A Work Project, Presented As A Part of The Requirements For The Award of A Master Degree in Management From NOVA School of Business and Economics
A Work Project, Presented As A Part of The Requirements For The Award of A Master Degree in Management From NOVA School of Business and Economics
A Work Project, Presented As A Part of The Requirements For The Award of A Master Degree in Management From NOVA School of Business and Economics
A Work Project, presented as a part of the requirements for the Award of a Master
Degree in Management from NOVA School of Business and Economics
Nathalie Koczor
January 2012
Acknowledgements
I have conducted this Master Thesis in the Master program of Management. During the
last 4 months, I have gained a deeper understanding concerning the importance of
Corporate Social Responsibility.
I would like to express my gratitude to all who supported me from the beginning of my
studies until its completion. This work project would not be possible without the
support of many people. First of all, I would like to thank the interviewees who shared
their time with me. To my friends, colleagues and library staff, who really helped me
finding articles and books – Thank you for your assistance and kindness. Further many
thanks to my family who supported me from Germany and who took the time to go
through my thesis with patience and positivism.
Last but not least to Professor Joana Story, my thankfulness for her outstanding
dedication. She has given me a great support and inspiration during writing the Thesis.
Thank you very much for your critical and constructive feedback.
2
Abstract
This paper studies the effect of Corporate Social Responsibility (CSR) on image and
reputation in the case of L’Oréal and its acquisition of The Body Shop.
L’Oréal was suffering from negative headlines claiming that its products were animal
tested and they expected that the acquisition of The Body Shop in 2006 would change
this image.
This study investigates whether CSR practices of The Body Shop helped L’Oréal to
rebound from the negative headings. Using a sample of 321 respondents for The Body
Shop and a sample of 289 respondents for L’Oréal, it is concluded that CSR is an
important factor for a company’s success since the results show that CSR campaigns
have a statistically significant impact on a company’s reputation and image. Since a
CSR strategy is the key to success, this paper ends with recommendations to
successfully implement CSR strategies.
3
Table of Contents
1. Introduction ............................................................................................................... 5
2. Literature review ....................................................................................................... 6
2.1 Definition: Corporate Social Responsibility and Strategic Corporate Social
Responsibility ............................................................................................................... 6
2.3 Definition: Mergers and Acquisitions..................................................................... 7
3. Analysis of the cosmetic sector ................................................................................. 8
4. Company Background: L’Oréal and The Body Shop ............................................... 9
5. The case: A controversial makeover: The acquisition of The Body Shop by
L’Oréal .................................................................................................................... 10
6. Financial performance of L’Oréal and The Body Shop after the acquisition ......... 12
7. Measurements.......................................................................................................... 13
7.1 Corporate Image ................................................................................................... 13
7.2 Corporate Reputation ............................................................................................ 14
7.3 Attractiveness ........................................................................................................ 15
7.4 Trust ...................................................................................................................... 15
7.5 CSR scale .............................................................................................................. 15
7.6 Perceived motives of investing in CSR activities ................................................. 16
8. Methodology ........................................................................................................... 17
9. Results ..................................................................................................................... 19
10. Conclusion............................................................................................................... 22
Appendices ..................................................................................................................... 26
4
1. Introduction
“The brands that will be big in the future will be those that tap into the social changes
that are taking place.”1
The purpose of this paper is to research whether CSR can be obtained by acquiring a
company with a strong CSR strategy or if this acquisition dilutes the image of both – the
acquiring and the acquired brand. Further, the aim of this paper is to examine the effects
of CSR on corporate image and reputation in order to support evidence that CSR cannot
be bought but has to be strategically implemented by developing a suitable CSR plan
for a company. This study focuses on the German market, which is one of the largest in
Europe. Summing up, three main aims of research can be defined: The study of
relevant literature in order to understand the effects of CSR, the analysis of a conducted
survey to understand the current and potential customer’s perception of L’Oréal and of
The Body Shop and the development of recommendations for L’Oréal to improve its
image and reputation.
2. Literature review
6
further regarded as means for “improving the quality of life or well-being of society”
(i.e. the philanthropic dimension of CSR, Carroll, 1991) and for “obeying the society’s
codification of right and wrong” (i.e. the legal dimension of CSR, Carroll, 1991). Based
on their review of the recent status of the theory of CSR, Vaaland et al. (2008) further
define CSR as the “management of stakeholder concern for responsible and
irresponsible acts related to environmental, ethical and social phenomena in a way that
creates corporate benefit.”
7
of the target company (DePamphilis, 2005). Acquisition strategies are undertaken for
variety of objectives. The main reason of acquisition is to achieve greater market power.
Further objectives include improving resources and creating efficiencies (Pearce,
Robinson, 2007).
According to Child et al. (2001) mergers, by contrast, aim at the “total integration of
two or more partners into a new unified corporation”. Mergers usually take place if
beneficial outcomes are guaranteed for both parties.
Summing up, acquisitions allow a certain degree of choice including the degree of
integration, which mergers do not allow. Moreover, acquisitions are mostly known to be
unequal partnerships (Child et al., 2001). Concluding, although the terms mergers and
acquisitions are often used interchangeably, they involve very different concepts.
In the past, the cosmetic industry has received much criticism for unethical and non-
environmentally friendly business practices (Coste, 2010). Growing concerns about
environmental issues affect the cosmetic industry nowadays. Due to the competitive
environment including consumers who want greener products and retailers introducing
a Sustainability Index such as Wal-Mart, the cosmetic industry is making efforts in
becoming a “good corporate citizen”.3 Nowadays corporations are not only focusing on
its profits and growth anymore but also on the environment. Whether sustainability has
always been part of a brands’ strategy or not, a trend that corporations demonstrate their
environmental consciousness can be noticed. Unilever, Nuxe and La Prairie are only a
few examples of brands being concerned about environmental issues reacting towards
the issues that potential and current customers are concerned about. 4 In 2009, Find/SVP
(a New York survey group) cited three main issues that customers were concerned
2
www.cosmeticsbusiness.com/technical/article_page/Year_in_review_2010/58921
3
www.german-business-portal.info/GBP/Navigation/en/Business-Location/Manufacturing%20Industries/
cosmetics-industry,did=326090.html?view=renderPrint
4
www.german-business-portal.info/GBP/Navigation/en/Business-Location/ Manufacturing%20
Industries/ cosmetics-industry,did=326090.html?view=renderPrint
8
about which were the following: animal rights and species preservation, availability of
clean air and water, and waste management.
Looking at the market, USA is the biggest market for cosmetics in the world, but France
is the biggest exporter of cosmetic products worldwide. 5 Market growth has moved
from the western part of the world to developing regions in South America, Eastern
Europe, and Asia especially China; accounting for an consumption more than 10.4%
CAGR in 2008 (Kumar, 2009). Since 2005 there has been a positive growth in the
European cosmetic market from which the German market also profited. 6 Being the
largest cosmetic market in Europe after France, Italy, UK and Spain, German
consumers spent €12.8 bn on personal care in 2010 having a per capita spending of €
156.87. Comparing the different segments, hair care products are the biggest single
market accounting for €2.97 bn while all sub-markets are writing red numbers due to
the launch of large volume low cost packages for instance.7
Concluding, a trend towards green business can be noticed. Cosmetic corporations are
not only concerned about selling beauty but also about environmental issues.
5
Global Insight, Inc., A study of the cosmetic industry, 2009
6
Global Insight, Inc., A study of the cosmetic industry, 2009, p.7
7
www.german-business-portal.info/GBP/Navigation/en/Business-Location/ Manufacturing%20
Industries/ cosmetics-industry,did=326090.html?view=renderPrint
8
http://www.loreal.com/_en/_ww/html/our-company/welcome.aspx
9
acquisitions. L’Oréal divided its brands into different groups allowing the company to
reach all customers and distribution channels from the mass market to the hair salons
and pharmacies. Further, L’Oréal employs more than 66.600 people worldwide, has 14
research centers including locations in France, America and Asia being responsible for
the registration of hundreds of patents per year. Women represent 55% of the research
workforce at L’Oréal - a percentage that no other company in the industry has reached.9
Although being the world leader, L’Oréal suffered from anti-L’Oréal campaigns
claiming that its products were animal-tested. The destroyed image seemed to be
irreversible; therefore L’Oréal decided to strategically acquire The Body Shop – a brand
known for its social responsibility.
The Body Shop was founded in Brighton, United Kingdom in 1976 by Anita Roddick.
From the very beginning onwards, activities of the Body Shop were accompanied by
strong social and environmental engagements. Producing natural soap and lotion, The
Body Shop always followed policies against animal testing, supported community trade,
defended human rights and followed environmentally friendly production and recycling
policies (Body Shop Homepage; Clifton and Maughan, 2000). All products are claimed
to be natural and without the support of animal testing (Mirvis, 1994). On March 17,
2006, The Body Shop announced that it had agreed to be acquired by the L’Oréal for
US$ 1.14 bn.10 With the acquisition of The Body Shop International in 2006, L’Oréal’s
aim was to demonstrate its consciousness about the importance of acting socially and
environmentally responsible expecting to change its negative image and reputation.
9
L’Oréal Sustainability report, 2008 available at www.loreal.com/_en/_ww/pdf/LOREAL_RDD_2008.pdf
10
www.guardian.co.uk/business/2006/mar/17/retail.money
10
1996, had its core values including developing community trade, building self-esteem,
campaigning for human rights, protection of the planet and not testing on animals
(Figure 1) allowing The Body Shop to develop a loyal customer base sharing the values
of the company which are also anchored in its mission statement (Figure 2) as the
following tables represent.
Values of The Body Shop
• “To dedicate our business to the pursuit of social and environmental change.”
• “To creatively balance the financial and human needs of our stakeholders:
employees, customers, franchisees, suppliers and shareholders.”
• “To courageously ensure that our business is ecologically sustainable: meeting the
needs of the present without compromising the future.”
• “To meaningfully contribute to local, national and international communities in
which we trade, by adopting a code of conduct which ensures care, honesty, fairness
and respect.”
• “To passionately campaign for the protection of the environment, human and civil
rights, and against animal testing within the cosmetics and toiletries industry.”
• “To tirelessly work to narrow the gap between principle and practice, whilst making
fun, passion and care part of our daily lives.”
Figure 1: Values_The Body Shop11
Being acquired by L’Oréal, a company that was regarded by activists as the “face of
present consumerism”, as a company that sold products being animal-tested, that
11
http://www.thebodyshop.com/_en/_ww/values-campaigns/our-values.aspx
12
http://www.thebodyshop.com/_en/_ww/services/aboutus_company.aspx
11
demoralized the sexuality of women and that sold its products by making women self-
doubting led to harsh criticisms. Customers felt betrayed as they felt that the company
traded with its core ethical values. 13 Further the fact, that Nestlé, one of the most
boycotted companies in the world due to doing business without ethical commitment
and further due to promoting milk products in developing countries in an insistent way,
owned 26 percent of L’Oréal led to people calling for a boycott of The Body Shop’s
products.14
Analysts also reacted with skepticism towards the acquisition. They feared that The
Body Shop’s image would be diluted losing its competitive advantage of having a
strong CSR strategy just because L’Oréal was trying to improve its image by “buying
CSR” through this acquisition.15
Anita Roddick defended the acquisition by saying that L’Oréal would not dilute The
Body Shop’s principles. Instead the acquisition would give The Body Shop a chance to
broaden its values to L’Oréal while L’Oréal announced at the same time that The Body
Shop would continue to function as an independent subsidiary.16
6. Financial performance of L’Oréal and The Body Shop after the acquisition
The acquisition of The Body Shop by L’Oréal was seen with skepticism. Although the
acquisition meant plenty of potential growth opportunities by addressing different
customer needs through access to new markets and access to natural products, for
instance, analysts feared that The Body Shop’s corporate culture was not in line with
L’Oréal’s one.17 In 2008, two years after the acquisition, L’Oréal had to suffer from
negative financial results. The brand reported a drop down in sales of 2.3 percent. 18
L’Oréal blamed a difficult economic climate, particularly in the fourth quarter, in some
of The Body Shop’s most important markets such as Great Britain and North America
for these poor results due to loosing loyal customers after the acquisition by L’Oréal.19
13
http://www.allbusiness.com/company-activities-management/company-structures-
ownership/16613309-1.html
14
http://www.telegraph.co.uk/news/worldnews/africaandindianocean/zimbabwe/6235566/Nestl-the-
worlds-biggest-food-company-and-one-of-the-most-boycotted.html
15
Jim Armitage, “L’Oréal Mulls £600m Body Shop Takeover,” www.thisismoney.co.uk, February 23,
2006
16
www.sustainabledevelopment.loreal.com/pdf/downloads/loreal-summary-report.pdf
17
Jim Armitage, “L’Oréal Mulls £600m Body Shop Takeover,” www.thisismoney.co.uk, February 23,
2006
18
www.loreal-finance.de/site/de/contenu/communique.asp?id_page=640
19
www.cosmeticsdesign-europe.com/Business-Financial/The-Body-Shop-s-woes-cannot-be-blamed-on-
the-economic-crisis-alone
12
Loyal customers left the company as they lost their trust into the brand and its core
values.
The acquisition also meant for The Body Shop a decline in sales as the following figure
shows:
125.000
Figure 3 shows that with the acquisition of The Body Shop by L’Oréal sales
performance for The Body Shop dramatically declined after being a subsidiary of
L’Oreal. Eventually, being acquired by L’Oreal had a negative impact on customer
perception and satisfaction in part of environment responsibility which is the key value
of The Body Shop (Milmo, 2009) resulting in the decline of sales for both companies.
7. Measurements
In order to examine whether CSR helped L’Oréal to rebound from the negative
headings, two surveys were conducted measuring the following five variables:
Corporate Image, Corporate Reputation, Attractiveness, Trust, CSR and perceived
motives of investing in CSR. In the following, each variable is defined.
Due to the increasing competition in the market, corporate image can be easier
destroyed nowadays (Smith, 2003). Consumers may punish corporations for actions that
they do not regard as being socially responsible (Smith, 2003). “Corporate image is a
13
result of everything a company does or does not do” (Smith, 2003). Based on an
organization’s unique characteristics (Esch et al., 2004), corporate image is the net
result of “all experiences, impressions, beliefs, feelings, and knowledge” of potential
and current consumers related to a company (Worcester, 2009). Since The Body Shop is
known for its strong social and environmental engagement leading to a positive
corporate image while at the same time L’Oréal is known for its scandals in the past
trying to solve this problem by simply buying CSR through the acquisition of The Body
Shop rather than implementing a whole CSR plan, I hypothesize that CSR will have a
stronger impact on The Body Shop’s image than CSR on L’Oréal’s image.
Hypothesis 1: CSR will have a stronger impact on The Body Shop’s image than CSR on
L’Oréal’s image.
Hypothesis 2: CSR will have a stronger impact on The Body Shop’s reputation than
CSR on L’Oréal’s reputation.
14
7.3 Attractiveness
An attractive brand personality can “pre-sell the vision before the purchase, reinforce
the purchase decision, and help to create an emotional link” binding the customer to
the brand. Once a customer is emotionally linked to a brand, he is more willing to
oversee weaknesses of a brand while at the same time searching for strengths of a brand
(Upshaw, 1995). L’Oréal was regarded as a company that sold products being animal-
tested and that exploited the sexuality of women whereas The Body Shop was related to
strong social activism. Therefore, I hypothesize that CSR initiatives will have a stronger
positive impact on the attractiveness of The Body Shop than on the attractiveness of
L’Oréal since L’Oréal has no integrated CSR plan.
Hypothesis 3: CSR initiatives will have a stronger positive impact on the attractiveness
of the Body Shop than on the attractiveness of L’Oréal.
7.4 Trust
Trust is defined as the quality of being reliable and authentic (Swaen &Chumpitaz,
2008). Trust is seen as the most desired feeling customers can have of a corporation.
Thus, it is the most important attribute a corporation can have (Delgado-Ballester,
2003). Trust is further the key variable for creating long-term relationships between
companies and customers and further for establishing a loyal customer base (Morgan
and Hunt, 1994). Alternatively, it can be defined as a set of beliefs (Frisou, 2000), a
desire (Chaudhuri and Holbrook, 2001) or a series of collected assumptions about a
corporation (Gurviez and Korchia, 2002). Since the total of theoretical and empirical
studies reveal that the more consumers have a favorable perception of CSR activities,
the more they will trust a company, the following hypothesis is justified.
Hypothesis 4: CSR initiatives will have a stronger positive impact on consumers trust
into The Body Shop than on consumer’s trust into L’Oréal.
15
Hypothesis 5: The Body Shop will be perceived to be more socially responsible than
L’Oréal is.
Variable Hypothesis
16
8. Methodology
With the definition of the problem, the identification of the variables that need to be
investigated and the development of hypotheses, the research can be designed.
According to Sekaran (2003), answering research questions is not possible without
measuring variables. Hence, different types of scales are applied to measure different
variables. Sekaran (2003,) defines scale as “a tool or mechanism by which individuals
are distinguished as to how they differ from one another on the variables of interest”.
There are four basic types of scales, including nominal, ordinal, interval, and ratio. For
this study, three are used in the conducted surveys being defined in the following in
order to find meaningful answers to the above stated hypotheses. Nominal scale in the
questionnaire is mainly used in order to gather personal data such as gender and age. In
order to measure the different perceptions of potential and current customers, most of
the questions are of an interval scale with a five-point scale where the respondents
assigned a certain point for each question. Ordinal scale is used at the end of the
questionnaire, asking the customers for their perceived motives of either L’Oréal or The
Body Shop investing in CSR.
The acquisition of The Body Shop by L’Oréal represents the practical case of trying to
buy a CSR strategy by acquiring a company that has a strong CSR strategy rather than
developing an appropriate CSR plan for the whole corporation fitting in its corporate
culture. This study therefore analyzes the potential and current customer perceptions of
L’Oréal and of The Body Shop. In order to gather representative data concerning the
consumers’ perception of The Body Shop on the one hand and of L’Oréal on the other
hand, two surveys were conducted. Each survey applied was composed by multiple
choice questions, focusing on different variables: Corporate image, corporate reputation,
trust, attractiveness, CSR scale and the customer’s perceived motives of investing in
CSR activities of L’Oréal and The Body Shop investing in CSR activities. It has to be
mentioned that both surveys were composed of the same questions but one for L’Oréal
and one for The Body Shop.
In this study correlations are analyzed in order to find out whether the acquisition of
The Body Shop by L’Oréal helped L’Oréal to rebound from its negative image or
whether it diluted The Body Shops’ image. A correlation is “a study conducted to
identify the important factors associated with the variables of interest” (Sekaran, 2003,
p.125ff).
17
Moreover, a regression analysis is conducted to test the relationship between CSR and
all the outcome variables from both The Body Shop and from L’Oréal. With this
regression analysis, the correlations between CSR (as independent variable) and image,
reputation, attractiveness and trust (as dependent variables) for both The Body Shop and
from L’Oréal are measured. A dependent variable is defined as “the main variable that
lends itself for investigation as a viable factor” (Sekaran, 2003, p. 88) whereas an
independent variable is defined as having a positively or negatively influence on the
dependent variable, explaining further its variance. (Sekaran, 2003, p. 88). In this study
the effect of CSR represents the independent variable. Thus, this study aims at
investigating the effect of CSR on image, reputation, trust and attractiveness.
The study is further a cross-sectional one where the data was collected between
September and November 2011 by using two surveys ensuring that the respondents stay
anonymous. The study was tested using data collected from a sample of 321
respondents for the survey for The Body Shop and 289 respondents for the survey for
L’Oréal in Germany.20 Data analysis was completed with the software program SPSS.
The following tables show the composition of the final respondents for both surveys.
Composition of final respondents for L’Oréal
39 41
150 139 13,5% 14,2%
51,9% 48,1%
113
39,1%
96
33,2%
124 41
38,6% 12,8% 64
197 19,9%
61,4%
79
24,6%
137
42,7%
18
As Figure 5 and Figure 6 show, most of the respondents for L’Oréal and for The Body
Shop are between 26-35 years old which is in accordance to the target group of both
brands. Further, in both cases, more women than men answered the surveys. This can be
explained by the fact that women have a stronger relation to cosmetics and the beauty
industry as a whole than men do.
9. Results
In order to present the analysis and interpretation of the results gathered, each
hypothesis is examined in the following.
Firstly, it has to be announces that the reliability and validity of the measurement model
was assessed by using calculations of Cronbach’s alpha (threshold = 0.7) between 0.770
and 0.968. Looking at the results from the correlations of both surveys, a trend can be
seen towards the correlation of CSR and a company’s image, reputation, attractiveness
and trust. The following tables show a summary of the results for both brands – L’Oréal
(Figure 7) and The Body Shop (Figure 8).
Variable M SD 1 2 3 4 5
1 Corporate Image 2.25 .784 (.85)
2 Reputation 2.62 .911 .59a (.84)
a
3 Attractiveness 2.63 1.036 .48 .47b (.77)
b b
4 Trust 2.14 .966 .34 .45 .51b (.90)
5 CSR 2.44 .878 .54b .49b .61a .47b (.96)
Figure 7: Means, Standard Deviations, Scale Reliabilities, Inter-Correlations (N = 289) for L’Oréal
Note: p<0.05ª, p<0.01b (two-tailed test)
The analysis of the correlation matrix indicates that the observed relationships were
very strong. The strongest relationship is between the variable CSR strategy and the
brand’s attractiveness (r = 0.61) which indicates that the higher the Index of L’Oréal’s
CSR engagement, the higher the Index of the company’s attractiveness. The positive
correlation means that as X increases, so does Y; thus, potential and current customers
who evaluated L’Oréal’s CSR strategy as positive also valued the company’s
attractiveness as positive. However, looking at the relationships between CSR and
Corporate Reputation (r = 0.49), CSR and Corporate Image (r = 0.54) and CSR and
Trust (r = 0.47), it can be seen that all relationships are strong indicating that if
L’Oréal’s CSR strategy was perceived positively, all investigated variables were also
perceived as being positive for the company.
19
Looking at the correlation matrix for The Body Shop, strong relationships can also be
noticed (Figure 8).
Variable M SD 1 2 3 4 5
1 Corporate Image 3.14 .783 (.79)
2 Reputation 3.86 .856 .68 b (.81)
3 Attractiveness 2.75 .911 .73a .62a (.91)
4 Trust 2.43 1.465 .71 b .72b .79b (.81)
5 CSR 3.97 .825 .64 b .73 b .85a .69 b (.91)
Figure 8: Means, Standard Deviations, Scale Reliabilities, and Inter-Correlations (N = 321) for The Body
Shop
Note: p<0.05ª, p<0.01b (two-tailed test)
Figure 8 shows, that the observed relationships for The Body Shop also were very
strong. However, the results presented higher correlations for all variables being related
to The Body Shop than to L’Oréal.
Further, regression analyses were conducted to examine the relationship between CSR
(as independent variable) and image, reputation, attractiveness and trust (as dependent
variables) for both The Body Shop and from L’Oréal and to ensure the reliability of the
correlations.
Consistent with the expectations, CSR appears then to be positively and significantly
correlated with image, reputation, trust and attractiveness. However, the regression
analysis shows that CSR has a stronger impact on all the outcome variables of The
Body Shop than L’Oréal.
The regression analysis of CSR on image for L’Oréal produced R² = .290, p < .001
whereas the regression analysis of CSR on image for The Body Shop produced R² =
.409, p < .001 meaning that the results for both – The Body Shop and L’Oréal are
highly significant. Further, there was a higher positive correlation (.64) between CSR
activities and the image of the Body Shop than between CSR and L’Oréal’s image (.54).
Therefore, findings are in line with H1 saying that CSR will have a stronger impact on
The Body Shop’s image than CSR on L’Oréal. For both brands there is a positive
correlation meaning that CSR impacts the images however, for The Body Shop it takes
a higher value. Concerning the regression analysis of CSR on reputation for L’Oréal
produced R² = .24, p < .001 whereas the regression analysis of CSR on image for The
Body Shop produced R² = .533, p < .001 meaning that the results for both – The Body
Shop and L’Oréal are highly significant. Looking at the correlation between CSR and
reputation of The Body Shop (.73) and CSR and reputation of L’Oréal (.49), H2 is
justified saying that CSR has a stronger impact on the reputation of The Body Shop than
20
on the reputation of L’Oréal. H3 saying that CSR initiatives will have a stronger
positive impact on the attractiveness of the Body Shop than on the attractiveness of
L’Oréal is proven by comparing the correlations for CSR and attractiveness for The
Body Shop (.85) and CSR and attractiveness for L’Oréal (.61). Since the regression
analysis of CSR on attractiveness for L’Oréal produced R² = .366, p < .005 whereas
the regression analysis of CSR on image for The Body Shop produced R² = .722, p <
.005 meaning that the results for both – The Body Shop and L’Oréal are highly
significant. Validating H4, stating that CSR initiatives will have a stronger positive
impact on consumers trust into The Body Shop than on consumer’s trust into L’Oréal,
also occurs by looking at the correlation coefficient which is .69 for The Body Shop and
.47 for L’Oréal. Further, the regression analysis of CSR on trust for L’Oréal produced
R² = .229, p < .001 whereas the regression analysis of CSR on image for The Body
Shop produced R² = .476, p < .001 meaning that the results for both – The Body Shop
and L’Oréal are highly significant.
The results of the regression analysis confirm that L’Oréal is perceived more negatively
when talking about CSR than The Body Shop. Further, consumers have a more negative
perception of both the image and the reputation of L’Oréal than of The Body Shop and
the Body Shop is also perceived as being a more attractive brand than L’Oréal leading
to the conclusion that the acquisition of The Body Shop by L’Oréal did not mean a
duplication of the success of The Body Shop’s CSR strategy.
Comparing the means of the variable CSR, these numbers justify H5 saying that The
Body Shop will be perceived to be more socially responsible than L’Oréal taking the
value of µ = 3.97 (agree) for The Body Shop and µ = 2.44 (disagree) for L’Oreal.
Finally comparing the perceived motives for engaging in CSR activities H6 is validated
by comparing the means for both brands. Whereas L’Oréal is perceived as engaging in
CSR because of wanting to increase its profit in average, The Body Shop is perceived as
engaging in CSR in order to give something back to the society. This might be further
explanation for the weaker financial performance of The Body Shop after its acquisition
by L’Oréal. The results of the study show that potential and current customers still have
a more negative perception of L’Oréal than of The Body Shop. Further, it shows that
customers neither trust L’Oréal nor The Body Shop. The low trust Index for The Body
Shop can be explained by the fact that its customers felt betrayed when L’Oréal
acquired The Body Shop and lost their belief in its core values (see Chapter 5).
However, the survey shows that generally consumers believe that The Body Shop is
21
engaging in CSR in order to give something back to the society. However, this might
change over time if L’Oréal fails to implement a CSR strategy that fits in the whole
corporate strategy.
Apart from analyzing correlations and regressions, Google alerts, Twitter and Blogs
were followed from October until the end of December, in order to monitor what users
were saying on the web about The Body Shop and about L’Oréal. For L’Oréal
reoccurring themes comprised the tests on animals and further criticism for not acting
socially responsible. Concerning The Body Shop, although people still talk about the
company mainly in a positive way, negative themes such as mistrust and criticism for
the acquisition by L’Oréal can be identified. Appendix 3 and Appendix 4 summarize the
major reoccurring themes referring to The Body Shop and to L’Oréal.
10. Conclusion
In this work project based on two surveys addressed to consumers and potential
consumers of The Body Shop and of L’Oréal we can draw many interesting conclusions
that can contribute to the public debate on the importance of CSR for a corporation.
The purpose of this work project is to examine the effects of Corporate Social
Responsibility (CSR) on corporate image and reputation in order to support evidence
that CSR cannot be bought but has to be strategically implemented by developing a
suitable CSR plan for a company. The first conclusion, we can draw from this project is
that there is no unique, precise definition of CSR due to the fact that its content and
relevance differs among different corporations and probably among different countries.
The results of both surveys show that CSR campaigns have a statistically significant
impact on a company’s’ image and reputation. CSR cannot be simply acquired by
acquiring a corporation with a strong CSR strategy. Instead, it needs to fit in a corporate
culture. L’Oréal camouflaged its problems by acquiring The Body Shop and expecting
to simply being able to project The Body Shop’s CSR strategy to the whole L’Oréal
group. Looking at the financial performance of The Body Shop, there are tendencies
that the acquisition by L’Oréal damaged the brand to some extent. Further, the results
of the surveys reveal that the consumer’s perception of L’Oréal is more negative than
the consumer’s perception of The Body Shop. It was naïve of L’Oréal to think that CSR
could be acquired with the acquisition of The Body Shop since CSR is more than that.
22
Concluding, it is assumed that L’Oréal did a strategic move by acquiring The Body
Shop involving more a cosmetic change rather than a real change. Therefore, based on
that, my recommendation for L’Oréal is to develop a CSR strategy fitting L’Oréal’s
culture being integrated in the whole L’Oréal system. L’Oréal needs to think about its
strategy and based on that the company needs to design its communication with its
consumers rather than faking social responsibility by simply acquiring a social
responsible brand.
Summing up, studies have shown that CSR is essential for facilitating a corporation’s
image and reputation resulting in a competitive advantage .Therefore, CSR needs to be
integrated in a company’s culture and strategy rather than being duplicated. It is
necessary for a corporation to understand the claim “Doing well by doing good” (Byus;
Deis and Ouyang, 2010) which implies the fact that strategic CSR adds value for both –
business and society. CSR influences external aspects of businesses; therefore, in order
to achieve an advantage in today’s competitive world, corporations should implement
CSR in the overall corporations’ strategy.
Last but not least, it has to be mentioned that the limitations of these current results have
to be understood. The results are only for the German market, in future studies it would
be interesting to investigate different countries. Further, Data can also suffer from single
source bias due to consumers and potential consumers answering questions about the
dependent and independent variable.
Moreover, as stated before, Google alerts, Twitter and Blogs were followed in order to
monitor what users were saying on the web about The Body Shop and about L’Oréal
from October until the end of December. However, this only reflects their opinion after
the acquisition. In future studies it would be interesting to investigate their opinions
before the acquisition and compare both.
23
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Appendices
Appendix I: Questionnaire_ L’Oréal
It does not matter when, it does not matter where – we are getting in touch with beauty
every day in our life. Be part of my study to find out how corporate social responsibility
in the beauty industry has an effect on the brand image and reputation itself.
Introduction
With your help, I will research in what way Corporate Social Responsibility affects the
brand and what actions need to be done in order to successfully implement Corporate
Social Responsibility strategies. If you like to participate please click on the button
below. Please answer all questions otherwise an evaluation is not possible. I am looking
forward to your answers. Thank you very much. Nathalie
1. At first I would like you to indicate whether you are female or male.
o Female
o Male
Customer orientation
15. L’Oréal seems to care about all of its customers regardless of how much money
they spend with them.
16. L’Oréal employs people who are concerned about customer needs.
17. L’Oréal employs people who treat customers courteously.
18. L’Oréal takes customer rights seriously.
19. L’Oréal is concerned about its customers.
20. L’Oréal treats its customers fairly.
Good Employer:
21. L’Oréal seems to be a good company to work for.
22. L’Oréal seems to have excellent leadership.
23. L’Oréal seems to treat its people well.
24. L’Oréal seems to have a management that pays attention to the needs of its
employees.
25. It seems that L’Oréal has good employees.
26. L’Oréal seems to maintain high standards in the way it treats its people.
27. L’Oréal seems to be well managed.
27
Reliable and Financially Strong Company:
28. L’Oréal tends to outperform competitors.
29. L’Oréal seems to recognize and take advantage of market opportunities.
30. L’Oréal looks like it has strong prospects for future growth.
31. L’Oréal looks like it would be a good investment.
32. L’Oréal appears to make financially sound decisions.
33. L’Oréal has a strong record of profitability.
34. L’Oréal is doing well financially.
35. L’Oréal seems to have a clear vision of its future.
36. L’Oréal appears to be aware of its responsibility to society.
37. I like what L’Oréal stands for, L’Oréal has an attractive identity.
38. I recognize myself in L’Oréal, my sense of who I am matches my sense of
L’Oréal.
39. L’Oréal has a distinctive identity. L’Oréal stands out from its competitors.
40. L’Oréal is a first-class, high-quality company.
41. I feel like I know very well what L’Oréal stands for.
42. It is difficult to get a clear sense of what L’Oréal stands for from its actions.
29
Appendix II: Questionnaire_ The Body Shop
Introduction
With your help, I will research in what way Corporate Social Responsibility affects the
brand and what actions need to be done in order to successfully implement Corporate
Social Responsibility strategies. If you like to participate please click on the button
below. Please answer all questions otherwise an evaluation is not possible. I am looking
forward to your answers. Thank you very much. Nathalie
1. At first I would like you to indicate whether you are female or male.
o Female
o Male
30
Variable 2: Corporate Reputation (Walsh and Beatty, 200)
The Body Shop Product range quality
6. The Body Shop stands behind its product range that it offers.
7. The Body Shop is a strong reliable company.
8. The Body Shop offers high quality products.
9. The Body Shop offers products that are good value for the money.
10. The Body Shop develops innovative products.
Customer orientation
15. The Body Shop seems to care about all of its customers regardless of how much
money they spend with them.
16. The Body Shop employs people who are concerned about customer needs.
17. The Body Shop employs people who treat customers courteously.
18. The Body Shop takes customer rights seriously.
19. The Body Shop is concerned about its customers.
20. The Body Shop treats its customers fairly.
Good Employer:
21. The Body Shop seems to be a good company to work for.
22. The Body Shop seems to have excellent leadership.
23. The Body Shop seems to treat its people well.
24. The Body Shop seems to have a management that pays attention to the needs of
its employees.
25. It seems that The Body Shop has good employees.
26. The Body Shop seems to maintain high standards in the way it treats its people.
27. The Body Shop seems to be well managed.
31
Reliable and Financially Strong Company:
28. The Body Shop tends to outperform competitors.
29. The Body Shop seems to recognize and take advantage of market opportunities.
30. The Body Shop looks like it has strong prospects for future growth.
31. The Body Shop looks like it would be a good investment.
32. The Body Shop appears to make financially sound decisions.
33. The Body Shop has a strong record of profitability.
34. The Body Shop is doing well financially.
35. The Body Shop seems to have a clear vision of its future.
36. The Body Shop appears to be aware of its responsibility to society.
37. I like what The Body Shop stands for, The Body Shop has an attractive identity.
38. I recognize myself in The Body Shop, my sense of who I am matches my sense
of The Body Shop.
39. The Body Shop has a distinctive identity. The Body Shop stands out from its
competitors.
40. The Body Shop is a first-class, high-quality company.
41. I feel like I know very well what The Body Shop stands for.
42. It is difficult to get a clear sense of what The Body Shop stands for from its
actions.
Variable 6: Perceived motives of The Body Shop investing in CSR activities (Swaen
& Chumpitaz, 2008)
The Body Shop gets involved in these environmental and social activities…
62. ... because they want to give something back to society.
63. ... because they are fully-fledged members of society.
64. ... by pure altruism.
65. ... because this gives them good publicity.
66. ... because this lets them increase profits.
67. ... because this gets them more customers.
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Appendix III: Reoccurring themes in the web associated with L’Oréal
Appendix IV: Reoccurring themes in the web associated with The Body Shop
34