CSR and Consumer Buying Behavior: McDonald's Case Study

Introduction

McDonald's is one of the leading food service retail chains in the world, operating nearly 33,000 restaurants across 119 countries. McDonald's employs around 1.7 million people, and nearly 80 percent of its stores operate under a franchise model. Since the company's inception, McDonald's has been committed to doing the right thing for its customers. The policies implemented by McDonald's are considered a mixture of rich heritage and a positive impact on society and the environment. McDonald's has been working to implement a wide range of corporate social responsibility (CSR) activities to contribute to society and the environment (McDonalds, 2011).

Most companies try to use CSR activities as promotional tools, but if the motive behind such activities is purely profit and consumer attraction, it becomes very difficult for those companies to sustain in the market. CSR should be embedded in the values and vision of an organization. Unless it is integrated into the company's vision, customers may not perceive it authentically. In addition to CSR activities, several other factors influence consumer purchase decisions, including quality of service or product, price, healthy food options, and convenience. Organizations like McDonald's need to keep a close eye on all of these factors. This dissertation focuses on finding out how corporate responsibility activities have been influencing the purchase behavior of consumers in the United Kingdom market.

Corporate Social Responsibility is considered the responsibility of every organization to encourage activities that positively impact stakeholders, society, and the environment. The term "corporate social responsibility" emerged in the late 1960s and early 1970s when multinational organizations came together and introduced the concept of the "stakeholder" — an individual who is directly or indirectly affected by the policies of any organization. Stakeholders in the organizational context include employees, investors, creditors, suppliers, and people who indirectly depend on the organization.

In today's technology- and information-driven world, consumers are very much aware of the social activities conducted by multinational organizations. The approach of an organization toward CSR influences consumer buying behavior and purchasing decisions. It is therefore very important for companies to follow a genuinely philanthropic approach to CSR. Different organizations follow different types of approaches to CSR; it largely serves as a complement to an organization's vision and mission statements.

Corporate Social Responsibility is not limited to environmental concerns. It also extends to business ethics, accounting systems, auditing, reporting, human resources, risk management, and brand differentiation. Companies are expected to follow regulations in all aspects that affect their stakeholders.

McDonald's has been implementing new practices that encourage a positive impact on consumers' perceptions of the company. Key focus areas include nutrition and well-being, environmental responsibility, supply chain responsibility, community experience, and employee experience. McDonald's actions in the areas of environmental responsibility and nutrition and well-being are among the major reasons for positive consumer perceptions of the brand.

Literature Review

Many companies mistakenly believe that their CSR approaches are unrelated to the services they offer, but most customers review a company's social activities before making a purchasing decision. If the organization operates in the food and beverage industry, that scrutiny is even more intense. Positive customer purchase behavior is crucial to business success, as it drives repeat visits. CSR plays a crucial role in influencing customer decisions. Its impact is greatest when customers believe in an organization's social activities; customers in the food industry in particular tend to perceive a poor CSR approach as negatively affecting service or product quality (Sen and Bhattacharya, 2001).

Several academic researchers have also explored the relationship between CSR and purchase behavior. According to Boulstridge and Carrigan (2000), companies that engage in CSR and follow ethical behavior are well positioned to sustain their market presence, because consumer purchase decisions are less likely to be negatively affected when a company is ethically responsible toward society.

Other studies, however, show that customers do not always consider an organization's CSR activities. According to research conducted by Carrigan and Attalla (2001), many respondents said they never look at an organization's CSR activities when purchasing a product, and some stated they were not even aware of CSR or how to evaluate it. This clearly indicates that CSR activities may or may not influence customer purchase decisions, and that the outcome depends on consumer perception (Carrigan and Attalla, 2001).

According to Becker-Olsen et al. (2006), how an organization's CSR activities influence customer purchase decisions depends on three key factors. The first is the motive of the organization behind the CSR activities — whether profit-driven or genuinely socially responsible — which is often visible in annual reports and directors' statements. The second is the fit between consumer perceptions of the product and the social cause; if consumers do not recognize the social cause, the campaign will not produce results. The third and most important factor is the timing of the promotion. Organizations must be careful about whether a campaign is proactive or reactive. Reactive CSR — carried out to create a positive image after a negative incident — is often perceived cynically by consumers and fails to achieve its intended effect. Customer attitudes toward CSR activities are therefore a major factor influencing purchasing decisions, and research suggests that consumers are more sensitive to negative CSR information than to positive CSR information.

CSR activities often stimulate word of mouth, which is increasingly central to purchase decisions in the age of social networking and online forums. Other influential factors in customer decision-making include loyalty and service satisfaction (Anderson et al., 2004; Reichheld, 2003), as well as service quality and product quality.

There are notable differences between the purchasing behaviors of younger and older consumers. Most young consumers do not pay close attention to a company's CSR activities; they prioritize food quality and service. Older consumers, who tend to be more socially conscious, are more likely to review a company's social activities. Older consumers also tend to rely on word of mouth, while younger consumers are more inclined to visit a new outlet and evaluate it firsthand. Thus, CSR sometimes influences customer decisions and sometimes does not, depending on consumer perception.

Value in marketing communication means that a consumer can differentiate between images that carry meaning when faced with competing brands. Brand equity is fundamental to establishing a successful business. McDonald's is one of the world's strongest brands, competing with the likes of Coca-Cola. The brand portfolio of McDonald's includes its distinctive yellow and red color scheme, name, logo, and product presentation. McDonald's adheres to a strict philosophy that puts the consumer first and emphasizes quality, service, cleanliness, and value (Love, 1995).

McDonald's serves high-quality products, and the sight of a McDonald's restaurant reliably evokes a craving for its food. The company respects local culture: in India, for example, it offers a range of vegetarian dishes suited to local tastes and does not serve beef or pork. The customer always comes first, and food is prepared using current cooking equipment to ensure safety and quality. The company focuses not only on profit maximization but also on minimizing costs while maximizing value to customers. As a result of this philosophy, McDonald's has achieved high growth, maintained a loyal customer base, and turned satisfied customers into brand advocates. It is not surprising that the company serves approximately 46 million people every day (Aaker, 2004).

McDonald's success is also attributed to its disciplined brand focus — it does not pursue an excessive number of product categories, which could cause brand dilution. McDonald's mission statement is "to be our customers' favorite place and way to eat," and the company has adhered to this mission consistently. Its values of quality, service, convenience, and value have underpinned its sustained success across all locations.

CSR is also shaped by internal factors defined by stockholders, the corporate constitution, and officers, as well as external forces such as government regulations, consumer groups, and clients (Basu and Palazzo, 2008, p. 122). Effective CSR instills in organizations the processes, vision, and structure needed to make decisions that guarantee long-term social sustainability. In an era of globalization, companies that can be profitable while achieving environmental, economic, and social value are increasingly valued (Mullerat and Brennan, 2005, p. 334). McDonald's has demonstrated that effective CSR supports responsible business activities and ensures marketplace accountability, community engagement, sustained financial performance, positive workplace management, and environmental stewardship (Banerjee, 2007, p. 78).

CSR describes the manner in which companies manage their business processes in order to produce an overall positive impact on society (Monks and Minow, 2008, p. 204). This has been achieved by McDonald's over the long run, despite changing business environments that compel companies to meet increasingly stringent social, environmental, and ethical standards (Burke and Logsdon, 1996, p. 496). CSR is increasingly perceived as simply good business sense, particularly for larger corporations. Organizations around the world are beginning to recognize the advantages of CSR, and nations are engaging seriously with this concept at various levels (Mullerat and Brennan, 2005, p. 335).

The marketing structure of an organization is a determinant factor in a number of organizational outcomes. Depending on the market structure an industry assumes, the profitability of the organization can be defined by its macro environment.

McDonald's operates within a market structure that can be characterized as oligopolistic. An oligopoly is a market structure in which competition occurs among only a few large sellers (Perloff, 2008). This structure has become common across many industries, including electronics retail and film production. McDonald's qualifies as oligopolistic due to the dominance it holds relative to a small number of similarly sized competitors.

McDonald's operates over 1,500 outlets across approximately forty U.S. states, and its chain of franchisees and affiliates serves a wide range of customers. Competitors of a comparable scale are few, and the profit turnover and customer volumes are well above those typical of a perfectly competitive market. Entering the market at a comparable scale would require enormous investment, creating a significant barrier to entry (Samuelson and Marks, 2003). Competition within this market is largely non-price-based, given the strong brand loyalty McDonald's has cultivated (Vives, 1999). This oligopolistic structure has helped McDonald's maintain a competitive advantage and scale new ventures quickly. Quality of service and product consistency have been central to reaching its current market position (Hirschey, 2000).

Labor factors in this industry include economic downturns, which may force spending cuts, though demand for food remains relatively stable regardless of economic conditions. With limited competitive pressure and a reputable brand, supply remains consistent, affected mainly by potential supply chain disruptions or commodity shocks.

The research objectives of this dissertation are as follows:

1. To examine how McDonald's embraces responsibility for its actions and encourages a positive impact through its CSR activities on consumers' perception of the company.

Methodology

2. To identify whether CSR has an impact on consumers' buying behavior.

3. To identify which CSR activities are most influential and analyze why and how they work.

4. To identify whether younger and older generations have different buying behaviors or perceptions of McDonald's.

Hussey and Hussey (1997) outline a six-step process for research studies: definition of the research problem, determination of the research approach, data collection, analysis, interpretation, and writing of the dissertation.

Malhotra (2010) asserts that research data can be classified as qualitative or quantitative, and that these two methods are complementary rather than mutually exclusive. Qualitative research provides understanding and insight without relying on statistical processes. Quantitative research, by contrast, requires quantification of data and statistical analysis. For this reason, scientific researchers often use quantitative methods as their default approach.

Both methods have advantages and disadvantages. Qualitative methods can exclude measurable dimensions of behavior, while quantitative methods may overlook the purpose and meaning behind human actions. Guba and Lincoln (1994) note that qualitative research is widely used in market research. This study employs both methods to capture a fuller picture of consumer behavior.

Qualitative method: Used to explore non-numeric data and understand human behavior and the reasons behind it. Qualitative research is carried out with smaller samples (Neill, 2006a, 2006b).

Quantitative method: Used to analyze numeric data and draw conclusions. Quantitative methods are applicable across a wide range of disciplines, including political science, economics, and social sciences (Neill, 2006c).

Secondary data refers to data that has already been researched and tabulated. It can be gathered from journals, books, newspapers, and reliable online sources. In this study, secondary data serves as supporting evidence for the primary data collected directly from respondents.