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Department of Business Administration
Title:
Addressing Eco-friendliness as a Marketing Strategy: Aninvestigation in the car industry
Author:
Emilene Reis Leite
15 credits
Thesis
Study programme in
Master of Business Administration in
Marketing Management
Master of Business Administration in Marketing Management
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Title Addressing Eco-friendliness as a Marketing Strategy: Aninvestigation in the car industry
Level Final Thesis for Master of Business Administration in MarketingManagement
Address University of Gvle
Department of Business Administration
801 76 Gvle
Sweden
Telephone (+46) 26 64 85 00
Telefax (+46) 26 64 85 89
Web site http://www.hig.seAuthor Emilene Reis LeiteDate 2010-04-29Supervisor Aihie OsarenkhoeAbstract
Keywords Green Marketing, Innovation, Value creation, Market orientation
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MBA thesis in Marketing ManagementEmilene Reis Leite
Handed in: April, 2010
Peoples
Nature
Vehicles
Addressing Eco-friendliness as a Marketing Strategy:
An investigation in the car industry
Zero CO2emission
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Table of Contents
1Introduction......................................................................................................................1
1.1 Motivation and Research Question............................................................................32 - Theoretical Framework................................................................................................3
2.1 Green Marketing: Strategic opportunity to innovation..............................................3
2.2 Previous Research in Green Marketing......................................................................5
2.3How firms create value? .............................................................................................6
2.4 Marketing Orientation................................................................................................9
2.5 Market Orientation and Environmental Practices....................................................12
3- General Automotive Industry.....................................................................................15
3.1 Automotive Industry Attractiveness............................................................................19
4Methodology...............................................................................................................21
4.1 Research Strategy.....................................................................................................22
4.2 Research Approach..................................................................................................24
4.3 Research Process......................................................................................................25
5Descriptive Results ....................................................................................................26
5.1 Interviews.................................................................................................................26
5.2 Firms reports...........................................................................................................29
5.3 Linking Anderson and Narus model with firms behaviour....................................30
6- Analysis and discussions ............................................................................................32
7Limitations..................................................................................................................38
8- Conclusion....................................................................................................................39
9- Future Research.......................................................................................................... 39
APPENDIXASurvey Question........................................................................................................40
BAutomobile Technological Evolution Timeline......................................................44
C- Tables summarizing the empirical results................................................................45
D- Figures showing firms green trends......................................................................... 50
REFERENCES
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Abstract
Research Questions: Environmental consideration has influenced managerial decisions
and has required from firms to develop an organizational culture that focus on theenvironmental issues. Despite the importance of adopting a business philosophy that take
into account the ecological concerns few studies have examined the relationship between
market orientation and environmental practices. This thesis contributes to fill this gap by
addressing the following questions: 1) Does the introduction of the environmental
facilities help firms towards green innovation? 2) Is Green marketing strategy of firms
positively associated with the augment in performance? 3) Does green marketing
communication affect positively corporate image?
Research Objectives: My aim is to investigate if firms green strategy can encourage
innovation; enhance corporate reputation and increase overall performance.
Research approach and methodology: The assesment of companies green initiatives
and the effects on their performance have been achieved through the content of annual
and sustainability reports as well as interviews with business managers.
Findings: The investigation indicates that when implementing an effective green strategy
firms will improve their managerial and organizational performance and such
improvements can contribute positively to their financial outcome. The better use of theresources via the introduction of the environmental facilities by firms indeed can help
them towards green innovation. Add to that, communicating environmental practices also
seems to be an important tool to enhance brand reputation. Thus this study agrees with
some authors who affirm that integrating environmental issues into business activities
firms can increase efficiency and competitiveness while reducing environmental impact.
Concluding remarks: The core lesson learned from this scientic work is that the
response of the firms in prioritizing the implementation of eco-friendly practices is linked
with their perception of current environmental trends. The most firms reinvent
themselves by adopting more reuse, recycle, reduce, re-design, green training, green
marketing, etc more eco-oriented they seems to be.
Keywords: Green marketing, innovation, value creation, market orientation.
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1. INTRODUCTION
A greater consciousness of environmental issues, working conditions and social
responsibility has led to an augment in the number of consumers considering all these
aspects when shopping. Companies aim to express their concerns and awareness of the
importance of such issues in their marketing activities. The relationship between the firm
and the environment has been an important theme in both professional and academic field
(Starik & Marcus, 2000).
The fast deterioration of the earths ecosystems not only has attracted the attention of
the scientific community but also has questioned the sustainability of the current
economic system (Jimnez & Lorente, 2001). Thus, the concept of sustainable
development has been commonly adopted by firms as one way to rethink their corporate
social and environmental responsibilities (Stanwick & Stanwick, 1998; Nash, 2000).However, to reduce the environmental impact has been a big challenge to many firms in
different industries. In Sweden, for instance, the personal mobility has seen the most
dramatic change in the last two decades with the increasing number of households that
have access to a private car (Sika Statistics). Transportation not only requires a high
consumption of non-renewable energy resources but also the emissions from vehicles
contribute to both local and global environmental problems. For many consumers, a
change from car to more environmentally friendly forms of transport implies a conflict
between individual short-term interests and social or collective long-term interests
(Kurani & Turrentine, 2002). For firms, a new perspective on consumer acceptance and
perception to green products as well as green initiatives represent a great room of
opportunities since green marketing can be a profitable endeavor (Grant, 2008). BMW
for instance in 2007 started a project whose aim was to incentive workers to reduce
energy consumption at their workplaces. The various energy-saving measures resulted in
saving of approximately 62 millions of Euros (BMWs Annual report 2008).
Undoubtedly, legislation has effectively caused transformation in the way business has
been made and many progresses have been achieved in the past decades. Policies to
reduce carbon emission mainly in the automotive industry with tax rebate for buyers
choosing alternative fuel vehicles, lower pollution via carbon credit program, more strict
laws concern to the usage of hazardous substances, etc are among other examples of how
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regulation has been a drive force of changing. However, it is just one of many forces that
will drive the necessary change into the future which demands even more noticeable and
effective actions from community, government, enterprises, NGOs altogether to protect
the environment (Olson, 2008).
From the supply side, firms must have a green strategy that helps them to make
decision that can cause a positive impact on the environment. Increased efficiency in the
use of resources, return on investment, increased sales, development of new markets,
improved corporate image, product differentiation, and enhanced competitive advantage
are examples of several benefits that firms can get when integrating environmental
sustainability issues into business activities (Bhat, 1993; Fierman, 1991; Peattie, 1992;
Miles & Munilla, 1993; Shrivastava et al., 1998; Berry & Rondinelli, 1998; Henriques &
Sadorsky, 1999; Kolk, 2003) but to obtain such benefits, appropriate strategies arenecessary. Green process, new product development and effective green marketing
communication play an important role to succeed (Albino et al., 2009). To respond
effectively and efficiently to the environmental sustainability challenge, it is imperative
that firms recognize that green marketing must be a fully integrated part of a firm's
strategic marketing plan. In this scientific work my aim is to investigate how firms have
used the eco-friendliness approach, more specifically in the automobile industry, as a
marketing strategy. My analysis suggests that the implementation of eco-friendly
practices is linked with firms perception of current environmental trends.
This thesis adds to the research body by relying on the understanding of how effective
green strategies can improve efficiency, encourage innovation and competitiveness. Its
structure is organized as follows. In the next section, a selection of previous research
studies in green marketing is presented. Section 3 shortly introduces an overall trend of
the automotive industry and green consumer behavior in Sweden. The design of the
research is depicted in Section 4. Subsequently, Section 5 starts with a discussion of the
data analysis and findings and finally interprets the questionnaire results. This section
terminates by considering if addressing eco-friendliness translated in firms market
penetration and profits. Limitations in terms of both, data set and methodology are
highlighted in Section 7. Finally, the conclusions are presented in the section 8 and future
research in the section 9.
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1.2 MotivationResearch Question
Environmental consideration has influenced managerial decisions and has required from
firms to develop an organizational culture that focus on the environmental issues. Despite
the importance of adopting a business philosophy that take into account the ecologicalconcerns few studies have examined the relationship between market orientation and
environmental practices. The motivation of the current thesis is to investigate firms
strategy in addressing their commitment to the environment conservation and at the same
time encouraging innovation, enhancing corporate reputation and increasing overall
performance. Thus, my aim is to answer the follow questions:
1. Does the introduction of the environmental facilities help firms towardsgreen innovation?
2. Is Green marketing strategy of firms positively associated with theaugment in performance?
3. Does green marketing communication affect positively corporate image?2. THEORETICAL FRAMEWORK
After presenting an overview about the link between green marketing and innovation as
well as the selection of previous research studies, the following subsections intends to
first give an insight into the strategy of value creation and market orientation. Based on
the idea that a market-oriented enterprise is systematically and entirely committed to the
continuous creation of superior customer value, understanding the correlation between
these two approaches is worthwhile. Besides that, both can shed light on firms
motivation in adopting environmental practices. This short illustration aims to introduce
the reader into the topic and making the research questions presented above easier to
understand.
2.1 Green marketing: a strategic opportunity for innovation
Green marketing is driven by the green consumption whose aim is not only to protect the
environment but also to use firms resources efficiently and effectively. Efficiency is
synonymous of increasing performance, boosting profits via cost reduction, adding
customer value and increasing market share. Porter & Van der Linde (1995) explain this
when they regard pollution as a form of economic waste. That it, harmful substances, for
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instance when discharged by companies into the environment in somehow it is a sign that
resource were used inefficiently or incompletely. If from one side, reduce pollution seems
to be an extra effort that firms must address and whose solution may rely on additional
investment in research and development. Both require time and money allocation. On the
other side, when firms are able to increase the quality of their production process via
reducing or eliminating waste, productivity tend to increase and cost run in opposite
direction.
By claiming that green design is the start point of successful green marketing, Bhat
(1993) introduces source reduction and better waste management as two kinds of green
design strategies. Source reduction embraces the concept of pollution prevention via
material substitution and product life extension while waste management refers to design
for recyclability, remanufacturing and composting. The first can help firms to reducewaste generation and keep competitiveness since a non-polluting product tends to be
preferred for costumers than a polluted one. In the long run, firms that do not invest in
environmental friendly technology tend to loose market. The second aim is to design
products, which waste cannot be totally eliminated but can more easily be reused. Thus,
bearing these two strategies in mind, enterprise may use it as a guide to help them
choosing the best green designs.
There are three main forces that determine the extension and the rate of consumer
adoption to the green technology which are: consumer taste and preferences for
environmental friendly products, supply-side decisions towards to green requirements and
government policies and regulations (Polonsky & Rosenberrger, 2001; Bhat, 1993) that
impact directly on consumer behavior and companies orientation. The latter objective is
simultaneously to meet customer needs and to exceed regulatory compliance (Hindle et
al., 1993)
People have recognized that the industrialization has damaged the environment and
also influenced negatively their living standard. This awareness has made them to value
highly the real nature, to be interested on non-polluted green food and also to be linked
with the natural environment through green forest and fresh air (Kilbourne, 1998;
Hanningan, 2006). For firms, a new perspective on consumer acceptance and perception
to green products represent a great room of opportunities since green marketing is not
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purely altruistic, it can generate profits (Grant, 2008). The firms challenge is to satisfy
the consumers' "green" demand through proper design, production, sales and recycling of
products. Add to that, strict environmental regulation to lower emission in the car
industry, for instance, can be a challenge for many firms but also an opportunity to
improve competitiveness by encouraging efficiency and innovation (Thun & Muller,
2009). Addressing environmental friendliness products, firms can differentiate
themselves from competitors and to assure firms competitive advantage (Reinhardt,
1998), to enhance firms corporate brand image, to show transparency and ethical values
that can capture buyers perceived credibility (Anderson & Narus, 1998), to develop
green innovative and commercially viable products that meet environmental benefits and
also to match customer interests. In brief green marketing seems to be a source of
reputation, competitiveness and financial advantage (Mintel, 1991; Worcester, 1993).
2.2 Previous Research in Green Marketing
Researches in marketing including environmental perspectives started in 1970 whose
work was centered in the relationship between environment awareness and consumer
behavior, more precisely in recycling activities (Kassarjian, 1971; Zikmund & Stanton,
1971, among others). Despite such attention to the environmental concerns, was only in
the late 1980 and earlier 1990 that green marketing concept emerged. Since then
researchers has embarked upon on different waves supported by a growing consumerinterest in green products and a pronounced willingness to pay for green features (Mintel,
1991; Worcester, 1993).
Contradictorily, claims that consumers were willing to pay more for green products
was not clear since the green demand in 90s had increased only very little and this was
evidenced in Mintles reports published in 1995 (Mintle,1995). In this perspective, some
researchers have agreed and suggested that the opinions of consumers do not appear to
translate into changes in purchasing behavior (Carrigan & Attala, 2001). That is, there
appears to be a gap between what consumers says about the importance of green products
or ethical issues and what they do at the checkout counters. Table 1 shows evidence about
such paradox, i.e.; gap between consumer environmental attitudes and purchasing
behavior. Furthermore, surveys show that buyers are not necessarily willing to pay
considerably more for green products. The preference for green innovation depends on
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the price of them, i.e. they would prefer them only if their prices were equal to those of
normal ones (Thun & Mller; 2009). Add to that, studies reveal that green products
which delivery for the consumers immediate benefits will create consumer demand
(Ottman, 1998; Reinhardt, 1998), since some consumers will not sacrifice their needs and
desire just to be green. Cost and energy savings through more efficient appliances, better
product quality and durability, better repair, as well as reduced health impacts are the
attributes that seem to match buyers expectations (Kammerer, 2009). In this case, to
implement environmental innovation activities more towards product improvements and
environmental issues that have a potential for customer benefit will increase acceptance
and reduce the gap between awareness and purchase behavior.
Table 1 - Gap between consumer environmental concern and purchasing behavior
Study by Aim Influence
Carrigan &Atalla (2001)
To investigate whether or not consumer care enoughabout marketing ethics to influence their purchase
Low
Kurani &Turrentine, 2002)
To explore customers willingness to pay more forhigher fuel economy.
Weakly
Rijnsoever
et all (2009)
To observe the consumers attitudes and behaviors
towards car purchasing in Netherlands.
Moderate
Dembkowski &Hanmer-Lloyd(1994)
To develop an environmental value-attitudesystem model to understand conscious consumerbehavior
No
Source:adopted and modified from Chamorro et al [2009].
2.3 How firms can create value?
Strategically, firms aim to search for source of competitive advantage by creating
sustainable superior value for its customers. To understand how firms can create value it
is important to understand such value concept. It can be defined as the utility of
combination of benefits delivered to the customers less the total cost of acquiring a
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aass
iceValueiceValue PrPr
product or service (Walters & Lancaster, 1999). It is created when a product or service
meets customer expectation. If companies do not delivery the value that buyers are
looking for certainly they will buy from those competitors that they perceive as
offering of the best value or best next alternative (Lindgreen & Wynstra, 2005). In order
to capture the essence of this, value definition can be expressed in the equation (1) based
on Anderson and Narus model (Anderson & Narus, 1998):
Eq. (1)
where Values and Prices are the value and price of the suppliers market offering and
Valuea and Pricea are the value and price of the next best alternative. The difference
between value and price should be equal to the customers incentive to buy. In this sense,
the customers incentive to purchase a suppliers offering must exceed its incentive to
pursue the next best alternative (Anderson & Narus, 1998).
The creation and maintenance of perceived value in the customer mind is not an easy
task and because of this, companies must focus on developing the key competencies and
capabilities that enable them to deliver their value proposition to the customer efficiently
(Treacy & Wiersema, 1996). One way for firms to create better offerings is to base it on
the augmented product notion which includes auxiliary services such as warranties,
customer service, financing, delivery arrangements, technological innovation,
environmental benefits and other things that people value in the process of purchase
(Levitt, 1960). The Toyota Motor is an example of value creation. When it introduced its
full hybrid electric mid-size car in Japan in 1997 and worldwide in 2001 the company has
successfully increased its market share. In the US market, it becomes a top seller with
more than half of the 1.2 million Prius sold worldwide by early 2009. The model is also
an example of products perceived benefits from customers and environmental agency.
According to the United States Environmental Protection Agency, in 2007, the 2008
Prius is the most fuel-efficient car sold in the U.S. and beginning in 2009 the latest modelbecame the most fuel-efficient automatic car. In UK, the Department for Transport
reported that the latest Prius is the second least CO2-emitting vehicle on sale in the UK
with 89 g/km. One can observe that, innovation in response to environmental regulation
can offset initial investment in research and development by helping firms to use inputs
better and to create better products (Porter & Van der Linde, 1995)
http://en.wikipedia.org/wiki/Full_hybrid#Full_hybridhttp://en.wikipedia.org/wiki/Hybrid_electric_vehiclehttp://en.wikipedia.org/wiki/Mid-size_carhttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/United_States_Environmental_Protection_Agencyhttp://en.wikipedia.org/wiki/Department_for_Transporthttp://en.wikipedia.org/wiki/Gramhttp://en.wikipedia.org/wiki/Kmhttp://en.wikipedia.org/wiki/Kmhttp://en.wikipedia.org/wiki/Gramhttp://en.wikipedia.org/wiki/Department_for_Transporthttp://en.wikipedia.org/wiki/United_States_Environmental_Protection_Agencyhttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Mid-size_carhttp://en.wikipedia.org/wiki/Hybrid_electric_vehiclehttp://en.wikipedia.org/wiki/Full_hybrid#Full_hybrid8/6/2019 Addressing Eco-Friendliness as a Marketing Strategy an Investigation in the Car Industry
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To create, exploit and delivery value to the final customers firms must develop, design
and implement the marketing programs in an integrated perspective where all within the
organization should be involved. Therefore, all the company should see themselves as
part of a value delivery process (Kotler & Keller, 2006). In 2008 for instance, Fiat
launched the Marketing bubbles initiative whose project was to use the action
learning methodology (based on actual business cases) and combine training, creative
thinking and business development in one initiative using the skills of marketing
personnel and employees from other departments. The objective of this training model is
the online collaboration platform for sharing documents, data and best practice. It
resulted in two pilot projects in which over 100 people were involved in identifying
opportunities to improve profit and to devise value-creation strategies, which helped the
firm to redefine the positioning of Fiat Bravo in Europe. The Lighthouse was anotherproject launched at the same year, which involved all employees in the business unit
through various training courses and communications programmes. As a result, the
project reinforced the Group values, redefined the organizational structure and processes,
team-building and enhanced innovation and customer feedback process (Fiat Sustainable
Report, 2008).
The holistic marketing highlights such process, which interactions between customers,
suppliers, distributors, company, employees, etc and others activities based on mutual
benefits can offer possibilities in creating, maintaining and renewing customer value.
To describe the holistic marketing framework and its entire value chain, I display in the
Figure 1, the three paces of the value chain: the exploration, creation and delivery value
procedure. One can observe that the process is linked one to other in order to show a
redistribution of benefits among different components and players in this value chain. The
value exploration is related to cognitive, competency and resource spaces, where
companies define its strategy by identifying and understanding the needs of its buyer
targets as well as taking into account the competences of themselves and of their
collaborators. The value creation is concerned to identifying new customer benefits by
getting feedback from them in order to improve services and products. The delivering
value is related to the management process, which concern to internal resource from the
company business domain and the management relationship process oriented to
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companys customers and to companys partners. It is important to mention that in order
to maximize value to customers; companies need to get maximum value from their own
suppliers. Under this perspective, winning companies will be the ones that combine not
only customer relationship management (CRM) but also partner relationships
management (PRM). The latter refers to the process in which firms establish
collaboration with other firms with the objective of getting economic advantage, i.e. it
should be a win-to-win relationship where both sides are benefited. In this way, a
collaborative network summed up with core competence seems to be a good combination
to maximize innovation, to maintain growth, to keep competitiveness and to improve
customer satisfaction.
2.4 Market Orientation
Traditionally, market-oriented corporate strategy has been recognized as a pillar of
superior company performance by both academics and practitioners. Slater and Narver
(1994), define market orientation as an organizational culture. Such definition is
particularly interesting since organizational culture is related to the adoption of the
marketing concept, i.e., the process of matching company's capabilities with customer
wants, as a business philosophy. Alternatively, market orientation also may be
understood as a group of activities, processes, and behaviors derived from implementing
a marketing concept (Kohli & Jaworski, 1990). These two approaches are reconcilable
according to Matsuno (Matsuno et al., 2005) since culture can lead to behavior and,
Figure 1. A Holistic Marketing Framework
Source: P. Kotler, D.C. Jain and S. Maesincee, Formulating a Market Renewal Strategy , inmarketing moves (part1), figure.1-1 (Boston: Harvard Business school Press 2002).
ValueExploration
CustomerFocus
ValueDelivery
ValueCreation
CognitiveSpace
Customerbenefits
CustomerRelationshipMana ement
CoreCompetencies
CollaborativeNetwork
CompetencySpace
InternalResourceMana ement
Businesspartner
Resourcespace
BusinessPartnerMana ement
Businessdomain
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behavior represents the basis to the development of the organizational culture. In any
case, a market orientation must involve the organization as a whole (Webster, 1992)
Deshpande (Deshpande et al., 1993) specifically affirms that to develop a profitable
enterprise in the long run, customers interests should be placed at first. In other words,
market orientation basic point is to profitably create superior value for customers. Note
that this make a parallel with the value chain process pointed out in the previous section.
In the marketing theory, to create continuous superior value for customers, a business
need to be customer oriented, competitor oriented and also interfunctionally coordinated.
That is, to survive and succeed, organizations must know their markets, attract sufficient
resources, convert these resources to appropriate products, services, ideas and effectively
distribute them to the final consumer (Narver & Slater 1990)
Now, let me describe the three components of the market orientation approach. Thefirst, which is the so-called customer orientation, suggests that firms should get a detailed
understanding of their target customers in order to be able of consistently creating
superior value. In fact the deep understanding of the customer needs is an essential
element for the business and it is the central element of market orientation. Customer
profitability, that is, profit derived from customers, is determined by customer retention,
margin and acquisition (Kotler & Keller, 2006). From this concept, customer relationship
emerged in the last decades as a technique to enhance performance in customer retention,
satisfaction and value (Bolton, 2004). Osarenkhoe (2008) suggests that firms moving
from a product and sales philosophy to a customer-intimacy philosophy will increase
their probability to outperform competitors. The author assumes that the objective of
firms applying customer-intimacy philosophy, which is a central part of the market
oriented approach, is to be present in the customers mind. To achieve this, the firm will
competently use its resources and organizational culture to create competitive advantage.
In the current consumption patterns, customers have shown the desire to cultivate "green"
consumption habits. Customer-oriented firms must be aware about the trends in green
consumerism by addressing and positioning their offers based on these new green trends.
The second component is linked to the competitor orientation approaches, which
suggest that firms should understand the short-term strengths and weaknesses and long-
term capabilities and strategies of both current and potential competitors. The scanning of
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the competitor can be compared with the industry-based view, which is linked to the
Porters five forces. That is, by analyzing the competitor firms must be aware about
industry profitability that depends on the threat of new entrants to the industry, the threat
of substitute products or services, the bargaining power of its suppliers, the bargaining
power of its customers and the intensity of rivalry among its competitors (Porter, 1991).
With regard to the green trends, earliest initiatives at launching green technologies by
pioneering firms can be a drive force to cause a competitive response.
The third component is the interfunctional coordination, which implies that the
resources available to the organization should be well coordinated in order to deliver
superior value for customers (Naver & Slater, 1990). In this component, the resource-
based and the competence-based perspective can be incorporated. In the process of
collecting information about customers needs, competitors, etc firms must have theability to transform such information in a strategic plan which brings a debate within
departments whether organizational changes are or not needed, which technology could
attend customers current and future needs and in the meantime meet environmental
requirements, or which strategic alliances will be required, what are the resource
available in the firm, what are the core competence and how it can be aligned with the
trend in demand, for instance, for green products, etc. Such integrated discussion will
lead to a collective learning in the organization, especially the capacity to coordinate
diverse production skills and integrate streams of technologies.
A resource based view focusing on development and application of core competences
can form the basis of competitive advantages since core competence provide potential
access to a wide variety of markets, make a significant contribution to the perceived
customer benefits of the end product, and are difficult for competitors to imitate
(Prahalad & Hamel, 1990). Chen (2008) extends this concept in the green issues by
suggesting new novel construct called green core competence. He proposed that green
core competence is the collective learning and capabilities about green innovation and
environmental management within department and extended in the organization as a
whole.
The market-oriented process is illustrated in the Figure 2; note that market orientation
is considered as the gathering of information and its dissemination intelligently. The
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market intelligence is composed by the scanning of information about customers needs
and also by factors that influence such needs such as government regulation, society,
competitors, etc. The maximization of the information process occurs when it is shared
among all business departments. In this process, market orientation provides a link that
joins all efforts and projects from people in different department within the organization
and thereby leads to the creation of superior performance (Kohli & Jaworski, 1990).
Figure2Market Orientation
2.5 Market Orientation and Environmental Practices
Recently the choice of environmental practices or changes in the way that processes and
products are designed to make them less harmful to the environment has been a trend in
business management (Gonzlez-Benito et al, 2008). Strategies that prioritize the
implementation of eco-friendly practices are linked to the firm's perception of current
environmental pressure from media, regulatory institutions, financial institutions,
suppliers, competitors, etc. The ability of firms to scanning the external business
environment to identify threats and opportunities and its sensitivity to respond to such
external pressure are characteristics of market-oriented firms (Kohli & Jaworski, 1990).
Thus, market orientation should be a drive force to set the cultural and operational bases
for increase awareness and committed reactions to the current environmental trends.
Inter-functional
Coordination
Developing new
technologies
Exploiting new
markets
Setting new marketing
communication
Knowledge about
Customers
(needs, tastes,
wants, etc)
FirmInternal Environment
Knowledge
about
Competitors
Stablishing new
strategic alliances
Source: Adapted from Kohli and Jaworski market-
orientation framework.
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Stone and Wakefield (2000) make a link between market orientation and environmental
practices and adapt the market orientation concept to an eco-oriented one, which refers
to organization that generates, divulge and responds to environmental information.
Atmospheric pollution and its consequences for human health, scarcity of freshwater
and raw material, and global warming are among others climate challenges that demand a
response from the society as a whole. In some way, all these environmental impacts have
a great influence on how companies manage their business, and therefore, they are also a
driver to innovation.
To develop green products as well as to address environmental awareness firms need to
create a successful strategy. Strategic planning requires simple, consistent and long-term
firms goals, a deep understanding of the competitive environment as well as realistic
objectives that is aligned with firms resources and capabilities (Grant, 2005). Creating agreen strategy is no different. Clear vision and objectives are useful to help managers in
making better decisions (Olson, 2008). According to Olson (2008), a green or
environmental strategy should lead a common culture of awareness and actions that
encourage initiatives to benefit the planet and at the same time add attractive value
proposition to the firm. Note that, attractive value proposition may be understood here as
the development of new technologies or initiatives that can reduce cost and increase
performance. Solar panels, electric cars, hydrogen vehicle conversions, recycling,
rainwater collection are examples of alternative green technologies that are cost effective.
The first step that firms should take when implementing an environmental strategy is to
increase green awareness and actions as corporate culture. To do this, they should include
environmental issues as part of their training curriculum that focus on organizations
environmental goals. Olson (2008) highlights the importance of organizations in
developing practices that cultivate a common culture of environmental consciousness to
support its green strategy (see Table 2). One important aspect of the responsible
environmental practices is that it can increase corporate reputation. Fombrun (1996)
proposes that a corporation's reputation is associated with credibility; trustworthiness; and
responsibility. It is clear that firms producing superior quality products, using credible
advertising, acting in a socially and environmentally responsible manner and having a
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history of examples which their obligations meet various stakeholder interests tend to
create reputational advantage (Miles & Covin, 2000).
Table 2: Responsible Environmental Practices
Initiatives Best practices
Provide training Employee new hire training that motivate conservation behavior
such as turning off lights, recycling paper, etc.
Be an example Corporate sponsorship of environmental initiatives in the
community such as investment in reforestation.
Measure and report
performance
How much paper was recycled?
What newspaper has been written or which institutions have
recognized the firms contribution to the environment?
Create communication
and change management
plan
Always communicate success,
Have support available to answer questions and provide facts
Anticipate organizational needs
Source: Olson (2008)
Green marketing strategies and tactics also might require changes in the marketing mix
(product, price, place and promotion) and marketers must be conscious about such trends.
Miles et al. (1997) point out that firms acquiring for instance an ISO 14000 certificate
must produce goods with maximum recycled content and designed to have minimal
environmental impact. Additionally, environmental claims must be supported by the
lifecycle of the product and firms will see an augment in cost because of ISO compliance.
Certification can affect its product price at the beginning but it will be compensated when
process to allocate resources efficiently are introduced. In terms of distribution, strategies
will also be modified since firms will try to minimize energy use and the total
environmental impact of the product throughout its lifecycle (Miles et al., 1997).
Consequently in the business to business relationship, buyers will require ISO14001
certification from their immediate suppliers and these immediate suppliers will in
somehow also demand that their suppliers get certificate and the standards movement will
involve the whole supply chain (Rothery, 1995).
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An eco-certification or eco-label such as ISO 14001 or EMAS (Environmental
Management System) provides guidance and advice on a wide range of environmental
issues including auditing, labeling, life-cycle assessment etc. Obtaining such certificate
can be fruitful for firms following a green strategy. Steven (Steven et al., 2003) shows
many significant relationships between the presence of a formal EMAS and improved
performance. Recent studies also found empirically a positive correlation of EMS in
general on environmental product innovation activity (Rehfeld et al. 2007 and Wagner,
2008).
It seems that firms environmental facilities, consider facilities here such as
environmental training program in place for employees, written environmental policy,
public environmental report, environmental performance indicators/ goals, etc that is
related to the EMS seems to be a key role for eco-oriented organizations to addressgreen products in its marketing campaign supported by actions that indeed prioritize the
environmental impact. The latter may help firms, in the automotive industry for instance;
to meet the triple bottom-line that refers to delivering value simultaneously to customers,
business and the planet (Elkington, 1994).
3. GENERAL AUTOMOTIVE INDUSTRY
The automotive industry is characterized by numerous new inventions. In 1908, the T
model implemented by Henry Ford made the world enter in the age of affordable
transportation altering our notions of place and distance. Nowadays, promising new green
technologies will revolutionize the transportation system as well as certainly will solve
the problem of global warming by creating a less carbon-intensive environment (see
Appendix B).
A new generation of lithium-ion batteries, coupled with rising oil prices and the need to
address climate changes, has accelerated a global race to electrify transportation. The
global automotive giants are already developing electric car battery vehicles (CompaniesAnnual Reports). One can observe that in terms of the cycle life, the car industry is
experiencing a rejuvenation of itself because of the wave of innovation. The actual car
version reached the maturity phase of the market but the new hybrid electric vehicle will
be in the introduction/growth phase. The demand for hybrid vehicles is increasing
worldwide as consequence of the limited emission standards, higher fuel prices and
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growing environmental-awareness. Hybrid vehicles will significantly reduce
transportation-related oil demand; it will make cars faster, cleaner and safer, as well as
more fuel-efficient. Demand will be encouraged by benefits offered for the technological
innovation, including faster acceleration, better fuel efficiency, increased customization
and the potential inclusion of new electronic systems that enhance functionality and
safety (Raskin& Shah, 2006). In Sweden such trend is already taking place. For instance,
the proportion of cars that run on renewable fuels is increasing, even though Swedes are
still buying relatively large cars with high fuel consumption, says Carl Magnus
Berglund, investigator at the Swedish Consumer Agency (Swedish Environmental
Protection Agency Homepage). For many consumers, a change from car to more
environmentally friendly forms of transport involve a conflict between individual short-
term interests and social or collective long-term interests, especially when individual carusers are asked to significantly adapt their lifestyles and transport behavior.
According to Sika Institute (Sika Report, 2005), the forecast for passenger transport to
2020 highlights that car is at present the dominant form of passenger transport and this
will maintain over the next fifteen years. From 2001 to 2020, the transport performance is
expected to increase by 27 percent and car will account for the highest absolute
proportion as displayed in Figures 3, 4 and 5.
Figure 3: Short-distance transport
performance (2001-2020)
Figure 4: Long-distance transport
performance (2001-2020)
Billion Pass.km Billion Pass.km
Source: Sika Institute (Sika Report, 2005)
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Figure 5: Evolution and forecast of passenger transport in Sweden from 2001-2020
Source: Sika Institute (Sika Report, 2005)
Despite of such good forecast for future, the automotive industry certainly is among
those that have been suffering most the effects of the global economic crisis. The current
situation is already forcing automakers to rethink its business model completely. The
negative demand shocks and more restrictive environmental policies are forcing firms to
adjust their strategies to increase productivity. Smith (1991) highlights that firms will be
more rational after an actual profit decline, especially if their survival is at stake. In other
words, crisis usually make firms rethink their traditional way of looking their external
and internal business environment since firms need to be more creative or abandon the
present status quo strategy (Erixon, 2007). External forces, i.e. forces that are out of thefirms internal environment, are demanding new technologies that should focus on the
environment. It seems that three key factors will enable the industry to make the
necessary changes: investment, creativity and courage since investment in new
technologies are not risk-free.
To transform the crisis into opportunities, government policies seems to be an
important tool to influence an entire industry and the habits of consumers, while
promoting the shared objective of reduced emissions and fuel consumption. In Sweden
the government is helping to create green car demand when introduced a program of tax
rebate of SEK 10 000, from 2007 to 2009 specifically, to individuals who buy a new
green car. The objective is to encourage more people to buy fuel-efficient cars and cars
that run on green fuels. Although the definition for the green car is not linked with a
specific technology or a certain type of fuel, the rebate aims to stimulate the reduction of
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fossil fuels and reduce carbon dioxide emissions (Government Office of Sweden). The
figure 6 shows new registrations of passenger cars by alternative fuel from 1996 to 2008.
The demand has significantly increased for both private owned and corporation owned in
the period of taxes rebates (see Figure 6 and 7).
According to the Naturvrdsverket (Swedish Environmental Protection Agency), the
new cars have contributed to reduce by just over three percent since 2008 (174 grams)
and by seven percent since 2007 (181 grams) the carbon dioxide emissions. However,
one can ask why Swedish government has encouraged green vehicle purchase mainly
when surveys commissioned by Naturvrdsverket shows that one in every two people
consider themselves to be environmentally and climate-friendly. Such scenario supports the
idea that even though there is a high awareness about the negative impact of cars to the
environment, contradictorily this is not translated in changes in car usage and purchasingbehavior. This gap between environmental attitudes and vehicle ownership can be a
puzzle and it seems that changes in diminishing environmental impact has come not
from changes in behavior but from changes in vehicle emissions technologies and fuel
efficiency gains. By assuming that if people know more about the environmental
implications of their behavior, they will act more pro-environmentally. Then information
is a prerequisite for changing environmental behavior and effective green marketing
communications is a plus for firms that need to meet environmental regulations and also
to gain market share for their green offers.
Figure 6:New registrations of private owned passenger cars by alternative fuel (1996-2008).
Data obtained from Sika (The Swedish Institute for Transport and Communication Analysis)
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3.1 Automotive Industry Attractiveness
To analyze the structural determinants of the industry attractiveness it is necessary to use
the Porters Five Forces framework (Porter, 1979). It includes the five forces of
competition that comes from two source categories. One, called the horizontal
competition, includes competition from substitutes, competition from entrants, and
competition from established rivals. The other one, called the vertical sources, includes
the bargaining power of suppliers and buyers (see Figure 8).
Todays automotive industry has become more concentrated with firms making
strategic alliances with competitors. Nissan-Renault, Toyota-Subaru and Chrysler-Fiat
are among others examples of strategic alliances. It can be also noted that the size of the
carmakers are becoming bigger due to mergers and acquisitions (M&A). Given that the
competitors are becoming bigger and getting more power, they not only can shape the
industry but also to increase barriers to the eventual newcomers. In the overall the market
mostly consists of a relatively small number of large-scale companies since due to the
high capital requirements to reach economy of scale, incumbents generally not face much
of a threat of new entrants.
In terms of the innovation, the importance of the research and development has been
crucial to survive in the industry characterized for intense competition. The cost in R&D
also has increased since to meet customers and environmental requirements demands
high technologies. One of the strategies to reduce the costs is to share R&D activities
Figure 7:New registrations of corporation owned passenger cars by alternative fuel (1996-2008).
Data obtained from Sika (The Swedish Institute for Transport and Communication Analysis)
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expenses by collaborating or creating joint ventures with others; it can be suppliers,
competitors, customers etc.
Due to globalization, the new cars market has a large number of buyers and the latter
are price-sensitive. Another aspect of the industry is the presence of a variety of
manufacturers with a high level of product differentiation and therefore a high level of
choice for consumers, which enhance the industry rivalry (Datamonitor Report, 2008).
In the market there is a variety of possible substitutes, i.e., buyers have many choices,
for example, when deciding for an alternative fuel-engine. Firms research has focused in
developing more fuel-engine technologies such as hydrogen, hybrids, biogas, electric
vehicles, etc in order to meet environmental regulation (Firms Annual Reports, 2008).
Firms that only focus on the conventionally-powered cars can consider electrically-
powered vehicles as a threat. Public transportation or cycles are other examples ofsubstitutes.
The key inputs of the industry are typically commodities items such as metals and
others raw materials. The importance of the raw materials quality and components to the
manufacture of cars to assure safety can enhance supplier power. In terms of the demand
side, it is possible to affirm that even though buyers are price sensitive they don't have
too much bargaining poweras they never purchase huge volumes of cars. In contrast, if
the buyers are other firms then their bargaining power increases according to their
purchase volume.
Bargaining power of suppliers
Bargaining power of buyers
Figure 8: Porters Five Forces of Competition Framework.
Source: Adapter from Porter (1979)
Suppliers
Industry Competition
Rivalry among
existing firms
PotentialEntrants
Threat of
new entrants
Substitutes
Buyers
Threat of
substitutes
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4. METHODOLOGY
Given the need for more detailed insights into companies green initiatives and strategies
in the automotive industry, a qualitative study was conducted. The chosen market for
conducting the research is the automobile industry in Sweden. The justification for thislies in several factors. Economically, the automotive industry is seen for many govern as
a pillar for the country economic growth since it brings technology, jobs and
investment to the economy as a whole. This industry is one of the major users of
computer chips, textiles, aluminum, copper, steel, iron, lead, plastics, vinyl, rubber, etc.
Politically, laws and government regulations have affected this industry since the 1960's.
Almost all of the regulations come from consumers increasing concerns for the
environment and for safer automobiles. Technologically, awareness about the global
warming and also the price of oil has caused the automobile industry to develop alternate
fuel vehicles. In other words, environmental concern is one aspect and the second reason
that is the most powerful to cause short-term changes come from the situation in the oil
industry. The world oil demand projections show that the new demand from transport
sector coming from developing economies such as China, India, etc would likely raise oil
price in 2020 by 3-10% if oil supply investment is constrained (EIA, 2005). The new
needs for vehicles operating with alternative fuels are urgent. Transportation not only
requires a high consumption of non-renewable energy resources, emissions from vehiclescontribute to both local and global environmental problems. Thus, there is a growing
demand in the transportation industry for new technologies that use alternative fuels.
Socially, there is a public debate about the impact that the gas cars have on the
environment. Furthermore, several macroeconomic and sociopolitical challenges are
directly linked with the automotive industry such as the redistribution of global economic
power, energy dependence, global trade balance and environmental concerns. Another
aspect is that the automotive sector is also one of the industries that have been strongly
affected by the economic downturns. The global economic crisis brings a debate on
whether change is needed and opens up opportunities for collaborative network among
governments and competitors as well as between government and industry which all of
these aspects make my analysis in this industry worthwhile and timely.
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4.1 Research Strategy
The unit of analysis in this study is the business level. This research employs a qualitative
study by collecting data from nine companies in the industry (see Table 3). Note that, I
strategically chose these firms because they are multinationals whose operational scale
requires massive consumption of natural resources. Thus, social and environmental
communications are critical activities within their ethical behavior.
The investigation is divided in three parts. Part one includes the analysis of firms
sustainability and/ or annual reports, part two interviews via email with business people
in Sweden and part three use the Anderson and Narus model introduced in the section 2.3
and its value creation approach to link firms environmental actions obtained by the
interviews (see appendix A) and/ or from the firms reports (see appendix C).
To capture firms environmental attitudes and performance, I have identified four
variables in the analysis of the annual and/or sustainability reports. In the following, such
variables are described.
1. Environmental Statement Plan. I assume that similarly to the vision and missionstatement, it must provide a guide that can orientate firms in achieving green aims
and objectives. It is important to highlight that I am not looking to seeing
environmental or sustainability term as part of the firms vision or mission
statement but the existence of at least an environmental guiding principle.
2. Green training program. I consider that green training is about changingorganizational cultures and individual behavior to combine environmental, profit
and efficiency objectives. Thus, I observe if firms clearly mention any training
programs that encourage internal green attitudes.
3. Green marketing campaigns. I consider the green marketing campaigns as animportant tool whose aim is to inform the public about firms new green offers.
Thus, I check if firms have communicated their green technologies trough sponsor
events, seminars and campaigns.
4. Encouraging supplier to obtain green certificates. I assume that requiring suppliersto obtain ISO 14001 or any other green certificate can assure green performance
and efficiency in the whole supply chain and benefit the firm as a whole.
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It is important to highlight that in the sample of nine companies (see Table 3) I address
questions, which are displayed in the tables title, related to the above key variables. The
tables illustrate some trends about environmental firms actions. In the interviews, the
way that the questionnaire is structured enabled me to get valuable qualitative
information that would be comparable across companies. The format of the questions is a
mixed of dichotomous, i.e., a yes/no type answer and multiple-choice.
The questionnaire is structured in three sections. The first consists of the descriptive
data of companies (including the number of employees, year founded, industry sector,
etc.); the second is the measurement of the green management systems used by firms; the
third part is the marketing mix usage with respect to the green perspective. The aim is to
understand how firms can influence customer adoption and continued use of green
products. The key issues are defined as follows:
To investigate whether the development of firms green products is supported bythe environment management system;
To analyze whether the marketing mix are used to stimulate demand for newgreen technologies;
To observe the importance of the firms suppliers in undertaking environmentalmeasures;
To link the Anderson and Narus model I have assumed an automotive market where
two kinds of firms operate and position their marketing offers. The standard firms are
those that deliver the basic benefits such as conventional or non-green technologies to
their customers and the outstanding firms are those that provide extra benefits via new
green technologies. The increase in market share is associated with firms ability to
communicate and be perceived as the best alternative by consumers. Each benefit offered
by firms receives a grade 1 and zero otherwise (see table 4) and the firm that get thehighest points probably are those that customers will have incentive to buy from. In the
market, consumers are strongly concerned with the environmental problems and they can
observe firms behavior via their published annual and sustainable reports. The data
obtained from the interviews and firms reports are used to grade the firms.
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Table 3: Participating Companies
Ford Motor manufactures and distributes automobiles in 200 markets across six continents. Its core and affiliatedautomotive brands include Ford, Lincoln, Mazda, Mercury and Volvo.
General Motors Corporation (GM) designs, manufactures and markets cars, trucks and other automobile parts inNorth America, Europe, Latin America, and Asia Pacific regions. Its core brands include Cadillac, Chevrolet, Opel,
Pontiac, Saab, Saturn
Bayerische Motoren Werke (BMW) focuses on the worldwide automobile and motorcycle markets. BMW sells itsvehicles under three premium brands, BMW, Mini and Rolls-Royce.
Honda Motor is one of the leading manufacturers of automobiles and the largest manufacturer of motorcycles in theworld. The companys popular passenger car models include Legend, Accord, Civic, City, Acura RL, Acura TL and
Acura TSX.
Fiat Group Automobile designs, produces and sells vehicles under the Fiat, Alfa Romeo, Lancia and Abarth brandswhich are made up of four companies: Fiat Automobiles, Alfa Romeo Automobiles, Lancia Automobiles and Fiat
Professional.
Renault designs, produces and sells vehicles under markets its products under the Clio, Megane, Logan, Espace,Kangoo, Scenic, Twingo and Laguna brands.
PSA Peugeot-Citroen ((Peugeot) is a France-based manufacturer of passenger cars and light commercial vehicles. Itproduces vehicles under the Peugeot and Citroen brands.
Nissan Motor is engaged in the planning, developing, manufacturing and marketing of passenger automobiles,automobile parts and forklifts. The group has significant operations in Japan, North America and Europe.
Toyota Motor is one of the largest automobile manufacturers in the world. The company sells its products underToyota, Lexus, Hino and Daihatsu brands.
Source: Firms website
4.2 Research Approach
The research approach is based on both, primary data whose focus group are people who
work in the business, marketing or sustainability and environmental policy department, as
well as secondary data which consist of previously published material such as annual
and/or sustainable reports on firms international website. Besides that to obtain a better
picture of the trends in Sweden I have used statistical data from Swedish Sika Institute
and general policies information from The Swedish Environmental Protection Agency. In
this thesis, I address the three following questions:
1. Does the introduction of the environmental facilities help firms towards greeninnovation?
2. Is green marketing strategy of firms positively associated with the increase inthe performance?
3. Does green marketing communication affect positively corporate image?
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To answer the first question I will use the questionnaire interview since it try to capture
the overall firms motivation to introduce green facilities, to adopt an environmental
management system, green marketing mix policies, etc which are in a way linked with
innovation process. The other remaining questions will be answered by using the firms
reports available on its international homepage.
For the purposes of the present study, the core of the investigation is based on the
firms reports (secondary data) rather than interviews (primary data). First, I assume that
the reports are reliable sources since it is one of the channels that firms communicate with
their shareholders, and the public in overall mainly to explain the company's efforts to
address environmental concerns. Second, most of the information in the questionnaire is
in somehow mentioned by firms in their reports then the interviews represent extra
information to support and validate my analysis. Finally, the emphasis on secondary datacan be good to my research since it can provide a background to primary research as well
as it may help to illustrate active trends (Newsom-Smith, 1988).
4.3 Research Process
I started my research by contacting people who work for the automotive industry in
Sweden in order to present my research outline. I contacted nine firms (see Table 3) via
their Kundservice (customer service) and then I got the phone numbers of the people
responsible for the marketing and/or business department. After contacting them, I sentthe questionnaire via email, which was requested to be returned after one or two weeks.
Most of the people contacted accepted to receive my questionnaire, however, only the
Toyotas coordinator of the marketing department in Sweden sent it back. Time
constraint was one the reasons for such fewer response but the main point that they
claimed was that being a small importer office in Sweden unable them to respond such
specific questions. For most of them the questions were much more suitable to the
manufacturer sector which is located outside of the country.
To broaden the scope of my research I decided to contact firms via their international
homepage. From one side, only one company, Ford Motor, accepted to answer the
questions. Initially, I contacted its customer service, which redirected my questionnaire to
the sustainability and environmental policy department and a business manager accepted
to answer it. On the other side, some companies said that the excess of inquiries had
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exceeded their capacity in the sense that they could not to attend my request. Other firms
advised me to search such information on their reports and the others did not replay even
though I sent emails to their communication service twice.
To help me to get a better picture of the green consumerism, green policies, alternative
fuel consumption, etc in Sweden I also contacted the Sika Institute. By email I got
statistic of green vehicles before and after the green tax rebates implemented in 2007. By
phone, I obtained some further information to help me to understand the Swedish future
green policies regarding to the transport industry. I also contacted by email the Swedish
Environmental Protection Agency.
5. Descriptive Results
Before presenting an overview about the empirical findings I will divide the analysis into
two subsections. In Section 5.1, I describe the main points of the interviews and make
comparisons between Toyota Motor Corporation and Ford Motor Company. In section
5.2, I display my analysis about the four variables (environmental statement plan, green
training program, green marketing campaigns, encouraging supplier to obtain green
certificate) analyzed in the firms reports. In the subsequent section namely analysis and
discussions; I make a link between the empirical results and the theoretical framework.
5.1 Interview at Toyota Retailer (MW Gruppen Stockholm AB)
MW Gruppen Stockholm AB is a Toyota retailer founded in 2004 with 115 employees
where Finance/Account is the department with an explicit responsibility for
environmental concerns.
The firm used tools such as environmental criteria to evaluate and/or compensate its
employees, environmental performance indicators, environmental accounting, internal
and external environmental audits, environmental training program, written
environmental policy and public environmental report when implemented an
environmental management system in 2001. The main motivations to use EMS were tobetter identify future environmental needs, cost saving in terms of use of inputs and waste
management. Add to that, regulators incentives also made it attractive, however, the
differentiation of products was judged as a moderately important issue. When the firm
was asked to rank from the most important to less important reasons to implement
EMS, meet regulatory compliance was the most preferable alternative while firm image
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was the second followed by product quality. Established relationship with buyers ranked
in fourth, competition in fifth and finally product price seemed to be the less important
item to be considered. In sum, regulatory compliance was the item ofmost interestwhile
product quality was the item of less interest, however, it was not possible to say if the
difference between the first and second alternative and between the second and the third
one, for example, is the same, more, or less important.
The firm also has used significant technical measures to reduce the environmental
impact associated with changes in its production technology. Solid waste generation and
local or regional air pollution were only two out of six alternatives chosen by the firm to
inform its concrete actions to diminish ecological impact. In terms of the overall business
performance after using the EMS, it assessed the implementation of green technology as
the most importantpoint.When asked about its marketing campaigns, address environmental issues has been one
important issue since it agrees that product performance play a key role in influencing
customer adoption and continued use of green products. Add to that, firms
communication efforts have put strong emphasis on green brands of its vehicles. In terms
of price policies, the firm has not used aggressive penetration-pricing methods to
stimulate demand for new green technologies once that it does not see any great
opportunity to pursue premium prices in the market. While purchasing and/or marketing
good and services the firm assess the environmental performance of its suppliers and
require suppliers to undertake environmental policies even though the retailer does not
seem to be involved in helping its suppliers of ways to reduce their environmental impact.
5.1.1 Interview at Ford Motor at U.S
Ford Motor Company was founded in 1903, currently it has 200,000 employees
worldwide and its headquarters is located in U.S. The firm pointed the senior
management as the location that best describe the explicit responsibility for
environmental concerns.
Analogous to Toyota, Ford has introduced an environmental management system and
at the time of its implementation adopted environmental criteria to evaluate and/or
compensate its employees, environmental training program in place for employees,
written environmental policy, external and internal environmental audit, environmental
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accounting, public environment report, environmental performance indicators. The firm
also has acquired its first certificates such as EMAs and ISO 14001 in 90s.
When comparing the main reasons that made the firm to adopt an EMS, I notice that it
differs from Toyota in some points. The most importantpoint considered was that, EMS
may help Ford to prevent or control its pollution and improve its efforts to achieve
regulatory compliance while Toyota assessed these two alternatives as not important.
Besides that, Ford seems to believe that implementing EMS would be very important to
help the organization to differentiate its products. For Toyota, this alternative was
considered as moderately important. Ford also believes that using an EMS can be very
importantto improve its relation with regulatory authorities while Toyota disagrees since
the latter considered it as a not importantpoint. Firms also differ in considering the use of
EMS as a tool that can improve firms image and facilitys profile. Ford considers this asvery importantwhile Toyota completely diverge. Convergence of opinions occurs when
firms consider EMS as a key role to create cost saving in terms of efficient use of inputs.
It is important to highlight that the others alternatives cannot be comparable since Ford
preferred do not give opinion about them.
Ford also has used significant technical measures to reduce the environmental impact
associated not only with changes in its production technology, as Toyota has used, but
also with changes in product features. Solid waste generation and local or regional air
pollution were only two out of six alternatives chosen by Toyota whereas Ford also
included use of natural resources, wastewater effluent, global pollutants such as GHG
(greenhouse emissions) and aesthetic effects for instance, noise, smell, landscape to
inform its concrete actions in diminishing its environmental impact.
When asked about its marketing campaigns, Ford and Toyota agree that both
addressing eco-friendly issues has been one important topic and that product performance
play a key role in influencing customer adoption and continued use of green products.
Moreover, similarity also occurs in terms of communication efforts which both have put
strongly emphasis on green brands of its vehicles. In terms of price policies, Ford and
Toyota do not see any great opportunity to pursue premium prices in the industry. While
purchasing and/or marketing good and services, Ford differ from Toyota only in the item
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to help suppliers of ways to reduce their environmental impact. I.e., Ford choose this
alternative but not Toyota.
5.2 Analyzing Firms Reports
Environmental Statement PlanAll firms under analysis have an environmental statement plan with clear objectives.
They claim to integrate environmental management goals into the product lifecycle at
every stage from design to recycling as well as the development of new and efficient
technologies. The statements are written indications that companies are in line with the
needs to have guidance to address their contribution to the environment.
Firms seem to be working intensively on renewing the product range, improving
industrial processes, strengthening the image of their brands by releasing their
environmental commitments to the public via annual reports, sustainability reports or in
other channels of communication such as press release or homepage, especially on
sections dedicated to the environment. Their guiding principles includesthe development
of green technologies, i.e., vehicle with less CO2 emission, recycling, energy
consumption, reducing waste and pollutants, air quality, among others (see Table 5,
appendix C and appendix D).
One can observe that 89% of the firms (in the sample) reported commitment to reduce
energy consumption; however, only 55% reported the introduction of eco-design in theirplants. This can be explained by the fact that such technologies are more investment
intensive. I consider eco-design here as the use of green alternative technologies such as
power-generating wind turbines, solar energy panels, etc that are assumed to be
environmental friendly. Another variable that firms have been committed is the reduction
of waste and pollutants with 67% of the firms addressing this topic in their reports.
Besides that, cutting water use has been one of the initiatives of Ford in North America. It
seems that firms have moved a step further by creating internal measurement to link their
actions with performance. Table 6, in the appendix C, displays such trends where some
firms have been proactive in developing their measurement of performance. However,
others only describe their initiatives without showing quantitatively how much they
reduced in terms of CO2 emission for instance. I also noticed that even though firms
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address their commitment with respect energy consumption, there is few published data
about energy consumption or percentage and total volume of water recycled and reused.
Regarding to the green training, almost all enterprises include green issues as part of
their training programme curriculum (see Table 7, appendix C). Except GM, did not
show information about this. In the overall, it seems that firms are exploiting their
internal capabilities to encourage awareness and participatory management structures.
In terms of green marketing campaigns, 100% of the firms have used sponsor events to
address climate change (see Table 8, appendix C). In addition, an interesting aspect to
create environmental awareness along corporations supplier chain is that the majority of
firms explicitly inform that their supplier are required to acquire ISO certificate as well as
are encouraged to implement some environmental management (see Table 9, appendix
C).
5.3 Linking value creation model with firms strategic behavior
In this section I will use Anderson and Narus model (see equation one, section 2.3) and
its value creation approach to link the data collected from the interview and/ or firms
reports. The aim is to understand how firms are perceived by consumers as the ones that
create more benefits and because of this are considered as their first best choice.
Firstly, let me consider a competitive market where there are two kinds of firms: One is
a standard firm that use conventional or non-green technologies and create its marketing
offering based on an augmented product notion which includes auxiliary services such as
warranties, customer service, financing arrangements, etc. Another is the outstanding
firms which have implemented strategically all the benefits described in the case of the
standard firms plus extra environmental values for instance: less polluted technology,
more energy efficient vehicles, or have implemented actions to reduce environmental
impacts that can be observed by consumers. Consumers are strongly concerned with the
environmental problems and they can observe firms behavior via their published annual
and sustainable reports. In the industry, firms have not incentive to pursue premium
prices and let be price equal to one for all firms. Each benefit implemented by firms is
graded as 1 and zero otherwise. The firms that have received the highest points probably
are those that customers will have incentive to buy from them. Table 4 describes the
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benefits and the total points obtained by firms following the Anderson and Narus model
(see last row).
Table 4: Linking Anderson and Narus model with firms behavior
Benefits or Value creation StandardFirm
OutstandingFirm A
OutstandingFirm B
Warranties 1 1 1
Customer service 1 1 1
Financing arrangements 1 1 1
Firm provides a less polluted technology 0 1 1
Firm offer a more energy efficient vehicles 0 1 1
Firm has acted to reduce global pollutants (GHGemission)
0 1 1
Firm adopted an aesthetic effect to reduce noise. 0 1 1Others benefits (example: technological expertise) 0 1 0
Firms communications efforts place greater emphasis ongreen brands or green technologies incorporated inproducts
0 1 1
Marketing campaigns to address environmentalfriendliness
0 1 1
The firm employed an EMS or acquired an ISO certificate 0 1 1
Total 3 11 10
Anderson and Narus Model (values - prices > valueapricea) 2 10 9
In the table above, it is clear that when comparing these two kinds of firms the
outstanding one has delivered more benefits (ValuesPrices = 9 or 10) than the standard
one (ValueaPricea = 2). Since 9 and 10 are greater than 2, it is obvious that outstanding
firms that strategically implemented extra benefits are those that create more value to
their customers. In this case, the customers incentive to buy from them is greater than
standard ones. However when comparing the two outstanding firms that offer a similar
product, consumers can still have different perceptions about the firms products.Observe that, firm A received more points than firm B (ValuesPrices = 10 > Valuea
Pricea= 9). It means that, firm A exceeded the customers incentive to pursue the best
next alternative and as a consequence firm A will have higher sales in comparison with
firm B. One can ask what has made firm A more preferred by consumers than firm B.
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Certainly this can be associated with other consumers perceived benefits that buyers
count for when shopping. Considering here that customers are sensitive about green
issues, providing market-driven solutions to such issue is an outstanding business
opportunity but other benefits can be linked with the ability of firms to communicate
value that might increase buyers perception of the value created. Or it also can be
associated with perceived more ethical behavior, perceived better green technology,
perceived credibility, etc.
Analyzing preferences associated with more perceived knowhow in new technologies,
one can say that consumers can feel confident to prefer a brand that is pioneer in green
design. Toyota is an example of this when launched its first hybrid vehicle in 2001.
Toyota Prius for instance was launched three years before the Ford first hybrid vehicle. In
the meantime, Toyota has improved the technology of its Prius and might be increasedconsumers awareness about its engineering expertise. Toyota is adding strong new
models and technology every year while still keeping its costs competitive (Annual
report, 2008). Note that, the knowhow is a source of competitive advantage and this can
be confirmed by the number of automobile sold in the last five years in U.S and
worldwide (see figure 9 A, B). One can observe that Toyota can