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responsibilities

    本科创新工程课题研究报告

    The Implementation of Strategic Corporate Social Responsibility in China:

    A Comparative Case Study of Ford and BYD;

     Accounting Department, Jinan University, PAN Jun-an

    Supervisor: Shen Hongtao

    Abstract: In this paper, strategic CSR theory is presented in comparison with economic CSR and responsive CSR. We explore the possibility of integrating CSR into corporate strategy for Chinese companies by conducting comparative analysis between BYD and Ford Motor. As a conclusion, we find Ford is better in enhancing the efficiency and effectiveness of the CSR implementation at a strategic level than BYD. On the base of these experiences, to carry out strategic CSR, firms in China also have to pay more attention to local regulations and subsidies from powerful government, close business network based on trust and loyalty, as well as cultural conventions based on Confucianism.

    Keywords: Corporate Social Responsibility, Corporate Strategy, Case Study

1 Introduction

     In the past few decades, Corporate Social Responsibility (henceforth CSR) has been a popular word all over the world. CSR is first defined by Bowen (1953) as “the obligations of businessmen to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society."

    Since then there are debates on what responsibility corporations take and how they should take it. Advocators believe that corporations should assume responsibilities in respond to the claims of stakeholders, simply because they are citizens of the society, and the absence of social responsibility would lead to gradual erosion of social power (Davis, 1960). On the other hand, some scholars against CSR believe that CSR is detrimental to the operation of the company, and that the philanthropic behavior is inefficient. Therefore, the only responsibility is an economic one: increase its profits (Friedman, 1970).

    The latest development of CSR is to integrate it into corporate strategy. Porter and Kamer (2006) argued that strategic CSR moves beyond good corporate citizenship to initiatives whose social and business benefits are large and distinctive. In this way, both self-sustaining solutions to sustainability issues and competitive advantage to the corporation will be created. Most multinational companies are paying more attention to gain competitive advantage by conducting CSR activities. Entering 21st century, the strategic CSR is proved to be a successful way to align the interest of shareholders and other stakeholders.

    In China, more and more people have realized that CSR is the key to the sustainable development. But to many businessmen CSR is more like a buzzword rather than a real action. With more exposure to the global economy, Chinese companies should take a strategic posture to CSR in order to gain competitive advantage. The research explores how to implement strategic CSR in China by comparing two companies in automobile industry. The paper is structured as: firstly, we illustrates the theoretical framework and practices of strategic CSR; then a comparative case study is carried out between strategic CSR practices in Ford and BYD; the factors to be considered when implementing strategic CSR in China are discussed at the end.

2 Strategic CSR: theory and practices

2.1 The theory of strategic CSR

    Porter and Kramer (2002 and 2006) developed a framework for strategic CSR. They shift the focus on the tension of business and society to the independence of them. The assumption implied in the debate of CSR is refuted by illustrating the inside-out linkage and outside-in linkage.

    The inside-out linkage is supported by generic value chain. It is used to identify the positive and negative social impact of corporations on the society. These linkages may range from hiring and layoff policies to greenhouse gas emissions.

    The outside-in linage is illustrated using the diamond framework or competitive context. Some elements of the business environment have effects on all industries while others are specific to a particular cluster. A cluster is a geographic concentration of interconnected companies, suppliers, related industries and specialized institutions in a particular field, such as high-performance cars in Germany or software in India. Clusters arise through the combined influence of all four elements of context. The competitive advantage is influenced significantly by its cluster and

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    competitive context.

    After refuting the assumption of the tension of business and society, Porter and Kramer explore two questions: where corporations should focus their CSR and how they should do good.

    The interdependence of business and society implies that there is a convergence of interests. The highlighted area shows where the focus of strategic CSR is. Focusing on the convergence of interests enables companies to create both social and economic value at the same time.

    The question of how companies should do good is answered by creating a corporate social agenda. There are two ways to create the social agenda: responsive CSR and strategic CSR. Responsive CSR comprises two elements: acting as a good corporate citizen and mitigating existing or anticipated adverse effects from business activities. Strategic CSR moves beyond responsive CSR to mount a small number of initiatives whose social and business benefits are large and distinctive. While responsive CSR address every social harm the business creates, strategic CSR is far more selective. Many opportunities to pioneer innovations to benefit both society and a company’s own competitiveness can arise in the

    product offering and the value chain. Addressing social issues by creating shared value will lead to self-sustaining solutions to sustainability issues and competitive advantage to the corporation.

    Porter and Kramer’s framework provides a theoretical basis for the strategic CSR. In developed countries, there are some best practices by companies that integrate the interests of business and society.

    Tab.1 Corporate Involvement in Society: A Strategic Approach

    Generic Social Value Chain Social Impacts Social Dimensions of Competitive Context

    Impacts

    Good citizenship Mitigate harm from value chain activities Strategic philanthropy that leverages capabilities to improve

    salient areas of competitive context

    Responsive CSR Transform value-chain activities to benefit society Strategic CSR

    while reinforcing strategy

    Recourse: Porter and Kramer (2006).

2.2 The practices of strategic CSR

    Kotler and Lee (2005) collected the best practices of strategic CSR and classified them into six types: cause promotions, cause related marketing, social marketing, corporate philanthropy, community volunteering and socially responsible business practices.

    Cause promotion provides funds, in-kind contributions, or other organization resources to increase awareness and concern about a social cause. Cause related marketing commits to making a contribution or donating a percentage of revenues to a specific cause based on product sales. Social marketing supports the development and/or implementation of a behavior change campaign. Corporate philanthropy makes a direct contribution to a charity or cause, most often in the form of cash grant, donations, and/or in-kind service. Community volunteering supports and encourages employees, retail partners, and/or franchise members to volunteer their time to support local community organization and causes. Socially responsible business practices adopt and conduct discretionary business practices and investments that support social causes to improve community well-being and protect the environment. Kotler and Lee (2005) also presented some examples for each kind of CSR, where corporations have been using CSR extensively as a tool to strengthen the competitive advantage.

3 A Comparative Case Study: BYD and Ford

3.1 Ford Motor Company

    Ford Motor Company (Ford) is one of the largest auto companies incorporated by Henry Ford in 1919. It operates in two sectors: Automotive and Financial Services. There are currently five vehicle brands: Ford, Lincoln, Mazda, Mercury and Volvo. The automobile industry includes the operations of Ford North America, Ford South America, Ford Europe, Premier Automotive Group, Ford Asia Pacific and Africa/Mazda segments.

    Ford encountered an extremely difficult time in the past few years. With the rising fuel price and declining demand for the trucks (including SUVs and pick-ups), Ford experience sharp declines in market share, profit margin and net income. Alan Murally, former CEO of Boeing Company, was appointed as CEO of Ford in 2006. He soon implemented a restructuring plan known as “The Way Forward”.

    During the restructuring, it is expected Ford will cut the cost of CSR. On the contrary, Ford sets up a position to integrate CSR into its differentiation strategy, which will be discussed in details as follows.

3.1.1 Ford’s Differentiation Strategy

    As one of the most successful players in the automobile industry, Ford directs its strategy towards a product differentiation. Nonetheless, since 2006 the market share and profit has been declining, mostly resulted from the competitive disadvantage in cost, especially in cost of human resources. The battle of The International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) against Ford won the workers in US

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    automobile manufactures a much higher compensation than that for foreign counterparts like Toyota. Also, the failure to take advantage of the economics of scale increased the cost for Ford significantly. For example, one of the best sellers, Ford Focus, had two different models designed respectively for Europe and Northern America. Murally was astonished at the excessive cost by saying that he could never believe there were two different types of Boeing 747.

    During the restructuring, the stakeholders, especially the employees and the government, are crucial to the success of the turnaround. The existence of powerful UAW makes the risk from human resources significant if there is any cost cutting measures like firing workers or decreasing the compensation. On the other hand, government loan, grants or subsidies are a possible way for it to get through the hard times. Therefore, Ford should design a proper CSR program to deal with the shareholders, as a risk management technique or a lobbying method to manage stakeholders.

    Since the automobile market is changing from fuel directed to alternative energy directed, Ford tries to differentiate its products to gain new competitive advantage. It knows quite well that in the North America, the trucks like SUVs and pick-ups would be the most profitable products like they were in the late 1990s, only if consumers do not need to worry about the price of petroleum. That is to say, a fuel-economy SUV is better than a fuel-consuming one.

    Therefore, Ford tries to invent a hybrid SUV and address the climate change issue. By engaging more stakeholders in the issue, Ford tries to establish a competitive advantage. In late 2008, the oil price remains low and Ford tries to lobby the government to raise the tax on fuel, thereby ensuring the awareness of the shortage of resources. By designing appropriate CSR campaigns, Ford can make more stakeholders to be aware of the importance of environmental friendly vehicles, increase the value of these vehicles, establishing a differentiation advantage.

    In short, with CSR programs, Ford can add value to the product, strengthening the product differentiation strategy. Ford follows three stages in the implementation of CSR: planning, practicing and reporting.

3.1.2 Planning of CSR activities

    In the planning stage, Ford altered the corporate governance structure by setting up a new position to supervise the implementation of CSR. Then the materiality analysis is used to identify the focus of CSR.

    In April, 2007, Ford appointed Sue Cischke as Senior Vice President of Sustainability, Environment and Safety Engineering. Alan Murally and Bill Ford state in the Ford Motor Company Sustainability Report 2006/7 that such position can integrate CSR into strategy and daily operation, marking a milestone for the development of CSR of the company. The CSR performance has been improved since the appointment of Sue Cischke. For example, in 2007, Ford considered 505 sustainability issues, comparing to 34 issues in 2005. There are 42 pages in the Ford Motor Company Sustainability Report 2006/7, 30 pages more than the previous year.

     In order to identify the focus of CSR, Ford conducted the materiality analysis. Firstly, the company takes the strategy as well as the need from stakeholders into consideration, and then finds out the sustainability issues which have impact on the entity. In the Ford Motor Company Sustainability Report 2006/7, Ford identified more than 500 issues, grouped into 15 topics. Secondly, these issues are further analyzed from three perspectives: the current or potential impact on the company, concern to stakeholders, and level of control or influence. The sustainability issues with the most impact on the company, most concerned by stakeholders, which at the same time the company can exert an influence on, will be filtered out and checked by independent third parties. With the help of materiality tests, there are five sustainability topics filtered out as the focus of CSR programs. These topics are climate change, mobility and emerging markets, safety, Ford financial viability and human rights.

3.1.3 Practicing of CSR activities

    In the practicing stage, Ford implemented the CSR activities from five aspects identified by the materiality test as described above.

    The first sustainability topic of climate change is a challenge as well as an opportunity for Ford. The rising cost of energy and green house gas (GHG) emission increases the demand for environmental friendly automobiles, and makes it a challenge for Ford to develop new products, while at the same time it was a great opportunity for Ford to take a niche position in the automobile market. Also, the regulation from the government is expected to be tightened. Thus Ford needs to reduce the overall GHG emission to get a “license to operate”. Investors, on the other hand, believe that

    the strategic response from a company is vital for their investment decisions. Ford responded to the climate change in various ways. Since the emission of Ford vehicle is more than that of the Japanese counterparts, Ford tries to cut the total emission of production and vehicles, which can save production cost. Ford is the first automaker to estimate its total GHG emissions from facilities and vehicles, to participate in carbon trading markets, to offset manufacturing emissions and offer customers an innovative way to offset emissions from use of vehicles, and the first automaker in UK to install solar panels and onsite wind turbines to provide power to manufacturing sites. On the other hand, the company tries to take advantage of the niche market of alternative energy vehicles. Ford is the first US automaker to offer a full hybrid vehicle, which is also the first hybrid in SUV segment. The long term strategic responses are as follows: continuously reducing the GHG emissions and energy usage of our operations, developing the flexibility and capability to market more lower-GHG-emissions products in line with evolving market conditions, and working with industry partners, energy companies, consumer groups and policy makers.

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    The second sustainability issue is sustainable mobility and emerging markets. The sustainable mobility problems are becoming more and more serious with the fast development of emerging markets. Climate change and GHG emissions, rapid urbanization, congestion, social inequality, and shifting demographics are some of the most significant challenges in the emerging markets. If these issues are not tackled, the transportation will not be sustainable and the demand for automobiles will decrease. To deal with these problems, Ford chose to cooperate with non-governmental organizations (NGO). Partnerships with NGOs is one of the most efficient way to implement CSR programs, since it requires less effort from the company while reaps a good result with the help of specialized NGOs. As stated in the sustainability report, “developing practical, broad-based sustainable mobility solutions will require the combined efforts

    of transportation companies, energy companies, governments and consumers. Ford partnered with World Business Council for Sustainable Development (WBCSD), The World Resources Institute, The Global Road Safety Initiative, Sustainable Mobility and Accessibility Researcher Transformation (SMART), The Princeof Wales Forum to solve the sustainability issues in mobility in emerging markets. ” By cooperating with the NGOs, Ford can get more information

    about the global trends, advanced technologies and market. It can better the decision making of the company in the emerging markets. Also, Ford improves the cluster in the emerging markets with CSR programs, developing a new and sustainable market for the company.

    The third sustainability issue is traffic safety, a growing public health challenge especially in developing countries. Ford has been tried to improve the quality and safety of its fleet, with 18 models received five-star rating for frontal and side impact from U.S. National Highway Traffic Safety Administration (NHTSA) in 2007 U.S. New Car Assessment Program (NCAP). The Insurance Institute for Highway Safety (IIHS) awarded 22 Ford models with“good” safety

    ratings and singled out three as “Top Safety Pick”. Ford had three of seven highest rated models tested by European New Car Assessment Program (EuroNCAP). As Ford is pursuing a product differentiation strategy, the quality of its products is better than most of the other automakers. However, the cost to innovate new technology to enhance the safety of its products might be high and unnecessary, since many cars are given a highest possible rating for safety. Therefore, Ford tries to improve the behavior of drivers and the road design. To improve the drivers behavior, Ford

    established a program called “Driving Skills for Life” to help youngsters develop the skills necessary for safe driving, and improve their skills in four key areas that are factors in more than 60 percent of teenagers vehicle crashes: hazard recognition, vehicle handling, space management and speed management. To improve the driving environment, Ford works in partnership with several other automakers to found the Global Road Safety Initiative (GRSI) to transfer best practices, with the objective of reducing accidents.

    The fourth sustainability issue is financial viability of Ford. In 2006, Ford reported a loss of US$ 12.6 million. To turn things around, Ford took some actions including closing factories and reducing the workforce. The challenges for Ford were how to manage downsizing and reducing the legacy health care cost, which were closely related to the employees. It is inevitable that Ford would reduce the number of employees during the downsizing. With CSR programs, Ford considered the need of employees to mitigate the harm of downsizing. Some incentives were given to the workers to leave on a voluntary basis, including four traditional offers and four innovative programs designed to help employees to acquire new skills. On the other hand, the legacy health care cost accounted for Ford’s competitive disadvantage. Therefore, Ford focuses on creating a culture of health and wellness for employees and their families to cut the health care cost. In this way, the company tries to promote the health of the employees as well as the financial health of the company.

    The fifth sustainability issue is human rights, especially in the supply chain. As an automaker, Ford has many suppliers all over the world. The poor human rights status in those suppliers could damage the company’s public image greatly. Also, a good working environment could improve the quality of products, which is consistent with Ford’s differentiation strategy. To manage the human rights status in the suppliers, Ford first sets the expectations for them based on its code, Ford Global Terms and Conditions, on the prohibition of the use of child labor, forced labor and physical disciplinary abuse. Since 2003, 400 assessments of existing and prospective suppliers in nine countries have been made. In 2006, the company conducted assessment and training sessions in India, Turkey, Russia, Romania and China. Also, there are follow-up assessments in Mexico. Ford also provides training for the suppliers. As of the end of 2006, 755 managers from 534 different suppliers in nine countries have completed a required training program. By CSR programs focusing on the human rights issues in supply chain, the company reduces the risk of scandals in the supplier companies and somehow manages the quality of the suppliers. This is congruent with the differentiation strategy to improve the quality of products and add social value to them.

    In sum, Ford performs CSR activities with an aim to solve the five sustainability issues identified in the materiality test. Therefore, these activities are organized to address the needs of stakeholders, supporting the corporate strategy. The final stage will be conveying these information to stakeholders.

3.1.4 Reporting of CSR activities

    The company reported its CSR activities in the sustainability report since 2001. This enables the company to differentiate from other automobile manufactures in terms of CSR performance to a certain extent.

    The sustainability report is compiled in accordance with G3 Guideline , the most accepted worldwide guideline for

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    CSR reporting. Also, the report is audited by third party, Ceres for its reliability.

    Feedback can be made via email, mail and telephone. Ford appoints a person, Krista Gullo to deal with these issues. The social performance rated by Fortune is increasing from 48 points in 2006, to 50 points in 2007 and 55.3 in 2008 since the appointment of new Senior Vice President of Sustainability, Environment and Safety Engineering.

    So far, Ford completes the cycle of planning, practicing and reporting the strategic corporate responsibility.

3.2 BYD Company Limited

    Established in 1995, BYD Company Limited (hereafter BYD) is a high-tech enterprise listed in Hong Kong Stock Exchange. BYD is principally engaged in two core businesses, namely information technology (IT) components business, which includes rechargeable battery, as well as handset components and assembly service, and automobile business. In 2006, BYD Group realized sales revenue of RMB 12.9 billion, with a year-to-year increase by 101%. In 2007, BYD Auto released F3R, F6 and F8 major models to realize sales quantity of 100,000 units and enter the mainstream of automobile manufacturers in China. In 2008, BYD launched a hybrid electric automobile known as F3DM, the first mass produced plug-in hybrid in the world, at least a year ahead of similar efforts of counterparts in the U.S. and Japan.

3.2.1 BYD’s Cost Leadership Strategy

    BYD is well known for its successful cost leadership strategy, both in IT components business and automobile business. The low cost research and development (R&D), production and marketing are often cited as the key success factors.

    The R&D activities in BYD are held in high regard. However, the cost is much lower compared to other automakers. The reason is that the research personnel are mostly fresh graduates from Chinese universities, and many facilities used for R&D are developed in-house. Moreover, the reverse engineering and patents management save the company a lot of R&D expenditures. The company also adopted a low cost production method. Instead of purchasing machines to produce new cars, the company hires many workers to play the role of them. The semi-automatic production method takes advantage of the inexpensive labor in China, thereby avoiding the expenditure of purchasing machines and increasing the flexibility. Marketing strategy is also congruent with the overall cost leadership strategy. Unlike most automobile manufacturers, BYD seems to be conservative in marketing activities. The company uses a “Precise Marketing Method”, which targets only some important cities in China.

    There are two challenges for its cost leadership electric automobiles strategy. The first challenge is that alternative-fuel automobiles may not be a solution for the GHG problems in China. According to a study by Nissan, zero- or low-emission automobiles that run on electricity are expected to make little to no contribution in China in reducing carbon-dioxide emissions, which is widely believed to be a cause for global warming. The generation of electricity burns coal and emits a lot of GHG. Therefore the electric automobiles would not reduce the total emission of GHG, just transferring the sources from automobiles to power plants. The second challenge is the inadequate infrastructure for electric automobiles. There are many gas stations, but no station to charge the electric automobiles. The development of infrastructure depends largely on the government who approves the use of land and design of the roads.

    To solve the problems, BYD should design appropriate CSR campaigns to address the electricity savings and to lobby government for inadequate infrastructure.

3.2.2 Implementation of CSR activities

    For BYD, CSR programs should be designed to address the global warming, especially the electricity issues. Although the company considers the social and environmental issue when designing long term strategy (developing low priced alternative fuel automobiles), the other CSR campaigns, as discussed as follows, are not as structured and systematic as Ford’s.

    The most obvious social responsibility taken by BYD is that it develops the affordable, mass production alternative fuel automobiles to decrease the GHG emission by vehicles to solve the global warming problem. It is the first automaker that launches a mass production plug-in hybrid automobile in the world, years ahead of its competitors. As stated by Ford and many other automakers, alternative fuel automobiles are the solution to the climate change, diminishing resources and sustainable mobility topics concerned by stakeholders. Also, the ability to develop alternative fuel automobiles is one of the criteria that investors value the most.

    However, BYD does not implement many CSR activities for theroblems noted above. The CSR activities are mostly generic social issues such as disaster relief and philanthropic donations.

    The company contributes to the local education and children welfare significantly. It has donated to the Center Primary School of Longgang town, Kuichong Center Primary School, Zuoquan Primary School, Shenzhen Middle School and so on to improve the local education. In 2007, BYD decided to donate RMB 8 million to establish BYD Children Welfare Institute and even organized a special project team in charge of the whole project. In 2008, after the WenChuan tragedy, 5 students from the disaster-afflicted areas entered the Shenzhen Yadi School with the help of the

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    company. In addition, BYD properly arranged over 40 graduates from SiChuan to work in the company.

    Although some may argued that these activities might call up people to care the development of next generation, which coincides with the sustainable development, they are not strongly related to the core business activities and strategy of the company. In fact, many of these activities show the personal preference of the CEO. As stated in the company’s website, these activities “show the President Wang’s personal noble character and personality charm”.

3.3 A comparison of the CSR strategies of Ford and BYD

    By comparing the implementation of strategic CSR of Ford and BYD, some points should be noted.

    In the planning stage, Ford’s senior vice president of sustainability, environment and safety engineering conducts a

    systematic materiality analysis to filter out the focus of CSR activities. In this way, the CSR is expected to support its differentiation strategy by managing the stakeholders. On the other hand, BYD does not have the systematic materiality analysis or a department to monitor CSR implementation, but it does focus its CSR on the global warming issue, which is identified by most automakers as the most important sustainability issue. However, other issues like vehicle safety, human rights are not targeted by BYD’s CSR activities.

    In the practicing stage, Ford implements the CSR campaigns in diverse ways. It participates in carbon trading markets to solve the global warming issue, designs programs to strengthen the driving skills of young drivers to solve the vehicle safety problems and changes the culture to a healthy one for employees to solve the employee issue. In contrast, most of the activities of BYD are simply donation.

    In the reporting stage, Ford’s report is a lot better in reliability, accessibility and interactivity. Ford’s sustainability report is audited by third party, while it is not the case for BYD. Also, Ford’s report is more accessible and provides an effective interaction channel for the stakeholders. Finally, there some indicators to track and monitor the corporate social performance (CSP) developed by Global Reporting Initiative (GRI).These indicators are used by Ford intensively, while there are no similar indicators in BYD’s CSR report.

    In short, we can conclude that Ford is better in integrating the CSR into its business strategy. BYD can learn more from Ford to enhance the efficiency and effectiveness of the CSR implementation at a strategic level.

4 Implementation of strategic CSR in China

    Most of researches on the CSR in China show that there is an increasing interest in CSR, as well as an increasing public pressure on the companies to assume social responsibility. Research on Corporate Social Responsibility in China, 2006, compiled by Peking University Market Economy Academy, reports: the awareness of CSR is increasing in Chinese companies; the corporate governance architecture is the vital condition for the effectiveness of CSR; the regulation and public pressure is the most powerful drivers; public do not understands the CSR correctly; and finally, public is most upset with the irresponsible behavior against employees and consumers.

    It is inevitable that Chinese companies should assume corporate social responsibility. But there is a deep worry that business success and social welfare cannot be achieved at the same time. Therefore, a corporation should either increase its profit at the expense of the society or advance society sacrificing company’s resources. However, the strategic CSR is a way to achieve a win-win situation for business and society. By identifying the focus of CSR, companies can change the social dimensions of the competitive context, enhancing the competitive advantage.

    BYD successfully integrated the CSR consideration into corporate strategy, taking up a niche position in the maturing automobile market. It successfully provides a unique asset to the society that solves the sustainability issue. BYD’s success sheds light on the possible way for Chinese companies to align their corporate success with the social

    improvement and environmental sustainability.

    Some factors should also be noted when companies implement CSR strategies in China. These factors are the regulation and subsidies from powerful government, close business network based on trust and loyalty, and cultural conventions based on Confucianism.

    Most western countries employ a laissez faire economic policy with a strong believe in the invisible hand of the market to manage the negative externality of businesses. China is a different country that the government plays an important role of fine-tuning and micromanaging the economy. BYD predicted that China cannot afford the consumption of oil if fuel automobiles continue to grow and the government would control the situation. The Chinese government's current five-year economic plan, issued in 2006, highlights the importance of the development of electric automobiles. It says that China needs to accelerate R&D 'of our own intellectual-property rights in electric motors, batteries, electronics, assembly know-how, and other primary components.' The government hasn't said how much it will spend. In February 2009, Chinese government provides a supportive policy for automobile industry. According to the policy, there will be lower tax for fuel economy automobiles and the alternative fuel automobiles become the strategy of the state. If there are further regulations, tighten the emission of automobiles for example, the demand for alternative automobiles would be even larger. With the support and regulation from the government, the price of automobiles will be lower further and it can support the cost leadership strategy of the company.

    The close business network system, or Guanxi, is still the most important factor to be considered. Therefore, with

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    appropriate CSR programs, the relationship with stakeholders, such as the supplier, customers, consumers, will be strengthened. With more consideration for the stakeholders, the long term cooperation can be achieved among stakeholders to lower the risk.

    Another important factor is the Chinese cultural conventions based on Confucianism. These principles are loyalty, honor and societal harmony. A socially responsible company is held in high regard in China, and the community relationship is vital for them.

    To enhance the competitive advantage of Chinese companies in the global playfield, the author believe they should integrate the corporate social responsibility into strategy. The sustainable development of Chinese companies can only be achieved with appropriate design and implementation of strategic CSR taking the unique factors of China into consideration.

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