THE INFLUENCE OF GREEN MARKETING STRATEGIES
TOWARDS ECONOMIC SUSTAINABILITY
By:
Pramayassya Amero 107081100070
DEPARTEMENT OF MANAGEMENT INTERNATIONAL CLASS PROGRAM FACULTY OF ECONOMICS AND BUSINESS SYARIF HIDAYATULLAH STATE ISLAMIC UNIVERSITY
THE INFLUENCE OF GREEN MARKETING STRATEGIES
TOWARDS ECONOMIC SUSTAINABILITY
Undergraduate Thesis
Submitted to Faculty of Economics and Business
as Partial Requirement for Acquiring Bachelor Degree of Economics
By:
Pramayassya Amero 107081100070
DEPARTMENT OF MANAGEMENT INTERNATIONAL CLASS PROGRAM FACULTY OF ECONOMICS AND BUSINESS SYARIF HIDAYATULLAH STATE ISLAMIC UNIVERSITY
Curriculum Vitae Setia Mekar, Tambun Selatan, Bekasi 17510 Handphone : +6285711536823
E- mail : prama.amero@gmail.com
Formal Education :
Education Name of School Year
University : Universiti Utara Malaysia, Bachelor of International Business
Senior High School : Sekolah Menengah Atas Negeri 2, Bekasi, Indonesia
2004 – 2007
Junior High School : Sekolah Menengah Pertama Negeri 1, Bekasi, Indonesia
2001 – 2004
Computer User Skill > Internet User Skill
> Windows PC User Skill
> Microsoft Windows Application (Microsoft Word, PowerPoint, Excel)
A Affiliation:Attributes:t Attriributes:Attributes:
Dean Awards in semester 2 in Universiti Utara Malaysia (GPA: 3.54)
Winner of Debate Competition in Faculty of Economics and Social Sciences UIN Syarif Hidayatullah Jakarta (2008)
Runner-up SIFE Exposition 2010 in Universiti Utara Malaysia (August 2010)
Attributes:
Honest, have a good personality, and friendly
Good leadership
Responsible
Ability to adapt to different environments
Hard working
Willing to learn
Motivational and energetic
Able to work independently
Able to change
OSIS SMAN 2 Bekasi (2nd Vice Chairman, 2005-2006)
English Club SMAN 2 Bekasi (2nd Vice Chairman, 2005-2006)
‘Galacticoz’ Inter-School Multi-Tournaments SMAN 2 Bekasi (Chief, 2006) Achievements:
‘Hyzteria’ School Anniversary SMAN 2 Bekasi (Chief, 2006)
Community of People against Corruption UIN Syarif Hidayatullah Jakarta (Chief, October 2008 – April 2009)
Corruption Preventing Alliance UIN Syarif Hidayatullah Jakarta (Vice Chief, April 2009 – October 2009)
Member of English Debating Language Society UUM (2010)
Indonesian Students’ Association (PPI), Universiti Utara Malaysia (Member, 2009 – 2010)
Basketball Club of Indonesian Students Association, Universiti Utara Malaysia (2009 – 2010)
Towards Palestinian Statehood and Peace in the Middle East, addressed by President of Palestine, Mahmoud Abbas (October 23, 2007)
‘Kenaikan BBM dan Implikasinya terhadap Bangsa dan Negara’, UIN Syarif Hidayatullah Jakarta (June 10, 2008)
‘Kupas Tuntas Kontroversi NAMRU: Kedaulatan RI dalam Ancaman’, UIN Syarif Hidayatullah Jakarta (September 11, 2008)
Multiculturalism in Religion, Democracy, and Modernization’, held by UIN-McGill Canadian Resource Centre (December 4, 2008)
Business in Canada, Lesson Learned from Canadian Company to Apply CSR, addressed by Senior Trade Commissioner Canadian Embassy (December 9, 2008)
MarkPlus Conference 2009: New Wave Marketing (December 11, 2008)
Introduction to The European Union & European Union’s Trade Policy, held by The Delegation of the European Commission (2008)
Multiculturalism in the US, addressed by US Embassy representative (2008)
Religion in the Contemporary World, addressed by Amien Rais (February 5, 2009)
Innovation in Entrepreneurship Seminar, Universiti Utara Malaysia (August 2010)
Company visit to P.T. Indosat Tbk. Jakarta (2008)
Study visit to Australian Embassy in Kuningan, Jakarta (2008)
Study visit to European Union Commission in Jakarta (2008)
Training of Trainer Education of Anticorruption held by KPK in UIN Syarif Hidayatullah Jakarta (September 2008)
Steering committee in Education for Anticorruption in SMA 46 Jakarta, SMA 86 Jakarta, Madrasah Pembangunan UIN Jakarta (June 2009)
Participant in Launching of International Students Affairs & Racial Integration Bureau “Creating World Class Manager” of Sime Darby Residential Hall UUM (July 2009)
Participant and delegation of Indonesian Student Association Basketball Team in PORSENI UUM (August 2009)
Steering committee in Education for Anticorruption in SMA 47 Jakarta and SMA 2 Tangerang Selatan (December 2009)
Participant in Cultural Night Tradewinds Residential Hall UUM (August 2009)
Participant in “Pencegahan Kanser” Workshop (February 2010)
Participant and delegation of UUM in “National Novice Debating Championship” held by Universiti Teknologi MARA (February 2010)
Committee in Parenting and Children Education of Anticorruption held by Corruption Preventing Alliance (May 2010)
Activity bureau in Indonesian Student Orientation (July 2010)
Participant in Protocol and Etiquette Course held by UUM (August 2010)Participant in “Every Things about Photoshop CS 4” Workshop (August 2010)
Participant in C.U.T.E Project AIESEC 2010 (August 2010)
Participant in SIFE Exposition 2010 held by SIFE UUM (2010)
Participant in 1 Malaysia Innovation Tournament 2010, held by Alpha Catalyst Consulting (August 2010)
R&D Serindit Assistant Computer Lab July 2010 - November 2010
UUM Sdn. Bhd.
Bank Indonesia Internship December 2010 - April 2011
UIN Jakarta Assistant Lecturer October 2011 - present
Place and Date of Birth Nationality
: :
Tanjung Pinang,May 9, 1989 Indonesian
Religion : Moslem
Sex : Male
Marital Status Interests/ Hobbies
: :
Single
Writing
Reading
Travelling
Playing football
Green and sustainability issues Identity :
i ABSTRACT
Marketing literature contributes different and inconsistent results in analyzing social responsibility or environmental strategy with financial performance. Thus, this research tries to investigate the relationship of green marketing strategies and economic sustainability. This research comprised several phases, including the development and comparison of green marketing concept, decision to use the appropriate measurement for green marketing strategy, and a study of the influence of green marketing strategies on economic sustainability. This research employs Greenpeace's quarterly Guide to Greener Electronics from version eight (June 2008) to fourteen (January 2010) and accounts eighty four samples. The statistics process involves classical assumption test and regression analysis to validate hypotheses. The study indicates green marketing strategies are associated with economic sustainability, specifically, product strategy has positive significant influence towards stock price; production strategy has negative significant influence towards stock price; distribution/market strategy has negative significant influence towards stock price; and promotion strategy has positive significant influence towards stock price.
ii ABSTRAK
Literatur pemasaran menyumbangkan hasil yang berbeda dan inkonsisten dalam menganalisis tanggung jawab sosial maupun strategi lingkungan terhadap kinerja keuangan. Oleh karenanya, penelitian ini bertujuan untuk menginvestigasi hubungan antara strategi pemasaran hijau dan ekonomi berkelanjutam. Penelitian ini terdiri dai beberapa fase, termasuk pengembangan dan perbandingan konsep pemasaran hijau, keputusan untuk menggunakan ukuran yang tepat bagi strategi pemasaran hijau, dan sebuah kajian pengaruh strategi-strategi pemasran hijau terhadap ekonomi yang berkelanjutan. Penelitian ini menggunakan publikasi triwulanan Greenpeace, yakni Guide to Greener Electronics dari versi kedelapan (Juni 2008) sampai versi keempatbelas (Januari 2010) dan menghasilkan delapan puluh empat sampel. Proses statistik dalam studi ini melingkupi uji asumsi klasik dan analisis regresi yang digunakan untuk memvalidasi hipotesis-hipotesis. Kajian ini menyatakan bahwa strategi pemasaran hijau berhubungan dengan ekonomi yang berkelanjutan, khususnya, strategi produk berpegaruh positif terhadap harga saham; strategi produksi berpengaruh negatif terhadap harga saham; strategi distribusi/pasar berpengaruh negatif terhadap harga saham; dan strategi promosi berpengaruh positif terhadap saham.
iii PREFACE
Bismillaahirrahmaanirrahiim
Assalamu’alaikum Wr.Wb
First and foremost, I would like to thank to Allah Subhana Wa Ta’ala for giving me a direction and a couple of good health and mind, so that I could finish this thesis. This research is entitled “The Influence of Green Marketing Strategies towards Economic Sustainability”. First, this research aims to fulfill the prerequisite for achieving Bachelor Degree of Economics in Faculty of Economics and Business of Syarif Hidayatullah State Islamic University (UIN Jakarta). Second, this research aims to contribute extensive literature for academic discipline so that can be developed broadly.
The road to complete this thesis is so long, challenging, and tiresome. Notwithstanding, supports and prayers have become the main drivers in finishing this research. In this occasion, the researcher would be very grateful to convey deep gratitude to:
1. Allah Subhana Wa Ta’ala and Mohammed the Prophet. The power of prayer and spirit to strive like the Prophet is the anchor to struggle finishing this research.
2. My beloved family –Alm. Amri Syahlul (father), Dra. Esti Rohmawati (mother), and Prispayana Vidro Amero (brother)- who shed the lights whenever my spirit down and thanks to my big family. This is a gift to offset any shortcomings during the research process.
3. Prof. Dr. Abdul Hamid, MS as Dean of Faculty of Business and Economics Syarif Hidayatullah State Islamic University Jakarta.
4. Dr. Ahmad Dumyathi Bashori, MA as academic supervisor I and Mr. Suhendra, S.Ag, MM as academic supervisor II, whom their counseling and direction helps making this research feasible.
iv
6. Prof. Dr. Ahmad Rodoni, Mr. Pheni Chalid, MA, Ph.D, and Ms. Leis Suzanawaty, SE, M.Si as comprehensive examination committee.
7. Mr. Sugih Waluyo, SE who assists academic and administrative needs during the research phase.
8. My fellow friends who help me up when down and encounter debate during research stage, especially Management and Accounting classmates, Hatta, Wike, Hilyah, Adhya, Ika, Ami, Dewi, Fitra, Ariningtyas, Weldan, Kharisma, Basyir, Fathhy, Rizki Z., Leo, Surya, Kiki, Isma, Tina, Dwi, Ade, Asrul, Sharah, Liko, Aga, Andrea, Sukria, Very, Yudi, Zahra, and Adel. I owe you all.
Last but not least, this research has limitation and shortage in some aspects. The researcher expects feedback and discussion to better improve the building blocks of fundamental framework in variables employed in this study. The researcher encourages students to develop framework and replicate study to enrich green marketing and sustainability literature. Perhaps, this study can contribute to variation and diversity of research for Faculty of Economics and Business UIN Syarif Hidayatullah Jakarta.
Wassalamu’alaikum Wr. Wb.
Jakarta, July 2011 Author
v
LIST OF TABLE
3.1 Environmental Regulations Has Competitive Implications 54
3.2 Operationalization of the Frame Reference 57
3.3 Summary of Operational Variables 62
4.1 Summary of Toxic Chemicals Criteria in Depth 78
4.2 Summary of E-waste Criteria in Depth 79
4.3 Summary of Energy Criteria in Depth 79
4.4 Example of Nokia’s Score in Greenpeace’s Guide to Greener Electronics 81 4.5 Descriptive Statistics 82
4.6 Multicollinearity Test Result 87
4.7 Autocorrelation Test Result 88
4.8 F Test Table 91
4.9 t Test Table 92
vi
LIST OF FIGURES
2.1 Logical Framework 44
2.2 Hypothesis Model 45
4.1 Guide to Greener Electronics Version 16 75
4.2 PVC-free and/or BFR-free Models 83
4.3 Own GHG Emissions Reduction Commitment 84
4.4 Voluntary Take-back 85
4.5 Company Carbon Footprint Disclosure 86
4.6 Heteroscedasticity Test Scatterplot 89
vii
LIST OF ATTACHMENT
A Statistics Output
viii A. Theoretical Framework... 12
1. Green Marketing Definition………... 12
2. Green Marketing Activities... 15
D. Hypothesis Development…... 45
CHAPTER III RESEARCH METHODOLOGY A. Scope of Research... 47
ix
C. Data Collection Techniques ………... 49
1. Types of Data………. 49
2. Sources of Data……….. 49
3. Data Collection……….. 50
D. Boundary of Operational Variables ... 53
1. Operational Definition………... 53
2. Measurement of Variables………. 58
E. Data Analysis Technique... 62
1. Classical Assumption Test……….. 63
2. Regression Analysis……… 67
CHAPTER IV ANALYSIS AND DISCUSSION A. Description of Research Object………... 71
1. Greenpeace at A Glance………. 72
2. Guide to Greener Electronics………. 74
3. NASDAQ……….. 80
B. Analysis and Discussion ………... 81
1. Descriptive Analysis……….. 81
2. Classical Assumption Test ... 87
3. Hypothesis Test ………... 91
CHAPTER V CONCLUSION A. Conclusion ………... 97
B. Implication ………... 98
C. Recommendations ………...……….…… 99
D. Limitation……….. 100
1
CHAPTER I
INTRODUCTION
A. Background
Companies never stop digg revenue, while the environment has been getting suffered. Every business entity all over the world aptly views shareholders’ wealth maximization as basic goal of the company. In effort of attaning this goal, company will strive to lower cost of production for the sake of economies of scale (Mankiw, 2008: 281; Krugman, 1980: 950). As a consequence of industry value chain activities and lack of control during upstream and downstream activities, the environment faces an obvious dreaded threat: our planet is in danger.
To avoid a more terrible effect of unwise practice by big companies, a number of special interest groups (SIG) –such as Greenpeace, World Wide Fund for Nature, and Pollution of Probe- comes up with huge pressures to prompt them acting
2 In addition to the urgency of the creation of sustainable business, companies are challenged with differentiating their products and services in a more highly competitive green marketplace (Chatterjee, 2009: 367). In connection with sustainable business idea, some companies have begun green marketing practice. Despite there is an ongoing debate of utilization of green or environmental or ecological marketing, some companies view green marketing as a strategic tool (McDaniel and Rylander, 1993 in Mendleson and Polonsky, 1995: 5; Prothero, 1990 in Mendleson and Polonsky, 1995: 5) to achieve what environmentalists and industry demand for.
In effort of executing green marketing ideas as a strategic tool, Mendleson and Polonsky (1995: 5) suggest companies to find methods of making environmental or green claims more credible in the consumers’ viewpoint. To align with vision of utilizing green marketing as strategy, it is imperative to ward accusations off from environmentalists, to avoid misleading green claims (Peattie and Crane, 2005: 360), as well as to elude problems with green marketing (Mendleson and Polonsky, 1995: 5) which may degrade companies’ brand equity.
3 recycled into new paper cups, bringing them one step closer to its goal of 100 percent of its cups being reusable or recyclable by 2015.
While some companies do walk the talk green business practice, we often see the other herald green claim without actually practicing green behavior or green policy in day-to-day operations. This action confuses green-conscious and traditional consumers. It is believed that green marketing practice is not just putting eco-label on product or advertising vague environmentally friendly campaign. Green marketing should be viewed holistically.
In debates of green marketing identification, Vaccaro (2009: 315) states that green marketing include wide range activities, such as: “product design, the manufacturing process, service delivery processes, packaging, construction and renovation of buildings, recycling, and other areas such as marketing communications”. It implies that green marketing is beyond four Ps, of which product, place, promotion, and price. If this definition is utilized, we may find few totally green companies and these companies cannot be labeled as sustainable organization.
4 framework that bring social, environmental and economic aspects in measuring performance of a company.
Sustainability and TBL are often interchangeably linked. Schley (2011: 1) asserts many people devoted to sustainability have used TBL to refer to strategy. As a plethora of research conducted in sustainability concept, a growing number of companies turn their attention to formulate strategy that may lead to sustainability. Some of them even claimed have achieved sustainability.
Since sustainability is referred to TBL, it is difficult to assess a company’s success based on TBL concept. Economic sustainability may be measured with financial tools such as profit, stock price, return on assets, (ROA), return on investment (ROI), revenue, and the likes.
Green marketing and sustainability are inter-twinning concept. A plethora of studies discussed green marketing (Vaccaro, 2009; Menon and Menon, 1997; Porter
and van der Linde, 1995; Mendleson and Polonsky, 1995; Peattie and Crane, 2005; Prakash, 2002). Some scholars also conduct thorough research in sustainability (Sebhatu; Hubbard, 2006; Schley, 2011; Yilmaz and Flouris, 2002). Nonetheless, there is a scant literature discussing green marketing strategy and economic sustainability altogether. It is still debatable if holistic green marketing strategy can lead to economic sustainability.
5 owner of the company may insist to direct the top management to maximize shareholder’s wealth. It is the basic objective of a business entity all over the world.
In addition to ownership issue, there is an increasing thought that a company is not merely possessed by shareholders. Special interest groups’ (SIGs) pressure may change a corporate policy. The cost of being accused by communities and SIGs is more expensive than investing in green innovation and lean technology that foster efficiency and effectiveness in day-to-day operation. Besides, another challenge may appear from employees. They may be reluctant toward changes that require them to gain learning experience.
While there is unwillingness to refuse greening idea in a company, a massive demand comes from external side. Government may urge company to act and behavior environmentally friendly. Customers demand safe and long-lasting product or services. Communities around the company where it operates begin suffered from manufacturing plant operation. This scenario will push company to reformulate the way they operate business in a benign and safe way.
6 value of stock price, making shareholders as the primary object of research than other stakeholders.
Based on situation described above, this research tries to analyze the influence of green marketing strategies towards economic sustainability. There will be in-depth discussion on green marketing definition. A number of definitions presented in this research. In addition, types of green marketing activities and green marketing strategies are also identified here. Nevertheless, the green marketing strategies are constrained in four types: product, production, distribution/market, and promotion strategies.
Furthermore, sustainability concept is elaborated through “triple bottom line” (TBL) approach. But, this paper only focuses on economic sustainability, represented by stock price. In gaining a conclusion of a company performance, the paper employs Greenpeace’s Guide to Greener Electronics to assess green marketing policies and practices of firms in electronics industry. This research aims to investigate the influence of green marketing strategies towards economic sustainability.
B. Problem Statement
7 sustainable, but they have shortcoming in sustainability or corporate responsibility report.
This research tries to figure out false claim on green marketing and economic sustainability issues. Stakeholder role appears to bridge the gap between the two concepts. The road to economic sustainability is not always easy, but it is feasible. It requires high level commitment of leadership, receptivity of changes, transparency, and accountability. Besides, clear measurement is a main key to assess economic sustainability performance.
Based on consideration above, this research aims to answer a major question:
Do green marketing strategies have influence towards economic sustainability?
This big question is divided into four minor questions:
1. Does product strategy have influence towards economic sustainability?
2. Does production strategy have influence towards economic sustainability?
3. Does distribution/market strategy have influence towards economic sustainability?
4. Does promotion strategy have influence towards economic sustainability?
C. Research Objectives
8 1. To identify if green marketing has influence towards economic
sustainability.
2. To identify if product strategy has influence towards economic sustainability.
3. To identify if production strategy has influence towards economic sustainability.
4. To identify if distribution/market strategy has influence towards economic sustainability.
5. To identify if promotion strategy has influence towards economic sustainability.
D. Significance of the Study
This study is essential to answer query if green marketing strategy can lead to economic sustainability. To be more managerially practical, this paper examines several companies in Greenpeace’s Guide to Greener Electronics. Furthermore, this study presents benefits as follow:
1. Benefits for Company
9 of green marketing strategies are presented, so this research is not a rhetoric nature, but rather than practical.
2. Benefits for Future Research
This research aims to enrich literature review, especially in green marketing and sustainability fields. In the future, there are research opportunities in examining green marketing that can lead to triple bottom line –economic, environmental, and social sustainability. Scholars may also examine green marketing strategies that can lead to sustainability with other performance measures. Since there is no universally accepted definition and strategy of green marketing, researchers are free to choose one of such green marketing definition and strategy. Other performance measures are also available to be examined.
3. Benefits for the Researcher
10 E. Research Structure
To simplify understanding of the whole parts in this research, there is a brief systematic explanation that describes plot of writing, of which generally comprises of five chapters as follow:
CHAPTER I : INTRODUCTION
This chapter discusses background of study, problem statement, research objectives, significance of the study, scope of the study, and research structure.
CHAPTER II : LITERATURE REVIEW
This chapter elaborates relevant theory related to the main topics, identifies the most appropriate concept and performance measurement, and stipulates previous research in regard of each variable.
CHAPTER III : RESEARCH METHODOLOGY
11 CHAPTER IV : ANALYSIS AND DISCUSSION
Chapter four will explain research findings based on the steps conducted in previous chapter and also elaborate the relationship between variables, as well as testing the hypotheses with performance measurement framework chosen.
CHAPTER V : CONCLUSIONS AND RECOMMENDATIONS
12
CHAPTER 2
LITERATURE REVIEW
A. Theoretical Framework
1. Green Marketing Definition
Henion (1976) in Bäverstam and Larsson 2009: 1) firstly explains green marketing as "the implementation of marketing programs directed at the environmentally conscious market segment" (Banerjee, 1999: 18 in Bäverstam and Larsson 2009: 1). On the contrary, Prakash (2002: 286) views green marketing is “the strategies to promote products by employing environmental claims either about their attributes or the systems, policies and processes of the firms that manufacture or sell them”. Henion seems to be program oriented, while Prakash is persistent with a strategy-based approach. Both definitions are not solely approved by company-wide and scholars.
Although there is no single commonly accepted definition, some scholars contribute various ideas from different disciplines. People may use “environmental” (Kärnä et al., 2001: 60), “ecological”, or “sustainable” terms (Simula et al., 2009) to supersede “green”. Notwithstanding, the key comprehension of green marketing is to deeply understand whatsoever business activities that a company may exercise as long as it is responsible to the nature.
13 and sustainable way”. On the other hand, Mintu and Lozada (1993) hold that green marketing is ""the application of marketing tools to facilitate exchanges that satisfy organizational and individual goals in such a way that the preservation, protection, and conservation of the physical environment is upheld". Peattie (1995) tries to generalize management process without specifying in what value chain activities a company should engage in and he identifies two stakeholders only should be taken into account in the process. On the contrary, Mintu and Lozada (1993) try to integrate organizational and individual interests with environmentally friendly marketing tools.
In another occasion, Peattie (2001 in Simula et al., 2009: 322) suggested that ‘‘green marketing has been used to describe marketing activities which attempt to reduce the negative social and environmental impacts of existing products and production systems, and which promote less damaging products and services’’. A bit different from his prior definition, Peattie emphasizes product and production processes as core activities which contribute to degradation of environment. Therefore, he encourages companies to design and create product, and to run production process that enable minimum detrimental effects generated by both activities.
14 sold, but it encompasses a firm’s strategy to achieve its objectives in accordance with environmental protection.
In a search for comprehensive green marketing definition, Charter (1992 in Simula et al., 2009: 322) referred green marketing to ‘‘a holistic and responsible management process that identifies, anticipates, satisfies and fulfils stakeholder requirements, for a reasonable reward, that does not adversely affect human or natural environmental wellbeing’’. In this definition, he just strengthened the notion that green marketing is a holistic process –not only associated with sales and promotion- that addresses stakeholders’ demand –not limited to shareholder’s interest, and keeps environmental concerns as a focus for formulating corporate strategy.
Speaking of a more holistic green marketing definition, Fuller (1999) views green marketing is "the process of planning, implementing, and controlling the development, pricing, promotion, and distribution of products in a manner that satisfies the following three criteria: (1) customer needs are met, (2) organizational goals are attained, and (3) the process is compatible with ecosystems". This notion seems to complement previous definitions discussed above.
15 2. Green Marketing Activities
Generally speaking, the core marketing activities are four Ps, which are product, place, price, and promotion. Meanwhile in green marketing, environmental concerns hold strong influence in traditional marketing practices and its activities are broader than traditional ones.
In addition to green marketing activities, Polonsky (1994) contends green marketing encompasses product modification, changes to the production process, packaging changes, and modifying advertising. In another study, Mendleson and Polonsky (1995) identify four green initiatives may range from “repositioning existing products without changing product composition” to “modifying existing products to be less environmentally harmful” to “modifying the entire corporate culture to ensure that environmental issues are integrated into all operational aspects” to “the formation of new companies that target green consumers and only produce green products”.
Furthermore, Polonsky et al. (1997) indicate marketing activities can include environmental concerns in “planning, product and package design, pricing, distribution, retailing, promotion, customer segmentation, strategic alliances, industrial marketing, and even overall marketing strategy”. This proposition holds more holistic greening activity than the previous stance. Polonsky et al. (1997) realize green marketing is not simply integrating marketing mix by adding environmental issues into the process, but it deals with multi-facets value chain activities and corporate strategy.
16 delivery processes, packaging, construction and renovation of buildings, recycling, and other areas such as marketing communications”. With this notion, he tries to corroborate that green marketing is a holistic process, not only constrained at creating environmental claims or designing environmentally friendly products, but also considering internal system and even building design.
From the identification green marketing activities above, some options are taken into account for companies willing to green themselves. As Prakash (2002) clarifies green marketing can be implemented in such attributes or systems, policies and process, an organization can start its greening initiatives from production process. In this level, a company can redesign product or substitute hazardous substance with the environmentally friendly one.
Moreover, management can restate new policies that include social and environmental concerns in overall value chain activities. For example, company can increase bargaining power over suppliers by enforcing them to supply safe and benign materials. In social issues, a company can set policies that support local communities and increase society well-being through corporate responsibility programs. In third level, a company can green its attributes or systems. This requires high level commitment of all organization members because it is highly related with corporate culture and reputation.
3. Green Marketing Strategies
17 propositions to assist an organization in satisfying the needs of customers in a profitable way (Kärnä et al., 2001) and gaining competitive advantage over the competitors (Porter and van der Linde, 1995). Furthermore, the cost to pay attainment of an organization’s goals is not cheap. Major companies even struggle to build reputation and keep the brand well-wrapped from accusation of certain groups. Once the brand is injured, there would be extra cost to offset the loss.
Speaking of organizational goals, traditional perspective views that profit and shareholders’ wealth maximization (Jensen, 2001) are the core objectives that a company should strive for. Unfortunately in effort of attaining these goals, some companies ignore non-economic issues. Social and environmental matters are the increasingly public attention in three decades ago. Poor working condition, human rights abuse, degrading natural environment, and injured consumers’ health are little problems arise due to unlawful business activity. To encounter this condition, some special interest group began to accuse those profit-driven companies. Subsequently, companies not only face legal impeachment, but also loss of reputational degradation due to negative backlash. Thus, a company should bring economic, social, and environmental issues together in determining corporate strategy.
18 companies has turned their conventional strategy into a greener concept. Their fundamental belief relies on a greener overall business operation may better lead to higher economic performance (Porter and van der Linde, 1995; Menon and Menon, 1997; Menon et al., 1999; Kassinis and Vafeas, 2006).
After extensive exploration on what should be avoided in formulating green marketing strategies, some questions may arise: What are green marketing strategies? Can a green marketing strategy be applied to all business? How to identify strategies that fit into an industry-specific firm? It is important to note that “there is no single green-marketing strategy that is right for every company” (Ginsberg and Bloom, 2004). That is why academic literature identifies plethora concept of green marketing strategies.
Firstly, Menon and Menon (1997) assert enviropreneurial marketing strategies are functional or tactical, quasi-strategic or business-strategic, and strategic approaches. In addition, Prakash (2002) contends greening strategy can be done in three ways: value-addition process, management systems, and/or products. Meanwhile, Ginsberg and Bloom (2004) introduce the green marketing strategy matrix that includes lean green, defensive green, shaded green, and extreme green.
Furthermore, Orsato (2006) reveals four types of generic competitive strategies: eco-efficiency, beyond compliance leadership, eco-branding, and environmental cost leadership. On the other hand, Vaccaro (2009) stipulates seven proactive green marketing strategy areas contain marketing research, production, product, distribution/markets, price, promotion, and partnerships. Finally, Cronin et al., (2010) identify three green strategies are green innovation, greening the
19 The ample green marketing strategy propositions identified by scholars may confuse some managers. Since there is no universally accepted green marketing strategies, firms can choose strategies that best fit into their organization’s systems, culture, and policies. Propositions held by Menon and Menon (1997) and Prakash (2002) contends structural organization-wide policies and systems are the patron for determining corporate greening strategy. Furthermore, green marketing strategy matrix developed by Ginsberg and Bloom (2004) and Orsato (2006) relies heavily on promotional efforts and cost efficiency in strategizing the green attempts. On the other hand, Vaccaro (2009) and Cronin et al., (2010) evolve greening strategy framework holistically, something that not only touch promotional and cost sensitive matters, but also integrating systems, policies, partnerships, and innovation altogether in a multi-facets embraced green marketing strategy.
The congruence between Vaccaro’s (2009) proposition and Cronin’s et al., (2010) framework contributes major sources of green marketing strategy in this study. In his research, Vaccaro (2009) aligns business-to-business (B2B) green marketing with innovation theory to gain competitive advantage. While Cronin et al., (2010) discuss green marketing strategies, of which stakeholder examination is upheld. The intersection of both propositions will be relatively novel complementary green marketing strategies.
a. Proactive Green Marketing Strategies
20 messages to educate stakeholders about green attempts. Subsequently, it can also be used “to identify customers' needs before designing new products and to determine optimum price and distribution strategies” (Vaccaro, 2009). This asserts that two elements of marketing mix are examined in this strategy.
Secondly, production strategy emphasizes on the significance of production- and other processes- changes to be more environmentally sensitive. Redefining green innovations in production process is critical to change radical behavior in the way customers consume and the way product and service is made. This strategy also suggests factory visit for customers, media, and the general public can help company to obtain media coverage about new green production strategies (Vaccaro, 2009).
Furthermore, product strategy stresses on creating “green products with a differential advantage which are recyclable, biodegradable, and are based on sustainable development and also existing these product lines” (Vaccaro, 2009). Another strategy held is substituting product or service rentals instead of ownership of physical goods. It is believed this notion will be cost effective for firms.
Subsequently, distribution or market strategy pertains to creating more circular markets where materials can flow through product take-back and recycling; using multi-channel distribution, to make easy to purchase new green products or services; and creating new markets or markets niches (Vaccaro, 2009).
21 Moreover, marketing communication that relies heavily on environmentally-friendly new media is a tipping point to succeed promotion strategy. This strategy also emphasizes on media, such as email, e-newsletters, webinars, mobile marketing, and environmentally-friendly recyclable promotional print materials to educate and sell to business customers. “Further, if the price of product or service is initially high, promotional messages might need to emphasize long-term costs associated with ownership and use rather than short-term price” (Vaccaro, 2009)
Finally, partnership or strategic alliances strategy relies more on incorporating partnership with multiple stakeholders with similar "green values" for input, strategy, and implementation. The eco-alliances can typically pertain to “working with suppliers or other channel partners on environmental programs, or gaining product endorsement and corporate sponsorships for environmental groups to enhance credibility with stakeholders” (Vaccaro, 2009).
b. Green Marketing Strategies Proposed by Cronin et al.
1) Green Innovation
22 green products and strategies can dramatically impact the frequency and success of green product innovation.
2) Greening the Organization
Generally speaking, greening of the organization encompasses three subsets: green champions, green processes, and supply chain management (SCM). Integration of these drivers can incorporate an overarching organizational greening initiative. Thus, allocating proportional commitment to manifest these drivers arise is so critical.
(a) Green Champions
Green champions are the individual or group of individuals who encourages and implements greening initiatives in a firm (Cronin et al., 2010). Past study suggests that members in an organization play a critical role in the green efforts and
success of the firm (Cronin et al., 2010). Notwithstanding, it is common that a person or group leading the green effort is less powerful to issue new environmental policy. Therefore, gaining support from top management is not always easy. The green champions even seek out other stakeholders to give pressure to management in adapting and initiating green effort.
(b)Green Processes
23 (i) Waste Reduction
Speaking of waste reduction, previous research has demonstrated that waste reduction effort through a lean systems approach has a positive effect on environmental performance (Cronin et al., 2010). In addition, improving organizational processes that reduce waste increases efficiency will increase demand from environmentally conscious consumers (Porter and van der Linde, 1995). Research also suggests waste reduction process is associated with a more positive green strategy than simply recycling waste (Cronin et al., 2010). Another study also concludes that integrating waste reduction into strategies can lead not only to pollution prevention and environmentally responsible behaviors, but also higher firm profitability (Porter and van der Linde, 1995).
(ii) Environmental Management System
Research found that firms with formalized environmental management system (EMS) gain higher performance (Cronin et al., 2010). The International Organization for Standardization (ISO), the number of ISO 14000 is the most widely applied EMS. ISO 14000 sets standards in terms of environmental policy, environmental objectives, implementation, control and continuous improvement (Goldberg, 2001). Research suggests that the application of ISO 14000 implies that positive indicators of systemic approach to green business practices are effective in enhancing the triple bottom line of an organization (Cronin et al., 2010).
(c) Supply Chain Management
24 two categories: chain construction and closed-loop supply chain management. Chain construction widely discusses the inception of establishment of supply chain, while closed-loop system explicitly evolves the idea of how to bring back materials into the firms.
(i) Chain Construction
Establishment of supply chain in a company should either incorporate the horizontal or vertical integration of both upstream and downstream operation. This is imperative to assure flow of whole company’s operation. The chain construction itself should be able to gain highly relative bargaining power of suppliers to gain competitive advantage. To date, an increasingly ecological concern triggers green supply chain to create potential advantage for an organization, as well as bolster triple bottom line performance by delivering economic, social, and environmental benefits (Cronin et al., 2010).
(ii) Closed-loop Supply Chain
25 Closed-loop supply chain (CLSC) constitutes the combination of forward supply chain (FSC) activities and reverse supply chain (RSC) activities, with the potential to improve the environmental performance of industrial operations to new standards, and to maximize profit and competitive advantages. (Talbot et al., 2007). FSC entails the flow from new product development, environmental product design, product research and development, and development of responsible manufacturing, which pertains to total quality management, just-in-time manufacturing, and lean manufacturing (Talbot et al., 2007). RSC deals with product returns, such as (manufacturing, distribution, and customer returns (Talbot et al., 2007) to the selling company, while the cycle will end when the company recovers the product's maximum possible value (Cronin et al., 2010).
The integration between FSC and RSC can create a cradle-to-cradle life cycle for goods manufactures, sold, and returned and reused, as opposed to cradle-to-grave flow (Cronin et al., 2010). Cradle-to-grave (C2G) is a full life cycle assessment from manufacture –known as cradle- to use phase and disposal phase, called grave (Wikipedia.org, 2011). It is seen as traditional notion, known as end-of-pipe solutions. On the contrary, cradle-to-cradle has similar approach with cradle-to-grave, while the end-of-life disposal stage for a product is a recycling process. It is utilized to minimize the environmental impact of products by exercising sustainable production, operation, and disposal practices, as well manifesting social responsibility into product development (Wikipedia.org).
26 maximum profit, comply with regulatory standards, and provide excellent customer service to customers and suppliers altogether (Cronin et al., 2010).
3) Green Alliances
The last important point in incorporating green marketing strategies is forming partnership. Past researches discussed the imperatives of eco- or green alliance in formulating green strategies (Mendleson and Polonsky 1995; Hartman, 1997; Crane, 1998; Hartman and Stafford, 1998; Stafford et al., 2000; Polonsky, 2001; Ählström and Sjöström, 2005). Stafford et al. (2000) emphasize alliance with environmental non-governmental organizations (NGOs), which can result in operational efficiencies, new technologies and marketable green products. They also identify stakeholder
characteristics and partnership outcomes. The same idea was also proposed by Hartman (1997), Hartman and Stafford (1998), and Polonsky (2001), which corroborates the significance of incorporating alliance with environmental group to achieve competitive advantage and integrating corporate environmental responsibilities in market goals.
4. Why Do Companies Need Green Marketing Strategy? – The Greenwashing Risk
27 which may accuse them and subsequently shock their brand equity. Some companies have experienced the shortcomings of accusation demonstrated by these groups, such as Nike vs Kasky case, GE’s poisoning of Hudson River with PCBs, Exxon Valdez spill, the relatively fresh BP’s spill on Gulf of Mexico, and the likes. The cost of accusation has led their brand equity weakened and stock price plummeted. By then, the SIGs’ pressure keeps some of them silent in promoting green campaign publicly.
Due to the growing concern of market research exploring green or environmental consciousness in two decades ago has pulled some companies to practice “me too” effect of green buzzwords. Some of the researches (Peattie and Crane, 2005: 358; Chatterjee, 2009: 367) indicate consumers are willing to pay more for green or eco-conscious products, making the existing companies turned their attention to create more environmentally friendly products, promote them with eco-label or colored green in shelf tag, and then charge consumer with premium price.
28 “Greenwashing is the misuse of the principles of environmental marketing and means that consumers cannot trust the content of advertisements” (Kärnä et al., 2001). It can injure a brand reputation and then enforces companies to carefully publicize their green efforts. Nike, Adidas, Puma, Coca-Cola, Starbucks, and McDonald’s are the proponents of silent green advertising, keeping them away from greenwashing risk. Their brand is too valuable rather than simply offsetting the cost of being accused by SIGs. Therefore, formulating appropriate green marketing strategy appears as a wiser idea in achieving corporate objectives, as well as tackling possible reputational risks (Louisot and Rayner, 2010) in the future.
It is imperative to determine appropriate green marketing strategy that does not mislead and confuse consumers. King (1985 in Peattie and Crane, 2005: 359) identifies four marketing failures -sales orientation, compartmentalism, finance orientation, and conservatism, while Peattie and Crane (2005) indicate five greenwashing practices, such as green spinning, green selling, green harvesting, enviropreneur marketing, and compliance marketing. This section will further discuss greenwashing which may answer question why strategy is necessary in executing green marketing ideas.
a. King’s (1985) Four Marketing Failures
1) Sales Orientation
29 2) Compartmentalism
Furthermore, "marketing department marketing represented a lack of integration between marketing and other business functions" (Peattie and Crane, 2005: 360). Moreover, the scholars stipulate that by utilizing green marketing buzzword, many companies are willing to address consumers' demand, but their effort is limited to establishment of marketing department, production department, or other separate functions, making them stuck in developing holistic green marketing concept.
3) Finance Orientation
Peattie and Crane (2005: 360) then stress that King's idea of "accountant's marketing" was characterized by an enjoyment with short-run profitability and
constrained concern for long-run brand building. They further criticize that companies are eager to add environmental dimension in marketing when it has involved short-run cost savings, but weakened in sustainable investment.
4) Conservatism
30 b. Five Greenwashing Practices (Peattie and Crane, 2005: 360)
1)Green Spinning
“Green spinning is an inward-looking, reactive approach placed in the public relations function” (Simula et al., 2009). This notion contends that companies tend to leverage reputation instead of market- and customer- orientation. Peattie and Crane (2005: 360) further add that companies often "went on a PR offensive, using glossy brochures, lobbying, and countless press releases in order to persuade the skeptical public of their environmental credentials". It is indicated by the establishment of special environmental marketing functions, such as more emphasis on public relations.
Peattie and Crane further assume that compartmentalization of green marketing functions for leveraging reputation- and risk- management cannot contribute a significant change on entire value chain activities. The scholars perceive that green spinners are categorized as conservatism and they -green spinners- do not respond various stakeholders' interests, otherwise making "the classic marketing error of looking inward when many of the answers they sought were to be found by looking outside of the organization" (Peattie and Crane, 2005: 361).
31 2) Green Selling
Green selling notes that environmental concerns among consumers are increasing, firms tend to conclude that something green will be best-selling. Peattie and Crane (2005: 361) refer green selling to "a post-hoc identification of environmental features in existing products, thus prompting a (usually short-term) hop onto the green bandwagon". It indicates that companies are engaged in sales orientation with promotional activity as the anchor, while product development is set aside. This type of greenwashing can also be identified with the existing products are still produced with additional green themes added in promotional activities and little market research conducted in responding to consumers' needs.
Peattie and Crane (2005: 361) further hold that "facile, meaningless, and unproven green claims were slapped on unchanged products in failed attempts to boost sales, leading to mounting consumer cynicism and suspicion, and concerns about a potential consumer backlash". Their stance indicates that consumers' skepticism towards green marketing is tailored by marketers’ failure in enhancing green operations in a company value chain activities, of which incremental sales is seemed as the superior goal rather than eco-conscious consumers' demands.
32 3) Green Harvesting
“Green harvesting is associated with a corporate culture that fosters short-term profitability and a financial orientation to green issues instead of radical change” (Simula et al., 2009). Firms take advantage with this approach by charging premium price for niche markets. A quite different from green selling, of which the firms turn attention into sales orientation without improving green aspects on product and production aspects, green harvesting brings environmental improvements and short-term profit orientation together.
Furthermore, "economies in terms of energy and material input efficiencies, packaging reductions, and logistics rationalisation provided strong incentives for firms to develop their environmental programmes" (Peattie and Crane, 2005: 362). Nonetheless, even though this notion may enable firms to gain incremental cost savings, firms lacking development of cheaper greener products, leading to hampered market penetration.
People may consider green harvesting firms direct themselves to conservatism, which is indicated by orientation of cost reduction, short-term profitability, shareholder value, and other financial gains. This makes them reluctant to invest in green marketing agenda.
4) Enviropreneur Marketing
33 and were able to buy green products, enviropreneurial marketers responded the demands quickly to bring the intended products to the market.
Nevertheless, Peattie and Crane identify this approach misses the point in three important ways. First, much of the research was weak due to much scope for respondents to give unrealistic and socially desirable answers. Second, much of the research emphasized general environmental issues, while in practice it addresses specific environmental concerns which will finally lead to specific green products for the market. Third, few companies take the considerable product-specific market research into account for ensuring their products' success in the market.
Many of the enviropreneur firms focused on production orientation, of which the goal was to produce the most environmentally friendly products against the products that consumers really demanded. Therefore, they failed to market products that are economically unsuccessful, as indicated by perceived products as under-performing, high price tag, and bad for business.
Finally, Peattie and Crane (2005: 363) concluded "the enviropreneur marketers may have meant well, but whilst they had the right environmental goals, they were always destined to have problems establishing a significant market presence in the long-term because they failed to successfully research, understand or educate their customers”
5) Compliance Marketing
34 describe this approach as a green marketing in a very conservative guise, of which "the firm seeks to travel the path of least change and will only go beyond compliance when there is a very real expectation of imminent legislation".
Moreover, there are a number of firms adopting "two-handed" approach in which "they simultaneously respond proactively to the pressures for change, and also reactively shore up their barricades against any further legislation" (Peattie and Crane, 2005: 364). For example, apparel makers in one hand keep producing benign products, which in turn they lobbying legislators to enact laws that enforce other firms in the industry to fit their operational standard into a new legislation.
“Whichever approach the compliance marketers have taken though, they have never had much hope of appealing to the environmental concerns of increasingly savvy customers, or of making any significant advances towards sustainability” (Peattie and Crane, 2005: 364). Thus, firms should carefully formulate appropriate strategy that segregates greenwashing and actual green marketing practices.
5. Sustainability
35 international forum. Thus, the trend now enforces every business entity to behave socially responsible and environmentally friendly.
a. Definition of Sustainability
As opposed to green marketing, scholars reached consensus to define sustainability. Sustainable development -as initially formalized at the Earth Summit in 1992 (Earthwatch, 2000) – “is development that meets the need of the present without compromising the ability of the future generations to meet their own needs.” This definition implies that companies should focus on limiting the consumption of present generation and leverage the ability to meet present and future needs (Garimella and Bhaskar). As a consequence, companies should put all attention to turn the operation in more efficient and effective ways, which reducing damaging impact both for society and environment.
Speaking of sustainability in organization-wide, Dyllick and Hockerts (2002) define corporate sustainability as achieving the needs of a firm's direct and indirect stakeholders, -such as shareholders, employees, clients, pressure groups, communities, etc- without compromising its ability to satisfy the needs of future stakeholders as well. From this definition, the scholars try to integrate interests of various stakeholders towards policy that affect organization’s objectives in present and in the future. Unfortunately, both scholars fail to clarify the boundaries of the stakeholders’ needs. Yilmaz and Flouris (2010) also justify that the vision of corporate sustainability is not well-defined, which leaves a wide approach with various characteristics.
36 management". It simply implies the paradigm shift from utilization of hazardous materials to renewable ones, minimization of pollution effects, improvement of working condition, and socially responsible program that touches people who do not have access to clean water, good sanitation, and other environmental-based issues. This notion further criticizes capitalism believers to not only attain economic objective, but also pay attention in environmental and social issues. The traditional paradigm should also turn thought from maximizing shareholders’ wealth into satisfying individuals who own stake on a firm.
In addition, Yilmaz and Flouris (2010) thoroughly discuss corporate sustainability in many perspectives. They argue that it can be viewed as a new and evolving corporate management paradigm, of which paradigm itself implies an alternative to the traditional growth and profit maximization model. The shift should count “future imperatives”, namely social and ecological concerns. This proposition further strengthens previous approaches that emphasize the importance of preparing the future generation with sustainable living.
37 In another point of view, Yilmaz and Flouris (2010) assert that corporate sustainability management can be described in both functional and institutional justifications. The first model is designed to guide ecological, social, and economic impacts of business activities with the direction of sustainability are developed by a firm. Meanwhile, the latter concept argues "corporate sustainability management describes the group of actors and organizational structure within the business enterprise that are concerned with social and ecological aspects and their integration in the conventional process of operational management of business activities”. Nonetheless, Visser (2007) employs different terms to define corporate sustainability, where it is the way in which the interface between business, society, and the environment is managed. All the definitions point out to emphasis on social, environmental, and economic aspects, which are much popular with triple bottom line concept.
b. Triple Bottom Line Concept
The terms sustainability is often interchangeably linked with triple bottom line (TBL) concept coined by Elkington (1997). To strengthen, Beilin et al. (2007) assert “the work of Elkington (1997) and others suggests that the TBL is useful in defining the concept of sustainability, seeing the two as inextricably linked”. The concept is growing as a widely popular conceptualization and reporting tools for justifying social, environmental, and economic performance, simply known as people, planet, and profit.
38 successors and policy makers in a firm to face more complex challenges in the future. The scarcity of resources, in terms of raw materials, shortage of energy and land, and well-educated human capital that fully concerns in social and environmental justice become prominent and all stakeholders of a firm by then to seek out the multi-faceted solution that satisfy them and non-economic factors.
Panapanaan (2002) indicates triple bottom line pertains to economic, environmental, and social sustainability. Economic sustainability comprises of economic profitability, competitiveness, and job or market creation. By ensuring this first bottom line fulfilled, a company can survive in highly competitive business, as well as improve employee’s welfare. In addition, environmental sustainability constitutes the way a company uses natural resources, environmental management and protection efficiently. It implies that company should run the business in ethical, safe, and benign ways. Meanwhile, social sustainability deals with social well being of everyone, both inside and outside the corporation. It denotes that a company should satisfy economic well being of its employees so that they can perform more productive and it should give feedback to the society through program like corporate social responsibility.
39 from time to time and level of basic economic needs also differs frequently. Thus, ensuring the three pillars are well-satisfied cannot be conducted without participation of stakeholders and well-determined corporate green strategies.
Furthermore, research conducted by Deloitte indicates the major respondents modeled definition of sustainability after the concept of TBL -pursuing performance in economic, social, and environmental aspects (Deloitte, 2010). Notwithstanding, some respondents define it as framework of company's policies and goals, which led to widely disparate areas of emphasis among themselves as a whole. It implies the significance of achieving sustainable business should integrate three pillars altogether, while the company’s policies should be in accordance with its goals.
1) Performance Measurement of Economic Sustainability
The management process from planning, execution, and evaluation will result in measurement of performance as a whole. To improve competencies and gain competitive advantage, a firm should gradually reach a higher point and by then requiring holistic measurement to assure if objectives are met. Corporate performance is defined as "the organization’s ability to attain its goals by using resources in an efficient and effective manner" (Fauzi et al., 2010). Then a question arises: What are indicators to measure corporate performance?
40 usually from sale of goods and/or services (Wikipedia.org). Return on assets indicates how profitable a company is relative to its total assets (Investopedia.com, 2011). The net income gained from company's business activities divided with its total assets. Economic value added is a measure of a firm's financial performance based on the residual wealth calculated by deducting cost of capital from its operating profit. The formula for calculating EVA = Net Operating Profit after Taxes - (Capital * Cost of Capital).
On the other hand, Fauzi et al. (2010) hold market mechanism as the heart of corporate performance by which the company deals with the financial, factor, and customer product markets. In the financial market, management utilizes corporate performance to meet interests of shareholders and creditors. In the factor market, the corporate strives to build good relationship with suppliers and other production owners by employing relative bargaining power that benefits both parties. Finally, from customer product market's point of view, a corporation's ability to deliver value to customers and generate revenue is the critical point for corporate performance.
41 (a) Economic Performance
The basic goal of business is profit maximization. This neoclassical theory strives to satisfy fiduciary stakeholders, primarily falls into shareholders, creditors, and other parties that have contractual ties. Fauzi et al. (2010) assert that “higher financial performance leads to the increase in wealth of these stakeholders”.
Furthermore, financial performance can be measured by employing three alternative approaches, such as market-based measure, accounting-based measure, and perceptual-based measure (Fauzi et al., 2010). Firstly, in market-based approach, “the market value of a company is derived from the stock price, all of which is used to measure CFP” (Fauzi et al., 2010). This notion concerns heavily on shareholders’ interests.
Secondly, the accounting-based approach is derived from “a company’s competitive effectiveness and a competitive internal efficiency as well as optimal utilization of assets, for some certain measures” (Fauzi et al., 2010). Financial tools such as net income, return on assets (ROA), and return on equity (ROE) are the basic proponents of this approach. Thirdly, in perceptual method, some personal judgments for financial performance will be exercised by respondents using some instruments, such as ROA, ROE, and the financial position relative to other companies. Furthermore, Sebhatu adds market share, sales turnover, and sales as complementary for financial performance.
B. Previous Research
42 that both frameworks can serve as a useful scientific insight to gain competitive advantage. The aims of the study is to investigate how innovation theory can be utilized to design more effective B2B green marketing strategies so that can meet the triple bottom line of economic, social, and ecological sustainability. The researcher initially elaborates corporate social responsibility theories relevant to green marketing. By then, he employs diffusion of innovation theory to address the gap in the literature on instrumental CSR theories. Furthermore, he explains reactive and proactive green marketing strategies that can be examined in B2B and their relationship to the levels of innovation, as well as corresponding diffusion of innovation theory and its relationship to B2B research. He later develops five propositions and a new conceptual model towards B2B green marketing innovation strategies and competitive advantage. Last but not least, he presents an analysis on the relationship of diffusion of innovation characteristics to B2B green marketing strategies and the benefits resulted linked with competitive advantage for B2B organizations.
