The Impact of Corporate Social Responsibility on Consumer Behaviour in the Malaysian Cosmetic Industry

1. Introduction

This introductory chapter provides a comprehensive background to the study of the research topic follow up by applying scientific methods. In depth, this chapter includes research background, problem statement, research objectives, research questions, hypotheses of the study, significance of the study, and chapter layout. This research is aim to examine the impact of corporate social responsibility (CSR) on consumer behaviour in Malaysian cosmetic industry. Specifically, we examine the relationship between 4 independent variables, economic responsibility, legal responsibility, ethical responsibility, philanthropic responsibility and the dependent variable, consumer behaviour.

1. Research background

The use of corporate social responsibility (CSR) initiatives to influence consumers and differentiate product offerings has become quite common. Corporate Social Responsibility (CSR) has become a main topic in recent years, especially within the cosmetics industry. The consumers are becoming more concerned with CSR and the demand for socially responsible brands is increasing. On the other hand, cosmetics brands are implementing more and more CSR activities. The consumers are getting more conscious of the company involved in corporate social responsibility (CSR) through better education and the increased influence of the media. Howard Bowen (as cited in Matthias S. Fifka, 2009) mentioned that entrepreneurs have a responsibility to consider social objectives, aims, expectation and values when they make decisions. But, the definitions of CSR have a larger term of responsibility today. The CSR today is define as a concept, and which is the basis for companies to integrate social and economical needs in their corporate activities and the interrelation with the stakeholders is very popular. Most of the companies had already understand that their socially responsible behaviour have a direct impact on the consumer buying behaviour. Consumers find CSR an important issue in the cosmetics industry and would hope to see more socially responsible cosmetics brands. They would like to be informed more about what the cosmetics brands are actually doing in terms of social responsibility. Consumer would also like to know on how the CSR activities of the cosmetics brands are truly meant to improve the society and the environment, not just to use as a marketing tool. When it comes to buying cosmetics brands; quality, price and ingredients are considered to be the main purchase factors by consumers. However, it can be stated that even though CSR is not considered to be a purchase factor, it does have a significant impact on the purchase decisions. In cosmetic industry, when it comes to purchasing cosmetics products, the product quality is the main reason that affects the consumer behaviour. Functional attributes like breathable, water-resistance, easy to wash are other factors are use to decide the quality of the product. For instance, some consumers use cosmetics for work and some for leisure and sports, as they need a lot of movement, while durability is an important consideration in purchasing cosmetics. The performance of the merchandise also effect customer psyche since a merchandise having huge sales would make the customer think that the quality of the product must be good to generate such sales (Hamza S.K., 2011). Under product quality were included aspects like good quality of products presented by the brand, match between product-consumer skin type, availability of a wide range of products under the same brand name and contents of harmful chemicals in the products (Chitralekhah H.D., 2009). The majority of the consumers are searching for products that are fragrance free and allergy tested, and that do not contain unhealthy chemical additives. The cosmetic industry has received a lot of criticisms on immoral and irresponsible business activities such as using of animals for product test, chemical pollution, unethical sourcing and unsustainable ingredients. Companies of the cosmetic industry have understood the importance of CSR and have started working on the prevention and minimization of the negative impacts by their business practices. Previous studies on consumers’ attitudes on CSR and CSR’s impact on consumer behavior and buying decisions are quite general. We found that many researchers explore that CSR have impact on consumer behaviour in the cosmetic industry. So, we see this as an opportunity and have the idea to overcome the problem (Zhao.G, 2012).

2. Problem statement

Consumers view cosmetic companies as profit maximizing companies rather than socially responsible companies that emphasizes on putting corporate social responsibility into practice to make the world a better place to live (McNeal, n.d.). There is a controversy issue that cosmetic companies use animal testing in the process of producing cosmetic products (Mohamed, 2010). In this day and age, consumers start to concern about the animal rights (Mohamed, 2010). Consumers have raised issues such as the humanness of Cosmetics Company for intentionally poisoning animals in order to test the cosmetic products that they produce where the ethicalness of cosmetics companies has been questioned (McNeal, n.d.). Consumers are not willing to buy cosmetic products marketed by cosmetics companies that have a bad reputation in terms of animal testing (McNeal, n.d.; Mohamed, 2010). Besides animal rights, there is also an issue regarding the cosmetic industry’s packaging which causes negative impact on the environment (Danley, March 2012). The cosmetic industry has been known in using large amounts of materials in its packaging, resulting in an increase usage of landfill space required for its waste disposal (Danley, March 2012). Moreover, a substantial amount of energy input is needed in manufacturing, production and transportation of those packaging materials leading to a large amount of natural resources and energy consumption, as well as resulting in the emission of greenhouse gases and harmful pollutants into the atmosphere which may causes global warming (Danley, March 2012). According to Mohamed (2010), consumers are not willing to spend money on cosmetic products produced by Cosmetics Company which have undergone unfriendly production process. In the present day, consumers have become more environmentally concerned as well as being more selective and accountable in their choices (Mohamed, 2010). They care about how, where and why the cosmetic products are produced (Mohamed, 2010). In addition, consumers have shown a high interest in cosmetic products which are made from natural ingredients such as botanical extracts, oils and minerals (Mohamed, 2010). When consumers are more aware of the CSR of the cosmetics companies, their purchase decision will look different. The decision statement here is in what ways cosmetic companies can improve consumer buying behavior towards cosmetic products. This research was done on Malaysian cosmetic industry as there was no or little research done previously by other researchers regarding this particular field. In order to fill the research gap, we have used a series of research methodology such as data processing, data analysis and other methods to conduct the test to determine whether there is any impact of the four levels (pyramid) of CSR on consumer buying behavior in Malaysian Cosmetics Industry.

3. Research Objective

1. General Objectives

The objective of this research is to investigate the impact of the Four Levels of Corporate Social Responsibility (CSR) on Consumer Behaviour in Malaysian Cosmetic Industry.

2. Specific Objectives

1. To investigate the impact of Economic Responsibility on Consumer Behaviour in Malaysian Cosmetic Industry.
2. To investigate the impact of Legal Responsibility on Consumer Behaviour in Malaysian Cosmetic Industry.
3. To investigate the impact of Ethical Responsibility on Consumer Behaviour in Malaysian Cosmetic Industry.
4. To investigate the impact of Philanthropic Responsibility on Consumer Behaviour in Malaysian Cosmetic Industry.
5. To investigate the impact of the Four Levels of Corporate Social Responsibility on Consumer Behaviour in Malaysian Cosmetic Industry.

4. Research Questions

2. How Economic Responsibility impact Consumer Behaviour in Malaysian Cosmetic Industry?
3. How Legal Responsibility impact Consumer Behaviour in Malaysian Cosmetic Industry?
4. How Ethical Responsibility impact Consumer Behaviour in Malaysian Cosmetic Industry?
5. How Philanthropic Responsibility impact Consumer Behaviour in Malaysian Cosmetic Industry?
6. How Four Levels of Corporate Social Responsibility impact Consumer Behaviour in Malaysian Cosmetic Industry?

5. Hypothesis of the Study (for quantitative research)

H1: There is significant impact of Economic Responsibility on Consumer Behaviour in Malaysian Cosmetic Industry. H2: There is significant impact of Legal Responsibility on Consumer Behaviour in Malaysian Cosmetic Industry. H3: There is significant impact of Ethical Responsibility on Consumer Behaviour in Malaysian Cosmetic Industry. H4: There is significant impact of Philanthropic Responsibility on Consumer Behaviour in Malaysian Cosmetic Industry. H5: There is significant impact of the Four Levels of Corporate Social Responsibility (CSR) on Consumer Behaviour in Malaysian Cosmetic Industry.

6. Significance of the Study

There is an increasing demand on a healthier and better lifestyle among Malaysian consumer. As these population continues to grow, consumer are more concerned in the product that they buy or consume and how the product are produced as well as delivered from the warehouse to the end consumer. Thus, it causes an increase in demand of Corporate Social Responsibility (CSR) among Malaysian consumers in various industries. Similarly in Malaysian Cosmetic Industry, consumers are gaining awareness on how manufacturers are producing goods (cosmetics) through various means. An increasing demand and “wants to know” behaviour among consumers in cosmetic industry has leads to a more careful behaviour among producers in producing goods to handling the goods. On the other hand, growing social media that reveals unethical behaviour of organizations has also helps in consumers’ awareness towards unethical behaviour conducted by an organization. Nowadays, many consumers are against animal testing and poor wastage management. They are also eager to know how a corporation performs social obligations such as giving back to the society. Generally, this research is conducted to identify how consumers react to the firm CSR which results in their purchase decisions. This research also aims to identify the impact of the four levels (economic, legal, ethical, philanthropic) of CSR in consumer behaviour in Malaysian Cosmetic industry and the positive impact of CSR that results in consumers’ positive behaviour such as higher purchasing power and loyalty as well as increasing corporate social image. Firstly, this study will acknowledge Malaysian Cosmetic Industry corporations about the importance of performing CSR activities as it is proved that there is a positive relationship between CSR activities on consumer behaviour in this study. Through this study, managers in the Malaysian Cosmetic Industry should be acknowledged that the level of CSR will affect consumer behaviour in their purchase decision of the products (cosmetics). Therefore, managers will be able to communicate with consumers regarding the CSR activities performed by the firm as well as identify how likely consumers will buy their products (cosmetics) if the firm actively participates in CSR activities which will in return boost both corporate image and sales. Secondly, this study also contributes to academicians as they will be able to understand the dynamics and role of the four levels of CSR on consumer behaviour in Malaysian Cosmetics industry. Besides, academicians or researchers will also be able to further the research subject in the near future through the contributions and findings of this study. Thirdly, this study will also contribute to policy makers or regulators of the Malaysian Cosmetic Industry such as the Drug Control Authority (DCA) which is established under the Control of Drugs and Cosmetics Regulation 1984 (CDCR) and managed by the National Pharmaceutical Control Bureau (NPCB) where their main function is to ensure safe, efficacious and quality of pharmaceuticals that are marketed in Malaysia (Malaysia: Control of Drugs and Cosmetics Regulation 1984, 2011). Through the result of this study, regulators may encourage firms in the cosmetic industry to disclose their Good Manufacturing Practice (GMP) as well as CSR activities as it is proved that there is a positive impact of the four levels of CSR on consumer behaviour in Malaysian Cosmetics Industry.

7. Chapter Layout

Chapter one of this research project is about the overview of the study which comprises the introduction, research background, problem statement, research objectives which are divided into general objective and specific objectives, research questions, hypotheses of the study, significance of the study, chapter layout and conclusion. Firstly, we have to understand the Malaysian Cosmetics Industry as a whole and then stating the problems faced by the industry which leads to the research objectives and research questions and developing the hypothesis. The hypothesis is then being tested by empirical evidence. Generally, research objectives are used to state the main goal to be achieved through the study whereby research questions are questions to be solved through the investigation of the study in the Malaysian Cosmetic Industry. Hypotheses are used to test against the results to determine whether it is true or false. The significance of the study generally is used to explain the importance and the contributions of the study. Chapter two, the literature review, consists of the introduction, review of the literature, review of relevant theoretical models, proposed theoretical or conceptual framework, hypotheses development and conclusion. In this chapter, the dependent variables and independent variables are developed. The discussion regarding the relationship between the independent and dependent variables based on the evidence from past researches such as journal articles are required as it serves as the foundation for the hypothesis development. Hypothesis development is developing statements which will be tested against empirical evidence and to prove whether it is true or false. Chapter three, the research methodology comprises sections like introduction, research design, data collection methods, sampling design, research instrument, constructs measurement (scale and operational definitions), data processing, data analysis and conclusion. In this chapter, the method used in this research is explained. Firstly, the qualitative or quantitative information are specified for the research and explained why such methods are used. Next, the methods used to collect data (primary data or secondary data) are also stated. In the sampling design section, the target population, sampling frame and location, sampling elements, sampling technique, and sample size are also stated. Then, the instrument to be used to obtain data and reasons using it are stated and the measurement (operational definitions and primary scale of measurement) which is used in the questionnaires are constructed. Data processing is a description how a set of data are processed from the respondents. Lastly, the data analysis tools (computer programs or software used to analyze the data) are also stated and justified. Chapter four, the research results comprises sections like the introduction, descriptive analysis which are separated into subsections like respondent demographic profile and central tendencies measurement of constructs, scale measurement, inferential analyses and conclusion. In this chapter, the result of this study will be derived from SAS Enterprise Guide software. Besides, all information of descriptive analyses is computed in the form of tables and a brief explanation of all relevant tests and results are also included. Chapter five, the discussion and conclusion comprises of sections like the introduction, summary of statistical analyses, discussion of major findings, implications of the study, limitations of the study, recommendation for future research and conclusion. In this chapter, a discussion regarding the result obtained will be conducted. Besides, recommendations, implications and conclusion of the study are also included at the end of the chapter.

8. Conclusion

In conclusion, this study aims to investigate the impact of the four levels (pyramid) of CSR on consumer behavior in Malaysian cosmetic industry. In the beginning of the research, we had provided the brief background or history of Malaysian cosmetic industry. In this chapter, the problem statement, general and specific objectives of the study based on scientific method for the research are provided. Besides, several hypotheses were formed to examine the relationship between the independent variables and dependent variables. This chapter also includes the significance of the study and the chapter layout. Next, Chapter 2 will further elaborate or study the variables formulated in Chapter 1.

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