaken by ALJ as just philanthropy or aims at making it a competitive differentiator for the company?
  3. What is the perception of the stakeholders of the company about its CSR activities?

Data Collection and Method

The data for the research is collected from secondary as well as primary sources. The preliminary background study of the company is done in order to understand the CSR initiatives of the company through its disclosures and published articles. This information are analysed in order to gauge the level of CSR activities and the trend of activities undertaken by the company. Then a questionnaire survey is done on the stakeholders of the company who include the company’s customers, employees, business alliances, and others who are not associated directly with the company.

Here business alliance would include the shareholders, partners, distributors, etc. the study will show the awareness of the CSR activities of ALJ and what perception the stakeholders have regarding the activities conducted by the company. This being an exploratory case survey research, there will be no hypothesis undertaken. However, the study will aim at answering the research questions posed in the previous section.

The survey questionnaire (see Appendix) consisted of 13 questions – one information regarding the relation between the company and the stakeholder, then 11 questions regarding his/her knowledge of the company’s CSR activities and policies. The last is an open-ended question. The responses to the 11 questions related to the company’s CSR are taken in 5-point Likert Scale. The data is analysed using descriptive statistical tools. The following section provides a case study of the company’s CSR activities and the survey analysis.

Case Study Analysis – Abdul Latif Jameel Co

The following section provides a case study analysis of Abdul Latif Jameel Co. The section will first provide a brief overview and background of the company, its business, and operations. A brief overview of the nature of CSR activities done by the company will be done. Then a content analysis will be done of the website and the CSR related terms, derived from the study of Paul (2008). The paper will then present the analysis of the findings and how the CSR in the company is handled.

The paper will end with recommendations as to the areas where CSR activities may be increased and the areas where the company lacks in CSR activities will be discussed. The material presented in the case study is derived from the corporate website (Abdul Latif Jameel Co. 2010) and the CSR website (Abdul Latif Jameel Co. 2009) of the company.

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Company Background

The Saudi visionary and entrepreneur Sheikh Abdul Latif Jameel (AJL) started the company in 1945. AJL was the automotive distributor and it had the sole right of distribution of Toyota made vehicles in Saudi Arabia. In 1970s, AJL diversified its business and expanded its operations in real estate, consumer finance, and general trading activities. The consumer finance division was started in 1979 when there arose increased demand for consumer finance and a separate division called the United Division Sales (UIS) was formed. In 1980s, ALJ realigned its focus on two key sectors i.e. automotive and consumer finance.

The company is a customer droves company with its key focus being on customers. As stated in the company website “Customers are treated as guests and treated as if they were guests in our own homes.” (Abdul Latif Jameel Co. 2010) Thus, customer orientation shows that the company’s policy is customer driven.

The company has three business divisions – automotive, financing and advertisement and media. The financing business segment provides innovative financing solutions to the customers through instalments and leasing services. The main aim of the financing segment i.e. UIS is to provide finance for sell of new and used Toyota and Lexus vehicles. UIS also provides finance for electronic and durable products to its customers. The third business segment is advertisement and media divisions called Drive Communications was formed in 1997 (Abdul Latif jameel Co. 2010). Further, this company also specialises in financial risk management.

ALJ and CSR

The section outlines the CSR activities undertaken by ALJ. ALJ has a community service program which mainly aims at “contributing to different social programs” like Bab Rizq Jameel Program, Health and Social Programs, and International Programs. The term stakeholder is motioned in the vision of the company, demonstrating that the company. Further, the vision statement also identified the stakeholders of the company, thus, making the stakeholder focus of the company clearer. The ALJ Community Service Program (ALJCSP) aims at socially responsible investment which has been stated as the key focus – “the key focus for its community investment, supporting initiatives, and projects that align with ALJ’s commitment to social and economic sustainability by creating new jobs for young entrepreneurs” (Abdul Latif Jameel Co. 2010).

The Bab Rizq Jameel Program, the company aims at creating jobs for Saudi male and females especially entrepreneurs. The program provides direct recruitment opportunities, vocational training, establishment of institutes for vocational training, and opportunities for self-employment like taxi or truck ownership, productive household program for women for financing home based micro businesses, etc. thus, creating job and business opportunities for Saudi citizens is one of the primary endeavour of the program.

ALJCSP also strives to provide health related support and benefit to the Saudi community. Health programs of the company include Abdul Latif Jameel rehabilitation and Healthcare Hospital, Saudi Red Crescent Society (SRCS) Development program, and Cooperation with the MOH to support certain hospitals. The company through movies made by the company called Role Model Program, Tanweer program to help orphan students, and road safety programs conducts a few social programs.

The poverty alleviation initiatives include programs like Grameen-Jameel Pan-Arab Microfinance Limited, Abdul Latif jameel Poverty Action Lab (J-PAL) at MIT, and the Yunus Challenge.

Data Analysis

Therefore, the corporate website mentions the terms stakeholder, CSR, and sustainability. The focus of the CSR program of the company lies in job creations. The CSR program aligns its goals with the Government and other private sector companies in order to cooperate in creating sustainable CSR. The sample for the survey is a convenience sample. The questionnaire was sent to 80 stakeholders who included employees, customers, business alliances, and those who have no relation with the organization.

57 emails were returned with survey questionnaires out of 50 were taken for the study, as the rest were found incomplete. The relationship of the 50 respondents is shown in figure 2. Most respondents are employees who comprise 50% of the sample, 14 are customers, 6 are business alliances, and 5 have no direct relation with the organization.

Respondent’s relation to ALJ.
Figure 2: Respondent’s relation to ALJ.

The descriptive statistics for the 11 questions are given in table 1. Q1 asks the respondents about the Awareness of their awareness of the CSR activities undertaken by ALJ in Saudi Arabia. The study shows that mostly the respondents agree that they are aware of the CSR activities undertaken by the company. The mean value for the question is 4.62 and the median and mode is 5. Therefore, most of the respondents are aware of the CSR activities by ALJ.

Table 1: Descriptive Statistics.

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11
Mean 4.62 4.86 2.42 3.88 3.4 4.58 3.28 4.48 3.02 4.1 4.44
Standard Error 0.09 0.06 0.15 0.08 0.18 0.10 0.12 0.10 0.12 0.09 0.10
Median 5 5 2 4 3 5 3 5 3 4 5
Mode 5 5 2 4 3 5 3 5 3 4 5
Standard Deviation 0.67 0.40 1.05 0.59 1.25 0.73 0.86 0.71 0.84 0.65 0.73
Sample Variance 0.44 0.16 1.11 0.35 1.55 0.53 0.74 0.50 0.71 0.42 0.54

Q2 relates to ALJ’s activities in employment, poverty alleviation, and social activities. The question asks if they feel that ALJ’s activities are in this area are related to employment, poverty alleviation, and social problems. The mean value is found to be 4.86, mode and media is 5. Therefore, most of the respondents feel that they are ALJ has worked mostly in this area. The standard deviation is 0.89 indicating that a great deviance in responses is there.

Q3 relates to the respondents’ opinion regarding the CSR activities of the company and the question was “I feel it is futile for the company to indulge in CSR activities”. The mean value of the responses is 2.42 and the mean and media values are 2 each, indicating that most of the respondents believe that CSR activities are not futile and support it.

Q4 relates to the cost of CSR activities and the respondents are asked if they feel that it is too high. The respondents mean response was 3.88 and the median and mode value is 4. This indicates that they believe that there is a high cost related to CSR activities. This indicates that ALJ spends a large sum of resources over CSR activities.

Q5 asks if they feel that awareness of the CSR activities of ALJ has increased recently in Saudi Arabia. The respondents have given a neutral response to the question. Thus, the answer is inconclusive.

Q6 asked if the respondents felt that the CSR activities of ALJ were aligned with government initiatives. The mean value of the responses found is 4.58 and the median and model values of the responses are 5. The standard deviation is high at 0.73.

The eighth question asks about the creation of new business opportunities for ALJ. For this, the respondents show a mean response of 4.48 and median and model responses show it to be 5. This indicates that the respondents strongly believe that the CSR activities have created business opportunities.

Q9 asks if there are policy and regulations at ALJ regarding CSR, for which the responses are neutral at a mean value of 3.02. The tenth question asks about the consideration of society that ALJ have while formulating strategies. The respondents agree, as the mean value of the responses is 4.1. the 11th question is related to the success of the CSR activities at ALJ. The respondents believe agree that it has been a success as the mean value of the responses is 4.44.

Though the answers provide a direction to the responses, however, the responses are statistically inconclusive. Therefore, the responses are further coded. The strongly agree and agree responses are coded as 3 implying agreement to the statement. Neutral statements are coded as 2, and disagreement is coded as 1. On running a descriptive statistics analysis on the re-coded data, at a confidence level of 95%, the descriptive statistics of the data found is given in table 2. Table 2 gives the mean and the confidence level of the responses.

Table 2: Recoded responses Descriptive statistics.

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11
Mean 2.96 3 1.8 2.96 2.52 2.96 2.6 3 2.36 3 2.98
Confidence Level(95.0%) 0.08 0.00 0.28 0.08 0.25 0.08 0.23 0.00 0.27 0.00 0.04

For Q1, the mean is found to be 2.96 and the confidence level is 0.08 (>0.05) indicating that the mean is not statistically acceptable. Though the sample shows that the awareness of the CSR activities of ALJ is high, but this response cannot be extended to the whole population. Q2, shows that the mean is 3, i.e. agreement of the respondents and the confidence interval is 0.00 (<0.05) indicating that the CSR activity of ALJ is in employment, poverty irradiation and social activities. This is supported through the secondary data collected, which showed that ALJ mostly worked in the employment-giving sector.

Q3 has a mean of 1.8 and a confidence level more than 0.05 (<0.28) indicating that the CSR activity is not futile is not a shared view of the whole population. Q4, Q5, Q6, and Q7 give statistically inconclusive responses. Therefore, even though the sample population agree that the CSR activities of ALJ are aligned to the government policy, it cannot be considered to be the view of all the stakeholders. However, Q8 gives a statically conclusive response indicating that CSR activities by ALJ have the capacity to create business opportunity. Therefore, CSR activities of ALJ provide competitive advantage to the company, and are not just a philanthropic work. Q9 shows that the company has a coded policy for CSR. Q10 also shows that ALJ’s strategies are undertaken considering social welfare. Further, the general view is that CSR activities of ALJ have been successful in achieving its goals.

Conclusion

The research and case study shows that ALJ is a socially responsible company, which aims at general development of the society in Saudi Arabia. In its commitment to eh betterment of the society, ALJ has contributed in the main initiative of the government to develop human capital, which can be emphasized through the employment creation CSR policies of the company. Further it can be stated that the company’s’ CSR policy is not just a philanthropic measure, rather a means of gaining competitive advantage.

Reference List

Abdul Latif Jameel Co., 2009. Abdul Latif Hameel Community Service Program. Web.

Abdul Latif Jameel Co., 2010. Community Services Program. Web.

Abdul Latif jameel Co., 2010. Drive Communication. Web.

Cetindama, D. & Husoy, K., 2007. Corporate Social Responsibility Practices and Environmentally Responsible Behavior: the Cae Study of United nations Global Compact. Journal of Business Ethics, 76(2), pp. 163-76.

Clikeman, P.M., 2004. Socially Conscious Corporation. Strategic Finance, pp. 23-27.

Cone, M.H., 2003. Corporate Citizenship: The Role of Commercial Organisations in an Islamic Society. Journal of Corporate Citizenship, 9, pp. 49-66.

Fukukawa, K. & Moon, J., 2004. A Japanese Model of Corporate Social Responsibility? A Study of Website Reporting. Journal of Corporate Citizenship, 16, pp. 45-59.

Hart, S., 1995. A natural resource-based view of the firm. Academy of Management Review, 20, pp. 986-1014.

Jose, A. & Lee, S., 2007. Environmental Reporting of Global Corporations: A Content Analysis Based on Website Disclosures. Journal of Business Ethics, 72(4), pp. 307-21.

Larsson, R., 1993. Case Survey Methodology: Quantitative Analysis Of Patterns Across Case Studies. Academy of Management Journal, , 36(6), pp. 1515-46.

Levitt, T., 1958. The dangers of social responsibility. Harvard Business Review, pp. 41-50.

Paul, K., 2008. Corporate Sustainability, Citizenship and Social Responsibility Reporting – A Website Study of lOO Model Corporations. Journal of Corporate Communication, 32, pp. 63-78.

SAGIA, 2008. Corporate Social Responsibiltiy (CSR) in Saudi Arabia and Globally. Web.

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